Hello all,
I was on the YouTube site browsing videos about money and I found a great video here. The host of the video did a great job explaining his story about financial mistakes made in the 20s. This inspired me to share my lessons learned from that decade. Now, I could probably write a book about all the mistakes I made. But who has time for that? Please enjoy my short and sweet top 3 mistakes below.
1. Bought a home with no money
To this day, this mistake still hurts. When I was in my early 20s, I bought a home with no money in the bank. I had a crappy job living paycheck to paycheck. I was somewhat aware of the threats of committing to the 30-year loan, so I decided to get two roommates. My thought was, their rent will cover the mortgage. With all these great plans what could go wrong? Here’s what happened in the first 30 days,
- My garbage disposal broke: This isn’t a huge problem right? Well, it rendered my kitchen sink useless because the water wouldn’t drain. And keep in mind, I wasn’t one of those rich middle-class folk with two sinks in the kitchen. Also, this was before the days of YouTube. So I had no clue on how to change a garbage disposal. Nor was I willing to gamble with messing up the replacement unit that took me a week to purchase.
- My hot water heater broke: I had to take cold showers in the Indiana winters for two weeks while I saved. Funny story, I decided to get a membership to a 24-hour gym to take hot showers while I saved enough money to pay a contractor.
- Rent payments were late: One of my roommates wore baggy pants and did not have a bank account. So, he would cash his paycheck working construction for two weeks then and keep a huge stack of money in his back pocket. Gravity being unforgiving as it is, my dear roommate would consistently lose money due to his style of clothing and wouldn’t be able to pay rent on time.
- Water Damage: A pipe burst in the thinly insulated garage and spewed water all over the ceiling. When drywall meets water they form an unscrupulous relationship and fuse into a nice heavy sponge of disaster. After some time, this will render mold. It’s a nice chaotic orgasm of Murphy’s law all over your life and the perfect example of what can go wrong when you are too poor, and in my case, ignorant to learn about the nuances of home ownership before diving right in.
2. Bought an impractical car with a loan
Where to start. Our American vehicular habits could be a blog post on its own. But below are just some minor pointers while I lament on the many woes of the dumb car purchases of my past.
- I bought a rear wheel drive muscle car in a state that snows. Not only was I sliding all over the place, but this handicap would cause me to be late for work. And thank God I never got into a wreck.
- Because I was poor, I kept maximum coverage on my stupid metal depreciating mass since I could not afford to pay for any repairs if there was a wreck. Now, I acknowledge that my next statement is controversial, but I keep the bare minimum insurance coverage on my $4,000 12-year old Toyota Yaris. I do understand the risks and have taken measures to protect myself (more on that later). The savings from this practice then gets converted into beautiful, succulent compound interest giving me super-human financial powers so great, that it would make a modern Marvel character blush.
- Negative Compounding effect: Because I had an expensive muscle car, I got bad gas mileage, I had to spend more on big tires, my insurance rate was higher, the list goes on. Because this vehicle was all consuming, it was sucking too much money in the wrong direction. The ultimate key to Financial Independence is to have the bulk of your net worth in investment conduits that appreciate in value.
3. Avoided Risk
On the surface, this doesn’t seem like it’s related to money. But hear me out, when you chase what’s comfortable you ultimately become soft and fluffy. I am not saying go after dangerous jobs or make hasty decisions without guidance. I am talking about doing something hard because it’s, you guessed it, hard. Or, taking a calculated risk because the payoff is aligned with your personal goal. You will grow out of adversity. You regress when you don’t challenge those precious muscle fibers.
You see, I wanted a comfy white collar job where I worked behind a computer all day. I figured, I could have stability with that type of career. My ego liked the idea of using my brain for a living. So, I became a systems analyst for a large pharmaceutical company here in Indianapolis. What that meant in practice was, I had an unhealthy sedentary life bending my back and sitting on my butt all day hunched over eating the fake preserved so called, “food” in the vending machine.
Prepping for the early morning meetings was a nice event that kept me up at night. Each day, I sat in my car on my 40 minute commute, waiting in traffic, coping with the pressure of the stomach pain that accompanies diarrhea due to the tension of stress and possibly, too much coffee. When I got to work each morning, I would grab a toilet stall that wreaked of another poor soul who just crapped his brains out. As ounces of coffee violently escaped my body, all I could do is sit and wonder how many smelly particles of others fecal matter were entering my body as a result of this warm toilet seat.
But at least I had stability right? Wrong! As I came to find out, I was the fool automating my job away with the software I was developing. Not to sound like a Luddite, but during the mandatory quarterly meetings it would be nice to see CEO’s show a graphical chart displaying stats employees really care about such as,
- amount of hours employees spent at home with the family.
- how many hours employees spent learning a new hobby.
- how much money was given out via bonuses to the staff.
Instead, I got to hear about how a few millionaires became richer. As I grew the corporate ladder, I learned that my job became more about squeezing hours out of people who would be replaced by cheaper labor overseas and or automation in the following year. So much for stability.
So, in my early 30s, I quit corporate America and joined a startup tech company in the heart of Indy. The job was intense. The company doubled its growth in a year, I had to learn or re-learn concepts on the fly and struggled to keep up. But I had more control to make decisions on my own or talk to different departments. And here’s the best part, the pay was 40% higher, each day was a new unconventional challenge and I grew as a consequence. The threat of losing my job was greater than the office position in corporate America, but I had a nice stash of cash, so I could afford to gamble.
Had I taken this risk earlier, perhaps my growth wouldn’t have been delayed. Stress still existed. But at the startup, I had more control over my destiny. It felt liberating as opposed to the tyrannical order I felt in the corporate world.
Perhaps I’ll do another post like this once I enter my 40s. Thanks for reading!
Footnote: I decided to make a YouTube video to follow this post. The content is the same but not identical.
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Says Joe Cole 