WTF was I doing? One year turn around!

[trailrated]

One year ago to the day I decided to clean up my financial mess and get my life together. I still have a picture on my phone as a reminder that reads the following:

8/15/13 WTF ARE YOU DOING
Combined bank accounts checking/savings: $42.33
Credit card debt:                                         $-1,593.87
Car loan:                                                     $-6,200 (with a year and a half of payments remaining, worth ~$7,000)
401k:                                                           $2,000
Net Worth:                                                  $1,248.46

Today the picture is much brighter, and I could not be more grateful for the support and ideas I have received from those on the forum. Thanks to you all this is my turn around in one year.

8/15/14
Combined bank accounts checking/savings: $18,354.78
Credit card debt:                                           $0 ($5,000 more credit available than before)
Car loan:                                                       $0.00 paid off in full over a year early (worth ~$7,000)
401k:                                                             $11,234.94 (bumped contribution to max out going forward)
529:                                                               $3,178.02
Net Worth:                                                     $39,767.74

I have a lot more I can improve on, but it is nice to know I am heading in the right direction.

[Gone Fishing]

Sweet! Don't forget to fund an IRA if it makes sense!

[Thegoblinchief]

Nice!

We started in October but I really put the gas on in January. Since then we've gone up $22K in net worth, and like you it's like what the hell were we doing before?

[davef]

Congratulations. I had a similar epiphany 5 years ago also at age 26. Also with a net worth of about 0. Its up to 295k now, and you had a better first year than I did.  If you plan on staying in the Bay area a long time buy a house or condo while the interest rate is low.
Like you, year one I paid off debts and built a buffer in savings.
Year 2 I bought a house. Year 3 my work transfered me across the country so I bought a new house and turned the other into a rental (Its not ideal but it worked well for me). years 4 and 5 I started investing heavily and started Roth IRAs.

Again Congratulations.

[MicroRN]

Congrats!  That's great work!

[FIreDrill]

Congrats! I had a similar turn around about 2 years ago and since then I've gone from a Net Worth of 0 to nearing the 100k mark.  It really is amazing what happens when you are determined. 

[DoubleDown]

Wow, that's a huge turnaround. Exceedingly well done! I'll bet you feel much more at peace, huh, having gained some significant wealth and ditching the debt?!

Also, think how just a few more years of this are going to lead to gigantic, compounded gains. Once you have enough money so that returns start to become really substantial, it's truly astounding. At this rate, you will be seeing that very soon.

[JetBlast]

That's awesome!  Congrats!

[6ftmustache]

Really inspiring, thanks for sharing

[6ftmustache]

DoubleDown at what sort of figure would you say those really substantial returns start to be hit?

[Cinder]

One thing I read (pre-mustachianism) was that once the money you have in your 401k starts regularly growing larger then what you are contributing  (assuming you are maxing it out) that's when you really see compounding take off.  That person said somewhere in the 250k+ range was where it really starts to take flight. 

[sirdoug007]

I would have to agree with the $200-300k range as where you start to really see the power of compound interest.

The key is that, at some point, your investment gains will exceed your contributions and then accelerate past them.  In the beginning you really just see a linear increase that is primarily contributions.  When those investment gains start outshining your contributions things really get going!

[dbanta]

Great job!  Congrats!!

Any advice or specific things you did to make the improvement?  I'd like to share this post with my brother to give him some inspiration.

[trailrated]

Great job!  Congrats!!

Any advice or specific things you did to make the improvement?  I'd like to share this post with my brother to give him some inspiration.

I think the biggest thing that made a difference for me was sitting down and writing out what my priorities were. My brother got the ball rolling by sending me this link http://www.artofmanliness.com/2011/02/08/create-a-life-plan/ and that is what eventually brought me to MMM.

The power that the "life plan" brought was to put things into perspective. Rather than having a choice to do something and seeing if I had enough money in my account to do it, I started thinking in terms of the big picture. I would reflect on what was more important, my future stability or a night out drinking. Saving for my son's college fund, or buying lunch at work instead of brown bagging it. Going on a trip to vegas, or paying off my car and owning it myself. The purchases seemed small that I was passing up but the way that added up over the course of the year was astounding.

[DoubleDown]

DoubleDown at what sort of figure would you say those really substantial returns start to be hit?

Heck I don't really know! There was actually a thread about that very question some time ago, but I don't remember what it was called. And of course, people had different ideas. For me, I think it was at a couple of hundred thousand dollars. At that level, then a 10% return in one year started to equal pretty big money to me! What about for you, what will you view as significant?

