6 Most Common Ways People Commit Financial Suicide (From Business Insider) [3 Articles]
~ Saturday, April 1, 2023 Blog Post ~
Article 1: ‘Financial Suicide’ Definition From Urbandictionary.com
financial suicide
Financial suicide refers to one’s personally fatal mistake that ruined their chances of ever making/saving money and permanently cements them in poverty, and along with it their possibility of earning a good living ever again.
employee 1:hey dude, i invested all my savings into (insert terrible investment opportunity that totally won’t financially ruin you) and i put in my two weeks notice to my boss, and its rather smelly especially sense its on his desk. soon I’ll be living super rich.
Employee 2: uhhh dude, that stock just Crashed.
Employee 1: what? NOooo!! that was my entire Life savings!!
Employee by the copy machine: and that dude just committed financial suicide, ouch!
by ??what__tahw?? May 8, 2021
Article #2: The 6 most common ways people commit financial suicide
By Jenna Goudreau, March 19, 2014
Sometimes we learn more from our mistakes than our successes.
Mary Hunt, founder of Debt-Proof Living, details what not to do with your money in her recent book, “The Smart Woman’s Guide to Planning for Retirement.”
Here are some of the top ways she says people sabotage their financial futures:
1. Living on credit. Hunt says unsecured consumer debt such as credit card debt, personal loans, and students loans is like a cancer. It starts small and then begins to grow. “If not treated aggressively, it can take over and do horrible things to your life.”
2. Living way beyond your means. If you spend more than you have in order to keep up appearances, you’re likely headed for financial disaster. Hunt says living below your means, and saving a little each month, is the best path to security and happiness.
3. Stripping your home equity. If you use your home to help make big purchases, say a wedding or college tuition bill, and can’t keep up with the payments, you risk losing that home to foreclosure, warns Hunt.
4. Raiding your retirement accounts. Not only does pulling out retirement money halt the account’s growth momentum, you could get hit with a double tax bill. “Don’t think of your retirement account as a liquid asset,” writes Hunt. “It is a frozen asset that is out of your reach for now.”
5. Taking out college loans for your kids. Taking out a PLUS loan, Parent Loans for Undergraduate Students, to help pay for a child’s education may be well-intentioned but diverts resources from your own retirement savings, which is not the gift you want to give your kids in the long term.
6. Procrastinating. You may rationalize that you’re not saving for retirement now because you’re young and poor, but you’re missing out on the power of compound interest, says Hunt. “When you throw away time, you throw away money.”
Article #3: I Would’ve Been A Millionaire By 40 — But I Committed Financial Suicide Instead
By Spenser Warren, December 24, 2021
Why Pursuing Happiness In The Now Is Worth It
If you could be a millionaire in less than 15 years by staying on your current path, would you do it?
Even if the path caused you to be overworked, stressed, burnt-out, creatively bankrupt, and questioning what you were doing with your life? That’s the exact path I was on a few years ago when I read the excellent personal finance book, The Latte Factor.
Set in New York City, The Latte Factor tells the story of a young magazine editor named Zoey.
Zoey struggles with many of the same things we all do on our journeys to financial independence: student loan debt, a salary that is unlivable in a high cost-of-living area, credit card debt, and mounting expenses. It’s only when Zoey meets an elderly barista named Henry that she discovers three critical lessons of personal finance: paying yourself first, making investing automatic, and living rich now.
It’s that latter lesson that finally caused me to pull the trigger on a decision that could derail my financial future entirely and set my early retirement back by several years.
But before I get to that, I’ll share exactly how I knew I was on this millionaire path, thanks to The Latte Factor.
In the book, Henry shares the importance of compounding with Zoey. He explains how investments made today, with an assumed growth rate over time, can lead to significant wealth when left in the market. The book provides a spreadsheet template that I used to plug in my own numbers of existing investment account balances multiplied by an assumed annual growth rate of 7 percent. I also assumed that I would max out my 401(k), contribute $500 per paycheck in my index funds, and $50 to my HSA account each paycheck.
When I carried this math out over the subsequent years, I saw I would be a near millionaire by the age of 40.
Pretty exciting, right?!
