From Broke Phi Broke to Financially Woke
To become a member of Broke Phi Broke, I took foolish actions that prevented me from taking the necessary steps toward growing my wealth and building my legacy.
-Peerless Money Mentor
Broke Phi Broke
Once upon a time, not long ago, I was an active member of Broke Phi Broke. To become a member of Broke Phi Broke, I took foolish actions that prevented me from taking the necessary steps toward growing my wealth and building my legacy. Even though I had acquired financial knowledge from reading Black Enterprise magazine religiously (dad was a faithful subscriber!), and reading personal finance books, I still found myself on the vanguard of Broke Phi Broke because I did not apply the knowledge I acquired to my financial life.
I bought a car and other material possessions I could not afford, contributed zero dollars to my retirement fund, co-signed a car loan for an ex, and became best friends with the credit card companies. By taking those steps, I was admitted to the not so secret group of Broke Phi Broke with open arms. Membership dues were non-existent for this group so it was ridiculously easy to join! As a matter of fact, this group had no standards or restrictions at all; men and women, regardless of their background, were encouraged to become members.
The Broke Phi Broke chant was the first thing I learned as a new member. Not only did we have a lack of money, we suffered from a lack of originality, too! We stole our chant from the Kanye West Broke Phi Broke skit. For those of you who have not seen the skit, the chant went like this, “We ain’t got it. Broke, Broke, Phi Broke! We ain’t got it. Broke, Broke, Phi Broke!” I grew tired of these daily chants but I put myself in this sad predicament by making terrible decisions financially. Let us now take a trip down my memory lane of major financial mistakes…
New Car Loan + Cosigning for Ex Mistake
I purchased my 2012 Nissan Altima, breaking Financial’s Samurai’s 1/10th Rule for buying a car, by more than 50 percentage points. According to Financial Samurai, you should spend no more than 1/10th of your gross annual income on a car. I disagree with the exact number but agree in principle that you should not buy a car that will put yourself in a financial hole.
My knowledge of personal finance was no match for the high-pressured sales techniques of the car saleswoman. I kept telling her that I did not need a new car. Her reply would always be something like this, “Why would you buy used when you have excellent credit!?” Initially, I resisted her sales pitch but she was persistent in checking in with me daily to see if I was still interested in purchasing a vehicle.
What you deserve and what you can afford are two separate things
High Pressured Sales Tactics
On Monday, May 21st, 2012 I finally gave into the high pressured sales tactics and purchased a brand new 2012 Nissan Altima. My foolish reasoning was, “My company promised to give me a promotion soon so I can afford this purchase.” Of course, I knew that purchasing the car would negate my raise but I still bought the car. In retrospect, it is funny how I let my emotions get the best of me when dealing with the saleswoman. My new car excitement lasted a few months and then my happiness turned into buyer’s remorse.
The promotion promised to me by upper management fell through so I had to touch my emergency fund to make payments on my car loan. My cash flow started to suffer and I was only able to make the minimum payment on my credit card bills. To make matters worse, during this time I had some unexpected medical bills come up. This is how I ended going from having a surplus of cash to living paycheck to paycheck. You would think I would learn my lesson and never buy more car than I could afford again, right? Wrong! My next idiotic move was to cosign a car loan for an ex.
Foolish Cosign for an Ex
Making the Broke Phi Broke move to cosign meant I would be responsible for paying the loan if she defaulted on the loan. Luckily, no payments have been made past 30 days so no damage has been done to my credit. I did get a phone call from a foreigner once saying my car payment was late. I told him I did not have a car loan with Capital One. He responded, “Oh, yes, you do, Buddy! Remember you are the cosigner on the loan for this…” Although I have made a bunch of dumb moves, my credit score has always been above 700. However, just because you have a good credit score that does not mean you are good with money!
Credit Card Woes
In the video above, the precocious young man says it seems like the credit card companies are setting you up for failure. If he could see that the credit card companies are setting you up for failure, why couldn’t I see it? By only paying the minimum on my credit cards, I was paying a whopping 18% in interest a year to the credit card companies. In doing this, I paid almost double for the vacations, television, and gifts I charged on my card. I often worried that high interest debt would keep me trapped in Broke Phi Broke forever.
My credit card debt soon grew to almost $10,000 and it became unmanageable. I called the credit card companies to see if I could lower my interest rates but all of them told me, “No!” Being so stressed out, made me oblivious to potential solutions. But I would soon find a way out of the hole I dug for myself and leave Broke Phi Broke for good!
Remember one thing
Through every dark night, there’s a bright day after that
So no matter how hard it get, stick your chest out
Keep your head up, and handle it
-2pac on Me Against the World
In the video above, Kanye West gets expelled from Broke Phi Broke for making beats on the side, eating everyday, and having money to buy a new pair of shoes. I eventually got expelled from Broke Phi Broke but it was for other reasons. My plan to get expelled from the group involved me refinancing my high-interest credit card loans and applying the financial knowledge I acquired from reading personal finance blogs.
Refinancing Credit Card Debt
The only way for me to free myself from high interest credit card loans was to take out a personal loans with my credit union and Lending Club. Taking out these 3 year loans with a 6% APR allowed me to avoid paying the credit card companies 18% in interest annually! It would have taken me a decade to pay the credit card companies back at that interest rate. I think it is safe to say that the credit card companies were setting me up for failure and I allowed them to take advantage of me by making poor financial decisions.
Reading Personal Finance Blogs
I have been reading personal finance blogs for the past three years and love reading stories of how people from all walks of life have overcome financial adversity. Most personal finance bloggers and podcasters encourage their readers to live below their means, save and invest their wealth, increase their income by picking up side hustles. Some smart money moves I have recently taken was opening up a Roth account with Betterment and increasing my HSA contribution by $1000. If you are wondering what side hustles I do, read my article Five Side Hustles to Help You Achieve Financial Independence. Also, read my article entitled WeGoLook side hustle!
Join me on the Path to Financial Independence
While I am not 100% debt free yet, I hope the financial independence community welcomes me with open arms. They are a community that has standards and want their members do exceedingly well financially. Within the community, there is some disagreement on how to achieve financial Independence. I could speak at length about that but the financial independence is the ultimate goal and there are many paths that each of us can take to achieve it. After all, personal finance is personal! I encourage you to join me on path to Financial Independence (FI)!
From Broke to Financially Woke Stories from the Financial Independence Community
If you enjoyed reading about my journey from Broke to Financially Woke, you will love reading more stories in my new From Broke to Financially Woke Interview series.
Also, if you want to share your story with me, just shoot me an email.
Jerry is a Business Insider Contributing Writer who is obsessed with personal finance. He believes you can improve your financial situation by applying principles taught by the financial independence community to your financial life.
If you are having trouble saving, he recommends that you join the SaverLife Savings program where you can get a $60 reward after six months (no income requirement). All you have to do is put a minimum of $20 a month into a savings account. Easy, right?
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