Gather Little by Little

One year ago today was a life changing day for my family and I. Honestly, it doesn’t even seem like a year ago, but more like yesterday. See, on November 7th 2006 our lives suddenly took a huge turn for the worse, it was the day we had what I will refer to as a major life crisis. The crisis itself is actually quite personal, so hopefully you will understand if I don’t share the details, but suffice it to say it vividly stopped us in our tracks, I was out of work for 3 months, and we wondered if I would even have my job again.

Soon after, my 7 year old son was diagnosed with Type 1 Diabetes, even furthering our downward spiral. All of this happened during our most favorite time of the year…the holiday season. You can read more about all of this on my about page, or in my article where I discussed why I blog.

Looking back now, I certainly wouldn’t wish these circumstances on my worst enemy, but at the same time I don’t think we would be in the state of financial control we are in today. It would seem the old saying “Every dark cloud has a silver lining” is very true. On this anniversary, if that is the correct description, I thought I would share the 10 things we’ve done to regain control of my finances and prepare ourselves in the event anything like this ever occurs again. Let’s face it, life throw waves at you everyday, some are small, some big, and some, like mine, are tidal waves. Be prepared.

1. Relied on our faith

My family has always relied on our faith, but never like we have for the past year. We are Christians and have been Christians all of lives. Until a year ago though, we never really understood the true meaning of faith. Being Christians, we relied on the word of God found in the Christian Bible to guide us in our decisions, both personal and financial. When you start looking and reading, the Bible is full of very sound financial advice.

If you aren’t Christian, look to whatever personal faith you have to help you in finding your way and when making decisions. Without faith, I wouldn’t be writing this article and not sure where I would be today. We began practicing the advice and guidelines for financial peace outlined in the Bible and as a result our finances are way better off than they were. That’s not to say we don’t have a long way to go, but I now feel confident we can get there.

Maybe your faith isn’t Christian, and I respect that, and encourage you to immerse yourself in the faith that you have. The point is, we found new meaning, purpose, and teachings we didn’t even know where there before.

2. Understood that we were the biggest obstacle to being wealthy

Personal finance is far less about math and numbers than it is about behavior and attitude. To regain financial control, you have to look at the person in the mirror and realize that your choices have brought you to where you are. You have to recognize that financial problems are related to your behavior and your ability to control it.

We decided to buy new cars instead of used and saving the extra money. We decided to purchase new furniture on a credit card instead of purchasing used furniture and saving up cash to by new furniture. We decided to buy that big screen TV when the TV we had was just fine. It all boils down to good and bad decisions we’ve all made.

So confront that person in the mirror, and make the decision to control your behavior. Until you do this, you will not be able to move forward.

3. Established a plan and goals

How often do you get into your car without knowing where you are going? The same holds true with your finances. Without a set of goals and a long term plan it’s impossible to get where you want to be. Develop a financial plan and set short term and long term financial goals. Review them frequently, and revise them as appropriate. Doing so will keep you focused and on track.

4. Built an emergency fund

When our major life crisis occurred, we had little to no money in savings. We were faced with not being able to pay the bills within a few weeks if we didn’t have some immediate income. This is not a situation I would recommend anyone be in.

As I said earlier, life throws things at you that you cannot predict. Without a financial buffer, surviving these things can be difficult. We relied on credit cards to survive these things in the past, and as a result our debt snowballed and snowballed.

Instead, create an emergency fund. Start with $1000-$2000 dollars, and work it up to 3-6 months worth of income. This money should be liquid, in that you can get access to it fairly easily without major penalty. We have about $1500 right now, and will stay that way until we get our consumer debt paid off. Once that’s complete, we’ll migrate to 6-months worth of savings.

Just having emergency money in reserve will go a long way to easing your stress and giving you peace of mind. I cannot begin to tell you how much better we feel about our finances just by having $1500 in savings.

For a more detailed article on emergency funds, read my article on how to establish an emergency fund.

5. Live on a budget (i.e. spend less than you earn)

One of the most popular pieces of financial advice you will find is spend less than you earn. This is such a simple concept, but yet so difficult to actually put into practice. Establishing a monthly budget is the key tool to doing this.

We create a budget for the upcoming month in advance of that month. We layout our expected income and expenses on paper, so we know exactly where our money is going. Once we run out of money for that expense, we don’t spend it anymore. It is really pretty simple.

