Money. We all know its importance or you wouldn’t be reading this post.
Whether you like it or not, it’s what the world runs on. You could opt out of playing the game and become a hobo, but there are very few of us that can live happily ever after in that position.
You can’t let money rule your life, but it’s important to understand its role. Once you can control your capital instead of it controlling you, you’re one step closer to freedom.
The old adage that “money can’t buy happiness” is only partially true. It can’t directly buy you a life of bliss, but it can buy you freedom – and that freedom can give you the opportunity to get out of the rat race and focus on what really does make you happy.
Money is a tool and the sooner in life you’re able to realize this, the better the chances of you making it work for you.
I’ve had my ups and downs with money over the years, but once I actually understood it, everything has fallen into place.
Money early on
I grew up in what was probably considered a regular middle-class family. We lived in a small suburb about twenty minutes outside of Cleveland, Ohio.
As a side note, I was recently told that it’s an “Ohio thing” to describe distance in terms of time like I just did – is that true?
Anyway, it was in a tight-knit neighborhood with the houses packed nicely together. I just looked up my old house (ah, the memories!) to see what we’re talking about. Here’s the scoop:
- Built in 1974
- 3 bedrooms, 1.5 bathrooms
- Single car, attached garage
- 1,912 square feet (bigger than I thought) on a 0.13 acre of land.
According to the auditor’s website, my parents bought it in 1976 (the year after I was born) for $43,000 and sold it in 1992 for $80,000. And it looks like it’s currently worth just over $100k according to Zillow.
In other words, it was a nice, but not-so-fancy house in a quaint little neighborhood.
My dad suffered from what my mom thinks was bipolar disorder and died when I was in the first grade from suicide. That left Mom raising both my younger brother and me until she got remarried 10 years later.
Dad didn’t leave us a fortune either so that left Mom as a working single mother. She had a job in retail for a little bit but then eventually started her own answering service business with a couple of partners.
The business really didn’t pay much, but it did give her the flexibility to work part-time so she could tend to us hoodlums… just kidding, we were actually good kids.
But even with that flexibility, she would still have to leave us home alone during the summer while she went into work for a handful of hours. I was probably around 11 or 12 at the time, which would have put my brother around 10 or 11.
I don’t remember everything about those days, but I do feel like there wasn’t a lot of loading up on crap. Sure, we got some toys and we were always begging Mom for candy at the grocery store, but I don’t think it was anything too outside of the norm back then.
And when it came to money, I was a saver. I mean, I had it in my head that I was going to be rich, after all. But other than knowing that I should have tons of money, I didn’t really know what was involved or what it would give me.
My mom remarried while I was in high school. Although two incomes are better than one, they weren’t rolling in the bucks. They started another small business together that they still do today and that now provides most of their income.
I still remember my first job I got – Convenient Food Mart when I was 16. I started at $3.85/hr. So much for getting rich anytime soon! However, it did give me a chance to develop a good work ethic and understand the working life a little more. I was definitely no slacker – if someone’s paying me to do something, I’m on their time and not mine.
Overall, I grew up in what would probably be considered your typical middle-class family.
The fun and not-so-fun money days
I continued to be a pretty good saver until after high school… but then college showed up.
Wait a minute… if I fill out this application, you’ll give me this awesome plastic water bottle worth about 88 cents AND a credit card?!! That sounds awesome – sign me up!!!
If you don’t already know, a credit card doesn’t mean you actually have any money… oops. Unfortunately, that’s the same trap that many of us fell for at one point or another in their lives.
However, I became a really fun guy to be around back in those days. Dinner with six friends – no problem, I got this – just put it on my card. I just bought some concert tickets – anyone wanna go?
Yeah, that was a lot of fun. But here’s the thing – they actually want you to pay back the money you spend! Jerks.
I racked up around $30,000 in credit card debt over a few years. However, the good news (note sarcasm) is that I had two credit cards so I spent a lot of time paying my MasterCard with my VISA and vice versa.
Not a great place to be at in life, but I made my bed and now I needed to lie in it. Not only that, but I had the saddle of student loans like many college attendees. My mom had set aside about a year’s worth of money toward tuition and I’m appreciative for that.
Welcome to Walmart – would you like a cart?
After my first year at Kent State University, I got a new job. I started working at Walmart. That work ethic I mentioned seemed to pay off pretty good, too. I started part-time in the jewelry department (yeah, I took what I could get), but then moved up to the department manager of menswear and then sporting goods.
Within a couple of years, I was promoted again to the assistant store manager of a different store. I was making decent money for a college kid (around $35,000/yr.), but my hourly rate was probably something stupid like 26 cents an hour.
For whatever reason though, I wasn’t in any hurry to pay off my credit cards. It was almost like carrying a bunch of credit card debt was normal. I just made the payments every month and didn’t even think about it.
I wasted years where I could have paid that debt off and started focusing on building wealth instead.
Eventually, though, things got harder to maintain in a different way. I was living in one city, working full-time in another city, and still going to school part-time in another. It was like a triangle of never-ending driving with no less than 45 minutes between each point.
I became a wreck trying to balance work and school. I was working about 50 hours a week and taking classes two days a week or sometimes in the evenings. I was falling asleep in class and even on the road.
Nothing could make things any more of a struggle… or could it?
