Grow Money Fast Sharing my story of becoming debt-free to wealthy

How the Great Recession has Affected Me

The Great Recession, according to Wikipedia, began in December 2007, and deepened into an even deeper downturn in September 2008 and supposedly ended around July of 2009. However, the aftermath of the Great Recession to this day still includes high unemployment, reduced consumer confidence, rising bankruptcies, foreclosures, a federal debt crisis, inflation, and rising gas and food prices. It sure is all doom-and-gloom when reading this Wikipedia article about the Great Recession.

Try as you might to keep your head in the sand, it's all true, and it's affecting everyone of us in some way or another.

I am very aware of how fortunate my wife and I are being independent, self-employed citizens, where we are finally debt free, and are able to continue to live comfortably in a two bedroom apartment in a very nice community. I am still making good money in business, and my wife is still working almost every day and earning money towards our new goal of starting a family and purchasing a home. I think the Great Recession has helped keep me acutely aware of how fortunate we are right now, and to never take it for granted.

When I think of how the Great Recession has affected me, I can't help but think how lucky I have been. I literally grew my business overnight, in late 2006, at the peak of the housing bubble and runaway economic successes in the stock market, businesses, etc. People were making loads of money and I was riding high on that wave. It was during the peak of the economic uptick that we upgraded from our low-cost $990/mo one bedroom apartment to a $1750/mo apartment, bought myself a new car, financed of course. We also bought various toys like gaming consoles, flat screen TVs, furniture, and other nice things, mostly financed by credit cards.

Then, while things started crashing all around us in late 2007 throughout 2008 - with people losing jobs, businesses going bankrupt, and people losing their homes - I was still earning the same amount of money year after year. I was also still spending like an unchecked fire hose. Then 2009 rolls around, goes by, and finally at the end of 2010, when I came to face the realities of the damage I had done with my accumulation of debts, I, along with millions of other Americans, pledged to stop the debt, and start paying it off.

The Great Recession has taught me to never take money for granted. When I was earning the same high incomes in 2007 through 2010, I ignored what was happening to the country around us. It was as close as Riverside where something like 40% of homes were foreclosed on. The San Bernardino County area had the worst unemployment in all of the U.S. at its peak - something like 13-15%. And here I was, making loads of money, and still blowing it all on stupid shit.

In a way, I'm glad that I was never personally affected by the Great Recession, and so far I'm still good. But I am also acutely aware of how it can all change in an instant, to where our clients could no longer afford to call us for services, where we could lose everything, and stop being able to pay our bills, and eventually have to move in with parents, live in our car, or do something totally drastic in our lifestyle level. I, of course, hope that never happens, but for each day that I save money, I grow more and more confident that I will prevent such a drastic scenario from happening.

When I see news stories about the 60-year-old woman who was a high-profile executive at a large company that suddenly found herself on the street, as she lost her home, her job, and all of her savings, I can't help but wonder why the hell she didn't save enough money to prevent such a thing from happening? But then I remind myself that I was once on that track. If I hadn't snapped and had my financial meltdown, I would still being recklessly spending, racking up more and more debts, buying new cars every year or two (I have a friend that does it every couple months - it's ridiculous), perhaps buying a house that is way over our heads with a very bad interest-only ARM loan that will switch higher 5 years later, and buying more consumerist crap that I don't really need. Extrapolate that over a lifetime of 40 years of a working life, and you can see that's how that woman ended up on the street after losing her job. There are a LOT of high-income earners in America that live extravagant lifestyles just because they can afford a $5,000/mo car lease, or a $20,000/mo mortgage with their high incomes. It really pissed me off when I read somewhere that Tiger Woods actually financed his Florida mansion. The dude has millions of dollars in cash. Why does he need to finance anything?!

This, I think, is the fundamental problem with America. As a whole, we simply do not live within our means. We are barraged by all of the capitalistic corporate drone machines to finance everything and anything so we can afford all of the nice toys and live super star extravagant lifestyles on a beer budget. This is how we all got into this recession - simply by living above our means, and financing anything and everything. We financed our homes with really shitty loans, leased new cars that lose their value the instant you drive it off the lot, bought boats, lavish vacations, and expensive toys on plastic.

