This is what my face looks like when I think about my finances.
Making this information public feels a little bit like having someone yank my pants down in front of a large crowd. No more secrets, just letting it all hang out.
Can we just be honest? In this society, we love to gawk at people. Celebrity news is the prime example of this - and c’mon, you probably look at that shit. It’s only natural, we all wanna know what other people are really doing.
I remember walking through the suburbs with a friend from out-of-town. She said, “I wonder what’s going on behind all these closed doors. Out here in the suburbs, the craziest shit is happening. This is where that Blue Velvet shit goes down.”
Warning: The image below is safe, but the video becomes NSFW pretty quickly.
Hopefully my personal finances do not remind you of Blue Velvet. But, they are not impressive. Here’s what I am starting out with:
—
MATT SOKOL’s PERSONAL FINANCES AS OF JUNE 9 2017
(note: bank names are left out and minor details scrambled for security reasons):
Assets:
Bank Account #1: Guilt Free Spending Account: $100
Bank Account #2: Business & Bills Account: $34
Bank Account #3: Emergency Savings: $80
Bank Account #4: Steem Power: $3,600 (!!!)
Debts:
Credit Card #1: $6,000 // the big annoying one - payments of $180 per month
Credit Card #2: $300 // the small one - payments of $30 per month
Money Owed to My Dad: $12,000
Note about the last one - my dad lent me money over the course of about five years after college for various stuff - mainly for my first move to NYC & later relocation to North Carolina.
This was extremely generous since he doesn't have much to spare. We’ve agreed that I will start paying that off at a rate of $200 per month as soon as the other two credit cards are under control.
For the record, I am fully embarrassed every time I type the phrase “money owed to my dad.” I know many people are not so lucky to have a parent who is able to lend them any money.
—
What Does it Feel Like?
Before I go any further, I want to explain what it feels like to make your personal finances public.
One on hand, it’s embarrassing. As a 26 year old dude with a college degree and all that, being $20k in debt w/ only a few hundred dollars per week of income is not desirable.
On the other hand, it is liberating. Who cares? It has no impact on my actual well-being if you read this and laugh at me. Go ahead, mock me in the comments. Bring it!
More importantly: There are many people in this world who live off of a few bucks a day. It doesn’t matter so much if I have a lot of money by American standards - by having a house with running water and food in the fridge, I’m already living a luxurious life compared to many other people in this world.
With that said, if I want to travel and live in various cities around the country (and eventually around the world), that requires money. I’m lucky to have this opportunity to earn more and will be doing my best to earn financial freedom.
That’s the mindset.
—
Short Term Goals
After a lot of research, I found two personal finance gurus who really resonate with me: Dave Ramsey and Ramit Sethi.
I love Dave’s debt snowball concept. You just pay off debts from smallest to largest. No worrying about interest rates or perfect optimization. Just crushing debt one at a time, feeling good about being able to see the progress.
That means I will be paying off my debts in the following order:
-Credit Card #1 - $300
-Credit Card #2 - $6,000
-Money owed to my dad - $12,000
But, how to decide how much income to allocate to debt? It’s easy to go crazy when every single purchase feels like a mistake - “Damnit, I spent $5 at taco bell, that should have gone towards the debt.”
That mindset does not work for me. I’m too inclined to worry about every single dollar I spend if I think that way. Instead, I use Ramit’s much simpler method of breaking down income by percentages:
20% of income goes into my “guilt free” spending account.
30% of income goes into my “business & bills” spending account.
45% of income goes towards debts. Minimum payments first, then snowball.
5% goes into emergency savings.
This system can be automated if you have a full time job. I’m a freelancer who has to invoice and get paid without any corporate assistance, so I do it manually. Ramit would probably say I’m a big idiot for doing this by hand. But that’s ok.
My “big” short term goal is to pay off all of these debts and reach net worth $0. My “realistic” goal for this is to do it by the end of 2018. My stretch goal is to do it in a year, aka by June 2018.
That’s kind of crazy, because it means I’ll be doing this series for years! But that is the ultimate truth of personal finance: Ambition must be tempered with patience and pragmatism.
The myth of Icarus applies in spades here. Fly too low (i.e. safe low-paying jobs) and you won’t make any decent money. Fly too high (i.e. high risk ventures) and you end up in a bunch of debt with no prospects, because your start-up/band/portfolio blew up in your face.
