Chapter 1: My history

Chapter 1: My history

I truly believe in order to understand my perspective, you need to understand my background.  After all, its our life experiences that lead us to be the individuals we are today.  You wouldn’t take medical advice from Dr. Kevorkian, banking advice from Bernie Madoff, or legal advice from Michael Avenatti, so why listen to me? Its simple: experience. I grew up in one of the poorest regions in the country, and continually busted my ass to become “successful” only to discover when I was nearly 30, after acquiring a Masters Degree and working in healthcare for 8 years,  that trying so hard was one of the biggest mistakes I made in my financial life. After nearly a decade in healthcare, seeing patients life savings destroyed in a matter of months, I determined working hard and saving for the future is mostly futile.

In our bathroom window, my wife has this little wooden decoration that says: “When you get there, don’t forget where you came from.”  Since I finally feel like I have arrived “there,” I have stopped to reflect on how I arrived at this point in my journey through life.  Not only do I look at what I did, I look back to what my parents and grandparents did for me to be able to live the life I live today.  I think of the times growing up on the farm working in 95 degree heat, while wearing jeans, long sleeve shirts and a large hat to try to avoid sunburn, and realize my father did the same before me, only he did it while using horses instead of a tractor. I think of the years of exposure to harmful pesticides/herbicides required to keep our farm free of unwanted visitors.  I think of the time when I worked so hard that I had a heat stroke, only for my uncle to show up at the hospital with the labels of the herbicides we sprayed that day to determine if it was chemical poisoning instead. When I was teens and early 20s, I worked harder than most teens of today could even imagine.  But for what? Why did I work this hard?  Its simple really, I didn’t have any other choice. 

I grew up in a rural area of Southwest Virginia in the Appalachian Mountains, where the cattle outnumber the people 10 to 1 working on our family farm.  I attended high school, where we had less than 300 students in grades 9-12, graduating second in my class behind my best friend.  Since every educator I had in high school, my parents, and guidance counselor told me the only pathway to success was to go to college, I went to college where I received my Masters in Occupational Therapy in 5 years.  Thanks to my maternal grandfather living the American dream and investing well, as well as a work study program, I graduated debt free.  

After graduation and shortly before, I immediately made every financial mistake you could imagine, from buying a H1 Hummer at 10 percent interest, to withdrawing funds from an IRA, and paying the early withdrawal penalty to purchase a motorcycle. I continued to make financial mistakes throughout life, because, well everyone around me did the same thing and nobody had educated me along the way about saving, at least not in a significant manner.  Other therapists and professionals I worked with were buying houses, new cars, boats, ATVs, and so on. I, being a new graduate, just assumed this was the way life was supposed to be.  Welcome to the reality we call “Keeping up with the Jones’s.”  I didn’t know there was any other way, after all society teaches us from an early age to grow up, go to work, work 40 hours a week, while paying for a 30 year mortgage, and hopefully, if were really good, we can save 10 percent of our income for “retirement” when were in our late 60s.  I didn’t know there was any other way, until my 29^th birthday.  

Just after my birthday, I met a man who “retired” in his early 40s.  Although at a later time I found out this was far from reality, it sparked my interest.  After all, how can somebody “retire” when they are 40?  Society had taught me this was impossible!  I had to wait until 67 to collect social security, 65 to qualify for Medicare, and according to the “experts” needed at least 1 million in the bank to have any chance of leading a decent life in retirement at the country club.  Through my research, and other FIRE blogs, I discovered that this train of thought is absolute and total BULLSHIT!  I just needed somebody to open my eyes, so I could see the truth.  After all, it had been staring me in the face, literally, for every working day of my career.  I just had to open my eyes and ears.

Most likely, you have never heard of something called an Occupational Therapist.  I hadn’t either until I hurt my arm my sophomore year of school while playing football.  The orthopedic surgeon referred me to occupational therapy, where they fixed my arm back to its normal function in a matter of a couple of visits.  Since my parents and educators preached there was no other pathway to success besides college, I decided to attend college to become an Occupational Therapist, where I graduated in 2009, thus working 10 years in the field this year.  

As an OT, my primary function is to restore a persons ADL’s or Activities of Daily Living, to their prior level of function so the patient can return to their normal routine.   ADLs consist of things such as bathing, dressing, toileting, grooming, and self-feeding.  My secondary function is to work on a patients IADLs or Instrumental Activities of daily living.  These include things such as shopping, home management, driving, and financial management.  It wasn’t until I became acquainted with the FIRE community, that I realized the most important ADL or IADL is actually financial management.  Why? Because without financial management, I don’t have clothes on my back, a home to shower in and manage, or food to eat.  It really is that simple, however financial management gets little if any significant attention in the majority of Americans daily routines.