I was on this path. I had the mindset that you just had to finance everything in order to get anything. That is not true. We were able to pay cash for a freaking cool roadster. We did not have to lease one at $600/mo. The 60-year-old woman who ended up on the streets probably earned well over $100,000 per year, but she probably had a huge home that had a 30 year mortgage tacked on it, a BMW that she was leasing, and credit card debt. This is the typical financial picture of most middle class Americans from what I have read in various books on the subject. Most American's are below their "recommended net worth levels" meaning they should have a home paid off by 50 years of age, a significant, six or seven figure savings, and be able to actually retire by age 62. This is the "perfect financial picture", but for the majority of Americans, it is simply not the case.

My new mindset, courtesy of the Great Recession, is to quickly achieve the level of lifestyle success that my wife and I want, and be able to stay there indefinitely. What I mean by this is, we want to be able to buy a home, and start a family. Once we reach that level, we want to pay off the mortgage as quickly as possible, so that we can have a roof over our heads that doesn't cost us an arm and a leg every month. While that is being done, we'll contribute to investment accounts that will eventually make enough money for us to live off of and finally be able to retire and never have to worry about losing the lifestyle level we have built up to. A side goal of my businesses is to get to the point where I can offload most day-to-day tasks to other people, and basically be a passive income earner in my businesses.

So, hopefully the stars will align and allow our dream to happen. We just have to remain steadfast on being frugal, debt-free, and focus on growing our businesses, increasing income while staying way below it in expenses, to finally achieve the ultimate goal of Financial Independence.

How I Became Debt Free

In early 2010, I took a good hard look at my finances. I saw how I:

• Had over $20,000 in credit card debt
• Had $14,000 remaining on a car loan
• Had another $21,000 remaining on the new truck my wife and I purchased
• Had zero savings
• Had like $400 in checking, with $10,000 tied up in accounts receivables

And I practically had a meltdown. I was making over $160,000 gross per year, only had $400 real cash in the bank, and all this debt? I started screaming at myself in my head how stupid I was to have this much debt with nothing to show for it (except for the business which I had managed to grow).

This made me snap. I thought back to all those sleepless, insomnia-ridden nights where I just kept constantly thinking about money, worrying about money, and wondering when I'll ever finally be able to get ahead. It triggered something deep down within me that made me sick and tired of being in debt and worrying about money. I wanted to change and I wanted to stop this endless cycle of debt. I needed to become debt-free. I needed to do something now and act now to be debt-free and eventually, wealthy.

I had read a book years ago, called Rich Dad Poor Dad by Robert Kiyosaki which had given me good insight on what it means to be rich, poor, or wealthy, or any other kind of level of financial being. There are definitely parts of the book that shouldn't be taken seriously - like never paying your creditors and letting the tax man bang on your door and letting your electricity go out. Robert Kiyosaki is one of those guys whose advice you have to take with a grain of salt. Anyway, what I took from the book - that was sound advice that made sense - is there is a difference between rich and poor by measure of one's wealth - or how long one can live off their money before being broke and poor. He called the high-income earning doctor Dad "poor" and the low-income earning teacher Dad "rich" because they had different financial pictures. The "poor" dad (even though he was making hundreds of thousands a year) was poor because he had the expensive house, cars, and fancy things in life, some debts, and no savings. The "rich" dad had lots of rental properties, was earning income from each one of them, and only making a few hundred thousand a year. If he were to lose his job teaching, he would be fine, because of his rental investments and savings he had amassed by being frugal during his life and never buying more than he needs (think: Warren Buffett). In other words, rich Dad is wealthy, while poor Dad is just that - poor.

After I snapped in late 2010 and decided to change my financial life, I started searching online for answers. I Googled like crazy. I found a wealth of financial independence books and get-out-of-debt books. I read reviews, I searched forums, until I finally stumbled upon a book that resonated with me in its title, and its huge following of fans whose lives were transformed by the author's ideas.

