For the first 10 years of our marriage, my wife and I thought we had personal finance down pat. We contributed to our work-funded investments, invested all of our high school coaching income into retirement accounts, and bought two homes before the age of 30, including one we turned into a rental property.
Sounds good so far. But in 2018, we realized that we were missing out on the other two legs of the personal finance stool: Paying off debt, and taking time to enjoy the money we have.
For us, the month-to-month financial jiu-jitsu of ensuring that no checks bounced was normal because we focused on long-term investments. The weakness in this approach was introduced to us by Dave Ramsey’s Debt Snowball strategy, and driven home one spring when the furnaces in our primary and rental homes had to be replaced at the same time. Two successful professionals in our thirties, we suddenly had to scramble to pay for both while still not missing any monthly utility bills, mortgage payments, car payments, and student loan payments. We ended up having to put one of the furnace purchases on a no-interest credit card, and kicked our own tails to pay it off before the no-financing ran out 18 months later.
We also adjusted how we used our money because as our three children grew older, we recognized that they needed to have the kinds of experiences which would create an amazing childhood.
With this new knowledge and perspective, my wife and I have gone from being one-trick ponies to having a comprehensive approach to personal finance. Our debts are under control, we enjoy vacations and small purchases like eating out with our kids, and we still add to our real estate and retirement holdings. Here’s how our journey has unfolded, and how we stay focused on our family’s personal “why” - why we spend, save, and invest to benefit the happiness of our “fab five.”
Pay Off Debt
The Ramsey strategy conflicted with our entire philosophy of financial intelligence - a philosophy we learned from my uncle, a former NASA man turned day trader who inspired me to invest early and often in the stock market. But what we found is that paying off debt is also empowering. When you are in debt, you feel like you get your paycheck and, before you get to enjoy the fruits of your labor, money goes out to all of the expenses which “own” your paycheck: car payments, credit cards, the government, the mortgage, etc. Each of those payments is like a chain, weighing you down until you feel completely overwhelmed and feeling powerless. Living paycheck to paycheck is no way to live.
We have always been investors, starting with my retirement account during my second year as a professional, but we had always just accepted that having debt was normal. Well, as Dave is fond of saying, normal is broke. The furnace debacle showed us that we had to engage in baby steps to turn ourselves into talented financial young adults. In less than four years, we’ve paid off several debts, built savings, and changed an issue like having to replace a major appliance or make major car repairs from an impending crisis to a blip on our radar. It was a special day for my wife when we paid off both her student loans and her GMC Terrain – the realization that there is no more freeing feeling than paying off debt and unburdening yourself from financial chains.
What drives us on our path to being debt-free and building wealth is carefully considering how financial decisions will impact our household. At the core, this brings us great peace because it simplifies the decision making process and unites us as a team. In addition to our why, we know that the goals of seeking financial freedom include eliminating stress or concern about money. Being able to make decisions based on how we want to care for our family instead of whether or not we can afford it is its own layer of freedom. For example, my wife needed to take a month of unpaid leave after the birth of our youngest child; in 2017, this would have created a financial crisis for us. However, when Bo was born in 2019 and required an extended stay in the hospital, we had enough savings to easily make this decision for our family.
Shortly after his birth, it was clear that his case of jaundice was progressing and the amount of bilirubin in his body meant that he would have to lay under the blue light around the clock unless he was nursing. The stress of phototherapy and the caution that if not treated properly this condition could cause complications such as brain damage was enough to bear. Amanda only had enough sick time to take 6 weeks off from teaching. Given the rocky start to his life, this just wasn’t enough time for Amanda to bond with Bo. Because of our diligent pursuit of debt elimination, Amanda was able to take an additional 6 weeks of unpaid leave.
Staying tuned into our “why”, focusing on the freedom from stress and dreaming big for future endeavors keeps us on track and proves the importance of paying down debt now and building wealth when the opportunity arises.
For example, following the baby steps was the most important thing to us. Amanda and I said “no” to some Christmas gifts and dinners out.. However, we didn’t lose sight of our “why”: We are doing this to have better and more meaningful experiences with our growing children.
Grow Wealth:
Investing is super powerful. It’s rumored that Albert Einstein once called compound interest the 8th wonder of the world. Since he is a reliable source in the intelligence department and was apparently well versed in a variety of subjects, I choose to trust his judgment that investment success is not about timing the market – it’s about time IN the market. As a teacher and a financial advisor, I often hear that people wish they’d started sooner. Much like a fitness and nutrition plan, the best day to start was yesterday; the second best day is today.
You don't have to invest a ton of money to grow wealth. You can invest a small percentage of your paycheck into tax advantaged accounts, such as a 401K or Roth IRA. Month after month, money is added to your account, and it starts to multiply at a quicker and quicker rate as the money you make on interest is also reinvested. The same “small investment, big gain” philosophy is present when maximizing employer matching programs - free money that builds over time - or investing a raise into retirement instead of increasing household expenses.
My wife and I love to coach high school athletes because we enjoy sports, working with young people, and strengthening connections we make as teachers with student athletes. No good coach does it for the pittence of pay which matches the hourly pay many of my students make at dead-end jobs, but ever since my wife and I began coaching, we’ve taken those small stipends and put it to work for us in the form of additional investments or extra payments on the condo. With each new Ward family member added, there became more of a need for me to coach so that we could continue to grow our nest egg - but even as we were working long, hard hours with young kids, we also madesure that our money was working hard for us.
BECOMING DYNAMIC FINANCIAL DECISION MAKERS
Let’s start by acknowledging that if you are actively investing or paying off debt, you are already winning. Paying down debt and buy and hold investing are two excellent strategies for improving one's financial standing. While mathematics surely favors investing for the long run, we can’t discount the power of paying down debt because while investments go up and down in the short term, paying down debt is a guaranteed rate of return that helps one become more immune to unfortunate economic circumstances. The experiences of losing a job with no consumer debt vs. losing a job with credit card bills and car payments are vastly different. Paying down debt and investing are both incredibly powerful, and individual circumstances are going to determine which focus is better at one particular time. However, investing, paying down debt and building an emergency fund are all victories.
We’ve laid out some of our “victories” already - paying off debt, improving savings, and building wealth without having to do monthly financial jiu-jitsu. I want to share one more advantage to having low-debt while also looking long-term: being able to take advantage of dynamic opportunities.
