The big WIN that I had in 2020 was getting to zero net worth. Doesn’t sound like much I know, I am now in my 30’s, basically starting from scratch. But for me it was a huge struggle to pay down debt and build wealth, and signified a momentous accomplishment.

4 years ago my net worth was around -$550,000 due to student loans and a mortgage. That amount was nearly debilitating to me. It was always somewhere in the back of my head, that if anything crazy were to happen, there is no reasonable way that I could climb out of that.

Zero to me is a clean slate, an even playing field, a point from which I can start moving up.

If you have struggled with debt and are trying to build a financially stable future, I am right there with you. These are 5 things that helped me to turn my financial life around: 

1. I moved back in with family as an adult

I consider being able to move back home a privilege, and one that is definitely not for everyone. I was lucky that my family was thrilled to have me back. I had lived in Southern California for the greater part of 10 years at that point, and when I got a chance to do my residency in the Bay Area, they were happy to just have me back home. I got to spend more time with my grandparents while I stayed with them for a year. Then I lived with my mom, and eventually my grandma,  in what she would always call the “girls house.” During this time I was able to save a significant amount of money, considering the standard cost for a studio apartment in the area was $2000-3000/mo. I also ate better than I had in years, for free.

2. I worked – a LOT

For the first 3 years I worked 6 days/week and some nights. This was definitely not the norm in my industry, where most of my friends and colleagues were only working 3-4 days/week, but for every extra day I worked, there was a significant bump to my paycheck and I was able to put all of that away into more savings. I was also grateful for a very understanding significant other, who in a long distance relationship had to do the brunt of the traveling.

3. I got financial advice

I have not used a financial planner on a regular basis, but initially I got a consult that set me up for success. I have a cousin that put me in touch with his advisor, Emi, at Mercer Advisors and she did a free consultation with me. It was really early on in my career and she set me on a path to making good money decisions. The things she had told me to do in that initial visit were:

• Max out 401K, IRA, and/or HAS
• Continue saving at a rate of at least 10% (hopefully more)
• Don’t put money in really aggressive stocks if I want it for a house downpayment within the next 5 years
• Use anything extra to pay down debt

Eventually, I learned about the FI community and that gave me additional resources. I got my intro to it through Millennial Revolution. It was super interesting, but a little overwhelming. I was so far from thinking about retirement, I just wanted to figure out my debt, so I started finding podcasts, books, and blogs. I listened to “How to Money,” “Popcorn Finance” and “Choose FI” regularly, followed blogs like Modern Frugality, Frugalwoods, Mr. Money Mustache, and The MadFientist. I read Broke Millenial Takes on Investing and Total Money Makeover. The more I researched, the more I felt a sense of ownership and control over what I could accomplish.

4. I tracked and automated my finances

This had a huge influence. Cliches often hold some truth, like “Knowledge is Power.” Tracking: Facing my finances was a really big step in starting to tackle them. I used a lot of excel spreadsheets (the networth calculator from madFIentist is great if you need one). I was able to start saving monthly for expenses that occurred yearly or things like continuing education and travel that I knew I wanted to spend on. This way I wasn’t hit with as many surprises.

Automating: I ended up opening different accounts, but many accounts will allow you to partition out your savings. When I was on salary it was really easy because I was able to just set amounts to transfer to savings, automatically invest, and separate in set savings categories like bills, travel, work related expenses, etc. Ally made it really easy to set buckets. I set all my bills to autopay and had an account it pulled from that was always a month ahead.

Tracking gave me a much better awareness of my finances. And once I had an idea of what I needed, I was able to set up a system so that I was making continuous strides towards financial goals, without having to always be thinking about it.

5. I started investing

Investing was terrifying for me. In all honesty, it took me years longer than it really should have to start. I was so afraid that I was just going to do it wrong, that I didn’t want to do it at all. I started reading journals and tracking some stocks, but the amount of information was just overwhelming.

Eventually I heard of a few ETF’s that kept coming up, VTSAX was the first one. It seemed easy enough, so I set up a  Vanguard account, and set an amount that autoinvested just into that one ETF twice a month. I did that for a couple years and literally nothing else. That was how I started investing.

Now I diversify a little more, but 80% of it is still set up to autoinvest twice a month. I can’t say that I really know much more about investing now compared to 10 years ago, but even when I haven’t gotten paid yet, now it’s fun to watch my networth growing just through investments.

I still don’t actually know if I’m doing it “right,” but whatever it is, it seems to be working. Sometimes, it just takes starting.

Why did I use net worth as a unit of measure and not debt payoff?

I have a LOT of debt, and generally the same type of debt. I read some Dave Ramsey, and the idea of getting completely out of debt was very attractive. I read so many posts about “how to pay off student loans in 3 years.” For me it just wasn’t feasible. I have so much student debt that if I only focused on paying it off, I wouldn’t be able to take advantage of growing any investments for possibly decades. I also didn’t want to just invest without making faster progress on getting out of debt because of the emotional impact the debt has on me. I chose to split my earnings into both investing and paying off debt early, so tracking net worth changes was the best measure of success. I use Personal Capital to track it and it is very easy for me.

If you have credit card or other high interest debt (anything above 7%), a laser focus on debt payoff only will be the most beneficial. I really like the idea of having a single focus, like debt payoff. I think it is easier to have one focused goal, implement protocols, and get quick emotional payouts. It just wasn’t right for my situation.

Why didn’t I just focus on investing?

The first big hurdle was that I didn’t feel like I knew how to invest, it was confusing and scary as hell.

If you ask financial experts though, many will say that when it comes to lower interest debt, you are better off holding onto it and focusing on investment because you will get more gains.

I am really looking forward to 2021. This will be the first year where I get to start really building wealth. I also get to start planning a wedding this year! More to come on that.

My next big goal – Payoff private student loans and mortgage by 2025.

What are you looking forward to in 2021? 

xoxo, 

Wayfarer