The Price of Ignorance

For the past several months I’ve become a very frugal man.  In October of 2011 I paid off all of my debt and went about drastically cutting expenses.  I do without many luxuries that are almost considered necessities in today’s society.  Far from feeling deprived (I actually feel liberated) I started thinking about why I decided to forgo the things that for most of my life were always present.  To understand this we need to consider a little history.

Most of my life my handling of money could be described as that of a spendthrift.  I wasted money, lived paycheck to paycheck and had no savings of any kind just two short years ago.  Money had one purpose in my life and that was to be spent.  And spend I did.  I bought gadgets, cars, boats, big screen tv, surround sound and who knows what else.  The wake up moment, well besides that of being divorced and flat broke, was when I read the book, Your Money or Your Life.  In the book is an exercise that requires you to determine the best you can the amount of money you have earned over your lifetime.  Up until recently I had always had a modest salary and for twenty years worth of work I estimated I had earned about 500,000.  The next part of the exercise is to determine how much of that amount you have saved or invested.  You know what I had to show for twenty years of work and a half a million in earnings?  NOTHING!  Yep, that’s right, big goose egg.  This is embarrassing to admit, but it’s the truth and it’s part of The Stoic Investor’s story.

Unlike those of you who may have always been wise money managers and began saving and investing early in life, I woke up to the ignorance of my ways later in life.  As a result I determined that I needed to make up for lost time.  Although I’m pursuing the path to financial independence I also realized that I needed to save a great deal of my current earnings to make up for lost time.  Today I’m lucky in many ways, one is earning a salary just over six figures and this has allowed me to save a large sum of money in a short amount of time.  I need to continue this high savings rate and live a frugal life for a bit longer so that I can accumulate enough funds to offset the disadvantage I caused myself from missing out on two decades of compounding.  I still have years to go before retirement and I believe if  I save aggressively enough the amount I put back now will get me to where I would have been had I been smart enough to manage my money better to begin with.

Some lessons are learned the hard way.  I’m thankful for second chances and the means to make good on past mistakes.

6 thoughts on “The Price of Ignorance

  1. I thought maybe your story involved some frivilous spending and possibly the D word. I went through a D a few years ago. Somehow I managed to keep all my 401k, but I should have also saved much, much more. I have found happiness in a marriage where our goals align, I too am thankful for second chances.

    • MSS– Going through hard times is no fun, but it was after being flat on my back that I began to gain a better perspective of the path I was on and where it was taking me. Sadly, the divorce was over money and after that I decided I really needed to make some changes. Glad to hear you and B are doing well and enjoying your second chance.

  2. Although I started the path to FI fairly early in life (28), I feel that I could also be much further ahead than where I’m currently at had I not been so unwise when it came to handling money. I was absolutely terrible when I was younger, and actually received a small inheritance when I was 21. I spent every last dime. Gosh, if I only knew then what I know now!

    Second chances are most certainly very nice!

    Best wishes.

    • DM– Second chances are indeed blessings. At least you came to your senses much earlier than I did. I read about you younger guys and what your doing at such an early age and I kick myself for not starting this earlier than I did. The ERE site is full of such examples. Oh well, better late than never eh?

  3. Be thankful indeed for second chances. I have always been good at saving, but now I’m working at spending money on the things I really want to.

    Did your divorce ruin or help you financially?

    • Leigh–Thanks for stopping by! I would say I was a financial mess before the divorce and post divorce just finished me off. It was a wake up call though and I have made quite a bit of progress in the past year.

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