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When I got married I really had no hands-on experience handling money and I had a lot of college debt. My husband and I both did.
Even though my parent's paid for my college tuition, I felt like I needed to do my share and cover all the incidentals. Not realizing the challenge I was setting myself up for, and being in an expensive major I would charge film, photo paper, photo equipment rentals and lab fees when I didn't have the cash to cover it. (Go ahead and insert your best "older than dirt" joke here since I really did earn a photography degree before the digital age.)
Our Dumb and Dumber Approach to FinancesMy husband and I started off our marriage living paycheck to paycheck thanks to his school loans and my credit card debt. We always wondered where the money went. Bonuses, tax refunds, and gifts seemed to evaporate in the checkbook. We frequently transfered money from savings to cover monthly expenses with the full intention of paying it back the next month, but rarely had the extra to do so. When savings ran out, we'd use the credit cards to pay for dentist bills or car repairs.
Like many families, when the economy took it's nose dive in 2008, we got hit hard.
We'd had a home we rented out that caused us major expenses thanks to a renter who racked up a $1400 water bill and frequently bounced her monthly rent checks. By the time we sold it, the housing market had tanked and we lost $40K+ equity, barely breaking even at the time of closing.
We continued to limp along for as long as we could. Our wake-up call was when my husband received his second pay cut because the company he worked for was struggling financially. (Thank you again crappy economy.)
We didn't know how we were going to make it. Even with the extra money my home businesses brought in, we ended up scrimping and saving to come up with the money for property taxes that year. I laid in bed every night worrying about money.
Turning the Out of Control Money Train AroundWhen our pain and stress around money got bad enough, the pain of doing the work to change it didn't seem so awful. We got angry with the situation which got us motivated to change, and every little step in the right direction we made, gave us more commitment to turning things around.
Within our first year we'd paid off more than $9,000 in credit cards and medical bills from my son's birth. Money surprises still threw us into a tail spin, but we did everything possible to minimize them, including replacing the window motor in the door of our minivan ourselves, turning a $400 auto repair expense into a $50 one. (It's a funny story which I wrote about in a guest blog here: Financial Failures: Money Saving Auto Repairs Not to Do Yourself.)
Our Biggest Money MistakesLooking back on our financial journey, I can see a few areas where we made our biggest money mistakes. I also asked our friends on Facebook to see what golden nuggets they had learned about money.
I was introduced to Dave Ramsey's plan after asking the FatWallet community what personal finance books they recommended right after I started here in 2011. Dave Ramsey's baby steps were what got us going on the right track and they have given us a blueprint to follow. We've tweaked his plan to fit our needs by increasing our initial emergency fund amount, but it was a great starting point and helped us get on the right track. We're almost done with Baby Step 2 (Debt Snowball) and have paid almost all our medical bills, car payments, and credit card bills in the last couple of years. We will be debt free except the house this fall (possibly before the end of summer) and it feels absolutely amazing.
Turning your financial life around is about progress not perfection. There are going to be money surprises and things you've overlooked, but every month that goes by will put you in a slightly better position than you were in the month before. Stay focused on your achievable goals.
If you're frustrated with your finances and are wanting to turn things around, I highly suggest you read the FatWallet finance forums and get engaged with our community on social media as well. There are so many money-savvy people around here who are willing to help!
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