[cdttmm]

Wow! Way to go! Congratulations on the amazing progress!

[londonbanker]

One year ago to the day I decided to clean up my financial mess and get my life together. I still have a picture on my phone as a reminder that reads the following:

8/15/13 WTF ARE YOU DOING
Combined bank accounts checking/savings: $42.33
Credit card debt:                                         $-1,593.87
Car loan:                                                     $-6,200 (with a year and a half of payments remaining, worth ~$7,000)
401k:                                                           $2,000
Net Worth:                                                  $1,248.46

Today the picture is much brighter, and I could not be more grateful for the support and ideas I have received from those on the forum. Thanks to you all this is my turn around in one year.

8/15/14
Combined bank accounts checking/savings: $18,354.78
Credit card debt:                                           $0 ($5,000 more credit available than before)
Car loan:                                                       $0.00 paid off in full over a year early (worth ~$7,000)
401k:                                                             $11,234.94 (bumped contribution to max out going forward)
529:                                                               $3,178.02
Net Worth:                                                     $39,767.74

I have a lot more I can improve on, but it is nice to know I am heading in the right direction.

Congrats. I know how you feel, i have myself realized that i was wasting money like there was no tomorrow, just about a yearr ago as well... Incredible how much impact one can have on its own finance when deciding to spend sensibly.

[Flying Squirrel]

This is a VERY similar to mine.

I was at roughly ~$5k Net Worth to about $50k in the past year. I have been really wondering WHAT THE HECK WAS I DOING??? I also got married and combined incomes, which helped boost the net worth a ton. It really helps to have a SO that is on board with Financial Independence.

My life radically changed from driving a sports car to biking into work, living in a huge luxury apartment to smaller place, buying whatever crap I wanted all the time to purchasing only the necessities. I have found that now, when I do occasionally purchase something frivolous, I find so much more pleasure out of it!

Congrats on the huge one year turnaround and good luck on next year!

I keep thinking it will only take about 10 years to retire from when I started... Only 9 years left for me! Hopefully you are on a good trajectory as well!

[Michael792]

Great job, brother! I gotta keep reading success stories like this to motivate myself :) It's awesome knowing it's possible to skyrocket in net worth like that.

[MooseOutFront]

That is a great turnaround!  Though I will say, considering your total investment portfolio value the 529 contribution seems a bit aggressive in a state where you don't get any tax advantage on contributions to the plan.  I would personally prefer the flexibility of taxable investments moving forward, even if earmarked for your kids college.  Maybe max an ESA at $2k per year and then pour into taxable.  The ESA money can be used on pre-college education expenses if appropriate.

[trailrated]

That is a great turnaround!  Though I will say, considering your total investment portfolio value the 529 contribution seems a bit aggressive in a state where you don't get any tax advantage on contributions to the plan.  I would personally prefer the flexibility of taxable investments moving forward, even if earmarked for your kids college.  Maybe max an ESA at $2k per year and then pour into taxable.  The ESA money can be used on pre-college education expenses if appropriate.

Thanks for the input MooseOutFront, I will be sure to look into that. I am contributing a set amount each week into it but quite a bit of that came from family members and was intended "for college". I might change up my contributions a bit in the future. What was given by the family will remain "earmarked" for what they intended. Can you point me in the right direction for some more ESA information?

Thank you everyone for the input and support!

[MooseOutFront]

I figured some of that 529 may have been gifted which makes perfect sense.  My dad put stocks directly in my kids name and that's bit of an annoyance but gift horse in mouth and all that.

Schwab is a great place to open an Educational Savings Account.  They have lots of good low expense ratio, free to trade index funds and ETFs to choose from.  Vanguard no longer offers this type of account.

Here is the Bogleheads wiki on the topic:
http://www.bogleheads.org/wiki/Coverdell_Education_Savings_Accounts

[trailrated]

I figured some of that 529 may have been gifted which makes perfect sense.  My dad put stocks directly in my kids name and that's bit of an annoyance but gift horse in mouth and all that.

Schwab is a great place to open an Educational Savings Account.  They have lots of good low expense ratio, free to trade index funds and ETFs to choose from.  Vanguard no longer offers this type of account.

Here is the Bogleheads wiki on the topic:
http://www.bogleheads.org/wiki/Coverdell_Education_Savings_Accounts

You are awesome, thank you!

[fmzip]

Great Job!

Wish I found a forum like this 15 years ago :)

I've always lived well within my means but boy did I waste a crap-load of money!

48 and still working, fortunately we have no debt and are now saving at least 50% of our incomes. Less than a decade of work left, barring no calamities :)