Jun 14

How we went from minus-$100,000 net worth to +$500,000 in 14 yrs

Most people are so hush-hush about their finances so when you get to peak behind the curtain, it is always interesting. It brings out the haters and naysayers and cheerleaders alike. One of the reasons I write this blog is to give people a data point on subjects most are not very forthcoming about: sex and money being two big ones. As both a person and a blogger, being forthcoming is risky. People stop listening or reading or being your friend. They apply their own faulty logic and reasoning to your situation and dismiss you entirely, or worse, call you a liar or get jealous. They don’t think it can be done, but it can. Realize your situation is yours, but it can usually be improved. It won’t be easy but it can be done.

I’m not great financial wizard nor do I have rich beneficiaries or received an inheritance or won the lottery. I don’t save 50% of my income like Mr. Money Mustache nor have we lived like the wealthy or like paupers. My wife and I have made a lot of early life mistakes and have battened down the hatches and turned things around. We have finally made some traction, and filled many of the leaky holes in our financial bucket. Things could still be better, but we’re more on the right track than before and more importantly, in this journey of life, we’re mostly very happy.

So let me tell you a story. Neither my wife or I got much (any) support once we left the house after high school. Both of us were responsible for putting ourselves through school and living, and despite both of us doing things to keep the costs down as much as possible (jobs, scholarships, grants, doing the RA thing in the dorms a couple years) we still graduated with a mountain of debt. I’m guessing between the two of us we had over $60,000 in student loans. The only good thing about this debt was that the degrees as the end result weren’t Worthless and actually led to relatively stable and well-paying jobs (eventually).

After finally graduating in 1999 we piled on this TNT tinderbox by moving to the very expensive east coast to start our careers. Moving out there, we piled everything into a hatch-back and a station wagon respectively. I think I started out making about $35,000 a year and Holly didn’t even have a job when she moved out to be with me. She was working at a hair salon (a really lucrative career) and even considering going back to school in cosmetology before landing a gig using her degree. Not exactly rolling in the dough, but we thought we were. When you are making a combined $10,000 a year while going to school full time, it seems like a fucking windfall when you’re making $43,000 combined.

Our salaries weren’t commensurate with the cost of living, but to two new grads, it seemed like we had more money than we knew what to do with. So we did what most who comes into this situation does, we spent too carelessly starting to live a livestyle beyond our means. I purchased a way too expensive SUV (it was used at least), paid way too much to have it insured (between payments and insurance it was $600/mo, a ridiculous amount), spent $800/mo. on a one BR apartment (it wasn’t very nice) and we struggled to keep things afloat. We would go into NYC occasionally and bought furniture to replace the air mattress and box crates/TV stand we moved in with. Nary an eye was spent looking at the bottom line, just paid the minimum balances on the credit cards and even deferred student loan payment due to “hardship.” We sucked.

By the time we moved back to the midwest in late 2000 (in a moving van this time), we were even deeper in debt. I would guess with the “new” used cars we both bought, getting deferrals on paying our loans off (meaning we didn’t pay off principal and even added interest, increasing our overall balance), and new and old credit card debt, we were in the ball park of $110,000-120,000 in the hole that we owed (call it January 1, 2001).

…then yadda, yadda, yadda, 14 years later our net worth is nearly half a million (as of June 2014 – dictated by stock market value so could easily come crashing down again), not even counting house equity (which like Rich Dad Poor Dad, I do not think should be counted as an asset as it is a very illiquid investment and is in many ways a liability which I may get into in a future post, but I digress).

Your experience may vary – you may think that’s a lot of money, you may think we’re behind in our savings (I think if we had been even more frugal, and see that number even higher, but at some point there’s this thing called LIFE we live and we still need to enjoy today). I call it a start. But don’t compare yourself to us, do the best you can in your situation. Your cost of living may be less or you may have other factors that impact what you “need.” I believe most everyone’s financial/life goals are two fold 1) to be happy and 2) work if and when you want to, not because you have to. That’s what I am striving for every day of my life. If you find your own way of accomplishing your own goals, more power to you. Different strokes for different folks.

So what the hell happened in those 14 years to swing nearly $600k in the right direction?  The short answer is we stopped accumulating debt, downsized some things, paid off debt, bought a foreclosed home and fixed it up, and started saving/paying ourselves first. It was a long road… is a long road. We are less than a year from being completely debt free with the exception of or mortgage.

Net worth is assets minus liabilities. In the beginning we had nearly all liabilities. By automatically saving/investing a minimum of 10% of our income once we moved back to the midwest we started the snowball rolling, even if our liabilities/debt were very large at the time. We wanted to create an asset that grew and would eventually pay us back and make money on its own, so we need(ed) to create a nut to do this. A little at a time we added to it over the last 14 years, we bumped up savings from 10% to 12% to 15% to 20%. I would love to find ways to get it higher like MMM fans do (some there save 50, 60%). But regardless of the amount, we always paid ourselves first.

