Hey everyone! Today I have an awesome read for you by Dave from MarriedWithMoney.com. This post really made me think of the moment that got me fired up about personal finance a few years ago, and ultimately led to me starting this site and writing about money full-time. I think you'll really like this one. Enjoy! ~M$M
As many of us go through our young adult lives, we live it up as our debt keeps pace and then some. We take out student loans, buy cars that we can't afford, or pile up credit card debt. We spend frivolously and save sparingly. These money decisions would make our future selves roll our eyes, or worse.
For many, this will go on for quite some time, until it's no longer sustainable. Our bills start piling up, and we realize that we can no longer live this way. In a moment of desperation, when it seems hope is lost, we crack.
We have finally reached our Financial “Aha” Moment. I prefer to call these your “Oh S***! Moments”. 🙂
Psychology, Not Math
People aren't born knowing how to manage money. It's a learned skill and one that far too many of us learn at too old an age. Most people can tell you things like “if you spend more than you earn, you'll go into debt.”
Managing your money isn't a math problem; it's a psychology problem. Until we figure out how to manage our own psychology, it's impossible to manage our own money.
The good news is that for many, reaching their financial “aha” moment is the point at which their life pivots for the better. When you've hit your rock bottom, there's only one way to go: up. This is the moment in which you say: “Forget being ‘normal'. Normal is broke. Normal sucks.”
It's the moment in which you decide that managing your psychology and your money will lead to a better life than letting them manage you. This is the moment in which you take control.
My First “Aha” Moment
I've had two Financial Aha Moments in my life. My first was shortly after I had purchased my first car after college. Up until that point, I'd driven used cars that my parents had gotten for me or my brother.
They weren't bad cars, and I am grateful that my parents were generous enough to let us use them. The 1990 baby blue Lincoln Town Car with the blue leather interior seats really made the ladies swoon. The 12 miles per gallon wasn't doing anybody any favors, but it was a good car.
Then came the Malibu. She was a great car that I loved even more than the Town Car since it was the first one my brother never drove.
However, when my Malibu started costing $1,000 every couple of months due to a recurring issue that couldn't be properly fixed, I knew it was time for a change.
Enter: Sonata Loan
I spent a few weeks researching cars and finally settled on my ol' trusty Hyundai Sonata. It was used but was still just one year old with less than 10,000 miles on it. I had $1,000 to put as a down payment and financed the rest.
Since I was in mounds of credit card debt at the time as well (which I blame on a trip I didn't even take…ugh more on that in a future post), I did not get a good interest rate. I was naive and stupid but needed a car.
So, I walked away with a 13.5%, 6-year car loan for about $22k. Yup…stupid.
As the first monthly car payments of my life came in, it hit me. That was my ‘oh s***' moment. I wasn't paying extraordinarily much for my income – less than $500 a month – but seeing how much I was paying in interest was incredibly disheartening.
Knowing I was also paying interest to the credit card companies added to the sting as well. I was bleeding money despite having a good job. I was unable to save as much as I wanted for retirement, and I was lazy with tracking my spending to boot.
Time for Change…
I decided that I needed a change. My first step was to make a plan to pay down my $10k of credit card debt within 6 months. The next was to destroy my $20k+ car loan within 24. I stopped going out to eat as much, stopped drinking as much, and got control of my spending.
I threw everything I could at my credit cards which had been slowly chipping away at my budget.
Paying off the first card felt GOOD. Paying off the last one felt better. I kept the good feelings and snowballed what I was throwing at the cards to pay off my car loan. I chipped away at that steadily, and still saved up some money in an emergency fund.
Then, in April of 2012, just 17 months after buying my car, I was home for Easter and to celebrate my birthday. I looked at my bank account: about $9,000, give or take.
The balance on my car loan? $7,000 nearly to the dollar.
I pulled the trigger right then and there in my parent's living room. I was sick of living my life in debt and just wanted it gone. Sure, I depleted most of my emergency fund I'd saved up, but I knocked that debt out of my life forever.
I had taken control of my money and my psychology and vowed to never get into consumer debt again.
To this day I still have not.
My Second “Aha” Moment
The next few years for me had played out in a way I could never have anticipated. I got a new job working with offices in Los Angeles and San Diego. I was traveling for 50% of my time, and I managed to save up a considerable amount of money with having half my food expenses covered, along with moving to a less expensive apartment with two other roommates.
Eventually, in May of 2013, I got fed up with the snow in Minnesota (seriously, it snowed nearly a foot). I moved to California, met a girl, and in April of last year got engaged.
Earlier in February, I had gotten a new job which, as luck would have it, moved both of us back to Minnesota.
The job was at a start-up, working with awesome people. We were building cool stuff, had a lot of fun, and did some challenging and enjoyable work. I loved it.
Too Good to be True?
Life was good; my job was excellent…and then, suddenly in February, my job was gone. If you've never worked at a startup, you should know: it's not exactly the most stable thing in the world. This wouldn't have been a big deal – really. We had money saved up.
