I Knew the Right Money Rules -- and Still Blew It
The Uncomfortable Truth
It’s time for me to confess what everyone hates to confess: knowledge ≠ immunity. In the months and years leading up to my financial ruin, I had learned the “rules” of personal finance. I understood the truths to achieving financial independence and early retirement. The problem wasn’t ignorance. It was ego and disobedience.
The Money Rules
So, what are the money rules? I won’t name them all here; each one could (and likely will) have their own post in the future. But here are a few that I’ve named.
Before starting any financial journey, have an emergency fund
Don’t finance toys (including couches, cars, boats, etc)
Cash flow > equity
Income should lead lifestyle, not the other way around
At this point in my financial journey, no one could call me new. I just thought I was different. To my chagrin, I’d eventually find out that I wasn’t.
The Rules I Broke
Don’t Finance Toys: I financed my Tesla (when I had little reserves) at around $714/month, which clearly violates this rule. This has not only cost me tens of thousands of dollars, but it’s also contributed to some stress in relationships.
Cash Flow > Equity: When I first bought my house-hack, it made sense for me to buy it even with negative cash flow. Afterall, I would only lose a couple hundred dollars per month and still live in the house. Sadly, with no reserves and my expenses stacking up, this couldn’t have been further from the truth. Again, my bank account and my stress level took a hit.
Income Should Lead Lifestyle: This is kind of a mix of the previous two rule breaks, but it’s still incredibly important to make note of. I let my lifestyle lead my income, not the other way around. Buying my Tesla, wasting hundreds of dollars a month on restaurants, not paying attention to my income and expenses, the list goes on and on.
Let Numbers Drive Decisions: I also let identity drive my decisions rather than numbers. I’m wealthy. I should get the nice watch and nice car to show folks that. I should live with high expenses because I can afford it. That can’t change. What a mistake! This not only cost me financially but also made me look like a real fool when I had to backtrack.
Out of all of these costs related to the rule breaks, the worse cost was the loss of peace and clarity — something I only regained when I strengthened my relationship with God.
Why Knowing Wasn’t Enough
The problem wasn’t a lack of knowledge. Like I said before, it was my ego and disobedience. Let’s take a deeper dive into each of those and how they affected me:
Ego: I somehow thought I was different. “Keeping up with the Jones’” was fine for me because I was smarter than our financial freedom forefathers. With the amount of money I made, I couldn’t help but be successful. At least, that’s what I thought. This kind of thinking led to tens of thousands of dollars of debt that I’m still climbing out of. The lesson? Don’t think you’re different and immune to ego leading to lifestyle creep. You’re not. I wasn’t.
Disobedience: What’s worse than getting tens of thousands of dollars in debt? Getting into hundreds of thousands of dollars in debt. And my disobedience led to that. I didn’t pray before decisions; I prayed after making my choices. I bought, with the sweat of my loved ones, a business I had no business being in. Had I even asked God for input, perhaps I would’ve avoided this entirely. The lesson? Rely on God before making decisions.
What I’m Doing Differently Now
I’m showing more restraint and choosing not to keep up with the Jones
I’m focusing on cash flow
I’m not getting into any new fixed obligations/debts
I’m praying/seek guidance before taking action
I invite you to walk alongside me in this journey; and remember, Knowledge doesn’t lead to financial success. Humility does.