As a personal finance blogger, specifically an advocate of the Financial Independence Retire Early (FIRE) movement, you might assume that the Heartland on FIRE family has a spotless past when it comes to money decisions. You might think we’ve rarely, if ever, paid interest on credit cards, purchased only used cars, and made flawless house purchasing decisions. I mean, if you look at our net worth progress, we are in better shape than many (most?) families in their early- to mid thirties.
You would be sorely mistaken
In this post, I am going to air out our dirty money laundry. To come clean, as it were. To demonstrate how, even after stacking poor decision on top of poor decision (FOR OVER A DECADE!!) you can still find yourself on the path to FIRE.
So what kinda monetary malfeasance manifested itself during our “Lost Decade”?
Oh, let me count the ways!
In college I (Mr. HoF) maxed out my available student loans, beyond tuition and boarding costs
In doing so I took home a “paycheck” in the amount of thousands of dollars each semester. Most of this went towards living expense; however, a sizable chunk undoubtedly went towards frivolous items. Compounding my idiocy, I made only minimum payments for years. With some of the loans having interest rates over 6%!!
Mrs. HoF was carrying a few grand of credit card debt when we first met
She was using credit cards the way I was using my student loans and putting living expenses on the card during her undergraduate years. While she kept the balance low, there was always a balance.
I purchased a house with only 3% down at the very height of the market (2008) in an area with declining property values
We are still trying to work through this mistake. What business did a single (at the time) dude have with owning his own 1,500 square foot home on a quarter-acre lot? After a few months of making the mortgage payment (barely), I was starting to look for a roommate due to financial pressure. We’ve been renting the house out for about 3 years now. The market has perked up a bit recently so we are contemplating selling it when the current tenant lease runs out.
I was late on the last payment for my wife’s engagement ring
This cute little scheduling gaffe led to me paying hundreds in interest on what was supposed to be a 6 month interest free loan. If I ever find myself in a similar situation again, I will set multiple reminders for myself.
We financed two large vehicles at the same time
Right out of college, barely a couple months into my career, I decided “I deserved” a nice ride. I ran down the to dealer and signed for a brand spanking new F-150 V8 with the Sports package and 20-inch wheels. I was hot shit (in my mind). With its terrible gas mileage I couldn’t go a full week without refueling!
I was still paying on the truck when my wife and I (newly married) decided to upgrade her car to a Honda CRV. New of course! Her old car was worth less than the trade in, so we even had to apply negative equity to the new car purchase!!
We financed a TV and a Tempurpedic mattress
Now that we were married and had sweet rides we needed to outfit our house…. Nothing like making installments on a TV on top of paying for the cable package. At least these were interest free (and we didn’t miss any payments this time!)
At one point each of us skipped 401k contributions for a year
This is partly due to a miscommunication. I thought I needed to work for a full year to qualify to participate in the plan. In reality, I believe it was the company match that required a full year of employment. More recently, Mrs. HoF, skipped contributions last year to give us a little more cash flow during our quest to pay off the last of our student loans. I wouldn’t recommend this approach to others.
We have not maxed out our 401k contributions (even this year!)
With the 2 years of no contributions above notwithstanding, we have generally contributed only enough to capture the full company match. We’ve recently stepped up contributions to max out our contributions over a full year. We have lost out on massive growth during the current bull market, so this one really stings.
I left a job before being fully vested
As a result, I forfeited around 20% of the employer contributions. This amounted to thousands of dollars. I don’t regret this one much though, as it allowed me to take a higher paying job closer to home. Keep this in mind when you are considering the real value of a job opportunity.
That sure looks disgusting laid out all together like that. And I’m sure I am forgetting others! Can you imagine what our net worth would be if we invested even a fraction of what we frittered away the last decade. We may well have been near FI by now!
So if the FIRE community wants to burn our membership card, they have every right to do it.
Having said that, there is really only one thing to do:
We can’t change the past, right? So we might as well stop worrying about it. Maybe we should even embrace it? I would go so far as to say that its the pain of these mistakes that has helped our quest for FIRE grow stronger. The desire to avoid additional silly mistakes helps keep us focused on the FIRE path.
What’s even more amazing to me is that we actually managed to save a chunk of change despite making one horrid financial decision after another.
How the heck did we do this?
- A large portion of the credit goes to the bull market. Since both our careers started at the very beginning of the Great Financial Recession, every dollar invested has grown handsomely.
- Credit also goes to my parents who put some money in a mutual fund for me shortly after I was born.
- Career growth led to increased incomes for both of us.
- We lived for several years in that first house. While too much house for a single guy, it was a modest choice for our growing family and our strong incomes. We have since moved; however, our new house is still modest for our income.
- I invested into my Roth IRA for many of these years (though I rarely ever maxed out my contributions)
- Last but not least, we’ve made major strides in the past couple years after discovering FIRE, by paying off student loans and vehicles, and ramping up savings. Our portfolio has grown over $54,000 in the last year (approximately 23% growth) while our net worth is up $91,000 (31%) over the same time.
In the end, if we can make money after a decade of mismanagement… just imagine how much we could make after a decade of seeking FIRE!
lots of mistakes but you did the one major move that really counts – investing in yourself – that gets you to FIRE quicker than anything.
Thanks Mark. I agree 100%. I believe, even though they’ve cost us a lot, these mistakes have galvanized in us a desire to save in the future.
I love reading about fellow fire bloggers money mistakes. None of us is perfect. I’ve also made lots of mistakes (and I’m bound to make more!) But a huge key is recognizing them and trying not to repeat the same ones (though i’ve done that too). Great post, I love the honesty!
Thank you Melanie!
I love that last line “In the end, if we can make money after a decade of mismanagement… just imagine how much we could make after a decade of seeking FIRE!” This is proof that mistakes can be overcome. We shouldn’t shame ourselves for what’s already been done, but to move on and grow from it. Progress not perfection.
Thanks Cat! The past is the past… learn from it and grow stronger. Some of us have more to learn from than others, but very few are hopeless.
On the bright side, would you have found your path to FIRE without the mistakes?
I’m still in process of unwinding our financial mistakes. But each one carries a lesson.
Plus, a Temperpedic mattress is a gift that keeps on giving.
I’ve been asking myself that question a lot recently. I do love the mattress though and if there is one thing worth spending on, it’s a good nights sleep! Thanks Stephen!
I don’t think one can call it a mistake if you learn from it. To me it looks like you’ve learned along the way. That’s what matters most.
Thank you! Sometimes you can’t learn the lesson without making the mistake.