Get Rid Of Your Debt? Get Rid of Your Ego!
One of the byproducts of being post FIRE and also being a competitive nerd is that you spend quite a lot of time reflecting on how you could have done your journey to early retirement better or more efficiently.
And of course, hindsight is 20/20!
When it comes to paying off your debt, there is no silver bullet, you have to work hard, save hard and chip away at the mountain until it's gone. There's the Snowball Method (pay off your debts from smallest to largest) and the Avalanche Method (pay off the debt starting with the one with the highest interest rate) and whilst each one could make a post all of their own, people much smarter than me have written articles much better than I ever could and a quick Google will give you literally hundreds of them. Plus, frankly if you're here to have me to explain to you how to get out of debt, then I can do that really quickly:
Come a little closer so I can whisper the secret into your ear......
STOP SPENDING MONEY THAT YOU DON'T HAVE ON STUFF THAT YOU DON'T NEED!
There, now we can get on with the point of this post and that's about not creating the debt in the first place, then you don't have to go through the simply depressing process of years of paying it all back.
Picture the scene... it's 1997, I'm now a working man and I've spent the last 5 years since leaving school at 16 working as a camera repair technician and I love it. I'm just 21 and I live for that small brown envelope stuffed with cash (well not exactly stuffed) that gets given to me on Friday afternoon so I can hit the pub on Friday night with the lads for 10 pints, a game of pool, some great laughs and a doner kebab on the way home. Then off to the nightclubs of Leeds on Saturday night in our best gear to go dancing and hopefully make a female acquaintance or two.
At 16, my first weekly wage packet was R1,300 / $86 / £65 and I didn't even need to pay tax (it was too small an amount!) and over the 5 years I had worked hard and increased the size of the contents of that envelope of joy to R3,300 / $220 / £165. By that time, Her Majesty's Revenue & Customs took their share in tax and national insurance (to pay for my state pension, healthcare and unemployment insurance) and left me with R2,500 / $166 / £125 to spend on my weekend adventures.
Well not quite. The other Mrs H (My mum) taught me a valuable lesson on independence from the day I started work.
Prior to that point, living with my parents meant pulling my weight. I had to wash up and make dinner twice a week and do my own washing and ironing. I had a curfew and I was house on-demand coffee maker (My parents have major caffeine addictions). As you can imagine as a teenager I complained royally about how this was "Slave labour" and "Exploitation" and that I should report them to childline. My mother used to just reply "You'll thank me one day when you live on your own".
I still haven't' thanked her and I left home 24 years ago!
But that all changed when I became a working man, I didn't have to lift a finger in principal, dinner would be provided, washing and ironing services where in abundance (although at the chosen pace of the landlady) and I could come and go as I please without question or interrogation. It was awesome!
And it only cost me the measly some of 50% of my take home pay.
At first this seemed like a great deal and I took full advantage of this bachelor-esque lifestyle to its fullest extent, I was even cheeky enough to ask if my mum would mind making some extra breakfast for a female "Friend" who I had brought back from a night out in the wee hours. Mrs H lovingly obliged.
Once I started to earn what was in my eyes the big bucks and without my knowledge that it was the early stages of what was one day to be the FIRE feeding pot of cash we live off today, I started to feel like Mrs H might actually be getting the better part of the deal. So a few years into this arrangement when I was probably 19, my (slightly older) girlfriend at the time gave me the opportunity to move in with her and her then 3 year old daughter I figured: "how much more could it possibly cost, let's do it".
My mother had won, she had successfully managed to eject me from the family home of my own accord, I bet her and my dad did the happy dance all night that first night as I was the last to go after my sister had already gone to London to study theatre (she was always fancy!).
And that's when it began.
A year later and I had learned that R2,500 / $166 / £125 living in a privately rented house with a child in private day care (we didn't fall into a catchment area for public childcare or housing) and all the bills to pay as well as a nearly new Fiat Punto car I had bought before meeting my now partner, was nowhere enough to make ends meet. My partner also worked and we got help from the state (whatever anyone says about the British Government, they look after their poor, or they did then), but it simply was not enough.
So I sold the car and reduced our expenses to something we could afford right?
This was the late nineteen nineties, you could walk into a bank that you weren't even a customer of and 20 minutes later, leave with a loan, in cash. You could buy a car with 3 payslips and proof of your address and drive it away the same day. You could get an agreement in principal for a mortgage of 125% of the property value over the phone!
Easy to get credit was everywhere and as long as you had a job, you could gorge yourself in credit cards and loans and hire purchase and store cards until you couldn't eat any more. If the credit card got full, you could just take out another one with a higher credit limit and transfer the debt, keep paying the minimum payment of 0.5% and spend the rest.
So that's what I did.
I was funding a lifestyle I couldn't afford. We weren't living lavishly by any standards but I was driving a decent car, going out with friends on the weekend as well as living in a 3 bedroomed house with my partner and her daughter and we were all well clothed and well fed.
Within a matter of a couple of year after that I had 7 credit cards, paid the monthly rental cheque with a credit card cheque and just kept paying minimum balances and increasing credit limits. My girlfriend of the time accidentally wrote my car off on the way to work so I was now driving an old car (because I spent the money the insurance paid out, probably on more stuff we didn't need) and was still paying for the car that no longer existed.
