I was raised an Air Force brat and spent my youth moving from public school to public school, never making friends for too long. Back in those days there was no social media or Internet, so long distance friendships weren’t really a thing.
I wasn’t very good in school, so when graduation day came around, while most of my friends were planning their university move in day, military career, or joining the family business, I was relocating once again with my family from Florida to Arkansas.
My father was career military and raised his family of 5 on an enlisted airman’s paycheck. He lived the same cycle of debt most military families experience, which feels like just above the poverty line.
My parents always bought us what we wanted, whether they could afford it or not. big Christmases, big birthdays, Boy Scouts, sports, it all went on the credit card. When I started working, my fathers advise was to save 10% of my income in savings. Of course that advise never stuck and I continued the same cycle of high interest credit and frivolous spending.
When my wife and I started our family, we already had a decent amount of credit card debt and had been upside down on fancy cars we couldn’t afford. We were renting a 2 bedroom duplex, had 2 Schnauzers, dual income, no savings and bought pretty much whatever we wanted. When suddenly, one day my wife announced to me that we were having twins. After I picked myself up off the floor, the fancy sports car was quickly traded for a 4 door sedan and we were all set with our family of 4, one boy, one girl, one income. We were settling into our crazy life of double bottles, diapers, strollers and no sleep. Not quite done yet though…two months later…pregnant again. The 4 door sedan was soon replaced with the mini van and the 3rd car seat was added for our youngest daughter. I like to jokingly say that I finally figured out what was causing this condition and put a stop to that funny business!
I was working a factory job with good health insurance but barely making ends meet. I’m not too proud to say that we were on WIC and thankful for family who helped us as much as they could. 401k and savings were the furthest from our minds, but that didn’t stop us from running up the credit card. I can remember driving an hour to Memphis to buy my first Packard Bell computer and charging it to the Sears card at what was probably 18% interest while making minimum payments. I can’t even begin to imagine how much that computer actually cost me with interest.
At some point I did move into IT as a Desktop Technician and saw a small salary bump. I began contributing 2% to my 401k plan, probably because, if I didn’t, my company was going to force me to contribute 5% through auto-enrollment. Of course I could never afford that much, right?
When I left that job I made one of the deadly sins of personal finance, and cashed out the 401k. NEVER DO THIS! Not only did I end up paying the income tax, but there was also an additional tax for early withdrawal which reduced my year end tax return significantly.
So, long story short kids, invest in your company 401k and do your best to get the full company match if they offer one. These are before tax dollars and you will not miss the money, as much as you might think. NEVER cash out your 401k. If you change jobs, you can rollover those funds to your new 401k or to a traditional rollover IRA. If your 401k provider doesn’t support direct rollovers, you are allowed 1 cash rollover in a 12 month period. You must deposit those funds into your new retirement account within 60 days or face the dreaded early withdrawal penalty.
Disclaimer: I am not a licensed financial planner or tax expert. Any views expressed are my own and based on what I have learned on my financial journey. Please do your own research before making important financial decisions.
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