Working primarily in long term care for the majority of my career I began to see a trend: most Americans are not financially prepared at all, especially for a significant medical event that requires prolonged therapy, hospitalization, or long term care.  For instance, most patients think when they hit 65, should they ever need Long term care, Medicare will pay for it. This simply isn’t true.  If you don’t learn anything else from this blog learn this: MEDICARE DOES NOT PAY FOR LONG TERM CARE!!!!!!

  Most states will cover Long term care with Medicaid, but most working class Americans don’t know this fact, or the fact that in order to qualify for LTC Medicaid, you basically have to have no assets other than your primary home, and less than 2k in the bank, or you have to give them to the state in a trust in order to secure payment for your long term care.  Some people say “well I will just give my assets to my kids.”  Well thanks to Medicaid’s 5 year “look back period” that is impossible, and will disqualify you from Medicaid.  This particular subject requires greater conversation which will be covered in a following chapter. The trend I’ve witnessed, and know to be an unfortunate fact of life in this country today, is this: should you live long enough to ever need Long term care, the cost of Long term care will wipe out your entire life savings.   

Now that I knew that should I or my wife ever need long term care, it would wipe out our entire life savings, even if we had that 1 million dollar “expert recommended” nest egg, I began to ask myself, “Is it worth it?”  After all, what’s the point in working my entire life away, missing time with my children, wife, family and friends and doing things  I love to punch a time clock 5 days a week, just to have every cent I ever made taken from me to pay for a small room packed into a facility with 100 other people in the same position?  The more I asked this question of myself, the more I realized the answer was simply “NO.”

But why is the answer no?  Surely the possibility of requiring long term care alone isn’t enough to make me throw in the towel in my early 30s, and it wasn’t.  What caused me to “throw in the towel” was a multitude of different things I call “penalties of success” or simply POS’s.    POS’s, when combined and weighed against doing the things in life I enjoy, with the people I enjoy in the time I have here, just don’t make sense to do. 

“Penalties of success,” are things such as the thousands of types of taxes and fees at the local, state, and federal level, a “progressive income tax,” the cost of daycare, and the inability to qualify for Medicaid while paying for the Medicaid system, on top of my private health insurance premiums.  This list goes on and on, and literally consists of thousands of taxes, fees, as well as income-based exclusions from government programs. Now add the upcoming presidential election where the front runners for the Democratic party are promising Universal Basic Income, free healthcare for all, and 1.7 trillion in student loan forgiveness, this simply guarantees that these penalties will continue to increase in both number and cost.  What I realized after careful computation of all these penalties, was this: It simply doesn’t make financial sense to continue to work anymore, even at our income level today, and definitely will not in the future.

So my dilemma was this:  If it makes no sense to work my life away, but I need my living expenses covered today and in the future, then how do I become financially independent enough to do so, while paying for these expenses today and into the future?   I spent the better part of the last 2 years of my life studying, researching, and finding the answer to the above question in a combination of tactics to reduce my bottom-line monthly cost of living at the end of the month.  What I discovered was this: By reducing our overall debt to zero, my wife and I could reduce to part time work, keep our kids at home thus spending more quality time with our children, while eliminating our daycare bill.  Furthermore, we could maximize our retirement savings, lowering our MAGI, and thanks to Obamacare redefining MAGI while eliminating the “asset check,” become eligible for Medicaid for my entire family, thus eliminating the need for private insurance, and our 600 monthly insurance premium.  After eliminating all these bills, even working part time, our monthly take home will be more than it is currently!

So now I know, you’re sitting there saying to yourself “sure that sounds easy enough, Ill just pay off my mortgage, cars, student loans, and credit cards tomorrow and get right to that.”  I know it sucks, and it takes time, but that’s exactly what we’ve done.  The key here is time.  When I discovered the FIRE community about 4 years ago, my wife and I “owned” 2 new cars, 2 homes, had 30k combined credit card debt at 20%,and my wife had 80k of student loan debt.  As of today, we own 3 old vehicles that are paid for, have 1 mortgage of about 80k on an original balance of 200k in 2015, and have eliminated all credit card debt, and student loan debt: not bad for adding 2 children at the same time.  

So how did we do it? How did we eliminate all that debt, in such a relatively short period of time, while maintaining nearly the same quality of life?  Stick with me and I will walk you through exactly how we accomplished this, how we continue to chip away at our debt while still saving for the future, so  we can enjoy more time with each other, our families, and our friends.