My Quest for Creative Financial Freedom Pt. 2: Gawk at My Pathetic Finances!

This is what my face looks like when I think about my finances.

Making this information public feels a little bit like having someone yank my pants down in front of a large crowd. No more secrets, just letting it all hang out.

Can we just be honest? In this society, we love to gawk at people. Celebrity news is the prime example of this - and c’mon, you probably look at that shit. It’s only natural, we all wanna know what other people are really doing.

I remember walking through the suburbs with a friend from out-of-town. She said, “I wonder what’s going on behind all these closed doors. Out here in the suburbs, the craziest shit is happening. This is where that Blue Velvet shit goes down.”

Warning: The image below is safe, but the video becomes NSFW pretty quickly.

Hopefully my personal finances do not remind you of Blue Velvet. But, they are not impressive. Here’s what I am starting out with:

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MATT SOKOL’s PERSONAL FINANCES AS OF JUNE 9 2017

(note: bank names are left out and minor details scrambled for security reasons):

Assets:

Bank Account #1: Guilt Free Spending Account: $100
Bank Account #2: Business & Bills Account: $34
Bank Account #3: Emergency Savings: $80
Bank Account #4: Steem Power: $3,600 (!!!)

Debts:

Credit Card #1: $6,000 // the big annoying one - payments of $180 per month
Credit Card #2: $300 // the small one - payments of $30 per month
Money Owed to My Dad: $12,000

Note about the last one - my dad lent me money over the course of about five years after college for various stuff - mainly for my first move to NYC & later relocation to North Carolina.

This was extremely generous since he doesn't have much to spare. We’ve agreed that I will start paying that off at a rate of $200 per month as soon as the other two credit cards are under control.

For the record, I am fully embarrassed every time I type the phrase “money owed to my dad.” I know many people are not so lucky to have a parent who is able to lend them any money.

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What Does it Feel Like?

Before I go any further, I want to explain what it feels like to make your personal finances public.

One on hand, it’s embarrassing. As a 26 year old dude with a college degree and all that, being $20k in debt w/ only a few hundred dollars per week of income is not desirable.

On the other hand, it is liberating. Who cares? It has no impact on my actual well-being if you read this and laugh at me. Go ahead, mock me in the comments. Bring it!

More importantly: There are many people in this world who live off of a few bucks a day. It doesn’t matter so much if I have a lot of money by American standards - by having a house with running water and food in the fridge, I’m already living a luxurious life compared to many other people in this world.

With that said, if I want to travel and live in various cities around the country (and eventually around the world), that requires money. I’m lucky to have this opportunity to earn more and will be doing my best to earn financial freedom.

That’s the mindset.

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Short Term Goals

After a lot of research, I found two personal finance gurus who really resonate with me: Dave Ramsey and Ramit Sethi.

I love Dave’s debt snowball concept. You just pay off debts from smallest to largest. No worrying about interest rates or perfect optimization. Just crushing debt one at a time, feeling good about being able to see the progress.

That means I will be paying off my debts in the following order:

-Credit Card #1 - $300
-Credit Card #2 - $6,000
-Money owed to my dad - $12,000

But, how to decide how much income to allocate to debt? It’s easy to go crazy when every single purchase feels like a mistake - “Damnit, I spent $5 at taco bell, that should have gone towards the debt.”

That mindset does not work for me. I’m too inclined to worry about every single dollar I spend if I think that way. Instead, I use Ramit’s much simpler method of breaking down income by percentages:

20% of income goes into my “guilt free” spending account.
30% of income goes into my “business & bills” spending account.
45% of income goes towards debts. Minimum payments first, then snowball.
5% goes into emergency savings.

This system can be automated if you have a full time job. I’m a freelancer who has to invoice and get paid without any corporate assistance, so I do it manually. Ramit would probably say I’m a big idiot for doing this by hand. But that’s ok.

My “big” short term goal is to pay off all of these debts and reach net worth $0. My “realistic” goal for this is to do it by the end of 2018. My stretch goal is to do it in a year, aka by June 2018.

That’s kind of crazy, because it means I’ll be doing this series for years! But that is the ultimate truth of personal finance: Ambition must be tempered with patience and pragmatism.

The myth of Icarus applies in spades here. Fly too low (i.e. safe low-paying jobs) and you won’t make any decent money. Fly too high (i.e. high risk ventures) and you end up in a bunch of debt with no prospects, because your start-up/band/portfolio blew up in your face.

My hypothesis is that working hard in a smart way, combined with patience, is the key to creative financial freedom. You don’t need a huge win to make it happen.

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Whoa

this post is already pushing a thousand words! I’m going to stop here for today.

Next week I will reveal my income sources: How much do I earn per month, and where from? Then we can do the math, see what my projected finances look like for the next six months, and go from there.

I’m very interested to learn: How soon can I move away from Connecticut? How much of an impact will there be if, for example, I double my rent payment from $300 per month here to an average of $600 per month in a more expensive/desirable area?

That will be a very useful exercise for both of us, I hope.

Thanks for reading!

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