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Financial Literacy Awareness Carnival-My Financial Aha Moment

financial literacy aha momentI’m very happy to be participating with an excellent lineup of bloggers for this year’s Financial Literacy Awareness Carnival by sharing my Financial Aha Moment. You can head over to The Heavy Purse to see all the posts today. I bet you’ll learn lots!

The American Dream

If you have been reading for a while, you know that my family used to have some serious debt. At the beginning of 2011, we owed over $30,000 to credit card companies and had over $70,000 in student loans. We also were a family who traded our cars for new ones every three or four years and bought things whenever we felt the urge. We had good income, made our payments on time (even if they were often only the minimums), and almost always got approved for new credit whenever we wanted something. We were living the American dream, right?

Well, if the dream includes constant worry about having no money at the end of the month and having to work all the time to make sure you can hit every payment, then I guess we were there. It actually sounds more like a nightmare that I’m afraid way too many people lose sleep over each night.

The Aha Financial Moment

After our daughter was born in 2007, I knew in my heart we needed to make a change. I didn’t want her to grow up in daycare because we could never afford to take time off work. I also didn’t want her to learn the credit card and minimum payment way of life. If you think your kids don’t know what goes on behind the scenes, think again. We started and failed at several attempts to remain debt free, mainly because we never really decided on a plan for the future.

In 2011, we watched some close family members go through a foreclosure. It was devastating for all parties involved.The thing that really woke us up was that we were really not living any differently from them.

The foreclosure happened because of many factors. If you made a list of why our family members lost their house and compared it to our financial situation, this is what it looked like.

Lots of credit card debt-Check

Frivolous spending– Check

Several previous years of high income-Check

Head buried in the sand about amount of debt owed-Check

Little savings-Check

No financial plans or goals-Check

Loss of two jobs during the recession-That’s the only thing we didn’t have on our list.

AHA! When I looked at the amount of our monthly payments and how much savings we had, we would not have made it through one month if we lost my paycheck. Even if we drained our retirement, it would have only lasted a few months if the income wasn’t replaced.

It Won’t Happen To Me

I think it’s easy to hear stories about people who lose everything because of debt and/or losing a job. It’s really easy to think it won’t happen to you. After seeing it happen to people we love, real and up close, it somehow lit a fire under us to do better for our daughter, for our future, for us.

What Can I Do To Become Financially Literate?

I don’t think anyone enjoys being in debt or living paycheck to paycheck, but somehow we get stuck. It’s really, really hard to change. Change could mean  giving up things you are comfortable with or risking alienation or even scorn from friends and relatives. If everyone you know is kind of floating along in the same boat, it really upsets the balance when someone jumps out and decides to swim.

You can read what we did to pay off our debts if you’re curious, but really the steps are the same regardless of your situation.

1) Decide what you want. Is is debt freedom and possible financial independence or more things and more debt? If you aren’t single, your significant other has to be on the same page. It will never work if you don’t want the same thing.

2) If you decided the former, then make a list of all income coming in and money going out. If you have no idea where your money goes, it’s hard to hang onto it.

3)Look at all the things you own and decide if they add value to your life or if they are necessary to what you decided in step 1. Get rid of stuff that doesn’t qualify and stop adding to the pile. This includes clothes, toys, electronics, whether you turn the air conditioner to 65 in the summer, and even food. There are ways to cut back on almost every expense.

4)Make more money. You can only cut back so much. If you want to really make change, you have to earn more money. I believe anyone can earn at least an extra $500 a month.

5)No excuses allowed. Yes, it’s hard. You will want to stop. You’ll miss things at first like a new dieter misses bread. You will have setbacks and months where you feel like you are barely treading water, but after being consumer debt free for almost a year and a half, I can tell you that the end game is worth every struggle and second thought. You do only live once, so don’t let debt and lack of a plan determine what you can and cannot achieve.

6) Reward yourself. This one may seem counter-intuitive, but it’s a lonely place out there in debt payoff land. After every milestone you hit, like paying off a certain credit card or saving your first $1000, then reward yourself within reason. Go out to eat or to a movie. You’ll enjoy things like that so much more than when you did it all the time without thought.

I’m really sorry that we had to see our family go through such hard times, but I’m eternally grateful for the financial aha moment, and I’m actually thankful for our debt. Without having to dig deep to pay it off, I’m not sure we would have the confidence that we now possess in regards to financial freedom. You don’t gain financial literacy overnight, but once you do, it’s certainly worth it. 

Has anything ever scared you into financial literacy?  

About Kim Parr

Kim Parr is a private practice optometrist, freelance writer, and personal financial blogger. You can follow her journey to 20/20 financial vision at Eyes on the Dollar.

35 comments

  1. “…it really upsets the balance when someone jumps out and decides to swim.” I love that thought Kim! And it takes a great deal of courage to leave the boat. But the freedom that comes is so worth it!

    • It’s funny that it takes courage to pay off your debts, but it does. It’s hard for adults to admit they are just plain wrong and it’s easy to blame the other spouse or your job or the government. Once you take responsibility, it’s much easier.

