Gather Little by Little

Ever ask yourself: “How in the world did I get here?”  If your current situation isn’t a good one, generally there is a huge emphasis on the word “here”. I cannot tell you how many times I’ve asked myself this same question over the past 4-5 years. Fortunately a few of the times have been positive, like when I stand out on our front-deck and see our beautiful mountain view or when I look at my work queue for my blog consulting business that is now booked out 4-weeks. For the most part though, the last 3 years or so have seen that question in a less positive light and particularly with my personal finances.

How in the world did I get here?

I was asking that same exact question in November of 2006: Due to some personal events in my life, I was facing a job loss. For some in the technology field like me, no big deal right? My problem though was that my finances were a mess:

• I was living paycheck to paycheck. We literally were spending each and every paycheck before the next one came. I remember for the last few days prior to receiving my next paycheck literally having no money in our accounts and frequently over drafting. I remember even buying life basics using our already way too full credit cards.
• I had more than 60,000 dollars in debt, not including our mortgage. This was a combination of car loans, a camper loan, and 3 or 4 different credit cards. We were just barely able to pay the minimum payments on the credit cards. Heck, I remember a few times even using one credit card to pay on another! Can you say stupid?
• We owned a home, but it badly needed some fairly major repairs. Due to how tight our finances were we couldn’t make them. We literally slowly watched the wooden chimney surround on our house rot away and fall off into the yard along with various other issues.

The only silver lining in our dark financial cloud was that I had been contributing 6% of my monthly salary into a 401k program since the first day I started my professional career. We did have some long term savings.

What a mess right? Have you seen the movie The Day the Earth Stood Still? We rented it from Netflix one evening. It’s not a great movie, but it did have one very interesting observation about people: “It’s only on the brink that people find the will to change. Only at the precipice do we evolve. This is our moment. ”

Was I on the brink? Oh yeah. Did I change? Absolutely.

Finding the will to change

At some point everyone “living in the land of stupid” (as Dave Ramsey likes to say), reaches the precipice. I was there, and here’s what I did to change:

I read

Don’t ever make the mistake of thinking you are the very first person to ever be in a particular situation. I can almost guarantee you that regardless of your situation, somebody, somewhere is going through your situation (or worse) AND someone in the past has survived your situation. The best way to get out of your situation and change is to look at the positive actions done by others. Fortunately for me I found Dave Ramsey’s book: The Total Money Makeover while at Costco one evening. I also found Get Rick Slowly and The Simple Dollar which opened up the world of personal finance blogs to me.

One thing I learned pretty quick is that just based on the number of debt reduction blogs on internet, I wasn’t alone. I was not the only one facing repayment of  large amount of debt. They say misery loves company. I believe that’s very true, but for me it wasn’t so I could complain and wallow in self pity, knowing that I wasn’t alone gave me hope. When facing 60,000+ in debt, one thing you really need is hope.

I also dove deep in scripture. The Bible is literally full of money advice. If you aren’t sure where to start, read to book of Solomon. Solomon was the first personal finance blogger and was given wisdom far beyond that or normal man.

I stopped what wasn’t working

Based on the things I was learning from reading, I stopped doing all of the stupid things right away. We immediately stopped eating out, we cut up our credit cards and  with the exception of buying things we absolutely needed to live, we stopped spending.

When you’re headed down a road to destruction, the first thing you have to do is stop. While that seems like an easy thing to do, it’s not. Easy or not, stopping is critical.

Another important aspect of stopping is facing the reality that you are the reason your finances are mess. Oh sure, blaming everyone else is easy, but it doesn’t get you anywhere. Go stand in front of a mirror, look at yourself and literally say out loud “You are the reason you’re here“.

Let’s just take a quick example. Many people today are losing their jobs. Their fault? In some cases yes, but for the most part no. Job losses as a result of corporate cut-backs are just a reality of the recession. So losing your job in this situation isn’t your fault BUT is not having your finances in order to sustain such a loss your fault? Absolutely. I don’t care who you are or how important you are to your job, you can lose your job. As a result, each of us needs to take the necessary steps to shore up our finances in case just such an event occurs.

I took action

Once I stopped and realized that I was indeed responsible for my own financial situation, I took action. I didn’t hesitate, I didn’t dwell, I didn’t roll in self pity crying out “poor me”. I immediately picked something I could do to start down the road to financial control and did it. That first step literally cost me nothing but a little time. What did I do? I created a budget.

Here are the initial steps we took to get our finances under control:

1. Cut up our credit cards and vowed to live on cash in our checking account only.
2. Created a budget
3. Created a financial plan – Think about it: if you want to head down a new path you better darn sure know where you’re heading.
4. Sold everything we had that we didn’t need and used that money to pay on our debt
5. Created an emergency fund
6. Created a debt snowball

Given I had lost my job, I also aggressively started looking for other employment. This event also taught me to never, ever rely on just one source of income. While not the initial reason I started blogging, blogging coupled with my blog consulting work has provided  that backup income. While it doesn’t earn me near as much as my full-time job does, my side income would pay the mortgage AND put food on the table. That is very comforting. Investors diversify their investments, shouldn’t be diversify our income?

How in the world did you get where you are?

Are you currently in a bad situation in your life asking: “How in the world did I get here?”  If so, while it’s certainly important to understand how you got where you are, don’t dwell. Remember also: Only at the precipice do we evolve. You aren’t the first person to be where you are, and you can change. Changing may not be easy, and the path to getting where you need to be might be hard, but it will be worth it.

Figure out what your first action is and take it. Don’t think too much, don’t look to far ahead as if you look at things as a whole it may be too overwhelming. Just figure out the first step and take. Then the next step and take it. After all, the journey of a thousand miles begins with the first step. Start your journey towards making your personal finances better. I did and it is one of the best decisions I ever made in my life.

Photo by: 0ccam