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?
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.
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36 thoughts on “From Broke Phi Broke to Financially Woke!”
This is a great post. I can definitely identify with what you are saying, especially with co-signing for an ex! It’s crazy what we will do for love. I’m so happy now you’re out of that Broke Phi Broke club and learning from your mistakes.
Exactly @Kay! You got me thinking about this Pac song Do for Love.
“What you won’t do, do for love
You tried everything, but you don’t give up”
I appreciate the feedback!
Haha! I love it, PPM. Broke Phi Broke–the best moniker I’ve ever seen applied to the least exclusive fraternity in the United States. Bravo, my friend. And bravo for ditching Broke Phi Broke for FI Kappa Mustache.
Thanks for the feedback, Mr. Groovy!. Lol @ Fi Kappa Mustache. That is hilarious!
Great post. It is not easy to change. To succeed, it is best to take small steps one day at a time. One day, you will reflect back on Broke Phi Broke and see it as the beginning of your journey to financial independence. Remember, success is not based on where we start the race, it is based on where we finish.
I appreciate the feedback, Dave! Exactly! On the path to FI, we will face many ups and downs but what matters most is how we finish!
I hadn’t heard of the 1/10th rule before but it makes sense. Going into a high-pressure situation without the financial understanding of how much you should spend is asking for trouble. Even the last (first) car I bought I wish I had spent less on a vehicle. It’s just too easy to get into Broke Phi Broke.
I completely agree! Next time I won’t let my emotions get the best of me. Yes, it is very easy to get into Broke Phi Broke!
This brings back so many personal memories, although my detrimental car of choice was a brand new Acura TL. A used Altima actually saved me from that demanding enchantress of a car.
Nice, I wish I would have bought a used car !
From broke to FI – that’s what I’m talking about….and claimed!
Thanks for reading, Danielle!
Nice write-up and lesson learned to get on track. There are a lot of financial temptations by people to take your money. Thanks for sharing!
Thanks for the feedback, Palmetto. I am about check out your blog now!
It’s so easy to fall into the trap that your “next” raise/bonus/whatever will cover what you want now. But every time you make that leap makes it less easy to change your employment situation because you then HAVE to work that new position or job. Great job on digging yourself out of that.
Thanks for stopping by, Angela! Yes, I definitely agree! If you fall into that trap then your options become limited.
I feel you on the cosigning on a loan for an ex. I did something similar – I HELOC’d my home and gave an ex (she wasn’t an ex at the time, but I was stupid!) a large chunk of change. I have no idea what she did with it. Thankfully I’ve since sold that house and no longer have the HELOC. It was aggravating though.
Thanks for stopping by, Joe! I can imagine that being a very frustrating experience. Were you engaged to her?
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Most of us can identify ourselves here. I know I did. Spending money you don’t have yet, and buying new instead of used. The bank loan on any purchase is simply how much they are willing to bet on you and not what you me actually want or need. Would like to ride in an Escalade,but the Pathfinder gets my there just the same.
Cars are more expensive than most people realize, in general. In July 2015, I bought a used 2005 Altima SE, loaded, with $5K CAD cash. Sounds great, right?
A few days ago, I did some math. After calculating for purchase price, paperwork and taxes, annual registration, regular basic maintenance, insurance, occasional repairs, average monthly fuel consumption, etc., I divided the final total by the number of days of ownership thus far. Didn
The $5K car has a total cost so far of well over $20K. At 962 days of ownership, she currently has a per day average cost of almost $25. Thankfully, she’s pretty reliable.
Hi, Nice post!
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This title cracks me up. I clicked just for that. Thanks for sharing your story!
Lol! Thanks for stopping by! Will you be attending FinCon this year?
I hope that is not a criteria. I would love to be financially independent, but being 100% debt free is not a priority as long as I can expect better ROI elsewhere.
But this is more valid when it comes to mortgage than credit cards I guess
Great Post Jerry
I can relate to this in so many ways. I think that sometimes, the more broke we are, the more prone we are to making really silly financial mistakes, particulalry when we get a ‘break’. Whoosh, and its gone.
I came to your site to read the Broke Phi Broke post with Thomas from LetsBuildThisThing.
I will certainly be checking out some more of these stories
Keep up the Great Work!