Why I’m Thankful for Over $75,000 in Debt

This post is for everyone who reads about millennials traveling the world with a seven figure portfolios and thinks, “What the hell? How have they had these perfect financial lives and now they’re FI already?”

They likely didn’t.

Just like Instagram and Facebook, many blogs are curated to highlight the best parts of the author’s life.

It is just as important to understand the backstory of mistakes to give you motivation on your own journey to financial independence.

This post is part one of a three part series about my own journey from broke to building wealth.

Stupid Internet

I first got online in 1996, junior year of high school. Oh the sweet sound of dial up modems and “You’ve Got Mail.” Looking back, I don’t think the explosion of the internet while my brain was still forming was great timing. Specifically, online gambling plagued much of my 20s.

 

Rounders was released in 1998, my freshman year of college. If you haven’t seen Rounders, it is kind of like Goodwill Hunting except that instead of being really good at math Matt Damon is really good at poker and instead of disappearing to a job opportunity he rides off into the sunset to the World Series of Poker.

The dotcom bubble burst in 2000 but not before I got into a few thousand dollars of credit card debt by playing online blackjack from the comfort of my dorm room.

Corporations like Enron, Tyco, and Worldcom made headlines daily. Then 9/11 in 2001.

The world my classmates and I had been preparing for the first three years of college was very different when we graduated in 2002.  I didn’t graduate with any student loans but I did graduate with a gambling addiction. I  got my first job making $33,000.

In 2003, an accountant from Tennessee named Chris Moneymaker won an $86 satellite tournament to the World Series of Poker. Then he won $2.5M by winning the whole tournament. The online poker boom began and I wanted in.

The poker boom is when I first got into serious debt. For me, poker seemed like a way out. The adult work world was boring. If I could figure out poker, I could be make my own schedule and pursue other interests in my free time.

My introversion fed my poker addiction because I wanted to be alone, I was anxious about this new adult working world and structured schedule. Poker made me feel like I was doing something productive that would allow me to reclaim my time and earn on my own merit.

Nearly Rock Bottom: In Debt and Back to Mom’s

After failing at poker initially, at 25 I moved back into my Mom’s house.

I was in several thousand dollars of credit card debt. I do not have the exact amount but it was five figures. Additionally, I had bought $10,000 of sports collectibles on ebay, financed by my father, who had given me a loan based on a plan I did not follow through on.

It was humiliating. My friends had girlfriends from work and were doing well in their careers. I regressed and moved into a small, cramped nursery room in a home my Mom bought my sophomore year of college.

Looking back on it, I used the fact that I had no money as an excuse to avoid social situations that I was not ready for. I also took on jobs that were easy so that I would not be put in high pressure and high stimulus work environments that demanded long hours.

These coping strategies were detrimental to my mental and financial health. I did not understand introversion (and therefore myself) at the time.  As a result, I did not have healthy coping strategies that would allow me to plan for high-stimulus events like interviews or presentations and take time to recharge.

Missing Rock Bottom: Beating Poker

I was in a bad situation. I was in debt. Living at my Mom’s. My friends were moving on in their adult lives.

At 26, I found an online poker education site. I must be a visual learner because watching training videos everything clicked. I saw how to beat the game.

Each night, I would race home, watch training for an hour or so and then play poker all night. I was finally beating the game and making significant money. At work, I was useless because I stayed up playing all night and read poker forums (and even played) all day.

Again, I was hiding from having to interact with adult colleagues and feeding on my introversion rather than harnessing it.

I was making between $44,000 (2005) and $77,000 (2009) a year. I hated my job but somehow I was getting raises.

“Buy a House and at Least Get Some Equity”

The above is what my Mother and nearly every other human being told me during the latter stages of the housing run up.

Everyone was making a killing at real estate from 2004 to 2007, at least that is what the media had you believe. 

Between my poker income plus throwing every penny I had at my debt, I was able to finally wipe it out in early 2007.  I even made enough money with poker to buy a Macbook, go to Australia, and think about buying a condo.

It took me almost a year but, at nearly the height of the real estate market, I bought a small condo with no money down in October 2007.

Those days were crazy. I remember being pre-approved for a $500,000 loan and thinking how insane that was.

With no consumer debt and a new condo, I stopped learning about poker and started to lose. There was just no drive or motivation for me anymore. I was comfortable.

I didn’t go back into debt. I just remember not putting in the time to keep up with the game anymore and losing. Because I had missed out on 24 to 27 social life, I started to go out a lot. I was making enough that I could cover my poker losses and go out nearly every weekend. Life was empty.

The housing market crashed soon thereafter. I had some 401(k) money but was otherwise no savings. I was 27 years old.

A Fancy Degree Must be the Answer

I didn’t want to play poker anymore and I wasn’t any good at it at a high level.

So the next logical step was to take out a lot of debt to get not one but two fancy degrees. In May 2009, I started a dual degree program at an expensive brand name university.

I had a condo in an expensive zip code and now I was going to have five letters after my name (as long as I paid). I was on my way.

I believe this dual degree ended up costing me about $80,000.

(Got student loan debt? Get $100 and pay it down faster here)

Rock Bottom…Finally

All I had learned thus far at 28 was that every time I got into debt I could get myself out somehow.  Financial independence was not something I had ever heard of.  How I wish Mr. Money Mustache and/or JL Collins had been around back then. I could have bought low cost index funds at rock bottom prices in 2008.

Instead, between May 2009 and May 2011 I took out massive student loans, quit my job, took an internship for $40,000, and tapped my ~$40,000 401(k) to pay for educational expenses while my meager salary allowed me to keep my condo.

The stupid internet got me again when I was pulled over in 2011 in bumper-to-bumper traffic. What could this cop possibly want? Turns out that in 2001, I never took a class I was supposed to take after I had gotten a DUI. I guess ten years later technology had advanced to where they could scan a license plate and the computer would let the police know. I had been driving on a suspended license for ten years! I lost my license and they towed my car.

“You Are Broke. You Have Nothing.”

When I got my license back, the engine of my car died. I was talking to the guy who owned the auto repair shop figuring out what to do.

He talked in a straight forward manner. We discussed financing a car, paying cash for one he had on the lot, or getting a new engine for my car.  After hearing my situation he said, “You are broke. You have nothing.”

I was 31 years old.

This man transformed my life. For once, someone had looked me straight in the eye and told me the truth.

I was broke. I had nothing.

I am thankful I got to a point where someone told me the truth. I had to hit rock bottom to get there.

Based on Excel sheets I still have, on November 15, 2011, I had $21,488 of credit card debt and on October 1, 2013, I had $53,500 of student loan debt. Additionally, I owed my Dad $10,000 for the sports collectibles. Though he never asked for the money, I felt obligated to pay him back.

Today, I am debt free except for a mortgage in a beautiful home I share with my wife and best friend (my dog).

Raise the Black Flag

At some point, you have to raise the black flag, declare war on your debt, take some risks, and live life on your terms.

If you are in debt right now and frustrated by the curated lives of people on social media or the bloggers who seemingly did everything right, I hope this post will give some perspective.

This is your time to get to zero net worth. Focus on yourself and your story. Only then can you start your journey to financial independence.

In the next post, I will discuss how I got out of that debt. The post after that will discuss how I am building wealth on the path to financial independence.

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