There I was at the top of my game. But exhausted and frustrated and burned out…and suddenly, FIRED! And at the spry age of 54, I wasn’t exactly ready to retire or jump to any old job. The disbelief gave way to relief and then to grief and … well, I’m still working on the next phase. But you know what, I’m in terrific shape financially, socially, and psychologically. Consequently, I have the luxury of time to plan and carry out my next move. So why am I not panicking or checking job openings at Walmart? As they say, hindsight is 20/20, so let me tell you the best and worst moves I made financially that put me in this sweet spot.
I had converted a 30-year mortgage into a 15-year mortgage at 4.25%. According to many financial experts, it would have been “smart” to keep the mortgage for the tax deduction. Plus, I could make a lot more than 4.25% interest if I invested “extra” money into the stock market. Then 2008 and the recession hit hard, and suddenly, getting a guaranteed return of 4.25% didn’t look too shabby. So I really became obsessed, paying off my remaining $64,000 mortgage in 15 months. And for me, owning my home outright is a huge psychological lift as it gives me a sense of security. I’d be really sweating bullets if I still had those mortgage payments!
I didn’t always max out my retirement contributions – especially when I was prioritizing my mortgage payments. But my salary increases typically went right into retirement contributions and when the house was paid off, I maxed out my contributions. Plus, I invested a fair amount into my Roth 403b option at work, which gives me tax-free distributions and more options in terms of timing my withdrawals. Now I certainly don’t have enough in my retirement funds to begin taking withdrawals at this young age, but I don’t need to make additional contributions either. I should be fine even if I average 5% annual interest – as long as I let the funds sit for a decade.
From the very beginning of my career, I’ve always tried to max out my leave. On my last gig, I accumulated the maximum 420 hours of leave, the equivalent of 11.2 weeks. Not a bad deal! And once I was fired, that accumulation of leave turned into a generous payout – enough to cover at least seven months of typical living expenses. That accumulated leave turned into a nice emergency savings fund!
In 2009, I set aside about $25,000 to invest in individual stocks. Well, I was great at buying low. But I discovered I was even better at selling lower! Darn you, Chinese solar power stock! I did my research, but I was new to the game. Worse, I later realized that I don’t have the “killer instinct” to know when to sell. I rode a stock to the penthouse suite, and then took it all the way to the basement! Uggghhhh! The takeaway from that experience? Stick to low-cost index funds and don’t try to time the market.
I failed to set a long-term goal for the assets outside of my retirement account. Truthfully, I had goals designated for home remodeling and vacation funds, but I just sort of stored remaining funds in multiple accounts. Ironically, I had just set things in motion to create a $100,000 early retirement fund a month before I was fired. That didn’t go so well, did it? While I am in a good place with my taxable accounts, I’d like a do-over on this one.
Even though I was saving and investing a lot, I got complacent. My monthly budget was a figment of my imagination. Now I can see that high levels of stress from the job and frequent business travel wrecked havoc on my spending patterns. My bar tab has certainly gone way down since I lost my job! Regardless of the cause, I got complacent and careless, and I’m finding it’s not quite so easy to return to a more disciplined budget.
I’ll be the first to admit, there’s a lot of luck involved in reaching a state of financial security. I was lucky to have excellent health insurance and work for a compassionate boss when I fell terribly ill. And I bought my current house before the housing market imploded. I’d like to take full credit for my state of affairs, but I can’t. My parents taught us to be frugal and to save money for a rainy day. I am a lucky duck! My final advice: Make sure your best moves outweigh the costs of your worst moves.
Dr. Brenda is a sociologist, educator, blogger, motivator, and financial coach. In addition to blogging at The Five Journeys, she writes 30-day challenges at BetterLifeChallenges.com. Her passion is guiding people on their journey to financial freedom through coaching at DrBrendaMoneyCoach and online courses at EarlyExitAcademy.com.