With our stable job income, we were able to leverage a little savings (and about a couple thousand dollar parental pre-wedding gift) into a first home purchase, which was a foreclosure with some cosmetic issues and some major design flaws. We put a lot of sweat equity into the house (installing stairs to the basement that entailed cutting out a portion of key room on the main floor, putting in new flooring throughout the entire house, finishing a basement, doing kitchen remodel) and “flipped” it just 10 short years later. We did use the equity in the house to pay off credit cards, and unlike most people, we kept the money off the cards going forward. I am (at least now) very frugal and even though my wife is less so, she has to fight through me on purchases which in turn makes her more frugal as well. We both have savings, and not accumulating debt as a priority, though the extent of the priority is different to both of us.

While we continued to pay down student loans, we also downsized our cars to less expensive models, savings us thousands of dollars a year. Once paid off, we continued to drive them for years after. Our priority since then has been to pay off any car loans and drive the cars until they aren’t safe or reliable to do so. We need two vehicles, unfortunately, but on average, we have been getting 7 years out of the used cars we’ve purchased to date, life well beyond when they were paid off. Going forward, we will likely get much more than that from the new cars we’ve purchased (I know – the frugal police say always buy used, but if you own and drive a new Japanese import for 10-15 years you’ve gotten your money’s worth out of it and justified the purchase – at least that’s how I see it. That kind of thing is in the “could be a little better” category shade of grey on frugality/practicality scale, but one we compromise on).

During that 14 years, we had a lot of life events happen. We got married (spent around $4k on a wedding all in, and maybe another $1k on a honeymoon where we saw national parks in the southwest), both had lasik eye surgery (life changing surgery for me, as I was legally blind without corrective lenses), had two kids (very expensive little buggers), purchased our current home thereby moving again, and switched jobs several times. Our income steadily increased but our spending did not.

That was key to the traction we gained – cut spending to increase the amount going to saving for asset purchases (investing). We found many used items for the children or got free hand-me-downs from relatives. We didn’t buy many new wardrobe items for ourselves. Didn’t have expensive hobbies like a boat (instead used a free canoe). Rarely went anywhere on vacation besides camping or short day trips to nearby communities. Took advantage of free family time at campfires and spent time with our friends at our homes. We rarely went out to eat and rarely went out to the bars except for special occasions. We built a home gym. We didn’t have cable for 12 out of those 14 years (momentary weakness there where we even had the movie channels). And we led a fulfilling life during that time as well, and continue to do so.

If I had tips for others, they would be fairly simple.Matrix Money Meme

  1. Stop spending and consuming. Cut the eating out. Cut the cable. Stop trying to have the latest phone or tablet gadget (many cheap smart phone options out there, going to do a post on that soon). Just stop! Everyone is so self-obsessed anyway, they won’t care if your purse isn’t name brand or you aren’t rocking the latest/newest fashions or driving a safe shitmobile. Just stop already. This mental shift is very difficult for people, but it needs to happen if you have a prayer of creating wealth. Find happiness within, with free stuff from the library, with free parks and family time. So many free sporting events are on regular tv (an internal antenna like the$40 Mohu Leaf will allow you to cut the cable while still watching most of the major events – if not, the $5 beer or hanging with a neighbor will still be worth the net $100+ savings a month…think about it. Stop being a sheeple)
  2. Begin saving. Even if you are paying down debt at the same time, start saving anyway you can. An emergency fund is a great start to cover those unforeseen events so you don’t have to use your credit card (and can subsequently pay that off). After that, if you have access to tax protected retirement accounts, that’s a good place to go, and stupid if your employer gives you a “free” match. If not, open up a brokerage account like E*Trade and start the snowball rolling. Buying ASSETS that we expect will increase and/or throw off money like dividends or interest or rental income.
  3. Look at the big stuff like cars and house. These things cost a much larger percent of our income, and therefore, while very painful to address, need to be looked at as perhaps the key to getting out of debt or making that delta between income and expenses grow (to increase savings). Was it any fun for me to trade in that nice SUV I erroneously bought for a POS manual transmission ghetto car with tinted windows (seriously. I got pulled over one time for having my windows “too dark”)? Hell no, but that’s what we did. And that type of thing makes a huge difference. If you aren’t upside down on your car or house, look at downsizing or even moving to a less expensive area (or even; gasp!; an apartment – keeping in mind the life costs like commute) to save even more. We have one of the smallest houses in our neighborhood and that’s how we’d like it.

The compounding power of a properly sized nut that starts to roll on its own should not be underestimated (especially if someone else, like your employer is giving you free money in a “match”), though many don’t understand it well. The thing is, once you start the ball rolling, and seeing this number keep going up, the more you want to find ways to increase the speed in which that happens while reducing the drain (debt) on this. The next chapter of our lives will be finding ways to further increase assets now that we’ve at least got a decent start, or finding more passive streams so that we can back off stressful working conditions and spend more time with family. THAT is what gives me happiness. Family. Love. Wife. Kids. and I don’t expect that to change.


  1. Tom

    Thanks for this post. Been a frequent follower of your blog for about a year now and always wondered what your financial situation was like after you finished school.

    As a fresh graduate from university it’s sometimes hard to fathom I owe approx 30k in student loans but nice to know there are people out there who have been in the same situation and are doing relatively well despite being in so much debt. It shines a light to the end of the tunnel.

    1. AverageMarriedDad

      Glad to provide a point of reference. It can be a daunting mountain to climb when you start. Better to take the long view, chip away at it little by little, as 10 years passes quickly and before you know it your situation is night-and-day different than as a young man. Best of luck.

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