I woke up around sunrise to find myself lying in the doorway, the door of my apartment wide open and my legs half way outside.  My neck was stiff and my back hurt

Some time later I glanced at my watch and jerked wide awake.  It was Friday and my last final exam was in less than an hour!  I shuffled into the bathroom for a quick shower, threw on some dirty clothes and tossed my suit over my shoulder as I rushed out the door

Big clumps of dirt and grass were sticking out of the grill and wheel wells of my car… and it all came rushing back.  I had finally finished my Senior Design project in the wee hours of the morning, but no amount of Mountain Dew and chocolate covered espresso beans could compete with 72 sleepless hours.  I had passed out driving home and gone in the ditch at 50+ MPH.  Apparently the adrenalin surge carried me only as far as my front door.  Fortunately nobody else was on the road at 4 am

I was young and fit, but working 20-30 hours a week, taking 18 Credits in an Engineering program, and spending another 20+ hours working in the lab would kill nearly anybody.

Over the next 72 hours I somehow got an A on my last final, presented my Senior Design project to the review board, attended the Graduation ceremony, loaded up the moving truck, drove it 100 miles to my new apartment, unloaded it, and made it to Day 1 of my first real job at 8 am on Monday morning.

Debt Slave

A wiser man would have taken a week off, but wisdom was never my strong suit

Of course I was really excited about my new job.  I was making an incredible $39.5k per year (~$55k today) and they even gave me a $1000 interest free loan to help with moving expenses.  Sweet, right?

This was going to really help pay off the nearly $40k of debt I had accumulated in college.  $35k of this was from 3 different student loans, with interest rates of 7.5% to 8%.

The rest was credit card debt for important college student accessories like ramen noodles and canned beans, a diet I would supplement with Saltine crackers stolen from the cafeteria.  I had even paid the $600 deposit on my new apartment with one of those credit card convenience checks.  Credit cards literally saved my life

Taking a week off wasn’t an option.  Debt demanded I start working immediately

Young Money Mistakes

I never had great financial role models.  Even my college accounting and economics classes didn’t register in my brain.  I just knew from growing up on the edge of poverty that debt caused people serious problems and I didn’t want anything to do with it

So even though I had a 6 month grace period on student loans, I started making payments with my first paycheck.  Interest was still accumulating

I was putting every penny I had towards debt, first paying off the credit cards and then extra payments towards the student loans.  If I had $1.47 remaining in my bank account at the end of the month, I would send in an extra $1.47

Paying off that debt was even more important to me than making 401k contributions.  I can save for retirement later, I have another 45 years to save.  Mistake #1

All of the other recent college graduates started driving new cars to work.  I only lived 5 miles from work, but that old beast I was driving just didn’t look cool compared to the sweet rides of my coworkers.  And I think the brakes were going bad, so it wasn’t safe.  I should get a new car too, I can afford it.  Mistake #2

I did eventually start making 401k contributions, enough to at least get the match.  But then I received a letter from my apartment building announcing the units were being converted to condos.  I could either buy my apartment for some ridiculous price or move out

Advice from coworkers was plentiful.  “You should buy a house!”  “Buy the biggest house you can afford, it is a great investment”  “A house is a great tax deduction!”  What the hell was I going to do with a 3 bedroom house?  I have no idea, but I got one.  Mistake #3

The loan terms were really generous, all I had to do was put 3% down and pay an extra $98/month for Private Mortgage Insurance (PMI).  And pay some fees.  Lots and lots of fees.  (“Don’t worry, we’ll add it to the mortgage”)  I didn’t have that kind of cash lying around, so I took a loan from my 401k.  Mistake #4.

And now instead of being within biking distance from work (but why bike when I had this cool new car?) I was now the proud owner of a 40 minute commute and a mortgage payment.  Mistake #5

I wasn’t even 25 years old, and I was living the American Dream! The Ultimate Mistake

Time to Wake Up

This was obviously ridiculous.  Despite being of average intelligence (I think?) I was making completely asinine financial decisions

I wanted it to change.  I wanted the debt to go away.  I wanted a reset button

I made spreadsheets that showed how I could retire at Age 65.  I made other spreadsheets that detailed my mortgage and the supposed tax benefits, and another that modeled my car loan and student loans.  I modeled the s&#t out of that debt…  but it wasn’t getting me any closer to paying it off (I wish I could find those spreadsheets, I’d probably get a good laugh)

I didn’t want to be the guy that could manage his cash flow and pay extra towards his student loans, I wanted to be the guy that was the master of money.  Whatever that was

I started trying to figure out how to do things differently

One of my coworkers was a big active stock trader.  He loved talking about investing, and I talked with him at length.  I learned a lot, but much like all of the “buy a house” advice I had received, I needed to unlearn it later (I don’t think active trading worked out well for him, I heard he still lives in his Mom’s basement)

But something had changed.  I started to get creative.  I was taking the first step

Beating the Banks

The specific details escape me, but I think I paid around $150k for the house.  The bank had no business lending me that much money

Shortly after closing my mortgage was sold by the small local bank that screwed helped me to Bank of America, a lovely organization that I refuse to ever do business with again

But being the valued and respected customer that I was, some time later I received a credit card offer in the mail.  Normally I tossed these in the trash, but something made me think it was a mortgage related document

Inside this magical envelope was an offer I couldn’t refuse.  I was pre-approved for a $10k credit limit.  And for a limited time, all balance transfers were completely free and interest free for 12 months

At this point, to eliminate the $98/month PMI payment on the mortgage I needed to increase my equity by about $10k.  So I used my new credit card convenience checks from Bank of America to write a check for my mortgage, held by Bank of America.

I never had to pay PMI again.  Take that BoA!

Over the coming months I had 2 other similar credit card offers, and used them to pay off my 8% student loan and my car loan.  The danger, and the hope of the credit card companies, was that I wouldn’t be able to pay all of this off during the 12 month interest free period

But I was the master of cash flow at this point.  Those spreadsheets did some good after all

Lessons Learned

I learned a lot in those first years out of college

If you are financially ignorant, lots of people and companies are happy to help you, for a fee.  Never take financial advice from people that aren’t financially successful.  Nobody will look out for your best interests better than you.

But most importantly, I discovered that learning about finances and being willing to be creative could yield untold rewards

It was just 1 more year before I finally clawed my way out of debt.  Compound interest was now working for me instead of against me.  A short 2 years later, Early Retirement became an official goal

No matter where you are financially, the journey begins with a single step