April 22, 2003

Money

It's been a money day. I'm looking at my account to see if I can manage buying a house. One friend is looking at job cutbacks and what that does to the budget. Another is looking at the emergency fund and how to generate multiple income streams.

On top of that I've stumbled across a lot of messages lately about money versus dreams. I've been paying attention for a while now about listening to random messages from life. Sometimes they appear distinctive, sometimes they happen multiple times from different sources. Spiritually, it might be the universe trying to tell me something. Or rationally, it might mean I am more open to learning a particular lesson than I have been in the past. The general gist of the messages I've been getting lately is that earning money should not be seen as a prerequisite to doing what you want to do. Figure out a way to do what you want to do now, and figure out how to make the money work for it.

So here's what I think about money. The basic very important goal about money is to make it as unimportant as possible. That doesn't mean trying to amass power over money. It just means to keep it from having power over you.

The number one way money has power over people is through debt. The basic formula for getting rid of debt is to consolidate your lifestyle as much as possible and keep your bad expenses low. Some people go overboard by limiting themselves even from spending money on ways to improve themselves, and that's bad.

I reduced my debt by consolidating my student loans, and by rotating credit card balances through various introductory rates. This kept the interest payments lower.

I also came up with a system of priorities for what to pay first:

  1. Stop Increasing Debt If I was paying out more than I was earning, ultra first priority was to change my lifestyle so this wasn't happening anymore. Sometimes this meant curtailing my discretionary spending, but other times it meant recognizing that I was in a situation that was costing me too much and needed to get out of the situation (like a lease). I really do not like the approach of curtailing my discretionary spending because that just means that my lifestyle does not support my personality as expressed through my daily choices. Rather than disciplining myself, it's better to get out of decisions I've made in the past that are limiting the resources I need in order to have day-to-day freedom of choice.
  2. Bills and Minimum Monthly Debt Payments
  3. Consolidate Debt and find low interest rates for it all
  4. Retirement Accounts including Roth IRA If I were eligible for a 401k, I would also max this out first, unless it were a stupid 401k that didn't let me choose where to invest. Then I would only contribute the % that was matched because that's like free money. I would also try to max out the Roth IRA. Most retirement accounts are actually a better deal than paying off low-interest debt because the money works better for you in the long run.
  5. Highest Interest Debt, excluding student loans The reason I excluded student loans is because they are eligible for deferment if you run into financial difficulties. All extra money would go towards early payment of the debt with the highest interest rate until it was gone.
  6. Student Loans - High interest student loans first.
  7. Emergency Fund If I didn't have empty credit cards with solid credit limits, I might choose to aim for the Emergency Fund before the Student Loan.

This is basically the most mental way to look at it all, but there are times where you might want to adjust things. For instance, there are times where you come upon a sum of money that could be applied toward retirement, or applied toward getting rid of a debt entirely, and at those times the psychological benefit and relief of paying off the damn debt is worth a lot more, emotionally speaking, than locking it up in your retirement account.

I was lucky because once I was about 80% done with paying off my debts, I received some inheritance money that allowed me to take care of the rest very quickly.

What's different with my situation right now is that I'm still a bit scarred from all the debt, which means that I'm very reluctant to go purchase big-ticket items. It just feels so good to have No Debt; to have bills that are only attached to what I am doing Right Now, and to know they would all disappear if I decided to change my lifestyle. There are a lot of reasons why buying a house would make sense for me, except that I'm so freaked out about getting a mortgage. I have to consciously remind myself that it's okay to make large purchases when the money is invested towards improving myself.

In general, money is bad when it leads to a restriction and good when it leads to freedom. That is why I try to ask myself, would spending this money lead to me having more options or less? Would I feel more freedom of movement and action or less?

Finally, I'm trying to get away from the thought of delaying my dreams until I have the money for them. Contrary to what people might think, when you later actually have a bit of money, it doesn't mean it's all of a sudden a lot easier to start pursuing that delayed dream. When you invest yourself in something to amass money to afford your delayed dreams, what you forget is that that investment changes you as a person, and perhaps over time makes you less compatible with it. So the better question is if you are okay with how your current projects might be changing you. I am trying to think more along those lines, to move toward paths where the paths themselves might change me in a way that I'd actually be proud of, and then just figure out how to adjust my lifestyle to fit the money that it would bring me.

What I haven't done is signed on to a particular path that would lead to some serious wealth-buildling. I haven't yet figured out how to reconcile that with my other personal priorities. I had a great plan for how to get out of debt, but this second part seems a bit more difficult to create for myself. I know there are a lot of books, but I've read a few and it's just so easy for the wrong kind of selfishness to seep in - not the kind that is merely about protecting one's self-interest, but the kind that does so by keeping others from protecting theirs.

So, money. It's a lousy way to keep score of how helpful one is to society. Right now I'm content with the goal of keeping it from having power over me. Not real sure what's next.

Posted by Curt at April 22, 2003 07:46 PM