An Average American Family (Part 1 – Drowning In Debt)

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Drowning in Debt

Like most American families, my wife and I have lots of debt. For a long time we struggled with our monthly bills and expenses because we did not have a good handle on our personal finances. The past year, we have worked very hard to improve on our financial education which led us to make better choices with our money and make smarter investment decisions. Through this journey, our debts became manageable and far less than what we had this time a  year ago and we were also able to start investing toward our future.  The past year, we got rid of $170,000 in debt (reducing expenses) and gained $186,000 in assets (real estate and retirement savings) all in the same year. Yes it may sounds like an infomercial, but unfortunately I have nothing sell you, it’s just my story.

This blog is two part series on ‘From An Average American Family to a Not So Average Family”

According to GoBankingRates, an average American family has $225,238 in Debt and many have less than $500 in savings.

We Were Average

Above statement, pretty much summed up our family’s financial status March of 2013.  One year ago today, my wife and I were roughly $230,000 in debt (mortgage, credit cards, student loans, etc.), with very little toward retirement and savings.  We weren’t big spenders or irresponsible with our money.  We both work and make decent paycheck, but after covering the bills and daily living expenses, there wasn’t much left over. We were living paycheck to paycheck, trapped in what Robert Kiyosaki, author of Rich Dad; Poor Dad often refers to as being in a Rat Race. I hadn’t realized we were in a trap and I was clueless on how to get out.

Path Out

Of course I dug my way out otherwise I wouldn’t write this blog.  I’ve found a path to what may lead us to financial freedom or at least to a place I can get a better handle of my finances, where things weren’t so muddy and twisted, and place where I can straighten thing out.  Once I got on that path, everything seemed to be achievable.

Change of Plan

Let me take you back a year ago when my financial education started.  It began in Chicago. Thank you Chicago!

My living situation was somewhat chaotic; I was working on a project in Chicago at a healthcare technology company and commuted home to Cincinnati on the weekends. Roughly 5-6 hours driving distance and 6-8 hours on a Mega Bus. I did a lot of Mega Bus.  The plan was, we would sell our house in Cincinnati and my wife would also move to Chicago and we would try Chicago for at least for two years.

It did not go as planned because we couldn’t sell our house. Our house was on the market on/off for 3years even before Chicago. And this fucker just would not sell. It was an old Victorian (beautiful) house, in the urban cul-de-sac in Eden Park, Cincinnati. It had no reason for anyone to not love the house but house had it’s limitation and with slow housing market, we just did not have good results.

I bought the house in 2004 for $176,000 when I thought I was big shot with first real paying job out of college but I was too stupid and naïve to realize it was out my price range. My friends and family advise me not to buy because they knew better, but  I was too young and stubborn so I  moved forth with the purchase. For better or worse the bank thought that I could afford it and they went above and beyond to get me that loan – and that’s another story.

We initially listed the house to sell at $199k and we went through 4 different realtors and it finally sold for $149k (we paid $7k out of pocket at closing).  Yes, it finally sold but after we made the decision Chicago is no longer in our future plans.

Moving Back Home To Cincinnati

The initial decision to move back home to Cincinnati was driven by these three factors. Later, the reasons became more strategic as my financial education grew (Part 2)

  1. House Not Selling: We were definitely a distress seller and we were exhausted from prepping the house for showings but unpromising feedbacks. ‘Not enough yard’, ‘why is there common wall?’ ‘Price is too high’, etc.,
  2. Real estate Investing: I’ve started to gain interest in real estate specially foreclosure homes and HUD properties and I had better grasp of the market in Cincinnati but Chicago I did not. Also, there were better deals in Cincinnati than Chicago for my price range.
  3. Establishing a family: I have a nine-year-old daughter from my previous engagement and my wife and I were ready for our first.

Del Seoul – Chicago

 

Del Seouls Tacos
Do yourself a favor, maybe the best advice I give you today.  Next time you are in Chicago go try Del Seoul. Order at least 3 order of Shrimp Tacos. Umm Umm Good..

delseoul.com/

I have to say Chicago is a great city.  I lived in the heart of the city, Oldtown that was four blocks from the North beach and a mile from Michigan Ave two miles from work and next to Millennium Park. I rode the L (subway) to work during cold, and flew on my electric scooter on nice days, and enjoyed Korean Taco from Del Seoul in Lincoln Park twice a week.

But for me, it just wasn’t the same without my family and I tried to be home as much as work allowed me and eventually moved back home.

Self Realization

During my stay in Chicago, I had lots of free time. After few months of discovering the city, I decided it was time for me to grow up and channel my energy into investing in our future.  I was already 36 and inching closer toward retirement but I was traveling on the road Average Americans were traveling which was not to a comfortable Retirement. I decided I did not want to remain average and do something about it.

It’s funny how age creeps up on you and you are in sort of self-panic, oh man I should have done this better or shouldn’t have done that. I shouldn’t have bought that ________ when I should of paid off the credit card bills. Or I shouldn’t have bought that motorcycle when I could have put that money toward Roth IRA?  But why, I’m still young and want to live a little.  What is Roth IRA? What is Traditional IRA or Rollover IRA? How’s that different vs. 401k. These were such confusing and uncomfortable topics because I did not have clear understanding as to how they worked and how I can make it work for me.

I look at self-realization being part of my survival instincts and I am glad I realized change was needed. I needed to start saving and investing for future sooner than later. It will directly impact how comfortable or uncomfortable our lives will be at an old age. Sadly, it could even come down to, can we afford to have this surgery or not?  I don’t want to contemplate on those issues at an old age.

Also, we just faced one of the coldest winters in Cincinnati and I don’t want to be here and be miserable when I’m 65. I aim to be somewhere warm all year around and close to the beach. A man is meant to be by the beach.

NEXT: An Average American Family (Part 2 – Improving Financial Literacy)

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Jona Hyun

My name is Jona Hyun. I'm an user experience and web designer by trade and a student of investing by passion. I am relatively new to the field of investing and I am pursuing to become a smarter investor. I am currently investing in Real Estate and looking to broaden my investment knowledge and portfolio.

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    […] I’m reminded of past which I outlined in my first blog, An Average American Family, even until couple of years ago, my family was in financial uncertainties and doubt. Not that we […]

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