My last post I spoke of the beginnings of my financial education. The most important part of any education is what you do with what you have learned. My experience of spending more than I made, using credit to finance my wants, and allowing the perceptions of others to influence my purchasing decisions contributed to my near miss with a financial disaster. I had to undo and relearn habits that I had created and that had been created by the environment around me. That process was a tough adjustment socially, but now that I am on the other side it was well worth it.
I began the process of getting out of trouble by changing my mind set first. I stopped caring what other people thought about where I lived, what I wore, or what I drove. Their opinions of me didn’t pay the bills that I had to pay. That was the hardest part of the entire process of getting out of debt, changing my mindset. After I had accomplished that I saved enough money to cover my highest deductible(s). For us that was about $1500. This was money that was set aside so when we began paying off debt, if the car broke down, or if we had to replace and appliance, or if one of the kids had to go to the emergency room our plan to pay off our debt would not be derailed.
We raised the $1500 by having a huge garage sale. We sold everything we didn’t need. I also sold guns I hardly ever used and military uniforms that I no longer wore. Some of these things had some sentimental value, but I was determined to be out of debt and I valued peace of mind and security for my family above all other things.
While we were saving the $1500 we listed out all of our debts from the smallest pay off amount to the largest. There were some balances that only totaled $120 and we knew that we could pay them off in about a month but we listed them anyway. We then began the process commonly known as “snowballing.” We paid off the smallest debts first, then worked our way up the list to the next largest. We paid the minimum amount on all of our other bills and focused any excess amount on the smallest debt, once we paid off that debt we rolled the payment to the next one on the list. It was the quick wins, marking the name of the company that we were making payments to off of a list that gave us the next mind set that we could actually do this. We also began to plan a date when we could be free of consumer debt.
We eventually paid our way out of debt completely. We later purchased another house, after we had saved a considerable amount of money and purchased a “fixer upper.” We bought the house cheap and we didn’t care what other people thought about what we were living in. We knew how we were going to fix the place up in time, not on credit this time. We saved and paid cash for a 700 sq ft addition to our house, built a new front deck, put hardwood floors down in the house, and replaced the heating system and the roof, all with cash. In the mean time I decided to leave my high paying corporate career and took a 50% cut in my pay and returned to education. All of this was accomplished because we took control of our lives financially.
How has/could taking control of your finances affect your life?
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