By the time me and that girlfriend split up (nothing to do with money, all to do with just being young) I was 23 years old, earning R240,000 / £16,000 / £12,000 per year and I had credit card debt of R340,000 / $22,500 / £17,000, no house and a car that might get me to work and back on a good day.
I arrived back at the boarding house of Mrs H and sat down on the bed in my old room and reflected on what I had done. I made three decisions that day:
I'm going to get out of debt and then never get back into debt again
I'm done with serious relationships until rule number 1 is achieved
I need to be out of my parents house in 6 weeks.
6 weeks later in March 2000 I moved into my new house, a tiny little back to back (you only get half of the house, there is no back door, it's another house!) in one of the roughest parts of West Leeds. In the preceding 6 weeks since moving back in with the parents, I had spoken with a financial adviser, changed career and got my first promotion to a Senior Customer Service Adviser in a call centre and consolidated all of my debt across 3 new credit cards each with 6 months interest free. I had rented out a room in my new house to one of my friends and his rental payment pretty much covered the mortgage payment so I only had to find the gas and electricity bill, water bill and council tax (rates/property taxes). The car was in a bad state but I didn't owe anything on it so I decided to only use it for my commute to work and drive it until it wouldn't go anymore so I also had petrol and car insurance to pay. All groceries were done at the discount supermarket Netto (the then equivalent of Shoprite, Aldi or Lidl) and I offered to cook 3 meals a day for my housemate for extra rent.
I was now on a monthly salary and my take home pay at the new job was R17,000 / $1,150 / £850 which was pretty good for a 24 year old and my total bills were around R10,000 / $666 / £500 so at that rate I need to keep that up for 4 years to clear my debt. It wasn't going to be easy but there also wasn't an option in my mind.
Those were without doubt the hardest years of my life financially but they were also the most important. I was actually so lucky to be in that level of debt because I cut back on the partying, the girlfriends, the cars and the "stuff" and I worked hard, really fricking hard on my career and it paid off big time. I didn't stop seeing my friends and having a good time and going out and "having it large", I just did it less. a lot less.
By 2004 I was working In London on secondment for my company, they were paying for my accomodation, paying all of the bills, I had a company car with the petrol paid for and they even paid me a daily allowance for any extra costs I might incur. They even paid me extra for travelling home on weekends if I wanted to! Of course I rented my house out in Leeds in full and with no debt at that time, my bank balance started to balloon. I was still only 28 and I had no debt, no bills, no wife, no children and a salary of R1,000,000 / $67,000/ £50,000.
That few years of focus had finally paid off.
I would love to tell you that things carried on that way. The career success did, however the lifestyle quickly caught up with the salary and continued in that vein for about another 10 years! I had a great time driving Audi's, Mercedes Benz's and Range Rovers, staying in 5 star hotels, having luxurious holidays and picking up massive restaurant bills and bar tabs. I had a great time! I met Mrs H (my wife not my mum), who also had a great career and we lived to our means and didn't really need or want for anything. We were pretty much the picture you would see in the dictionary if you looked up the word "Yuppy"
But despite all the excess, we never went back into one penny of debt and prioritised paying our mortgage off as the last bit of debt we owed. That was complete by the time we decided to move to South Africa in 2014.
It's just over 7 years since I owed any other living being any money. Then in 2017 I discovered the FIRE movement and found a new thing to focus on. The process was exactly the same as getting out of debt, spend less, earn more.
I retired on the 1st May 2020 and it is turning out to be one of the best decisions I ever made.
Having reflected on this journey, I don't regret any of it but if I was advising the 16 year old me how to do it better or more efficiently, it would be to drop the ego and stop caring what people think. Throughout the first 40 years of my life, I wanted to portray success, I wanted my parents to be proud of me, I wanted my friends to admire me and I wanted my family to respect me. The biggest problem in that scenario is the word me.
I regarded what other people thought about me more than I cared about how I felt about me. I guess they call that ego. And now I'm aware of it, I see it everywhere. People over stretching themselves to have things that they don't need that and they can't really afford.
Most importantly is that I now realise that I don't feel jealous of those people, I feel pity towards them. They would rather risk the debilitating pain of drowning in debt than live to their means. They would rather impress me with their fancy watch or sports car than de-risk their future and that invokes the response "How sad, what a shame" inside me. And that was me, while I thought I was impressing everyone with the latest sneakers or new car, the ones whose opinion I cared about probably felt pity towards me and then ones that were impressed are probably now not even in my circle of friends.
So the advice I would give to 16 year old me, is drop the ego and impress yourself with your achievements not others with your stuff.
To close this post before it gets as deep as a philosophers rabbit hole, a simple example of how different I am today from the 16, 21, and even 28 year old me.
This week I arranged a business lunch with an ex-colleague who is striking out on his own. Instead of my focus being on where I could take him that would impress him and how I could show off my achievements of how I started my own business last year, I spent 30 minutes debating with myself on if I could go to the restaurant on a rainy day in Cape town in my shorts and flip-flops as I didn't want break my 124 day streak of not wearing long pants!
I wore jeans but when I got there I wished I had worn my shorts because my friend really wouldn't have minded and I really wouldn't have cared if he did!
Until next time, keep living