I somehow came across the holy grail of how to become debt-free, and eventually, wealthy. I discovered the book, Total Money Makeover, by Dave Ramsey. I later learned that he's quite well-known for his radio show, and had amassed a large fan base of ordinary people who are just like me - stuck in mountains of debt, running on the credit card treadmill day in and day out, and never seeming to get ahead no matter what. He introduced me to the baby steps of financial freedom. Baby step one was to get $1,000 emergency cash saved up as quickly as possible, even if this meant selling something out of your garage or closet, working extra hours, and/or cutting back on some expenses. I managed to breeze through this step by selling the TiVo for $400 on eBay, cancelling cable altogether, and saving income to build up $1,000 in my savings account. Baby step two was to start working on the debt snowball and cutting up ALL credit cards. I cut up all six of my credit cards, and wrote down the minimum payments for each of the debts, from smallest debt to the largest. It looked something like this:

• MasterCard: $600, min payment $26/mo
• Visa #1: $4,400, min payment $110/mo
• Visa #2: $6,000, min payment $140/mo
• Discover Card: $10,000, min payment $80/mo
• Car loan #1: $14,000, min payment $333/mo
• Car loan #2: $21,000, min payment $380/mo

Within a couple weeks, I was actually able to pay off the MasterCard completely, which started my debt snowball amount at $600. I was able to pay the minimum payments, with the help of my wife for the truck payment, while tackling the next smallest debt with $720 ($600 plus the $110 minimum payment on Visa #1).

With "gazelle-like intensity" (my favorite term coined by Ramsey), I reduced our expenses significantly, and we even moved from our $1750/mo expensive apartment to a similar sized one a block north for $1400/mo, saving $350 per month to go towards debt pay-downs. We killed the cable TV ($150/mo savings), reduced cell phone bills ($50/mo savings), reduced restaurant visits to once per week ($300/mo savings), amongst other small, but significant, savings. All of these savings went to tackling the debt snowball, which I grew to be $3200 per month at its peak. In six short months, I paid off ALL credit cards, except for the Discover card which had $7,000 remaining. Then, I either did a smart thing, or a really dumb thing, but I did a balance transfer of the Discover card to a new 0% APR credit card for one whole year, at a cost of $110 for the transfer itself. This would allow me to "hold" the debt, interest-free, for a year, while I worked on the two biggest debts that really bugged the shit out of me - our car loans.

When we bought my wife's truck - we bought it totally under impulse. She was super excited to graduate from her 9 month massage therapy program, and I was happy and proud of her. Her paid-off Honda Civic was a perfectly fine vehicle, had low miles, was low maintenance, and all that good stuff. The only problem with it was it would not allow her to fit her massage table in it. And since she was going to be a successful massage therapist with lots of clients, we needed to get her a bigger vehicle. So, we went shopping for a Toyota Tacoma truck with an extended cab and bought it the same day by trading in the Honda, and plunking down $8,000 cash from my wife's windfall savings account. After all this, we still had to finance $22,000 at 6.25% interest for 5.5 years at a payment of $380 per month.

There are few regrets in life that I have. This was my number one regret.

We lived with the truck and its $380/mo payments, of which my wife was barely able to keep up with to begin with, for a whole year. In mid-2011, she finally landed a new job as a massage therapist in her hometown, Sherman Oaks, which is an hour's commute from where we live now (Rancho Cucamonga). Normal Toyota Tacomas actually have great gas mileage, in the 25-28 range. However, her's was a V6, raised, and souped up Tacoma (The PreRunner SR5), and thus was a total gas guzzler. She was paying $300-400 a month in gas alone (and this was the same amount of money she was earning from massage jobs!). So, this truck was a total money pit and I knew it. It took awhile for her to finally realize the truck was killing her financially, but I had planted that seed in her mind that she was earning money and all of it was going to the truck's bills and eventually she was no longer in denial and agreed that we needed to dump the truck and get something more economical and efficient.

Meanwhile, I had finally, finally, after having a car payment for over 7 years at that point (from the previous car I had given away to my brother, to my first fully owned car now), I had finally paid it off! I plunked down $3,000 cash into the Toyota Financial Services account and said bye-bye forever to my car payment. I have been car-payment-free for over six months now and I freaking love it!

