Wednesday, August 03, 2005


Someone asked me in comments how I saved my money. Mostly I think it was luck, although not quite the way one might think.

My parents didn't have any money set aside for my college. It taught me how to turn adversity into opportunity early in life. I started working when I was fifteen, got good grades and by the time I went to college I had $5,000 in savings from various part time jobs as well as a full scholarship.

I worked all through college too. At times I felt like I was working all the time while my friends were out partying. At times I felt rebellious and thought "it's my money, why can't I spend it?" But I had seen what debt can to do people with my own parents and I didn't want the same outcome for me. In the end it was worth it because I graduated top of my class with a great job offer and zero student loans.

After I started working things stayed more or less the same for the first year or two. There were the occasional happy hours and a few more trips to the mall but for the most part my lifestyle didn't change. I had a modest apartment that I shared with a friend. We lived just west of downtown Chicago and rode the L everywhere. I didn't have cable, ate at home most days, went to the library a lot. I had fun too but fun a lot of times was as cheap as an ice cream cone and a ride at the Navy Pier or a road trip across the country. As a result, by the end of my first two years in the workforce I had saved almost $27,000. I remember opening a $20,000 CD and the guy who was helping me exclaiming "Wow, you are so young!" It felt great.

That was six years ago. I have been working almost 8 years now. In this time I have changed three jobs, traveled to and worked in Europe and Asia, seen meteoric rises in my fortune as well as pay freezes and have even been unemployed. I have received no inheritances or windfalls. On the contrary, I have helped my parents out of debt and my brother through medical school.

My lifestyle has also changed and my spending increased along with my salary. One too many lattes and designer handbags have gotten in the way of my savings goals more than once. I have moved into bigger apartments and I still haven't balanced a checkbook. But all through it all I have kept to the same values that saw me through school -- hard work and avoiding debt like the plague.

In late '99 I joined a big consulting firm and over the next three years I traveled within US as well as abroad for projects. My company paid for all my expenses on the road so my only out of pocket expenses most of the time were meals on weekends, my apartment and the car and even the car I didn't have for long. I was traveling every week and it didn't make sense to have a car just sitting there so I got rid of it. On weekends when I flew into town I would rent a car at the airport and then drop it off on my way out. I typically got free rental days every few weeks so it was cheaper than car payments and insurance. On top of the free rentals, I also racked up tons of frequent flyer miles and Amex points which also helped supplement my income. I bought my TV & VCR with the Amex points and it wasn't until recently that I had to start paying for my own air tickets.

These perks didn't come cheap though. I worked 90-100 hr weeks for three straight years for these privileges and paid the price. By the end of it I was drained. I had no social life to speak of. I never got to see my friends anymore and my relationships didn't last long because I was never around. And then I got lucky. I got laid off.

It's kind of interesting how it all happened. The company I was working for was bought out by another company. Shortly before the sale went through I got a call from my partner saying I had the choice to stay and take my chances with the new employer or leave with a severance package. He offered six weeks severance, I asked for twelve. This was October 2002. Layoffs were everywhere. Cashing out seemed like the better choice for me. In the end I was able to negotiate 2 months of severance and 1 month of unused vacation payout for a lump sum payment of $18,000.

Of the 18k I put all but 4k in the bank. The 4 I used to buy a printer and a laptop, get a freelance license and set up a home office. It was a bleak year. Companies weren't hiring much let alone outsourcing work to contractors. Despite my best efforts I only worked about 5 months that year. My family obligations also increased. My parents were in debt, my brother was getting married. My life was some kind of a black comedy. I had a really nice apartment at the time. 1000 sq ft with a view to die for. I sublet it and moved to a much smaller one in a less preppy part of the town. I sold a lot of my nice furniture and cut back on expenses drastically. I also started a side business making and selling custom fragrance blends a la The Body Shop although that didn't really take off as well as I would have liked as a business. And then things turned around again.

Early in 2004 I got a job offer from a company in Seattle, moved out here and I have been here since. Over the last 18 months I have had time to reflect on my life and my priorities. Other than the car I have not made any big purchases and have managed to save a big chunk of my salary and bonuses. I also started a 401k last year and have been trying not to lapse back into my old spending habits ever since.

I think most of my savings come straight from my salary. I did get a couple of really good bonuses. The consulting firm I worked for used to hand out hardship allowances for people who were over 100% productive or traveled more than 45 weeks a year. I qualified on both counts and saved most of the bonus I received as a result. Other than those and the $18k I got for taking the severance package I can't think of anything else that contributed to my bottomline. No real estate appreciation, spectacular investments or parental boons here. Honestly, I am a little surprised I have as much saved as I do. Don't laugh but I think what helped me was not knowing how much money I had. Seriously. Not knowing my net worth meant instead of counting the money in the bank I only counted my current income and I tried to stay below it. Over the years as my income increased or decreased so did my expenses but I never tapped into my savings. Other than that I don't really have a very good answer because mostly I have just muddled through. I didn't set out to save. I set out to avoid debt. Somewhere along the line I got lucky and grew up financially.


At 8/04/2005 9:59 AM, Blogger Hazzard said...

Thanks for the POST. Sounds like you had your head on straight all along. I bet if you'd known your net worth, you still would have made good decisions. You made good decisions when you were young and knew the importance of staying out of debt. Our experiences weren't very different:

My "experiences" post

I really like your blog and am checking it regularly now. Thanks!


Everybody Loves Your Money

At 8/08/2005 9:15 AM, Blogger mmb said...

Thanks Hazzard. You know, it's funny. Now that I know my net worth I am actually more determined than ever to make it grow so I can be financially independent. I enjoy your blog too.


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