My hypothesis is that working hard in a smart way, combined with patience, is the key to creative financial freedom. You don’t need a huge win to make it happen.
—
Whoa
this post is already pushing a thousand words! I’m going to stop here for today.
Next week I will reveal my income sources: How much do I earn per month, and where from? Then we can do the math, see what my projected finances look like for the next six months, and go from there.
I’m very interested to learn: How soon can I move away from Connecticut? How much of an impact will there be if, for example, I double my rent payment from $300 per month here to an average of $600 per month in a more expensive/desirable area?
That will be a very useful exercise for both of us, I hope.
Thanks for reading!
—
It only takes ten seconds to join my weekly email newsletter, packed with mind-expanding media from around the web. Sign up here: https://mattsokol.us
Good luck and i really enjoy financial freedom topic too. My plan utlimately is to project how much i need to spend per year and then divided by 4% to get the capital i need. This assume 4% is the average return one can have with diversified portfolio. Inflation may kick in so you need a bit buffer as well.
Ya - sounds like you are following the same exact strategy as me. My goal of one million dollars is based on a yearly income of $40,000, which is a 4% return per year. It's not too crazy!
Debt sucks. Keep crushing it!
thanks nepd, your continued support is giving me the extra boost I need to keep crushing it. :-)
i have a funny story about my email i sent to Ramit Sethi. He was wrong. I explained my situation in detail, about how I'm an entrepreneur, but at the time wasn't making enough money. His advice to me was to quit all my entrepreneurial pursuits and go get a 'real job'. He was harsh too.
I didn't take his advice. Instead, I busted my ass and found a writing job that paid peanuts...but I was writing science articles, which was pure joy for me.
Right around that time, i found steemit. The day i found steemit, i quit all 'my low paying writing gigs', and started blogging on steemit full-time (well actually more than full-time.) Soon it took over my life. i am in the best financial situation i have ever been in now.
I am glad i followed my passions and ignored the advice I received from Ramit Sethi.
That's an interesting story and I'm thankful that you shared it. Ramit seems to suffer from the same issue that a lot of "gurus" in any field suffer - basically, overconfidence and thinking they have the answer for EVERYONE.
I'm glad that you didn't give up on your pursuits, since it's clearly working out so well for you!
One question - when you say full time on steemit, you mean this is the only way you earn money right now? I ask because I've also toyed with that idea - what if I put 100% of my effort into this platform and truly went all-in? - but right now, I'm doing a diversification strategy of trying to maintain a wide variety of income streams.
Curious to hear what you think about risk diversification - do you just accept the risk and roll with it, or do you have some safeguards in case (unlikely as it is) steem crashes or even dies?
no, i have 4 different income streams, but I make most from the Dash DAO and Steem.
It feels like we are keeping track of your life. Your readers are facing it with you together! Keep Up :)
That's the idea ;-). Thanks for the support as I work towards my dreams :-D
Hey good luck! I appreciate you being honest and giving full disclosure. It helps other people (myself included) come to a better understanding of our own financial situations, and feel like we are not the only ones who need to deal with getting ourselves out of the hole and onto a better financial future. As a young man I have never paid much attention to my budget and how to best allocate my monthly income the smartest way. I recently started reading 'secrets of the millionaire mind' and it gives a great blueprint for how to go about dividing your assents into percentages, much like you are doing. Keep it up and good luck. One day with the help of steemit and smart choices we can become financially free!!!!
Cool, I've never heard of secrets of the millionaire mind. Might have to check it out - though right now I've just started reading Rich Dad, Poor Dad on @shenanigator's recommendation, so I'll have to finish that first.
thanks a lot for letting me know that you like this series - I'm really happy that people seem to dig it. While this isn't my most lucrative steem series right now, it seems to be having the biggest impact on people - and that makes it more than worth it.
feel free to let me know if you see me doing anything wrong - could always use some extra advice :-)
I am in the same boat. Good luck! I will write a post these days about it too.
Dude, please do! I would be so happy if you or anybody else followed suit and made your finances public. Maybe we could go as far as to try and get a chainbb subforum for finance support blogs - similar to what some fitness forums do with people blogging their workouts.