I think this made my wife jealous as it was not too much time later when she finally admitted it was time to trade in the truck for something better. She traded it in for a small, used two-seater roadster, with 65,000 miles on it from 2007. This thing has a V4 engine and gets 177 horses, and still only sips gas. She gets up to 35 miles per gallon and is easily able to keep up with it financially, in gas and in the fact that it has no car payment. We were able to trade in the truck, get the original loan of $18,000 remaining paid off, and still have enough equity to buy this roadster with $14,000 cash from her windfall savings account - all in an effort to be debt-free with zero car payments for both of us. Now you may be wondering - what about the massage table? How the heck can that fit in a tiny two seater roadster? If she ever needs to bring the table with her (which is like once every six months it turns out), she can use my Matrix, which is a hatchback wagon and can easily fit it. Duh, if we only had thought about this first before trading in the Civic for the Gas Whore. I guess we have to learn things the hard and dumb way sometimes!

So, in summation, I have paid off $20,000 in credit card debt, $35,000 in car loans, and finally saved up $10,000 cash in just 11 months since I first took action on Dave Ramsey's debt snowball method.

Now it's time to grow money on trees.

History of Me Hemorrhaging Money

When I was 12 years old, my mother took me to Wells Fargo and helped me open up my very first bank account - a savings account - of which I promptly deposited a small jar of coins I had accumulated. She told me to be diligent in putting whatever money I could into this savings account, since it will help me reach goals in being able to buy things. Sound advice - except for the latter part of it. Reflecting back to this moment, I wish it was my grandfather who was teaching me about savings accounts in the first place. His advice years later would be "I wish I saved $20 a week and just forgot all about it. Put that money in a savings account and forget all about it". I was in my late teens when he gave me that great advice. Unfortunately, it was too late since I had been brought up to save money then immediately spend it.

My dad used to pay me and my brother a weekly allowance of $5. I used to buy baseball cards whenever I could get my hands on that cash. As soon as I had the cash, I would go to the supermarket, where they had an actual sports card display full of unopened packs of cards and I would hope to land the next awesome Ken Griffey, Jr., or Frank Thomas, or Cal Ripken card. I actually did score a few nice cards, and to this day, they are all in plastic sleeves stored in a huge stack of 5-row card boxes pilled from the floor to ceiling in my old room's closet at my parents house. I guess some would call this an investment, but unfortunately the period I was actually collecting cards was a bad period to collect cards in. They were all over-printed, over-priced to begin with, and thus were way too saturated in the market. So, the baseball cards of years 1989 through 1995 that I do have are not that valuable, even more than 15 years later. Reflecting back on this, I wish I had Warren Buffett as my dad who would have told me to invest money in the stock market, especially before the dot-com boom, then cash out at the peak of that bubble. Baseball cards were a stupid thing to invest hemorrhage my money on.

When I was 17 years old, I proudly applied for my very first credit card. I wish I could remember who told me to apply for the card. Maybe it was a commercial or ad I saw somewhere. Maybe it was a friend. Maybe it was my parents. I have no idea, but I remember the excitement I had when I opened the Wells Fargo envelope that contained my first piece of plastic. I showed my mom my card and she smiled and said she was proud of me and that I am now a grown up. I had a whopping $700 credit line, which was huge for me, being a high school student with no job, aside from the allowance my parents gave me. What's interesting to me right now, as I reflect back on this, I recall that I was still smart with money. I was still very smart with the credit card. I would use the card for certain items, like food, maybe a DVD or two, and then promptly pay it off. I understood the importance of "building credit" so that I eventually would be able to get a loan for my first car, my first house, and a loan for anything else I needed. I felt, at the time, that this was very important. My main financial goal was to obtain and maintain a FICO score of 700 or greater. When I checked my first credit report, I was proud to see I had a 714 FICO score. I felt I had achieved financial greatness and was on the right path to being financially smart and responsible. After all, I was paying off my credit card each and every month, without accruing any late charges or any interest. I did this for years, until I moved out of my parents house.

