Our Best and Worst Money Moves Before Starting our FI Journey

As the start of our FI journey is fresh, I wanted to reflect on our prior decisions and habits that helped our finances as well as those that didn’t.

Even when we were clueless about money, we made some smart moves earlier on that we would certainly make again. However, there were also plenty of things that we could have done better.

Here, I want to share some of these with you as they may help you on your journey to financial independence.

What we didn’t do well…

This is a little painful walk down memory lane and I am not about to add the numbers to make it any worse.  However, it helps to see where the immediate changes were needed to get the fastest traction. 

1. Ignoring Gross vs. Net Income

This was an ugly mistake that costs of years of savings and investing. 

Here is the shameful confession – When I got my first job offering across the country, I planned our move and our new life on the gross income in my offer letter.  I had an advanced degree involving lots of math but I was CLUELESS about taxes and other things that come off from a paycheck. 

After living like college students for so long, we did what everybody does and upgraded our lives with the new job.  We rented a house, committed to buying an used car from my friend’s dad (at least we had cash but still) and got the utilities set up.

Getting my first pay check was a shock to say the least. I made the new budget to make it all work but it left very little room for savings. 

2. Not Taking Advantage of Retirement Accounts

I knew that contributing something to investments was smart.  We were told to at least get the match which we did (thankfully!). 

However, Dave Ramsey’s baby steps recommended paying debt (baby step #2) and having a full emergency fund (baby step #3) before contributing to retirement. He also recommended working with a financial professional for investments when arriving to baby step #4.

It took us a long while to save the emergency fund. When we reached our goal, we continued saving for our wedding and honeymoon and then for a house down payment (what DR calls Baby Step 3B). During all this time (about 5 years), I never contributed more than 5% to my 401k and we never opened IRAs either as we weren’t “ready” to invest based on DR’s plan.

Baby step 4 started to get close enough late last year so I found a financial adviser and opened a Roth IRA. Now that I have learned about actively-managed funds and the long term impact of the associated fees, I realized this is not what we want to do with our investments.

This year we are changing this and we are on track to maxing all retirement accounts for the first time ever (yay!!)

3. Misusing an Inheritance.

This one is one of the most annoying financial mistakes we made but it was the experience that became my catalyst to learn about personal finance.

Earlier in our dating years, my now-husband got a windfall from a family member that passed. At the time, we were both clueless about money; we were not even budgeting yet so we had no short or long term vision about our finances.

I watched him trying to be responsible and go to the bank to get “advise” but he never came across someone that gave him good genuine suggestions on what to do.  After all, we didn’t talk openly about money with others and listening to the bank representative made sense.

The money was parked in a CD (certificate of deposit) and a “Preferred Customer Account” in our bank [insert eye roll]. Little by little we started making fancier dinners more often, spending more in entertainment and buying things we “needed.” On the flip side, the cash helped us stay afloat when my husband got laid off during the recession and, even though we weren’t married yet, he used some of the funds to pay some of my credit card debt (I was too stubborn to let him pay all of it).

The whole experience showed us that without a plan money dissolves into thin air. We didn’t waste the entire inheritance but we missed the chance to make the most out of that wonderful opportunity.

The smart moves…

Before I came across the FI movement, we were already doing somethings right either out of fear or simply for not having other options. Back then, we were not fully aware of the positive impact these decisions would have in our lives. Now that our journey to FI has officially started, we plan to continue applying these principles as part of our strategy moving forward.

1. Saying NO to Debt

Even though today I am the Chief Financial Officer of our household, it was my husband the one that brought the “no debt” mentality to the family. 

When he was younger he saw family members going through bankruptcies, unplugging the house phones to avoid collector calls, and experiencing serious financial stress due to debt.  He wanted nothing to do with it. 

Meanwhile, I used credit cards to pay for things I couldn’t afford like taking my family and friends on nice trips every time they visited. I wanted to appear successful in their eyes and paying for things made me feel like I was achieving that. Except that I had no clue how credit cards worked or how I was going to pay the balances.

Eventually, my partner’s debt-averse attitude started to get contagious even before we got engaged. I slowly started paying up the cards and saving for purchases ahead of time.  Not having to pay for things months and years after enjoying them was incredibly worth it. 

2. Budgeting

Saying no to debt meant planning ahead and we used a budget for that. 

Starting on the Dave Ramsey plan helped me get a grasp on telling our money what to do by using a zero-based budget.  I had two spreadsheets going: one that I updated weekly with every expense, and a second one that got updated once a month with totals for each category [these days Everydollar & Personal Capital are my apps of choice].

Saying NO to debt kept us out of trouble and budgeting opened our eyes about where our money was going.  I quickly saw how the little expenses were adding up to ridiculous amounts of money which help us curve our habits. Seeing the debt number go down month after month also kept me motivated to keep paying off my credit card debt as fast as possible.

Our budgeting was far from perfect (and still is at times), but it certainly helped us get and stay organized. We haven’t stopped budgeting since we started and I believe this has been a key aspect to the financial traction we have made so far.

3. Mindful Purchases

Mr. Fimigrant is always proud of finding deals; he never pays retail for anything and can see value when it isn’t apparent to most.  He is patient, negotiates, and knows when the price is right to pull the trigger with a purchase.

I didn’t have that skill but I have never been a fan of shopping either.  For me, buying more stuff means something else to have to take care of like a pair of sunglasses I could break (again) or leave behind somewhere (for the 5th time).   

After all these years, I’ve learned to thrift shop for things we want or need though. It is the ideal option for me as I get overwhelmed with the endless options available when buying new plus it is great for the environment and the budget 🙂

Purchasing a home with a small mortgage relative to our take-home pay was also an excellent decision for our finances. I am glad to have come across Dave Ramsey’s advise when we did as it helped us avoid purchasing a home when were far from ready.

So what would you say are the best and worst moves you did with money before truly having a plan?

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