Episode 19: Financial Freedom My Only Hope

I’m officially consumer debt free-ish!

🔗 Links to all sections to skip to what you want/need:

What I’m Thinking About | What I’m Reading | What I’m Watching | What I’m Vibin’ to | Bonus Track: Getting smart with Credit Cards

Financial freedom my only hope
F**k livin' rich and dyin' broke

Jay-Z - The Story of O.J.

What I’m Thinking About

This post is more lengthy than others, but I truly hope this helps gets someone free! Feel free to ask me questions for clarification on anything I mention here.

Money might not buy happiness, but being financially secure/free does impact your mental health. With that, I’m happy to report that as of TODAY, I am consumer DEBT FREE-ish! My credit cards are mostly paid off - even the business card I had. I’m carrying some small balances on cards, which is fine, but what I paid off is the grad school + moving to Atlanta + graduation party + layoff balances. I think at it’s peak, including my business credit card that I kept from my financial advisors until last year, I had ~$30,000 in credit card debt. Some people are fine with carrying credit card debt, but I am not. Especially with the high interest cards I have. It’s a no for me, but more on that later.

My car also happens to be paid off this month (after breaking down on me and costing $6,995 to fix the WEEK before my last payment SMDH), but not because I was aggressive about paying it off. Since the interest rate was so low, my financial advisors instructed me to just pay the monthly payment. The loan happened to be paid off this month, so the timing was perfect. My student loan will also be paid off this year, but the amount is so minimal you never hear me talk about it.

Getting consumer debt free has always been important to me because I want to be able to leverage credit to work in my favor and not against me. I’ve been a stickler about my credit score because home ownership has been a goal of mind for a very long time and I want my credit score to be ready instead of needing to get ready. Even through carrying a large overall balance of $30,000, my credit score was fine because my debt to income ratio was still under 30% across all of my cards. Either way, the debts needed to be paid so I can move on.

What all of this brings up for me is how it takes a long time to unpack growing up in survival mode. In fact, I didn’t even realize I grew up in survival mode until I was an adult and started to unpack my financial habits. As a kid, I knew we weren’t rich, but I didn’t think we were poor. All of my basic needs were met and for a while, my village (i.e grandparents) spoiled me to no end and provided anything extra that I wanted. Once I got a little older I did realize that my family’s financial situation wasn’t what I thought it was. I used this to my advantage when it came to applying for college. I was on reduced/free lunch for the sole purpose of requesting that my college application fees were waved. I didn’t even eat the school lunch and brought my own food to be healthier, but I knew my strategy would be necessary.

When I got to college, I knew to avoid student loans and credit cards at all costs. I heard stories of creditors preying on college students and I didn’t want to get caught up with that. By my second senior year, I applied for a student credit card through State Farm at the suggestion of one of my sorority sisters, just to begin building my credit. My limit was like $1,000, so I couldn’t do too much damage anyway lol.

Once I was finally in the workforce and living my best adult life in California, I was still in a survival mode mindset. My grandpa always taught me to save money, and I’m not sure if I even had a savings goal at the time, but I constantly felt “broke”. Yes, I know California is expensive, but I had a roommate and I was making decent money at the fruit stand (AKA Apple lol). I later realized I was living in survival mode because I knew if something went left, no one in my family could afford my California rent. While these habits served me well once I quit my job and needed to live on my savings for a few months, I knew I needed to be smarter with my money, my habits, and get free.

My friend Sherrell highly recommended I Will Teach You to be Rich by Ramit Sethi, and that was the beginning of me making a shift towards letting go of some of my learned habits. I recognized that I was holding on to too much money in a low-interest savings and should’ve contributed more to my investments and retirement. At the minimum, any large lump sums of my money I saved should’ve been in an High Yield Savings Account so that I could earn money while saving. Additionally, I needed to SPEND more. Ramit’s philosophy is that you should enjoy the money you’re making, while you’re making it. If going to Starbucks makes you happy, go to Starbucks - guilt free, because that is how you define your rich life. He also believes you shouldn’t feel guilty on spending money on health, wellness, and knowledge (books and classes). Only you can define your rich life. For me, that’s budgeting for monthly housekeeping, buying whatever I want at the grocery store (although I still reach for the cheaper packs of meat lol), and splitting checks evenly when I’m out, if and when it makes sense.

Ramit has percentages for how you should spend your money (i.e 50% of your expenses should go to living, 20% savings/debt repayment, 30% everything else), which make it easy to create a “budget” for spending. I used this as my rule of thumb for a while until I leveled up and invested in financial advisors. Folks have mixed feelings about financial advisors (including Ramit lol), but mine have been a God send. They’ve taught me ways to shift my thinking in order to reach my goals and make smarter money decisions. They even help me determine what health plan to select when it’s time for me to enroll in insurance lol. When my car broke down a few weeks ago and I was faced with that huge bill, I called my financial advisor to talk about my options and he assured me I would be fine! That was probably the first time I spent that much money on something and was able to sleep well at night. I was just grateful I had the extra money because I knew that if this would’ve happened last year when I wasn’t working, it would’ve really broke me.

