Zaphod for President

A few months ago I accidentally stumbled onto the Housing Bubble Blog, and was horrified to find an entire community of people who were activley laughing at me.

Why were they laughing? Because I, like so many of my fellow Americans, had purchased a home at the height of the “housing bubble”, had rung up an insane amount of debt, and had destroyed my future by being incredibly short-sighted and immature in regards to my personal finances.

After a few weeks of denial, I expanded my reading to include other wonderful blogs, such as Get Rich Slowly and Lazy Man and Money. As I read more and more about the world of finance, I learned three very important things:

1. Life requires money. Like it or not, personal finance is a part of every adult’s life.
2. I am not the only one who has done incredibly stupid things with my money.
3. Unless I get my $#it together and take care of this, my financial life is going to remain a mess.

That said, it is my goal to chronical my slow rise from “total god-damned mess” to “pretty friggin’ comfortable”. Here is my thinking:

• I hope other readers might avoid a few of the mistakes I have made by reading the raw, painful truth about my own poor choices.
• I find personal finances somewhat boring, and have a hard time motivating myself to care about them as much as I should. I hope this self-spotlight will help to keep me focused.
• I am fortunate to have some pretty bright readers, and I trust they will offer criticisms and advice where appropriate.

Above all else, I wish to avoid becoming a braggart. Therefore, I expect I will end this series once I have achieved “pretty good”. My end-goal is “comfortable”, not “bling bling, look at me and my small penis on this shiny yacht”. There will be no book, no infomercial, no “system” and no get-rich-quick scheme when I am finished.

Being that this is the first post, I need to start at the beginning. I will do my best to keep this brief, relevant and interesting.

1997-2000: I left home at age 17, lived in a series of delapodated appartments, and worked a series of degrading low-wage jobs in order to pay the rent and buy shiny things I didn’t need. I dropped out of high school claiming that I had to work instead, but in truth, I was simply being a typical arrogant 17-year-old. I also decided to ring up about $2,000 of credit card debt for no good reason, and then promptly pretended as if that debt did not exist.

2001: I was working a fairly decent job, but I had no college degree, only a few technical certifications. As my company started switching into “lean mode”, I got nervous and decided to get my GED and go to college. I went to a SUNY (State University of New York) because they were close, cheap and indiscriminate. I added a night job to save up some cash, and after about 6 months, quit to attend school full time.

2002: After my first semester of college I ran out of money, but I wanted to remain a full-time student. Student loans took care of tuition and books, but I still needed rent, food and spending money. A friend and I took about $2,000 and started a small Internet/mail-order company specializing in sporting equipment. Between the company and school I was working about 100 hours per week, earning about $18,000 per year. Despite this meager reward, I was proud to be “self-employed”, and to remain a full time student.

2003: As I started my junior year of school, my business partner suffered a personal tragedy, and the business quickly collapsed from neglect. I was desperate to remain a full-time student, but my only source of income had vanished almost overnight. I used student loans to survive for another six months, and began drafting together plans for a new company. I also met the love of my life, and promptly pissed away my life savings in the hopes of impressing her. it worked. By the end of the year we were living together in a small basement apartment.

2004: My lovely lady is a few years older than me, and by 2004 was already secure in a “real job” making a fair middle-class salary. I meanwhile had run out of money, had no source of new money, and was still a few years away from graduation. Out of options, I began pitching my “new company” at anyone who slowed down long enough to listen to it. My girlfriend did the girlfriend thing; she supported me wholeheartedly, despite the fact that my “big idea” was incredibly stupid (I wanted to create something resembling MySpace.com. In my defense, this was back before everyone had heard of MySpace, so I thought I had a fighting chance).

2005-2006: I proceeded to teach myself PHP while completing my degree and launching my MySpace-clone business. I opened an American Express small business credit card, and proceeded to rack up $24,000 of debt in the next two years. For two years, this credit card was my main source of “income”. This was also the same two years during which MySpace became the hottest thing on the Internet. Needless to say, my “new company” died with a quiet whimper, after years of preparation.

2006-Today: After ringing up tens of thousands in debts, and wasting a full two years of my life on a clearly bad idea, I decided to compound my mistake by buying a house in Florida at the height of the housing bubble. Six months after buying, my house had lost about 12% of its value, and property values continue to slide lower every month. On top of this I owed $24,000 to AMEX, $12,000 on my car, $20,000 in student loans, meanwhile, my fiance had run up a VISA bill totaling $16,000 and owed $10,000 in student loans.

Why would I buy a house while in such a poor financial condition, at a time of insanely high property values? Well, duh: I wanted to re-fi my debt. My long-term plan was this: I’m not sure what “re-fi” means, but if it will make the debt go away, I’m all for it.

Lucky for me, I did a few things right:

1. I accidentally taught myself a marketable skill (PHP), and began building up a small clientele as a freelance programmer. As a result, I was able to remain self-employed and secure a legitimate source of income.
2. I forced all of my “million-dollar ideas” to the back burner. I am still an eternal entrepreneur, but I have found the discipline to work my “real job” first, and my latest zany scheme second.
3. I bought a “fixer-upper” house, and negotiated a fairly decent price. Our mortgage is 30 years, fixed at 7.37%, and the monthly payment is within a reasonable budget.
4. I researched the “refinancing industry” before falling victim to it. For those who don’t already know, “re-fi”-ing debt is like pulling off a band-aid…very…very slowly; trust me when I say, it would only make matters worse.
5. I faced reality, accepted the gravity of my situation, and had “the talk” with my soon-to-be-wife in which I admitted my total failure, and admitted that I would understand if she decided to leave me forever.

I am now about six months past “hitting bottom”, and in that time I have remained very focused on three financial goals:

1. Become 100% debt-free.
2. Save $15,000 (3-months expenses) in an emergency fund.
3. Create and fund a Roth IRA to the maximum allowed annual contribution.

These are not the end-all, be-all of financial independence, but I feel they will provide me with a solid foundation on which I can plan my next move.

Better still, the love of my life has remained with me, and has agreed to commit to these goals along with me.

To that end, we have achieved two milestones this month (May 2007), and that has given me the courage to write this post.

First, the emergency fund has reached $5,000. This is a psychologically satisfying number to me. This money is locked away in an ING Direct savings account, earning 4.50% APY, FDIC insured.

Second, the VISA balance has been reduced to an even $10,000. Breaking the “5 digit” barrier feels like a major accomplishment to me.

Milestones aside, here are the numbers:

Car:	$6,897.92
Visa:	$10,000
AMEX:	$16,157.57
Mortgage:	$273,928

Note 1: I like to pay the bills a few days in advance, so this counts as “May 2007″ even though it is currently April 26th.

Note 2: I have not included the student loans here because I am currently in the process of consolidating them. I expect to include them in next month’s update.

Note 3: I would also like to begin setting specific short-term goals for myself, but I am going to allow myself until next month before implementing this (I am about to incur some home improvement expenses, and don’t want to promise myself more than I can deliver).

So there it is; my dirty laundry. Feel free to point and laugh, or offer some advice. I blame no one but myself, and take full responsibility. With my current level of dedication, I am confident that I will achieve these financial goals within the next few years.

And, in case you were wondering, writing this post was incredibly cathartic for me. Thanks for listening.

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