But, we were also set to get married in June (which, for the record, was the best wedding in the world according to our guests). And we had just signed a contract to build a house and needed to have money for the down payment.
I'm the primary breadwinner in our household, and without me earning anything, our entire future was up in the air. Would we have to go into debt to pay for part of the wedding (to allocate some of that money to cover basic living expenses now, or the down payment)?
Even scarier for me: what would the bank say about it? Would we be able to secure financing?
A Sobering Walk
My wife always drove me to work, so I walked home at 8:30 that morning after getting laid off. It was about 25 degrees outside, and I had a mile and a half walk to think about all sorts of things that were at risk.
In that moment I knew I had two decisions.
I could either go home and wallow in self-defeat, or I could accept what happened and figure out how to save our wedding, our house, and our general sense of security. I chose the latter.
It took me 5 weeks to find work again, but it wasn't all bad. I broke into a new industry, got an effective 20% hourly pay increase, and don't have to be on call 24/7. We've bolstered our emergency fund, threw the most amazing wedding, and have our down payment taken care of.
The bank actually likes that I'm no longer at a start-up. Getting laid off and taking control of our financial situation for real – as in, actually budgeting and actually following that budget – prompted me to start my blog, in part to share my thoughts and keep me accountable.
As bad as it was, getting laid off was an eye-opening Financial “Aha” Moment that turned out pretty dang good, all things considered.
Your Mileage May Vary
Everyone's Financial “Aha” Moment is different. Some people are overwhelmed by student loans and are annoyed at having to pay so much on them every month. Sometimes people reach their moment without any sort of real drastic circumstances.
Maybe it's the result of reading a good book or blog post, and just finally something clicked. Perhaps you haven't had one yet or had one and you didn't realize it until you looked back at your life.
Whether you needed a catalyst to take control of your psychology or not, being in charge of your money – instead of your money being in charge of you – is an important step toward the freedom to live the life you want.
Question for you:
What was your Financial Aha Moment?
Thanks for featuring me Bobby! I hope most people can relate to having some sort of catalyst that helped them turn things around!
No problem Dave – love this post. Nice work!
Just wanted to share mine: Right after I graduated college, my wife and I were going water skiing a lot with a good friend. This lake (that we still go to pretty often) has all of these mansions on each side. I basically said something along the lines of “Man, I really want to live in one of these someday.”
My friend said: “You’re a teacher with $40,000 of student loan debt. You won’t get there like that.”
And that was pretty much it – after that I paid off my loans and quit my teaching job!
Ouch, that’s a tough thing to hear!
Do you still talk to that friend? 🙂
Haha yeah – he was just telling the truth, I didn’t take offense to it.
My aha moment was reading the book “Rich Dad Poor Dad” when I was 13 years old. That book totally rewired my brain. Since that day, I always dived deep into learning investing and how to make money work for you.
It totally changed how I look at money. If I hadn’t read that book, I would’ve just been leaving money in a savings account right now.
But thanks to the book, I went out there and learned how to invest for cashflow and I now make 1000s of $$$ from investing.
I’m now looking to start blogging as well.
Dude 13??? That’s awesome. I didn’t read that one until I was in my 20’s, but it was a game changer for me too. Make sure you take my blogging course – it will make it so much easier!
Will certainly take your course on blogging in the next couple of weeks Bobby. I also joined your Facebook group!
And I have an idea for a massive blog post in which I present a totally new angle to the age old problem of 2/3 of millennials not doing any investing. To the best of my knowledge, nobody has ever written anything like it before.
Would you be interested?:)
How massive? Typically I like to keep it less than 1,500 words, but I’ll look at it 🙂 Just shoot me an email
I read that book a few times when I was younger. Kiyosaki’s gotten a fair bit of flak over the years, but I think some of the fundamentals of RDPD still ring true. It’s kind of a nice refresher book to read every now and then.
If you like to write, you’ll like blogging. 🙂 It’s so easy to start, may as well!
Dave, I have heard criticisms mainly that RK talks about the importance of doing certain things but doesn’t show you HOW to do it.
What else would you say should be taken with a pinch of salt?
Basically everything should 🙂 I always approach money with skepticism and lots and lots of research. If something doesn’t jive with me, I toss it. That doesn’t mean I disregard entire people necessarily (sometimes I do), just that it’s important to find out what works for you.
Hahaha, most of us do have that moment. 🙂 For me it was a “Holy crap!” moment when we realized we couldn’t afford to buy a house when we got married. And that’s what led us down this fun yet bizarre money-saving, debt-destroying journey. 🙂
It definitely is a bizarre journey – can’t believe how much stuff has changed for me in just the past 2-3 years.
The journey can be fun, once you get the stressful parts out of the way especially! Buying a house is a huge deal, it’s not surprising that many young couples aren’t able to afford it…especially depending on where you live. We are fortunate to live in a moderate COL state. 🙂
When we were back in Los Angeles we wanted to buy, but knew we would basically never be able to afford it (without some huge change in circumstances) out there. Moving to MN changed all of that. We’d planned on moving on our own anyway a few years down the line…this just sped everything up.
