From Broke Phi Broke to Financially Woke – Educator FI

avoiding lifestyle inflation

Today, I am excited to share with you the latest interview in the From Broke to Financially Woke series!  The purpose of this series it to give hope to those struggling to escape from the not so secret group Broke Phi Broke.  A group whose chant is, “We ain’t got it. Broke, Broke, Phi Broke! We ain’t got it. Broke, Broke, Phi Broke!”

To help me accomplish this goal, I have invited the best and brightest of the financial independence community here to share their stories.  As you read their interviews, pay close attention to the mistakes they made.  Take mental note of the success principles they used to turn things around.

When trying to apply these principles to your own life, realize that success in life is rarely linear.  You will encounter some struggles.  But stay persistent.  Keep moving forward.

Our special guest today is Ed from Educator FI. At his lowest point, he and his wife entered the workforce with over $130,000 in debt with a combined annual salary of $70,000.

One of his biggest mistakes was investing later in life than most. Despite a late start, he and his wife are on track to reach financial independence by July 2022. His story serves as a poignant reminder that it is never too late to turn your financial life around.

How did he do it? I’ll let him share the story…

Introduce yourself. Where do you blog? What are some of your interests outside of financial independence?

 

Hi there, I’m Ed from EducatorFI.com. My wife and I are both career educators, passionate about the importance of public education. We give most of our time and energy to supporting kids, but also like to read and travel. 

I also really enjoy writing. On the blog, I write about my pursuit of financial independence to support other educators in building wealth while doing work that matters.

 

Tell us about a time where you were a member of Broke Phi Broke. How did living paycheck to paycheck make you feel as a person? At your lowest point, how much debt did you have?
avoiding lifestyle inflation
Broke Phi Broke

 

My wife and I met in college. We both had issues with money from our childhoods and were not smart with it in our early years together. We spent more than we earned, and went back for graduate degrees when our original jobs turned out not to be what we wanted.

As a result, we started out as brand new teachers with $130,000 in debt, entering jobs that paid $70,000 a year total. Ouch! Then we bought a house!

Having that much debt and feeling the drag it has on you can be demoralizing. It’s easy for me to understand how some people feel despair or just give up on ever taking control of it. We never got there, but that debt was a source of stress in our lives and marriage. 

It also made me feel trapped because we had to work just to service the debt. Even though I liked my job, I hated the feeling of being stuck.

For me, it reinforced a lifelong feeling of scarcity and financial insecurity.

 

What are some of your biggest financial mistakes?

 

This one is easy! I recently turned 45 and spent time reflecting on my biggest financial mistakes.

I started investing far later than I should have. I think this one is far too common, and one of the first things I tell new educators is to start immediately – even with just a little bit. I lost more than a decade of both tax advantages and compounding returns. 

Another big mistake is not discussing money and setting financial goals with my wife for our first 15 years of marriage. After we got rid of that debt, we stopped thinking about it. Which led to…

Our biggest mistake was lifestyle inflation. We did the right things of getting debt free and earning more money. We just spent it all. We bought a house that was too big, spent too much on travel, and saved very little.

Those things together mean that we lost more than a decade of potential financial progress. Now that we’ve figured it out and started making good decisions, we’re moving quickly toward financial independence. We would have been there years ago if we hadn’t accumulated debt early and had started planning, investing, and spending wisely in our 20s instead of our 40s.

 

Describe your upbringing. Where did you grow up? What did your parents or teachers teach you about money?

 

I grew up in a small town near a larger city. It was ideal in many ways. As kids we spent a lot of time exploring and playing sports. The area included migrant farm worker families, so I was fortunate to grow in the midst of a mix of cultures. In many ways, it felt like an ideal childhood.

My dad left us when I was in elementary school. My mom was forced to work full time and go to school full time while caring for three young kids. Her work ethic and effort to take care of us was incredible. My mom is my hero.

Unfortunately, there are a lot of people and systems out there that take advantage of people who are desperate or don’t know a lot about money. My mom struggled with these even as she gave everything she had. 

Things like bank fees, used car dealerships, and cash checking places all made an impact on my life. I wasn’t learning what I should do, but I was learning what I’d always avoid.

Contrary to what I often read in the personal finance space, I had personal finance and economics classes in high school. I even took economics in college. What people miss though is knowledge isn’t any good without the mindset and drive to do something with it. 

When money is a source of anxiety, it’s hard to view it as something that works for you.

My experience with my childhood made me associate money with scarcity. I just wanted to earn enough that I never had to fear not having enough. I also spent more than I should early because I felt I’d missed out on some things during my childhood.

It took me awhile to overcome that mindset.

 

How important is becoming financially woke to you? What steps have you taken to increase your financial knowledge?

 

Outside of the energy and effort we put into our jobs and our relationship, our financial life is now the largest priority. In the past five years we’ve completely turned our finances around, reversed our lifestyle inflation, and plan to be financially independent in the next three years. 

