I started my journey to early retirement and financial independence in early 2010 just as I was turning 28 years old. I felt that my 20’s had largely been a financial waste, as I spent money just as fast (or faster) than I earned it and largely felt okay about it. I never really looked at financial statements because I knew I wouldn’t like what I was going to see. I racked up credit card debt, student loan debt and spent cash like it was going out of style. I don’t know why, but something just “clicked” one day in my head as I realized that I was on a path that was unsustainable. I hunkered down and decided to break out all my finances and see where I stood. After all, you can’t know where you’re going if you don’t know where you’re at.
First, what is net worth? Basically, it’s all your assets subtracted by all your liabilities. You take all the assets you have (cash, home, stocks, bonds, etc.) and subtract all the debt you have and money you owe (mortgage, credit card debt, etc.). The number you’re left with is your net worth, or how much you’re worth financially.
To my disappointment, when I finally sat down and did all the calculations, I found out that I had a net worth of NEGATIVE $19,000. I wasn’t totally shocked, as I knew I wasn’t in great shape. But, looking at the numbers I realized something tragic and depressing. I realized that I was worth more money as a baby. I came to the realization that as a small human being, one that couldn’t talk or walk or feed myself, I was worth more money because I was worth exactly $0 as a baby. I had no assets or liabilities. I didn’t have a dime to my name, but I didn’t owe anything. That hit home pretty hard: after being alive for nearly 28 years and going to elementary school, high school, college, getting a “real job” and thinking of myself as a pretty intelligent person, I had actually managed to have less money than I did when I only knew how to cry and poop myself. Wow!
It was then and there that I knew I had to make significant strides in my life if I wanted to have a better financial future than my financial past. I picked up Your Money Or Your Life at the local library and read cover-to-cover. I decided to self-teach myself investing. I started reading investment blogs, skim financial books and magazines and opened an account with Scottrade.
Looking back on it, two years into my journey, I’m extremely glad that I decided to change my ways. I’m turning 30 in a couple months and I’m very excited about what the next year brings me. In the past two years I’ve cut out all debt except for low-interest and tax-deductible student loan debt, increased my credit score by over 100 points as I’ve managed my credit extremely responsibly and now actually get paid to use credit cards, increased my investments from $7,000 to $65,000, received a raise at work as I’ve steadily and increasingly applied myself at my job and now can say I’m worth much more than I was when I was a non-talking and non-walking baby.
How about you? Were you worth more as a baby? Is now the time to make a change?
Thanks for reading.
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