My Journey To Financial Peace

There's nothing worse than waking up and realizing how far in debt you are. I know, I've been there too and with the prices rising in 2022 life has become even more unaffordable for most people. The hardest part about tackling your debt is starting. Once you decide to change your future and provide a better life for you and your family then you are ready to roll.

I moved out of my parents house to move into the apartment that my soon-to-be wife and I would be sharing after our wedding. We were EXTREMELY excited about starting our life out together. We had a place to live, $27,500 a year in salary to accomplish it, and nothing but excitement and hope.

We very quickly learned that $27,500 was not enough to survive, at least not to the standard that we were hoping. Debt started piling up, we took refuge in the Wendy's that was a block from our house with the $4 unlimited mini frosty's for our dessert for the year and we slowly started building up a mountain of debt. Where did the debt come from? The car needed repairs and new tires. The family vacation that everyone went on and we couldn't afford to go was financed by a 0% APR credit card. We bought a freezer to help us save money on food. We had to put our sofa on a payment plan to be able to at least have a place to sit. Very quickly our debt became almost what we made in a year of working. Student loan payments were about to begin and life was hopeless. I looked at my wife then and said "We have to fix this."

I personally started looking for ways to make more money. The first step was asking for a raise from my place of business. I went into data-analytics mode and found out how much I currently was making my company. I was single-handedly responsible for roughly $1.1 million worth of revenue. With a 15% margin that would bring in a profit of around $1650,000 .  Given the fees that they had to pay to keep me employed (benefits, equipment cost, taxes) it cost them roughly $15,000 just to have me as an employee before paying me. That put it at $150,000 a year in profit I was generating. So, I divided that by 2 and came up with $75,000 as a great salary for the current value I was providing. I created a document showing all of the math and all of the numbers showing how if I was paid $75,000 a year, then I would be justified as having as an employee. BUT, I didn't stop there. I gave them a 3 year plan to raise my salary to get me to $75,000 with the promise that I would increase my benefit to the company equally to offset the expense of my additional salary. I asked to start at $50,000 walking out of the meeting and they increase my salary by roughly $8,333.33 a year for the next 3 years after that. They countered with putting me at $45,000 and giving me $10,000 in raises every 6 months. Their offer got me to $75,000 much faster than my current plan and we shook hands. I left that day extremely happy.

Now you have to understand WHY I was paid so little to begin with. This started as a part-time job, that then turned into a full time job that allowed me to take off as much as I needed to finish getting my degree. Sometimes I was in class for an entire day. However, I loved this company and I wanted to continue to work with them. My boss agreeing to raising my salary the way he did gave me a TON of respect for the man. I am forever appreciative of him. 

But why did they give me the raise? That day I became the highest paid employee at that business. The reason is, I didn't ask for more money for doing the same job. I told him I would create the value to the company to match my raise and I did. By the time my salary was $75,000 a year, I was bringing in roughly $2 million a year in revenue AND helped bring the profit margins of the company up to 22%. That was roughly $440,000 in value to the company versus the $160,000 I was bringing to the company. Why can't they just pay me $220,000 now? Because the company was growing, hiring more employees and trying to build a company that was stable. Also, even though I could easily track my performance leading to the increase in revenue, we were a team and without my team my work would never have been able to be that effective. 

The key I learned here is to never just ask for a raise, but to ask for a way to increase your reward for the value you provide. This is a lesson I would continue in my career and is why I am continually seeing raises, bonuses, and stock in the companies that I work with. I never say "I need to be paid more". I always say "What do I need to achieve to be at this level". 

Now that I was making a higher salary AND working part-time outside of my main job on nights and weekends, we started chipping away at our debt. It had ballooned to over $90,000 in debt by this point (both my wife and my car died on us the within a year... so car debt + credit card debt + student loans). I was terrified. I calculated that with our current bills and with interest it would take us roughly 6 years to pay off all of that debt. I got angry. I felt hopeless. Our debt was growing just as fast as my salary was growing. To make it worse, our apartment decided to plaster the name "Luxury" on the building and started to renovate new units. These were DOUBLE the rent that ours was currently, but our renewal was months away and the rent was only $50 less than the newly renovated units. I talked to them about moving us into a new unit if I was basically paying the same price, but we ended up finding a house that was 3 times the size of our apartment and the mortgage was literally 1/3 of the price of the new rent. Moving into the house added even more debt, because we didn't have enough for a down payment we had to pay PMI until we paid the mortgage down to 80%. I looked at this PMI as more debt. We were now in over $100,000 worth of debt. 

I switched jobs not long after achieving that $75,000 a year salary for another job paying the same. It was actually a pay cut, because the new job didn't pay for our benefits 100% AND the insurance was worse costing me much more. However, I was the lowest position in the new company where the old company I was as high as I could go. If there is no where to move up, then you are stuck. I wanted to learn from others as well, so I moved to a larger company. It was rough the first two years, but after that it has been the best decision of my life. 

Was I ungrateful for the last company? Absolutely not. I was a software developer working for an e-commerce company. Everything they did relied on me. If I were to have been killed or left the company they would overnight be in a ton of trouble. I wanted to put them on a safe path and created a plan to migrate them to a new e-commerce store that they could maintain themselves without the need for a developer. Sure, I had to do a lot of custom code at first to get them setup, but after that it was all maintainable by them. It was a two year plan that they didn't utilize until well after I left the company, but I was able to work part-time to maintain their systems for years until I was finally able to move them over to the new system. Now they can control everything themselves and it doesn't involve paying outside developers or me anything. This was exactly what we both wanted and I'm so happy that we were able to achieve this together.