Even during college, when I had a job and was earning roughly between $400-1000 per month, I was still using my credit card for everything. I was actually depositing my checks into my bank account, but using my credit card for purchases and then paying it all off at the end of the month with all the cash from paychecks. I was keeping careful track of purchases in a spreadsheet and making sure that I wasn't going over my "budget" which basically was my credit line. I was always earning more money than my credit line, which was $700, but always managing to rack up $700 in charges each month, and then some. I was using the card as a means to be able to buy things and be a consumer. I never looked at my finances as if I had to "save up" for something, since I had the credit line ahead of time, and could simply work for the next 2-3 weeks to pay it all off and then start over. Reflecting back on this habit, I realize that the credit card, and the way I was using it, was keeping me in an endless trap of consuming, spending, working to pay it off, consuming more, spending more, working to pay it off. Never did I actually set aside a percentage of my earnings in a savings account and "just forget about it" like I sure wish I did.

While in college, I met my future wife. We would go out all the time to dates, dinners, and whatnot. My spending greatly increased during the time of my early twenties. I had a $2000 credit line at that point, and was beginning to earn money on the side freelancing for computer consulting for various businesses and individuals. Once again, I was racking up thousands in charges, and managing to pay it all off without ever getting hit by fees or interest. I continued to spend all the money I earned without saving anything.

When I was 24, my future wife and I decided to move into an apartment together. I didn't even have a job, although I was getting social security payments (about $550 a month) due to my disability, and I was still earning some cash on the side from computer consulting. By this time, I had zero savings (of course), probably $1000 in credit card debt, and a few hundred in cash/checking. We knew we were going to be okay to begin with, as my future wife had a large savings account built up due to a windfall that she came into. We were very lucky to have this windfall, but we refused to touch it. Within a few months, I had personally racked up over $5000 in credit card debt, had even started opening up more credit lines, and "investing" my credit lines into my new business, which I was trying to grow.

In late 2006, I landed my first big fish client. Once a week I would go there, work all day, then come home. Four solid working days a month of this equaled about $1600 per month in guaranteed income. This was huge for me and my fiancee (whom I proposed a short while later). I was on cloud nine making so much money. I went from earning $550 per month on Social Security, to earning $3000-4000 per month from clients. I had obtained several other accounts along with the big fish one.

Even while earning this much money, I was still trapped in the debt cycle. For the first time ever, I incurred my first interest charge on my credit card. I could no longer pay it off in full, because I had to have cash as working capital in order to buy computer hardware and software for clients, and then they would be late in paying me back, so I would be hit with all kinds of finance charges. It was a mess but I still paid no attention to it.

In January of 2007, my brother had totaled his car in a rear-end accident. At the time, I was driving a car that my parents helped purchase by taking out a loan from their home equity line, and I was paying my dad back interest-free at $150 per month and nearing the end of the car payments and finally paying it all off. Since I was now making so much money, and wanted to help my brother out, I gave him the car free and clear and let him take over the car payments. I went out and financed a brand new 2007 Toyota Matrix at 6.15% interest for 5 years. I did put $5000 down which was supposed to be working capital money but I didn't care - I wanted the best interest rate and the dealers said in order to get it below 7%, I would have to have a small stake in the purchase with a down payment. I would now have a car payment of $333 per month for five years. This didn't faze me since I had so much credit line, was making good money, and was able to stay on top of bills.

A few months later, we decided to move from our one bedroom apartment into a much larger apartment. We went from 800 square feet to 1250. We went from $990 to a whopping $1750 per month in rent. We had all the nice amenities with this new apartment. An attached garage, a second bedroom of which became my office, and fancy stuff like crown molding, nine feet high ceilings, a BBQ pit, and a nice green belt right outside our windows.