The best part is it has changed how we feel about work, strengthened our relationship, and improved our quality of life. Being financially woke really has been a game-changer. 

It all started with picking up a financial book (The Automatic Millionaire) randomly. From there, I went down the personal finance rabbit hole and discovered all of the great online content.

We started tracking our expenses and set some financial goals. Reviewing and updating those regularly has grown our understanding of our own finances and let us see other opportunities. 

 

What are some of the key principles you have used to improve your financial life?
avoiding lifestyle inflation
Success Principles

 

Despite wasting years of our lives with lifestyle inflation, we fortunately did two things right: got out of debt in our 20s and always grew our income. This enabled us to turn things around quickly once we got financially woke. If only we’d started earlier!

As they say, it isn’t easy but it is simple: create a gap between what you earn and spend, invest the difference. Our spending was so high it was easy to create a large gap once we stopped being clueless.

Now, we max out our tax-advantaged accounts. As public employees, we are fortunate to both have great 403b and 457b options. Adding in our IRA and one HSA and that’s over $90k a year in tax advantaged savings. 

We’ve also worked to unwind our lifestyle inflation, especially by downsizing our home. That cut our monthly housing costs in half and allowed us to save more in a brokerage account.

We’ve pushed our savings rate up to almost 70%. That helps us make up for missed time.

We don’t live a deprived life though. We spend on what is important to us, and reduce everything else. Despite living in a smaller house now, we’ve become clear on exactly what we want and it’s made us happier.

Finally, we set annual goals, update our spreadsheets quarterly, and have a monthly financial discussion while we go on a long walk. Having finances be a full partnership between us is incredibly important.

 

The easy way to sum up our approach is:

  • Set and track goals together
  • Reduce our big expenses
  • Prioritize tax advantaged accounts
  • Invest anything left over

 

How often do you consume personal finance information? Name 3-5 of your favorites sources (books, podcasts, blogs, etc.). 

 

Daily. There might be a day here and there where I get too busy with work, but in general I start my day by reading (or writing) something, listen to podcasts while driving, and then do a little more in the evening after work. I enjoy it, and I want to provide the best information I can for my readers.

There is so much good content out there it’s hard to narrow it down to only 5! I’ll go with the ones that have had the most impact on my own financial journey and planning.

JL Collins’ Simple Path to Wealth is the book I give to others who I hope to start on the journey.

Early Retirement Now, especially the safe withdrawal series had a huge impact on my understanding and planning.

ESI Money’s millionaire series was one of my early binge reads when I first started consuming online content.

I listen to every episode of Afford Anything and What’s Up Next? Podcasts.

Finally, I just enjoy the way A Purple Life approaches life.

[Editor’s Note: I listen to the Afford Anything and What’s Up Next podcasts as well. Also, I was a guest panelist on the What’s Up Next Podcast’s second episode: Does Income Matter?]

 

Where are you on the path to financial freedom now? 

avoiding lifestyle inflation

 

We’ve just set a financial independence date for July 2022. I’m confident we’ll make it because we use fairly conservative assumptions in our planning. Of course, if the market tanks dramatically, that will adjust our time.

We’ve got enough now that if something were to happen with either of our jobs we could make it work.

We’ve embraced FIOR (Financial Independence Optional Retirement). When we achieve financial independence, we’ll most likely keep working unless we’ve lost our passion for our jobs. Education is our life’s work, but we’ve promised that we’d never become those bitter old teachers that need to retire but can’t because of money. 

 

Is there any advice/encouraging words you can give those who are struggling to escape Broke Phi Broke?

 

We were two broke teachers with over $130,000 in debt. Two decades later we’ll be financially independent. 

I never say “If we can do it, so can you!” because I know that everyone’s life and challenges are different. We don’t need more trite advice, we need examples, understanding, and real discussions. That’s how we help each other get there.

On my site, I share our story, and the stories of other educators working to financially independence to show that many people can do it, at different speeds, with different approaches.

Get clear on what matters to you, spend money on that, save anywhere you can. Applying the principles of financial independence to your life has benefits outside of the purely financial. 

 

How can the readers contact you?

 

Drop by EducatorFI.com anytime, and I’m most active on Twitter @educatorfi. I’d love to talk with you!

Huge thanks to Jerry for letting me write for this series and sharing the stories of how people climb out of those dark financial moments!

avoiding lifestyle inflation

Read more interviews in the From Broke to Financially Woke Series.

Please share this From Broke to Financially Woke interview on social media with the hashtag #escapebrokephibroke

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Author: Jerry

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?

For a fun read, check out his article 10 Signs You’re a Personal Finance Addict to see if you are a personal finance nerd.

Before you go, check out the new From Broke to Financially Woke Interview Series.

Also, please subscribe below if you found his content valuable and want to continue following him as he documents his own journey from Broke to Financially Woke!

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