The Power of Sound Personal Finance

Last week, I mentioned that I was recently switched jobs to a lower paying job. If you check out the post, my lower pay is specifically base, and the new job offers a significant amount of upside for me. At the end of every calendar year, I will be eligible for a bonus (which I never got/expected working for the government) pending the company does well, and at the end of 18 months, I will be eligible to purchase stock options in the company if I desire. In addition to that, I also get a certain percentage of my income put into a SEP-IRA, which will start for me in 2016. So all in all, even though my base pay is lower, I think my total compensation will be quite a bit higher every year, and by the end of the first quarter in 2016, I will be well ahead of where I would have been had I stayed with the government.

One thing that I had not thought of before this though was why I was able to even consider taking this job. 4 years ago, my income was hardly greater than my expenses, and I was focused on trying to pay down the large amount of debt that I had managed to bury myself with. I had credit card debt, car loans and student loans. Each of those was gobbling up a significant portion of my monthly income (20%+), and that was just to cover the minimum payments. All of the extra that I could possibly find was being funneled that direction too, in hopes of getting out of debt earlier than normal. What Im trying to point out is that if this same opportunity popped up 4 years ago, there was no way I could have taken advantage of it. My finances were too tight, and I wouldnt have been able to take a pay cut for upside in the future, no matter how big the upside actually was. Because of the poor position that past me had put current me in, I would have had to do something that future me probably would not have agreed with.

Thankfully that is not the case though. I have been hard at work on my (and we have been working on our) personal finances since early 2009. We are so close (2,400 away – most likely will be paid at end of month) to being debt free except the mortgage and we are living well within our means – so taking a pay cut such as this that has a seemingly high upside isnt a big deal. We will probably lower our monthly spending to make up for it and keep the same amount of money going towards our savings goals, but other than that, it will be business as usual around here.

As for the new job, I’m really enjoying it so far – I really like my co-workers and have been given a lot of interesting stuff to work on so far. Even though everything is new and the newness will eventually wear off, I suspect that I will enjoy coming to work more at the new job than I did at the old job.

It’s these types of opportunities that make all the sacrifices that I made from 2010 to 2013 totally worth it. Opportunities that I would have previously had to turn down because old me mismanaged my money have led to opportunities that I can now jump on because old me repented for his sins and paid off all his debt and stopped piling on. Current and future me are grateful, and will continue to ensure that future versions of me will be afforded the same options.

Another thing to note – we will be seeing a pretty big reduction in household income come fall – my lower base pay, and my wife is not going to work full time. Since our expenses are so low (like we mentioned earlier) we are just going to go business as usual around here, and there’s nothing better than that. All in all, I think it’s about a 35%+ reduction in household net income. It doesnt matter though, because we’ve been focused on our finances for years and have done well.

Readers: Have you ever had a moment in your life that was made possible only because your finances were in good shape? What was that moment and how were you able to take advantage of it?

 

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2 thoughts on “The Power of Sound Personal Finance

  1. It’s awesome when you work hard for something and can reap the rewards. In your case, it was becoming debt free and financially sound. I can’t say I’ve been able to take advantage of “good times” just yet due to finances (I totally blew it when the housing market had a melt down – I wasn’t ready financially to take advantage of the low prices!) I’m hoping that in 24 months, I’ll be in a good position and maybe the housing market in my area will slow down a bit (or drop? 🙂 )

    • Indeed LH that would be great – it’s always nice to have a big cash pile stored up when things get bad. I just wish I had more in 2009.

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