Our budget is the financial controller of our marriage. Our budget is the bad guy that tells us we can’t spend anymore money. We do our budget together and agree to follow it together. We also review it weekly to see where we are and make an necessary adjustments.

You can read more about how to create a budget and following it here. You can also find a guideline budget here.

6. We manage our finances together

Are you married? If not you can most likely skip this section, as I don’t advocate sharing your finances with anyone until you are. If you are married, do you fight over your money? Of course you do, we all do, in fact money is the number one cause of marital fights and divorce in the U.S. What to stop fighting about money? The answer is really very simple, do your finances together.

Face the mirror together, plan together, save together, budget together, and track your expenses together. When both couples have a say in the money and both agree on the goals and how your money will be spent the fighting stops. One of the biggest issues in our marriage that caused strife was one of us telling the other when we could or couldn’t spent money. We now have a budget that both of us develop and agree on. The budget now tells us how we can spend our money.

Do we still argue over money? Sure, sometimes…but honestly not very often and when we do, it’s generally because we skipped a budget meeting or didn’t communicate.

For more info on working together on your finances, take a look at these articles: How to get my wife or husband to follow a budget and In Financial Chaos? Pass the test,

7. Stopped using consumer credit

After finding Dave Ramsey and reading the Bible’s perspective on debt we decided to begin our journey to be debt free with our first goal to payoff our credit cards.

Debt is like a ball and chain the keeps both you and your money from growing as quickly as it should. If the ball is big enough, you may not be able to move or grow at all. Debt is also like a dark cloud that follows you around and never seems to go away. Personally, it caused us a great deal of stress and even made us feel hopeless at times.

Just imagine for a second how much money you would have each month if you had no debt…no mortgage, no car payments, no credit cards. For us, it would be a significant amount of money. Money we could invest and get paid 10-15% interest for instead of paying out 5-30% interest. In many cases, debt makes you poorer and other people richer.

We cut up our credit cards and haven’t used one since. We’ve paid off 3 cards, and this month should have the forth gone.

You can read more about being debt free here. You can also read through some of the article I’ve written on debt as well.

8. Placed our money where it will earn money

We’ve always kept of money in local bank checking and savings accounts which have probably the lowest rates available. Now, we keep all of our money in ING Direct Savings accounts. My paycheck gets deposited into our local bank account for paying monthly bills, and our savings money gets transferred from there directly into our ING Savings Accounts. I say accounts, as ING allows you to have multiple “sub” accounts to divide up your savings. For example, I have an emergency fund, property tax fund, Christmas fund, and an account for my earnings from this blog.

Rates have recently dropped substantially at ING, but they are still far better than your local checking and savings account. Seeing the monthly interest deposits is really rewarding. If you don’t have an ING Savings account and would like one, let me know and we will both get some free money!

Don’t make the mistake of leaving your money in a no interest or low interest account. In doing so, you are missing out on income. Make your money work for you.

9. Automated our finances

Dealing with finances, paying bills, updating balances is painful. We’ve automated our finances. All of my bills are paid automatically using online bill pay and all of our savings transfers are automated using online transfer features. I am still working on automating our budget and expense tracking, but I’ve had good success with You Need A Budget, Mvelopes, and with Mint.

With the technology facilities available today, you can honestly spend less than 5-10 minutes a day thinking about your finances. Take advantage of these services and save yourself some time and stress. Just not having to keep track of what bills are paid and which ones are due has gone a long way to making me a much happier person.

10. Stopped making purchase decisions based on emotions

In the past, we would make very uneducated and frankly stupid purchase decisions based mostly on emotion. Just a few examples:

• Going to the dealership to buy a car without knowing the dealer cost, financing options, or even exactly what we wanted. Worst part, we would go ahead and buy it!
• Going to a furniture store, falling in love with a bedroom set but not being able to afford in. After seeing the 0% interest for twelve months, coming home with a $3000+ furniture set and further in debt
• Purchasing a big-screen TV, again 0% down for twelve months.

Would I have made these purchases anyway? Maybe, maybe not. The point is, we purchased based on emotion. We now have a rule, if we are out and see something expensive we want, we sleep on it. Doing so has saved us quite a few times. Your perspective on the purchase is real different once you are out of the store and dealership and have had time to think on it. That is the exact reason sales people pressure you so much to not leave and to buy now. They know from experience that if you leave, you probably won’t be back.

Make intentional decisions about your money, and really evaluate what you want vs. what you need. If you want a big screen TV, then save for it. Honestly, you’ll save money as it will be cheaper down the road anyway.