What would eventually follow from this move would be a lot more money hemorrhaging:

• Adopted another cat
• Bought two flat screen TVs, priced at $2,000 each
• Bought a PS3, XBOX 360, Wii (and eventually sold them on eBay for a fraction of the purchase price when we got bored of them)
• Bought a TiVo and the most expensive cable package (bill was $200/mo)
• Bought new furniture and home decor (pffft, thousands of dollars right there - I'm scared to look at the financial records here)
• Bought a brand new truck for my wife
• For my business, I built a new computer and home server, costing around $5,000 all told
• I bought a $2,200 Dell laptop - top-of-the-line - which eventually died 2 years later, out of warranty and salvaged about $200 off eBay for it
• We bought iPhones, and had unlimited plans costing us $120 per month at one point
• Adopted a dog
• Bought 3 servers for my web hosting business - which put me way over my head into debt
• Gambled away $3,000 in a Vegas trip
• Spent hundreds a month on bowling in a league
• Spent over $2,000 on building my company website which gets zero traffic anyway
• Spent over $1,400 on building my web hosting company website which I admit sucks, and isn't pulling in any customers
• Bought countless other things

All told, I racked up $20,000 in credit card debt, still had a car payment with about $14,000 remaining, and we had a new truck which was another $21,000 remaining on the loan by the end of 2010. And we did this during the recession!

Granted, I have been making good money with my business, which has thankfully been successful during this horrible recession. I still have my big fish client, and others to boot. My hosting company is now very profitable and I am easily able to cover my high costs and then some. I just wish I wasn't so stupid with money from the outset, and grew our lifestyle and my business with cash instead of financing everything with debt.

Stay tuned for my next posting, which will be all about how I turned it all around and finally became DEBT FREE!

It Begins

Drawing upon the inspirations from multiple personal finance blogs, I have decided to start my own. I am an avid reader of great personal finance blogs and financial independence advocates such as Mr. Money Mustache, No More Harvard Debt, and Early Retirement Extreme, to name a few. I know I'm not alone in creating personal spin-offs of these such blogs, as there are others like Toward Mustachianism and Death to the Mortgage. So, I'm going to jump on the bandwagon and try to become the 1% that every other damn American is being a complainypants about.

Why "Grow Money Fast"?

Well, I chose this name because it was a throw-away domain based upon some affiliate Internet marketing I was experimenting earlier this year. Since I already had it, and it was using a stupid gimmicky website that tries to get Tweets with a "pay per tweet" method I was experimenting with, I figured I might as well hose the site, install WordPress, and finally do something that has some real value to it, instead of trying to be like the other 4757392 spam-bloggers out there. I learned a ton about Internet Marketing in general over the years and have finally realized that it is not for me. I must disclose however, that I may try to monetize this blog if it takes off, but right now, my goal is to just talk about what's on my mind in the important matters of money. There are more important things than just money anyway, right?

Besides the fact I chose such a scammy-sounding domain name, it's still true to the purpose of this blog. The purpose of this blog is to advocate towards financial independence. And in order to do that, one must learn how to pay down debt as quickly as possible, cut down expenses to live below their means, and finally, grow money fast to the point where one can live a financially independent lifestyle where their money works for them, and thus creates true wealth -- all by the time death rings the doorbell, preferably. In my own case, I have completed most of baby step one and two, which is to establish an emergency fund, and to pay down debt until it is paid off in full. I get the "baby steps" from Dave Ramsey, author of the best-selling Total Money Makeover book, which I have read from front to back over and over again earlier this year, and which I give full credit for sparking my own financial revolution against over-consumption and debt. This has caused me to change my thinking on a wide variety of things related to finance and money. Gone are the days of excessively spending every last dollar I earned on electronics, entertainment, clothing, food, eating out (though I definitely still need to work on this area). Also gone are the days of using my credit cards so blindly under the assumption that one must "build up credit" (yes, plural as I have several credit cards like most Americans do). I absolutely love Dave's philosophy on FICO scores. A FICO score of zero is better than any FICO score. FICO scores mean that you LOVE debt. I know I don't!

So in a nutshell, I will write about my journeys through becoming debt-free, financially independent, and growing money on trees, figuratively speaking. It is also to hopefully inspire other people to do the same, and break out of the mold of being the "typical American consumer" that is hypnotized by corporate greed as new products are constantly pushed to market in order to suck away all of the income of so many of us work hard for in the rat race of the economy, which by the way, was totally screwed up by the very corporations themselves. What's wrong with this picture?

I look forward to writing as often as I can, preferably every day, and getting feedback from others who are interested in joining me on my journey to growing money fast.