Over the years, my relationship with credit cards began to evolve and I began to leverage them for points and rewards. Every now and again, the balances would get to be higher than I originally planned, but I gave myself grace because it was usually for a reason, like being an entrepreneur, going back to grad school, etc. When I met with my financial advisors for the first time and told them about my credit card debt, which was somewhere around $20k, they were like oh, that’s not a lot, we know people with way more! I was like well this is a lot FOR ME!? LOL.

Anyway, I started to learn the rules of the game and leveraged balance transfers with 0% APR to help stop the bleeding on cards with high interest rates. Interest alone can eat you alive and feel like an uphill battle sometimes smh. I had two strategies with this: the first time, I applied for 2-3 new credit cards that had intro 0% APR offers (plus fees) and transferred my balances that way. The second time, I took advantage of 0% APR offers (plus fees) on cards I already owned to buy me some time to pay the cards off with no interest. In some cases, this meant that my utilization for some cards was higher than the recommended 30%, but that wasn’t an issue for me in the moment.

I am grateful to be ale to redirect the aggressive credit card payments to my savings account, because I am planning to buy a house in August/September! Beyond that, I am ready to SPEND MORE. Something I never really would’ve made a goal, but knowing that my savings is stacked, bills are paid, and my retirement accounts are also stacked, I am ready to finally SPEND and not HOARD my hard earned monies.

I’d be remiss if I didn’t mention that I was able to reach this goal aggressively because I have an additional stream of income that I can’t talk about publicly….just know that it’s legit lol.

I know this post was longer than most, but it was important to me that I be transparent around this topic. We don’t talk about money enough in our community and I’ve found that by being more transparent about money has helped me get free and shift my thinking.

If any of this resonated, please let me know!

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What I’m Reading

I Will Teach You To Be Rich by Ramit Sethi

Rating 5/5

If you are in a place where you feel like you have a few aspects of your finances under control and need to level up in other areas, this book might be for you. For instance, if you have your spending under control, but want simple strategies to increase your savings or invest more, this book can help you with that. If you’ve struggled with feeling like you have to pay fees from companies whether it’s a late fee or something else, this book can empower you and give you tools to dispute those to get your money back. If you feel guilty for buying a latte from your favorite coffee shop, this book can help you feel better about that.

In my opinion, Ramit has simplified finances with this book. It’s what I used to guide my finances over the few years, including making sure I had my old Apple 401k transferred to another brokerage that I could control, etc. It’s a great companion for folks who aren’t ready to pay for a financial advisor just yet.

Also, to get a feel for his style, Ramit had a show on Netflix that was pretty good to watch.

If you don’t want to read the book, start here: https://www.iwillteachyoutoberich.com/budget-help/

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What I’m Watching

Paradise on Hulu!

If you don’t know, let me help you - this is one of the best shows out right now! If you were a fan of Sterling K. Brown on This is Us, your fandom will only increase while watching this show. Episode 7 alone was one of the greatest 50 minutes of tv that I’ve seen in a very long time.

Do yourself a favor and check this show out, ASAP!

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What I’m Vibin’ to

Managing your finances can be a lot. While my financial advisors help me out with most of my finances now, a few years ago I created a money playlist to listen to when I was updating my budget or paying bills. It helped me relax, focus on my bigger goals, and be less anxious about thinking about money.

Whether you need some tunes to play while you’re combing through your finances or you’d like to ride around feeling like the boss that you are, check out the playlist and let me know your thoughts!

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Bonus Track: Getting smart with Credit Cards

Credit Cards don’t have to be the enemy if you’re smart with how you use them. Below I will share three key strategies I leverage with credit cards.

Credit limit increases:

You should be requesting a credit limit increases on your credit cards at least once per year, if not every six months. You want to make sure that it is a SOFT pull, meaning that it will not be reported on your credit history. I do it often and I have cards with AMEX, Chase, and Discover. Sometimes they’ll say not at this time, sometimes they’ll only increase your limit by a few thousand dollars.

Why? Because it will increase your overall Available Credit and decrease your debt to income ration. My uncle always says to ask for what you need before you need it.

Points

USE YOUR POINTS! That’s it and that’s all (I’m kidding). My friend Sherrell is the points queen and hipped me to leveraging points for other purchases. I feel like getting credit cards that fit your lifestyle is the best way to maximize your points. All cards differ but some will give you 3X points for categories like travel or groceries, and then 1-2X points on all other purchases, etc. I’ve leveraged credit card points for flights and gift cards and it’s come in clutch over the years. Sometimes airlines or hotel chains will have 20% bonus point offers if you transfer your credit card points over to your airline/hotel account. For instance when I went to Cuba, Chase had an offer to give me 20% more points for transferring my Chase points to Southwest Airlines, which I then used to purchase my flight.

In my humble opinion, Chase and AMEX have the best point systems when it comes to using your points for things that matter.

Balance transfers

If you find yourself carrying larger balances on high interest credit cards, a balance transfer to a 0% APR account could help. I’ve done this with current credit cards that I already have, and I’ve also done this with new cards that I’ve applied for. Essentially you pay a fee to transfer a large balance to a card that will not charge you interest for a set amount of time. It’s a nice way to stop the bleeding as you attempt to pay down your debt. The fee may suck, but it’ll likely be a lot less than the interest you were paying.