By LOUIS DENICOLA
Everyone makes mistakes -- but if you're fortunate, you grow and learn from the mistake so it doesn't happen again. I recently spoke with Christopher Kimball who, at one point, was facing about $20,000 in non-mortgage debt.
Chris's story is particularly interesting because he didn't just learn from his financial mishaps -- he actually went on to become a Certified Financial Planner™ (CFP®) and now manages others' money for a living. Here's how everything went down.
Chris's story in his words
I grew up in Centralia, Washington, about 90 miles south of Seattle. I worked at Sears throughout high school and while taking classes at Centralia Community College. I worked enough hours to qualify for Sears' 401(k) plan, and I regularly contributed to it.
However, when I was 21, I decided to cash out my entire 401(k). There was about $12,000 in the account, but after the taxes and penalty, I only received $8,500.
I used the money for a down payment on a truck, and between the ages 21 of 23, I played drums in a couple of bands. We toured across the country and internationally. Any money I didn't spend I used to buy expensive recording equipment. When I came off the road in 1982, I had a lot of cool equipment, but no money.
I was barely scraping by financially.
I settled in Chehalis, WA, and rented a house with a childhood friend. I played gigs around town, but was close to broke. Neither of us could afford to heat the entire place, so we used space heaters to keep a few rooms warm at a time.
I was living hand-to-mouth, and my credit card debt began to grow.
When my friend moved out, I was in trouble. I was only able to stay because the landlord let me live there rent-free if I helped him prepare the house for sale. Still, some of my friends would leave money in my mailbox anonymously to help me out.
I finally realized I couldn't just wait for my life to get better, so in 1983, I went to the library and checked out a book on how to get a job. I'll never forget the title: "Guerrilla Tactics in the Job Market" by Tom Jackson. It showed me how to put together a resume and gave me the confidence I needed to go out and get hired. I got a job at the first place I applied to, a stereo company in Olympia, WA.
I was obsessed with credit cards -- they made me feel important.
I started in the back room repairing stereos, but soon moved onto the sales floor and went on to became the number one salesperson for the company's three stores, even though the branch I was working at was the smallest.
But even with more income, my debt kept growing. Whenever I got a new credit card, it made me feel important and successful. I'd quickly max the cards out buying whatever I wanted at the time. I bought drum equipment, records, even a motorcycle. I had five or six cards, and they were all maxed out. I always made on-time payments for at least the minimum and sometimes a card issuer would increase my credit limit on a card, and then I'd max it out again.
Between my credit card debt and the remainder of my auto loan, I ended up with about $20,000 in debt. And this was in 1985. (According to the federal inflation calculator, this is about $44,000 in 2015 dollars.)
With a plan, I paid off my debt in two years.
Not long afterward, I changed careers and got a job as a youth director at a church. The salary was less than $1,000 per month, but it turned out to be a great decision for my finances. My pastor hated credit cards, and when he found out about my debt, he was horrified. He took it upon himself to help me get out of debt.
Together, we made a plan and I focused on paying off my debt. In addition to the salary, I was making $250 to $300 a weekend playing music. I was living in a new, very small place, and my rent was only $250 a month. I didn't buy or travel much during that time.
Every time I paid off a credit card, my pastor and I would cut it up and close the account. I was debt free within two years.
I now manage money for a living.
In 1998, I returned to school, and I finished a Bachelor of Arts degree in Communications from the University of Washington. I worked as a copywriter after graduation, but hated it and wound up going back to selling electronics. But this was the early 1990s, and commissions were dropping.
I was looking for a change, and a family member recommended financial services. I decided to give it a shot, and after passing the necessary exams, started working with Prudential in 1993. I was helping clients with life insurance policies, IRAs, annuities and 401(k) plans.
I worked for Prudential, but I was responsible for promoting my own business. I had to do my own advertising, give seminars and make brochures. As it turned out, the weird, eclectic lifestyle I had beforehand surprisingly prepared me for the financial services industry.
I was comfortable talking in front of people and doing presentations. I knew how to sell things and how to listen to people and understand their needs, as I had done some counseling at the church. I was also comfortable advertising my services after working as a copywriter.
Now, I run my own financial planning practice and manage others' money for a living. I have an entirely different perspective on money and credit cards compared to thirty years ago -- I no longer think more credit cards equals more status. Used correctly, credit cards can be beneficial, but they can also be devastating to a person's financial life.
As a CFP®, Chris can look back on his story with a unique perspective. When he mentioned the money he withdrew from his 401(k), he did some math and told me that if only he'd left the money in his account, it might be worth as much as $200,000 today.
After reflecting on his journey, I asked Chris if there were pieces of advice he'd like to share. Here's what he said:
- Don't let emotions drive your finances. I had this idea that credit cards made me important. If you take the emotions out of it, you may be able to make better financial decisions.
- Stay consistent over the long haul. I started contributing to a retirement account again in the 1990s, putting aside 5 percent of my income and bumping that up by a percent or two every few months until I was maxing out my contribution. When there were big market adjustments in 2000 and 2008, I stuck with it and continued putting my money into the market. It's worked well for me, and I think staying consistent over the long haul is a good way to save for the future.
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