Sunday, January 27, 2008

My story so far...

Flashback to 2002 (Canada): Like most students fresh out of college, I had no clue where my money was going, how much I owed (and to who) or how much I had in the bank. I regularly missed paying bills and had no idea about taxes (and hence never got a lot of refunds). In short: I was clueless about money. I knew it and was very afraid to accept that!

To add to my misery, I had moved to an Asian country since I was unable to find a suitable job in the US or Canada (it was 2002... the dotcom had turned to dotbomb)

I was able to find a job that paid less than 1/10th of what I would have made in the US, but I wanted to show "continuity" on my resume and get started with gaining work experience. Just as everything seemed to be going alright, I got a collections call: Turns out I owed ~$4000 in student loans that were now delinquent. Not only that, the interest had accumulated over the months and the amount owed was $6000 (and counting). I was shocked! I scrambled to put together that amount (mostly borrowed from family) and paid off that loan.

It was my first real wake up call. Until that day, I had taken life as it comes. Always thinking that someday I'll learn about money - but that day was in the future. That fateful day in January 2003, I realized that my learning had to start - not tomorrow, but NOW. Not only was I married (and hence had increased responsibility), I also had ~$20,000 in debt (all student loans) and absolutely no idea or plan on how to pay it back and now I had a large blemish on my credit history.

From that day on, I decided that the least I can do is to keep a track of exactly how much I have in the bank and how much I owe. I used a simple excel sheet to track this and kept it fairly up to date every week. It was depressing to see that I had almost no money in the bank and owed a ton. Having a job in Asia meant that I was making money in a weaker currency, while owing in a stronger one.

Fast-forward to 2004: I got my first real job back in the US. Until then, I had been paying the minimum on my loans and had been good with my bookkeeping. But having a real job meant that I had to move on to the next step and get rid of debt altogether.

Also, I wanted to organize my finances a bit more, beyond simple excel sheets and also start analyzing where my money was actually spent and get some real statistics. I noticed that my cousin used Microsoft Money and after watching him for 10 minutes I was convinced it was for me.

I decided to invest in the $40 for Microsoft Money (best $40 I spent!) and made a complete list of all the accounts I had at each bank and how much money I had in each account. I started with a negative figure and every night, I would sit and update my account balances, which inspired me to save more money and pay off any debt that I had.

My wife and I decided to forgo many luxuries that people take for granted: a TV set, car, regular dining out etc. We ate at home - but ate well. We went out for a movie only once in a while, and hung out with friends which was very good to build relationships. We took long walks together, always encouraging each other on how our life was improving day by day. It worked! Within 10 months, the whole loan was paid off, and we had saved $10,0000 USD on the top of it! I sold some of my ESPP shares and we were able to buy a used Honda Accord - a lovely car which we enjoy driving to this day.

This simple success made us even more inspired to save more, plan more and realize our dreams of financial freedom. I started reading more about investing, how the stock market works and how to organize my money. I'm far from having learned it all and am obviously still learning something new everyday.

In the next few posts, I'll outline how I've setup my savings and my investment accounts and also highlight some of the short-midterm goals that I'd like to reach.

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