A Man in Debt is so far a Slave

It may be cheesy to use a quote as a blog post title, but maybe Ralph Waldo Emerson was on to something.

I don't think I would understand how liberating it is to be out of debt* if I hadn't "unexpectedly" found myself $6,000 in the red.

For people with student loans, $6,000 may not seem like much, but I didn't earn this debt by attending a university and getting a degree. Nope. I was just dumb.

Looking at you, online shopping and poor impulse control.

When I was trying to buy a house, I researched how to build my credit. Every article I read told me to get a credit card and use it each month. When I went to speak with a banker about setting up a credit card, she told me that I didn't qualify for their credit cards and could only acquire a secured card. She also told me that it's better to carry a small balance so that it "registers" in the system that I'm actually using the card. She warned that if I paid it off in full before the system tracks the usage, I wasn't going to build my credit. Don't do that. That's incorrect. Always pay it off in full.

Needless to say, I got a "real" credit card, ended up in real debt, then made more bad decisions and ended up in even more debt. In November of 2015 I had officially owned my home one year, had a $600 per month job, was about to leave my fiance, and had a ton of debt.

I knew I had a lot of work ahead of me, and while I loved my job, I had to find something else if I wanted to pay off my debt, eat, and pay my bills. While I was on a weight loss kick, I didn't think foregoing food and utilities was going to solve my problems in the long run.

There are a lot of different strategies for paying off debt. While I was bemoaning my financial situation, my BFF (and by that I mean Best Financial Friend) Lizzy talked to me about the Snowball Method. The Snowball Method basically says that you should make the minimum payment on everything except your smallest debt.** Your smallest debt then gets all your extra money. Once it is paid off, you use all the money that was going to your smallest debt to pay off your next smallest. In this way you gain momentum. You get that quick reward from paying off a small debt, and can use that quick gratification to continue. Lizzy, like we all are, is a fan of instant gratification. The Debt Snowball works for her, it works for lots of people, and especially if all your debt has about the same interest rate, it makes a ton of sense.

But that seemed really dumb to me given that some of my debt had a 29.99% interest rate and some of it had no interest at all.

Then I looked in to the Debt Avalanche. The Debt Avalanche made more sense in my situation because you pay off the debt with the highest interest rate first, then work your way down. 

The first step to getting out of debt, regardless of what method you choose, is by figuring out who you owe, how much, when its due, and the minimum payment (and if you like the Debt Avalanche the interest rate).

Go forth, fellow millennial! Gather up all your bills, sit down, and make that list. Organize them by amount owed, interest rate, due date, alphabetically, whatever makes you happy. Have your List of Debt handy for the next post.

*Currently the only debt I have is my mortgage. Many financial advisers are under the impression that a mortgage is an unavoidable debt to owning a home, so for the time being, we're going to use that definition as well.

**There's actually quite a bit more to Dave Ramsey's financial strategy and I'll go in to that in a later post.

How to be Unbroke

I already addressed what unbroke means, but getting there can be a bit of a lengthy process depending on where you start. For my situation, unbroke was 5 steps.

1. Get one month of expenses saved up
2. Learn to budget
3. Get out of Debt
4. Build a Fuck Off Fund
5. Save for micro-retirements

The next few posts will be boring. They'll be practical and all about managing money, budgeting, and being honest about your financial situation. It isn't going to be fun, but it will get you to the point of having fun.

Today will be a fun post with a fun activity. Right now, grab a notepad (or your phone) and write down what you would do if you didn't have to work. If you were retired all of a sudden, what would you do? Make your list of 15 things and really think about how you would spend your days.

Retirement doesn't have to wait until arthritis and gray hair.

My List:

1. Fish
2. Run
3. Pursue artistic interests
4. Learn new hobbies
5. Read more
6. Cook and bake more
7. Visit friends
8. Spend more time with my family
9. Learn a new instrument
10. Go camping
11. Annual ski trip with family
12. Learn woodworking
13. Home projects
14. Travel
15. Write more

 Luckily for me, my list has lots of things that don't require a ton of money. While traveling, skiing, and a new home projects all can be expensive, most of the list I can do pretty cheaply. This is good news for my micro-retirements. Chances are, hopefully, your list doesn't just contain 15 things that cost thousands of dollar each. If it does, you'd better be willing to postpone your micro-retirements longer than me.

In just under a year, I've gone from having more debt than my annual income to my first micro-retirement. I have 13 weeks off with two vacations planned. The boring, tedious follow up posts will show the strategies that worked for me and what didn't and how to implement them. Trust me, it's worth it.

What Does 'Unbroke' Mean?

I don't think I'll ever retire. There are lots of blogs about retiring early. Some of them are really inspiring! But a lot of them focus on not retiring in the traditional sense, as much as having enough money to pursue hobbies and the priorities in life. This blog isn't really any different, but the target audience is. There are literally hundreds of articles that denounce us as flaky, selfish, entitled job-hoppers. I know that's not all there is to tour story, and that's why this blog is different.

One thing that really shaped the way I think about money is 'The Four Hour Work Week'. I listened to that audio book voraciously. The author, Tim Ferris, talks about how most people who retire young either get bored after a few years and end up going back to work, or they get sick and die. He proposed that "micro-retirements" were the way to live. In theory, one sets up a business that generates enough income with a minimal amount of work in the end, so that one can then "retire" for a few months. Once "retirement" is over, either the individual once again manages the business from a hands-on perspective and expands it, or starts a new business and repeats the cycle.

Let's say that Average Joe works 40 hours per week*. Let's just pretend Average Joe had the luxury of not working until graduating with a bachelors degree at the age of 23.

One of the many reasons someone might take an extra year or two to graduate.

Average Joe finds a job (maybe not his dream job, but let's cut poor Average Joe a break and have him be employed) the summer after graduation. Average Joe then will be more-or-less consistently employed for the next 42 years. If he takes two weeks of vacation each year, he'll have worked 84,000 hours by the time he retires. This assumes he never works overtime or becomes a salaried employee.

84,000 hours is more than 9.5 years!

That's a lot of hours. I worked long before Average Joe. I'll work long after Average Joe. Being unbroke is about not being miserable for 84,000+ hours of life.

To me, being unbroke is about having enough financial freedom to stop and start traditional jobs as I please, or opt out of traditional work entirely. It's about putting my money to work so I can experience things, not just working for the weekend/vacation/retirement. That's how this generation is different, and why we feel differently about money.

*I know for young individuals, hours spent working per week varies greatly. There were times in my life I worked 16 hours each week and times I worked 75+ hours each week, but his name is Average Joe for a reason.