I commented in this post about the consumerist fog that in which I was living as a middle-rank American military officer, and my desire to “fix” or improve my situation by taking command of my finances.
How did we do it?
It was simple, but not easy.
After working through the mental gymnastics of being in the consumerist fog, I resolved modify our life along four lines of effort: Tracking, Intent & Direction, Fighting Consumerism, and Improving Relationships.
1) Tracking. I needed to figure out what, exactly, was going on with the income and expenditures. As I said before, it was relatively easy to drift from month to month, bills getting paid, and random purchases getting processed through these pieces of plastic that the American economy ensures we carry. This way of living needed to stop.
So I decided to track. Every penny of income, every penny of expenditure. Pre-tax income, the few pennies of interest earned in our checking account. The status of the student loans payments, car loan payments, everything. Absolutely everything.
To be sure, there are numerous tools available to do this (Quicken, YNAB, pen & paper, etc.), but I chose to build an Excel spreadsheet. I’ll describe this spreadsheet in a future post, but suffice to say that it provided the method to track and analyze what we were doing with our money, to optimize our debt payments, and to assist with saving and investing.
This tracking would have been impossible without taking a very rigorous appraisal of all things financial: Credit reports, statuses of loans, when each bill is due and how it gets paid, pay stubs (to account for the withholding of taxes, insurance premiums, etc.)
Note that I’m not saying “budgeting.” Budgeting is forward-looking. It’s difficult to project future financial needs without some real historical data, so that’s why I put so much effort into tracking the finances, instead of budgeting. You need to build up a history of financial data before you can accurately project what will be required.
Today, my wife and I have 14 months of transaction data saved and available for future use.
2) Intent & Direction. After having started tracking the finances, we decided to cut out the waste. This was done through intimate awareness of how each purchase would affect the finances. Every day of buying lunch while at work had a financial dimension. Each day I filled up the gas tank, each time I decided to allow “extra” money to sit in the checking account without a purpose, each day a loan balance didn’t have a principal curtailment applied–it all had a financial dimension. We had to become aware of it, in real time. This awareness informed our future decision making.
3) Fighting Consumerism. I needed to push back the fog of consumerism that was in our life, and naturally, I turned to books for this. Most influential on me was The Millionaire Next Door, by Stanley & Danko (more info here and here), which is something of a classic among those who care about personal finance. This book really showed me what was possible to accomplish by reasonably well-off Americans who really take charge of their finances. It is a book about how the stealthy wealthy among us arrange their lives, how they build personal relationships, how they invest, and how they control their consumption. It is a classic book in personal finance, and rightfully so.
Also influential on me was The Intelligent Investor, by Graham, which basically taught me that traditional stock investing isn’t an amateur’s game, unless you’re willing to put serious time and effort into it, or risk losing a good amount of your money. Sure, you can speculate, but speculating isn’t investing.
I also turned to a number of blogs: I binge-read Mr. Money Mustache, and read many posts from No More Harvard Debt, Early Retirement Extreme, Frugalwoods, jlcollinsnh, and Get Rich Slowly, and others. The New Yorker just published an article this week on Mr. Money Mustache, the man. (No…we’re not frugally hardcore like him.) These blogs assisted with reprogramming my financial brain by providing good financial tactics and techniques, and they also provided a degree of inspiration: We live in an immensely rich country, with gobs of wealth all around us (seriously!). But we need to wisen up on how to make use of it. When you do, you can really do amazing things.
The dark side of American wealth is really the consumerism. We have a consumption-based economy, with so much focused on immediate gratification of various needs which are, frankly, programmed into us. (T.V. programming is called “programming” for a reason!). When you become aware of this, it’s much easier to resist the urge to consume and instead save that Geld.
On an equal footing of the blogs were the numerous podcasts which I listened to. These were particularly influential because I was able to radically increase my financial literacy during activities which are amenable to consuming a podcast, like commuting, doing tasks around the home, and yard work. Looking back, it’s difficult to really quantify how this changed my outlook on finances, money, and broader life choices. I intend to write a post in the future reviewing these podcasts, but I’ll point out that Joshua Sheats’ Radical Personal Finance podcast has been singularly awesome. His podcasts are a bit long, and they can be rambling, but that’s a function of the information that he conveys. I have listened to all 300ish episodes to date, and it’s been well worth the time. Also, note that “Radical” is in the title: This is not a mainstream financial podcast.
Changing my consumption of books, blogs, and podcasts also had the added benefit of getting me away from more toxic sources of entertainment and commercialism. Each minute spent on a good book is one additional minute away from the consumerist machine. Each podcast episode listened to is one less episode listening to the liberal infotainment of NPR or talk radio. Each blog post about personal finance topics represented actual time NOT spent on other forms of fog-propagating social media (Facebook, for example.)
4) Improving Relationships. I worked to improve the interpersonal aspects of managing the finances. I have a small family: It’s just my wife and me, and a couple cats. That’s all. We each bring strengths and weaknesses to the table, along with different upbringings, experiences, and expectations. Yet we’re a unitary financial entity: A Family. My taking charge of the finances, and ensuring that the finances were being appropriately directed was definitely a change in the relationship dynamic, and that required some significant massaging to ensure that the changes I was leading us toward could be sustainable over the long term. The challenge was to enlist the support of my family in the financial decisions that I was making on our behalf. This was done, mostly through leadership by example, not by cajoling, haranguing, plea, or argument.
Having a supportive spouse is invaluable–I can’t express enough how important it is. Personal finance really is, in total, a summation of individual decisions over time. If a portion of your marital union is working against the other, financial progress will be difficult at best, or perhaps impossible. Becoming financially healthy and getting on the same financial page as the rest of the family go hand-in-hand.
Those are the four pillars that we took to get on the trajectory we’re on right now. What is that trajectory? Well, we’ve managed to save or invest over $11,000 in 2016 so far. We’re on track to invest perhaps $65,000 this year, which, given some Monte Carlo Analysis, will do much to get us toward independence.
Notes: I have no financial qualifications or credentials. You do what you want with your own money and I’ll do the same. I’m just sharing my story.
Additionally, I’m also an active-duty Marine Corps officer. All words I have written on this blog, however, are solely my own, and do not in any way represent those of the US Government.