  2. What scared me into financial literacy was when I decided it was time to start saving to buy a place. I then realised there was nothing left over to save at the end of every month. My money was being swallowed up by monthly debt repayments. So I had to get real by paying off the debt first so that I can save this monster of a deposit that I’m going to need.

    • Debt takes away so many choice. You can’t save for anything because the payments do take it all. We have so many more choices now, and I am incredibly thankful for that.

  3. It’s unfortunate that your family had to go through that, but I’m glad to hear that at least something good came out of it- maybe not for them, but for you! I hope that they are back on their feet and that life is different for them these days too. We cannot wait for the day that we hit debt freedom- it’s a ways off at this point, but we are working hard to get there!

    • They are actually doing OK and have a life of forced frugality because they can’t get credit. They are still bitter and fail to accept blame, so it’s hard to talk about. We tend to just stick to safe topics.

  4. Great post Kim. I definitely agree with your point about no excuses allowed. When you are trying to turn your personal finance situation for the better there really isn’t time (or energy) towards making excuses or feeling bad for yourself.

    • At this point in my life, I really can’t tolerate excuses of any sort. I think I used them all myself and can spot them a mile away.

  5. Having kids tends to bring up the responsibility in a lot of people. It did for us in every facet of life…except our finances. It took us several more years for that to come about.

  6. I could not agree more about kids knowing what goes on behind the scenes, especially as they get a little older. That said, nice post Kim and great point on the no excuses. I started and stopped several times as I began and so much of it came down to excuses. I didn’t want to make the changes necessary to move out of debt.

    • Our biggest excuses were that everyone was in debt and that we deserved certain things that we couldn’t afford. It’s easy to justify why you are in debt. It’s harder to accept that you are at fault and only have yourself to dig a way out.

  7. Sometimes we learn money lessons from watching or hearing what happens to others. Losing everything you own or worked hard for is a huge blow for anyone. I think this is why we worked so hard over the past years so we could be mortgage and debt free before we were 40. Losing a job or becoming injured all these things circle in our minds so owing no-one was the best option. Sure we could all invest our money but if things go South the bills are still needing to get paid. At the end of the day we all do what’s best for us. It sounds like you learned lots about your finances and what path you wanted to walk. Good for you. Mr.CBB

    • It’s sad when you have to learn from the misfortune of others, but it was a huge wake up call for us and I know we’ll never go into our senior years with any mortgage or other debt.

  8. I have definitely seen that scary check list like you did between friends and family and it just shows you how “common” money problems truly are. And I agree with you, you cannot let excuses get in the way of your financial health. We can all sit here and come up with a million reasons why we can’t make change, but at the end of the day, the responsibility falls on us individually and we have to “own” our futures.

  9. Thanks for sharing your story. Having a child definitely makes you contemplate your finances, though without a plan, it’s like being in a boat without a paddle. Sometimes seeing others who are in a similar financial situation as you are get into money troubles makes you realize that it can happen to you too. Glad you were able to jump out of the boat and swim on the path to financial freedom.

  10. Sometimes when something bad hits close to home that is what forces us to take action. Your checklist is not uncommon unfortunately and I’m glad you decided to turn things around. We so often cling to the hope or belief that it won’t happen to us, but it still can and with devastating effects. Debt can be awfully painful, but it can also be a great teacher if you are a willing pupil. And the very best thing I see about debt is all the strong and financially confident people I see emerge as they eliminate their debt. They have a new found purpose and know what they want. And best of all – they most often achieve it too. Thanks for sharing your money a-ha with us. I know it will inspire others to take action!

  11. Being “scared into” financial literacy is sometimes just the kick in the behind you need 🙂

  12. It is sad that your family members had to go through foreclosure. One of my family members did the same thing and that helped me get my act together. They were heavy spenders and loved material goods. It was eye opening for me.

    • It was certainly eye opening for us. There is no way on earth I’ll ever go into my 60’s with any sort of a mortgage.

  13. Hey Kim! I can’t believe you guys were in so much debt. You’ve obviously come a long way. Foreclosure is scary and it happens to people at all income levels!

  14. Kim, this is an awesome post – thank you for putting it into words so clearly and relevantly, and thank you for continuing to share your story here. You are such a huge inspiration to so many people, including us!

  15. Wow, that was a reality check smack to the head. Learning how to do a 180 turn is tough, but you did it well! We can all learn a lot from personal finance bloggers and by reading books to make this happen. There’s nothing like laying it all out in black and white in front of you. I love that you want to set a good example for your kids. That’s a huge gift to them for their future success!

    • My daughter might make her own mistakes, but at least she will have the foundation to make the right decisions if she chooses to be smart financially.

  16. It’s amazing how far you guys have come since 2011! Every point you made is so true…I’m actually at kind of a loss for words because there in not much more I can add! lol!

    • I know you long time readers have seen my story a hundred times, but I’ll tell it over and over if some other knucklehead like us maybe decides that they can start the ball rolling and pay off debt!

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