Working a full-time job and working nights and weekends for my previous company led to me working all of the time. It also led to me making a massive dent in our debt. In one year I had paid down over $16,000 worth of debt and I was feeling pretty amazing about it. But, the student loan payment increased (we are on a graduated plan that increases every other year and it's a 10 year repayment plan). This would make it harder to pay more on our other debt. To make it worse, both of the AC units on the house died within a few months of each other and increased our debt again by roughly $16,000. We were back where we started. I felt sick to my stomach. I hated the feeling of being stuck in debt.

My wife and I sat together. I felt miserable. No matter what we did we kept increasing our debt. We had to make a change. We bought a home security system that was "recommended by Dave Ramsey". I had never heard of that guy, but when I was installing my security system my dad came over and asked "Is that the system recommended by Dave Ramsey?". I was like yeah, who's that? He told me he's that financial guy that helps you get out of debt. I was hooked. I wanted to learn everything Dave Ramsey knew. I started watching the Ramsey show and learning his methods through his callers. It's available on youtube now and I highly recommend it. My wife and I decided to do a budget. It was a MASSIVE failure. Through that failure my wife and I developed The Weekly Budget system. No, there's nothing to pay to learn my secrets, it's all in that post. But this is where we actually started to make a difference and to destroy our debt.

At the new company I wasn't happy. My wife and I were expecting our first child and my wife wanted to be a stay-at-home mother. This was going to cost us a good bit, as she wouldn't be bringing home her full-time salary from her job. I knew it was a big ask, but I went to my manager and talked to him about what I could do to increase my salary to a place that wouldn't hurt so bad. I had recently received a lot of interest from another company and while I didn't want to move out of state for the new job, it was a significant amount of money.

I went into the meeting room and I let him know what was going on in my life and why I felt that I personally added enough value to justify the massive pay raise. I went from being a small contributor on the team to the lead developer. My contribution on a team of 6 was around 5% when I was first hired and was close to 90% when I was asking for the raise. I did let him know that there was another offer from a company, but that I was not interested in it and had no plans of taking it unless I absolutely had to. I wanted to be honest and clear.

I remember him looking at me and telling me that there was no chance that I would receive the raise. He told me that he thought that I had a lot of valid points, and he would do his best, but that he would have to work with HR to try and get the budget for this big pay increase. 

The day my daughter was born, I received a phone call from my boss congratulating me on the birth of my daughter. We received a large gift basket and a note from everyone on the team letting me know they were excited for my new adventure into fatherhood. In that phone call, he also told me he called me as soon as HR called him. They approved the increase by promoting me to a higher role. My job would be the same, but I was a more senior developer now and the pay was there to justify my new role. 

So what happened by asking for a raise this time? I literally asked my way into a promotion. 

Even with the new raise, we were making less now then we were when my wife was working. I was no longer working the contract job on the nights and weekends anymore at the same time. So we had to stick to our weekly budget and do everything we could to save enough to pay down our debt as fast as possible. We used the snowball method Dave Ramsey touts and quickly paid down our debt. It took a few years, but as the number of loans started dropping it was amazing to see. We spent every bit of our effort to get rid of our debt. We accomplished it in just 3 years. We owned our only vehicle, cash-flowed the birth of our second daughter, and cash flowed a lot of upgrades to our house. We were debt-free in everything except for student loans. It was the biggest relief I've ever felt in my entire life.

Now that the debt was gone, we started to save money. We were never going to go into debt again. I was all about Dave Ramsey's way.  Then... I learned something that Dave Ramsey didn't know. Debt that has a low interest rate for an improvement to your home is actually not bad debt. Why? Because if you borrow $15,000 to renovate a bathroom and it adds $20,000 of value to your home, it's the same as putting $20,000 into your mortgage. Dave is smarter than me... Yes, the bathroom renovation did increase the value of my home, as verified by an inspector. It was actually considered a $25,000 increase in the value, so not quite double the amount that I paid for it. However, I'm having to make payments on that now and the feeling of being debt free is gone.  We also took out a personal loan to pay for home improvements. Now you may be saying "WHY WOULD YOU BORROW MONEY TO DO HOME IMPROVEMENTS? DAVE RAMSEY WOULD NEVER APPROVE?!?!?!?!".  I agree with this and would never advise anyone to ever do this. In my circumstance though, the money we borrowed is at a rate of 6% and I'm currently seeing around a 34% on my investments. Instead of withdrawing my investments, I borrowed money to create an emergency fund. These are in an account earning 3.7% interest so it is only costing me a small amount of interest to have this money, and with keeping my money invested I'm actually making a lot more than I would if I didn't take the loan at all.  Again, this is not the Dave Ramsey way, it is not safe. My investments could go belly up and I lose everything. But, I didn't borrow more than I can afford to pay off even if I didn't have any investment income.

The reason I call it good debt is the money I borrowed is increasing the value of my home. When we sell our house we will pay these debts off with the sale of the house. They also are increasing the value of my home. I honestly can't wait to pay off these debts and plan on paying them off as fast as possible. But these debts aren't holding me back like the car loans, credit card debt, and furniture debt. When I make these payments I'm paying back a loan but getting increased value in my home. So I'm really paying myself back.

Dave Ramsey and his team are smarter than me. They are smarter than most people who talk about finance. The Ramsey way WILL make you a millionaire at some point in your life. His way is the best way for most people to become financially independent and enjoy financial peace. I highly advise anyone who is struggling with debt to at least try it the Ramsey way. If you find that it isn't for you that's fine, but it is a proven system that will work. 

The reason that I don't do it the Ramsey way is that I am making a massive amount of money on the debt that I am borrowing. Sure, it's debt. Yes, it's risk. But, I'm borrowing money to improve an appreciating asset that is only making me more money. My home has doubled in value since I bought it and it is continuing to go up while most homes are going the other way. Even if my house drops 20% in value I'm still up massively on what I paid for it.