Stop Buying Lattes and Bubble Tea: Invest In Yourself Instead
Write down your financial goals and you’ll be amazed at what you can accomplish.
We all love to treat ourselves out.
Drinking a hot latte at our favorite coffee shop and saying, “Hi,” to our favorite barista is a nice pleasure.
My wife and I enjoy drinking Starbucks.
She loves to drink Frappuccino while I enjoy iced matcha lattes with extra scoops of matcha.
These are luxuries that help us enjoy the now, but they do not help our future selves.
If we are not investing for our future, we risk struggling later in life when we want to buy a home, pay for our kids’ education expenses, or retire with comfort.
Let’s honestly ask ourselves, “Is buying my favorite latte more important than saving or investing?”
If the answer is, “Yes,” we should reflect on how we see our future.
If having everything the same in the future is truly what we want, there is no point in reading any furthur.
But if we realize we want more and do not know how to get there, then we need a plan.
Here is my story of how I went from being in serious debt with no plan to almost being debt free.
My Financial Story
I have made almost every financial mistake you can think of.
I was drowning in debt before I was 30.
I bought a house six months before the housing bubble burst and eventually had to short-sell.
I got multiple 401(k) loans to pay down debt.
I bought the wrong ETFs that kept losing value in my 401(k).
I went back to school to get my master’s, got a student loan, and spent several years in debt and didn’t look for a job that would pay me more.
I bought a fancy electric vehicle that I couldn’t afford and got a car loan.
I spent years trading stocks without having a plan and lost thousands of dollars.
I bought crypto during the hype without a plan and lost over ten thousand dollars.
If you can relate to any of these mistakes, there is a light at the end of the tunnel.
My Lessons Learned
I once heard, “The borrower is a slave to the lender,” that hit home.
I would work hard to pay off my debt, but a portion of that money was going toward interest.
I was working to make someone else rich.
If the lender ever wanted to call in the loan and ask me to pay it in full, I would be in serious trouble.
Then a friend gave me a copy of Dave Ramsey’s Total Money Makeover when he learned about me buying an EV I couldn’t afford.
I read that book and made a decision to be debt-free.
In 2017, I wrote down this goal: “Be debt-free by 2027.”
My Plan To Become Debt Free
Dave Ramsey has a system called the Debt Snowball.
He recommends paying off the smallest debt you have.
I picked the credit card with the smallest balance and made it my goal to pay that off.
Whenever I had money left over at the end of the month, that went into paying off that credit card.
When that card was paid off, I focused on the next debt with the lowest balance.
In order to avoid the credit card debt from getting bigger, you stop using credit cards and used cash for everything.
That’s what I did.
For six months, I carried cash and paid for everything with cash.
I kept using cash until all my credit cards were paid off.
I introduced credit cards after that but with the rule that I can only spend what I can pay off in full.
Another thing Dave Ramsey recommended was stopping investing in stocks and retirement until all your debt is paid off.
I didn’t agree with this.
My employer matched three percent of my 401k contributions.
That was free money I would be throwing away.
And I would be hurting potential growth on my 3% contribution and the 3% match.
Dave Ramsey’s perspective is that once you are debt-free, you can contribute even more toward retirement and make up for lost time.
The market history has shown that waiting to invest hurts your potential growth.
Plus, you pay less income taxes when you contribute to your 401k.
That’s why I didn’t follow his advice on stopping retirement contributions.
I contributed just enough to get my employer’s match.
My Progress Toward My Goal
I have accomplished a lot since I wrote down my goal.
I have no more credit card debt and I pay my credit cards in full every month.
I paid off my student loan.
I paid off my car loan during the COVID shutdown so I had peace of mind in case I lost my job.
I have paid off almost 50% of my mortgage.
I have enough invested to pay off two thirds of my mortgage if I wanted.
I would pay off my mortgage but my financial advisor keeps talking me out of it.
He says that the market has greater returns that outweigh the interest I am paying with a 2.75% mortgage interest.
I will give him that.
When it comes to late 2027, I will sell some of my investments to help me achieve my debt free goal.
Also, I developed the PIMM Trading System so I can have a plan and set of rules to follow to help me be successful in the stock market because invest a portion of my money independently of my financial advisor.
I invest in ETFs that pay me thousands of dollars in dividends (some which are tax-free).
All that came from writing down a goal of where I wanted to be in ten years.
What Is Your Journey And What Can You Do?
I shared my mistakes and how I learned from them.
Feel free to leave a comment, and we can discuss how to invest in yourself.
Here are my suggestions for you if you are struggling with debt.
Get Out Of Credit Card Debt
If you have credit card debt, read Dave Ramsey’s Total Money Makeover and follow the Debt Snowball.
Stop using credit cards and use cash until you pay off all your credit cards.
After that, you can introduce credit but promise yourself that you will never get back into credit debt again.
Invest In Your Retirement
If you are not investing, start.
Start with the minimum contribution in your 401(k) that will get you an employer match.
If your employer doesn’t match, start with 3%.
Every year, increase your 401(k) contribution by 1%.
Ask for help with investments to choose for your 401(k).
I recommend choosing a fund that targets your retirement year.
For example, if you plan to retire in 2050, you would choose something called the Target Retirement 2050 Fund.
Set Up Recurring Investments For The Stock Market
Another thing to do is invest $5 in the stock market and skip buying that latte once per week.
There are many investment brokers that let you invest a set amount of dollars on a schedule.
I recommend starting by investing $5 every Friday or $10 every paycheck day.
I recommend choosing either the Vanguard Total Market Index Fund (VTI) or the Vanguard S&P 500 Fund (VOO).
Increase the recurring investment after you pay down your debt and have more money to invest.
Write Down Your Financial Goals
Last but most important, start by writing down your financial goals.
Write your goals down on paper.
When you take the time to write down your goals, something amazing happens.
Your brain will start working on achieving your goal.
Your brain will assess your everyday actions so that you work toward achieving your goals.
If you are struggling with debt, there is a way out.
If I could do it, so can you!
If you are not struggling with debt, do your best not to get into that situation because it sucks.
Wishing you much success in your financial journey.
Disclaimer: The author of this post is not a financial advisor. The information provided herein is not financial advice and should not be construed as such. This content is intended solely for educational purposes. The author will not be held liable if you decide to used this material as a basis for any financial decision-making. Investing involves risk, including the potential loss of your invested capital. Only invest what you are willing and able to lose.
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