Ah, yes, I remember that. For me, it was more about other people’s finances than my own.
I studied financial planning in school. Retirement planning was probably my favorite class ever, and I was so excited about everything I was learning that I went home to visit my parents and talk about how they were saving for retirement.
Turns out they didn’t have a single clue what they were doing. They both just kind of hoped they’d be able to retire when the day came.
Since then, I’ve talked to so many people in similar situations. It’s scary how little people know/understand about THEIR OWN finances.
That’s why I started my blog – to track my own personal finance/frugal journey paying off my debt and reaching my goals and to teach others about personal finance.
Wow, that’s kind of scary to think about how people just “hope” things will work out. It’s so fascinating to me how different people can be on this path. Thankfully having a world of knowledge at our fingertips helps at least get the information, but you still have to seek it out…
I agree. We must all think ahead. I want to mention back around 2010 when our company took a bad hit I saw a special on tv about the economy and Ponzi scams and what had happened to people. There was a man who said he did everything “right”. He had married in college, bought a house, had kids, saved the entire time, put the kids through college, then when all the things happened with the economy and the Ponzi and other scams, he had $500k in investments and lost all of it! He did not have a savings account, and he did not own stock on his own, only through this one investor he worked with. That is the person that ripped him off. So important to know who has control of your money. It should be yourself. Educate yourself on investing and do not rely on someone or a company to have your best interests at heart.
I had two Ah-Ha moments in my life. The first was when my uncle passed away and my mom was talking to my aunt and she was crying how she was left with nothing. My mom said she thought they had money as they always went on vacations, had a big house, new cars, and my uncle had been vice president of an insurance company. I might mention my mom was always jealous of them while my dad never made more than $30k a year. My aunt explained she had no idea, never knew anything about money, thought my uncle had it under control, only to find out he had NOTHING! No savings, no investments, no retirement account. Meanwhile, my mom had been investing a mere $10 a week over the course of forty years and their nest egg was growing. My mom turned her investments into a million dollars and they retired and are still living well in their own home and are in their 90s.
This encouraged me to start investing and saving. I did what I thought was a pretty good job, as we started a business and had a nice savings built up, and several great stocks. After being in business 10 years and having a great vacation and party to celebrate, the economy took a nose dive and we ended up losing a large account with a bank. That was 2010. To maintain our company, we had to use all our savings and two years later filed reorganization bankruptcy. We managed to not only keep the business going, but we paid off our debt. No vacations, no eating out, no new clothes. It was a long hard 5 years, but we made it. As soon as the bankruptcy was over I started throwing money at the interest of our house note, and buying more stock. The saving is going very slow, but I have a better grasp on what I need to do to deter anything like that happening again.
You never know what life brings you, so do what you can, laugh and live, and always think about your future. My folks never dreamt they would live so long, and thank goodness my mother had the inclination to save and invest so they could be comfortable in their old age. I would also like to mention we have not had or used a credit card in 7 years. If you don’t have the cash to buy it, you don’t need it. Only thing to finance should be a car or home.
Wow! Sounds like a roller-coaster for sure.
It’s crazy to think how somebody who’s bringing in so much money can just spend it all. 🙁
Wow. I’m sorry about your aunt. This reminds me that it isn’t so much about what you make but how much you keep. The other thing is that you never know what going on underneath the surface of people’s lives. Things may look good on the outside but be a hot mess on the inside.
For me it was when in 2008 when I got laid off from my first real job out of college. I had zero savings and a good but of debt. I had to choose between continuing to live with my best friend or moving back in with my parents. The choice was made for me already though because I couldn’t afford to pay rent and make my debt payments. I vowed to never go back into consumer debt again. And once this mortgage is paid off I’ll never go back into debt ever.
Wow, that would be rough – but it sounds like things worked out for you! 🙂
We’re making it our goal to pay off our mortgage early. I know the numbers might suggest that investing is a better option, but there’s something to be said to not owing anybody any money at all. I think we’re going to shoot for 20 years instead of 30, so we’ll see how that goes!
My husband and I own a bowling alley. From April to October, we live off my salary (I work elsewhere) and my income also supports the business with numerous loans. In the last 2 years I’ve paid almost all of a $12,000 roof loan, but still have massive credit card debt. I want to take the kids on vacation. Thanks for the inspiration. I’m trying – in April the first of my personal debt will be gone, and in December 2018 the first business loan will be gone so we can use that money elsewhere.
Wow! Keep on plugging away at that debt. You can definitely take vacations on a budget. 🙂
Mine “aha” moment was inspired by a soggy hotdog. I wrote about it on my old blog WAY back in May of 2008, which in blogging terms feels like a lifetime ago.
http://www.frugaldad.com/the-soggy-hotdog-a-personal-finance-wakeup-call/