At first I thought there was no way this could be true, that I could be a millionaire while still young enough to enjoy it. Just seeing this number was motivating, assuring me that the path I was on was worth it. Until one day it wasn’t.
The day I pulled the plug on this millionaire by 40 possibility by committing financial suicide and turning off my income source.
The day I quit my job.
Why Living Rich Now Matters
I had a mid $100k salaried job with a financially strong company, good coworkers, and supportive leadership.
From years of hard work, I’d risen to a Sr. Manager role in my company and was doing “all the right things” to keep climbing the corporate ladder if I kept at it for a few more years. Heck, I probably could’ve been a millionaire earlier than 40, with the salary growth I likely would’ve achieved from future promotions. But I realized I didn’t want that path.
Not only did I not love what I did for a living, but the higher I climbed, the more I realized that the project management aspects of middle management weren’t for me.
What I wanted to do was write and create for a living.
I realized the financial uncertainty I’d face by taking this path, but I figured with over 6 months of savings that would allow me to afford my career break, that this was a gamble worth taking. Only a month post resignation, I found a new career path that I’m genuinely excited to pursue. Ever since I’ve discovered this new career possibility of UX (User Experience) Writing, I’ve anxiously dived into reading new material about the field, taking courses, and practicing my craft at writing microcopy that will move users to action.
For me, this is the best use of my creative talents that can actually pay off, unlike one of my other major hobbies over the years.
With me feeling genuinely excited about my next career step, I’m confident that this will enhance my quality of life and only fuel the fire (ha ha!) toward achieving financial independence faster in the future.
How I Plan To Make A Financial Comeback
Over the next 6 months, I’ll participate in a program that will qualify me for a UX Writing role in technology companies.
While I won’t earn anywhere near what I was making in my last job at first, the field I’m entering still has great income potential. If I take a remote role or continue working in my current city, I can expect to earn $75-$85k or so in an entry-level position. If I were to move to a higher cost-of-living area, I could earn more, with salaries equal to my past salary possible for Sr. UX Writer positions down the line.
With more financial stability from a stable job, I plan to get back to regular investing in index funds, my 401(k), and HSA accounts.
Until then, I’m going to pursue freelance writing and potentially take on some contract work in my old domain so I don’t completely drain my savings.
Who knows, I might even earn more in my new career path since I think I’ll actually enjoy it. I may even have more success writing here on Medium without the pressure of it being my primary income source right now.
This Wasn’t The Only Choice
Of course, I could’ve continued to sacrifice my personal happiness for the pursuit of financial success.
For some people, that would’ve been the right path. Pursuing FIRE without fail may be worth it to them, knowing they’ll have plenty of years to enjoy their hobbies once they’ve hit their financial independence “number.” But like author David Bach of The Latte Factor argues, we should enjoy our lives right now.
I personally believe that everything in life is about balance.
I needed to quit my job and commit financial suicide to pursue a career path that would make me happy.
That happiness is carrying over to many other areas of my life, including my relationships, health and fitness goals, and how I live in the present moment. If you’re committed to pursuing financial independence no matter what, ask yourself if you still feel that you’re on the right path. You may be surprised to find that things aren’t as rosy as you thought they were.
Just like anything else in life, whatever you want to do is under your control.
You can choose to keep going, or take a pivot, hoping to hop back on board stronger than before.
Final Thoughts
I have to acknowledge the tremendous privilege I have with the possibility of being a millionaire at 40.
Having no debt, a high level of income, and an excellent jumping off point for my investments based on past savings has put me in a great position to achieve financial independence. I understand not everyone is as fortunate, so I want to leave some words of parting advice based on what I’ve learned over the years.
If you’re struggling on the path to financial independence, it’s important to take it one step at a time.
Maybe you don’t quit your job right now if it’s your best means of paying down debt to save.
Remember to pay yourself first by investing, even if it’s a small amount every month. This adds up over time. As the number grows, your motivation to keep on the FIRE path will grow with it.
And as I’ve learned from committing financial suicide, try to have some fun and enjoy life along the way.
Sources:
https://www.businessinsider.com/common-ways-people-commit-financial-suicide-2014-3?amp
https://www.urbandictionary.com/define.php?term=financial%20suicide