It could. I started dating a girl during that fun and she was going to school at a different college… nowhere near the three points of my triangle. When I would go to see her, it was anywhere from 40 minutes to an hour and a half to get there depending on which point I was at.
I held strong for a while but I finally collapsed. It was just too much.
So, my girlfriend and I broke up after about a year of dating and then I later made the decision to punt on retail. I quit Walmart in 1999 without even having a job lined up. But I was still living at my parents’ house and my career change ended up being a smart move.
My first money wake-up call
By this point, I was a well into my major of Computer Information Systems but had zero experience. That’s when you need to step up your game.
I put a suit on and literally went door-to-door where I knew there were a lot of IT firms. I asked to speak to the human resources person, introduced myself, personally handed off my resume, and then moved onto the next company.
It worked, too. I was able to get my foot in the door, which was all I wanted. But the money part of the equation wasn’t so great to start off with.
I still had a year left of school and decided to go part-time for the first year until I graduated. So I took a pay cut down to $12.02/hr. at this job in 1999. In other words, I was making $15,000/yr. for that first year… ouch.
However, I got my first money wake-up call that year as well. I discovered a little program called Quicken. It opened my eyes to how bad off I was financially and it became the catalyst I needed to get out of debt.
After graduating in 2000, I went to full-time and got another pay increase to $35,000/yr. Each year after that, my pay continued to increase at a very nice pace. I don’t share my current salary out of respect to my employer, but I’m doing very well now. Remember that part about work ethic I mentioned – it’s continued to pay off.
The year 2000 was also the same year I met Mrs. R2R. She didn’t go by that name back then and she probably wasn’t thrilled that I was buckling down to pay off all my debt instead of spoiling her. For some reason though, she stuck around and even let me marry her six years later.
Realizing where you stand financially is probably the number one key to growing your wealth. If you don’t know what’s coming and going, you can’t fix the problems in your financial situation.
I continue to recommend using Empower (formerly Personal Capital) to manage your finances. It’s completely free and probably the best and easiest way to track your investments that I know of.
Although Mrs. R2R and I continued to enjoy the here and now, we really buckled down to get things paid off. And it’s amazing how it worked… first my credit card debt and then our student loans. Then it just started accelerating – we were able to pay off our cars faster and start saving money.
Then the saving continued to snowball as well. If you don’t have debt to pay off, then you have more money to stash away. And the more money you put away, the bigger the compounding swing starts to take effect.
It’s incredible to watch because the growth continues to accelerate faster and faster and obviously, that gets pretty motivating to other possibilities in life as well.
The real awakening to money
You’d think that would be the end of the story – debt is paid off and savings is growing. But it gets even more exciting.
My understanding of money has continued to grow more regularly. I consistently learn more and more every day. And the more I learn, the more avenues I find to make my money work for me instead of the other way around.
It started out slow. I started to understand that putting more money into your 401(k) didn’t affect your paycheck 1:1. In other words, since you’re contributing with pre-tax dollars, you’re then taxed on less money. So it’s completely possible to contribute a larger amount to your 401(k) and have the same take-home pay.
This was like some black magic to me… but I liked it!
I started maxing out my 401(k) and my Health Savings Account (HSA) because I was starting to grasp the differences between pre-tax and post-tax dollars.
Then I started to understand how important multiple streams of income can be to your future. I first began with focusing more on real estate. I bought a single-family house that we turned into a rental property. It had its high and low points, but I learned quite a bit. We sold it earlier this year after having the same tenants for nine years.
In the meantime, my real estate knowledge grew somewhat stronger and we bought a duplex. This one was a much better buy. I understood not only what to look for in the property, but also the actual math. And if you don’t know the numbers, you’re just rolling the dice.
Along with real estate, I started expanding into other areas. I wrote and published a couple of technical books. These weren’t huge sellers, but the process helped me understand the nuances much more. Once retired, I have a couple more books I plan to write that I think will generate a decent stream of income based on everything I’ve learned already.
Nevertheless, the biggest awakening I’ve had when it comes to money is discovering the FIRE movement. I always credit Joe at Retire by 40 for opening my eyes to this possibility. I knew that retiring early was possible, but Joe’s story was basically my life as well and that was the motivation I needed to really get it.
I decided to start this blog in early 2015 and I’m so glad I did. Not only is the community amazingly supportive, but the amount of knowledge you pick up just from being a part of things is insane.
I now understand tax optimization so much better (though there’s still a ton I want to learn on this!). I’ve learned how to use different strategies in our early retirement planning like the Roth IRA Conversion Ladder or the bucket strategy that my buddy Fritz discusses at The Retirement Manifesto.
Our money continues to grow now, not just from saving, but also from comprehension. The strategies and optimizations that are available to each of us can make your wealth grow stronger than it ever could otherwise. The key is learning and understanding what’s out there and how to apply the ideas to your life.
We’re still not rich – far from it. But I learned that you don’t have to be rich to be financially independent. And we’re now in a position to chase after our dreams.
I’ll be leaving my job at the end of this year to “retire” and I couldn’t be any more excited about it. It’s an amazing feeling to realize that you’re financially independent and don’t need to base your decisions in life around your wages.
It turns out that the key to making more money is understanding it better. Armed with that knowledge, it’s more than possible to make strategic decisions to have your wealth continue to grow to the point you no longer need to work if you don’t want to.
What’s your relationship with money? Are you in control or is money controlling you?
Thanks for reading!!