Reaching the tipping point

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My good buddy in the Money Life Network, freefrombroke, asks this question on his blog:

What is your personal finance tipping point? I see there being two tipping points in one’s personal finance. The first is when you finally admit to yourself how bad your finances are and you resolve to do something about it… The second is that point when everything comes together; all of your saving and paying debt come to a point where you can finally say you have a positive net worth and you can see when your debt will end.

I thought I’d throw my hat in the ring and describe my own tipping points.

Growing up frugal

Growing up at my house we always lived simply. My parents never had extravagant things, they drove older used cars, and now that I think of it, we never even had a microwave until sometime in the mid-90’s! Even then we got one from the “scratch and dent appliance store”. My family was not a group of big spenders!

Living frugal was always something I had done and maybe to some degree by the time I left home for college I think I’d maybe had enough of that. I became a bigger spender than I had been taught growing up. I used my student loan money for a stereo system, a super nintendo (does this date me?) an awesome new 27″ stereo TV and a variety of other purchases. I was living the high life.

Also during college I got my first credit card. Oh the freedom! Having a credit card meant I could buy just about anything I wanted - from a candy bar at the school bookstore to a trip to europe. The world is my oyster! Want some new CDs? Sure - sign up for that BMG music club for $20/month. Want to go out for a night on the town? Put in on the card!

The temporary tipping point

After college I took the summer off. I wasn’t working much, just living off the remainder of my student loan money. And then the summer came to a close and the money ran out…

That’s when reality set in for me and I came to my first tipping point.

Oh my gosh. I’m out of money, I don’t have a job, and my student loans are coming due. I have credit card debt. What am I going to do?

I set about finding a job, and luckily I was able to find one within a couple of weeks. In no time I was quickly getting a steady income, and quickly forgetting how much it stunk not having any money. Again I started spending most or all of the money I was making. My biggest weakness? Audio-Visual equipment in the form of TVs, receivers, big speakers, video game systems (a Dreamcast this time), and other assorted gadgets (like the new fangled digital cameras). Although I wsn’t going into huge amounts of debt, I was still spending all the money I was making, and using credit like it was going out of style.

The only good decision I made during this time period was putting away a portion of my paychecks into a company 401k. Because of that I’ve got a nice chunk in my 401k today.

The permanent tipping point

I finally came to a more permanent tipping point in my finances when I met my beautiful wife Maria and ended up proposing to her 6 months later in 2001. She was my soulmate, and I realized that now I was part of a team, and I couldn’t behave as selfishly as i had been in the past. Any debt or frivolous spending I would do now would mean mortgaging OUR future. I realized that I couldn’t do that. At that time I began cleaning up my financial house.

The cleanup process didn’t happen all at once. In fact it has taken years. When we got married I still had thousands in student loan debt, a car loan, some credit card debt and debt to pay for my wife’s wedding ring. Add to that a mortgage, a honeymoon in Hawaii and various other expenditures for our new townhome, and we had plenty of debt to deal with.

Through careful spending, not using credit cards unless we absolutely had to and a decision not to enter into any new debt we were able to work our way out of the red Last year we finally paid off the last of our debt except our mortgage.

FREEDOM!!!

Tipping point - for the future

These past few months since starting this blog I have started taking things to the next level. We want to be saving for our future and making wise decisions now so that we can live better in 30-40 years when we retire. As Dave Ramsey says, we want to live like no one else right now, so that later we can live like no one else later.

We are currently taking Dave Ramsey’s Financial Peace University so that we can learn techniques to help us in building an emergency fund (done!), saving for retirement, paying off our house early, and sharing the blessings we’ve been given with others. Check out our series of posts as we go through the class with you, detailing what we’re learning. Start the post series here.

So what was your financial tipping point? When did you realize that you were in bad shape? When did you finally feel that things were moving in a positive direction? Write your own post, let freefrombroke know!

Other tipping point stories:

This post is inspired by Free from Broke’s Contest about Tipping Points. Want to join in on the fun and gain a chance to win a $25 Amazon gift card? Here’s how:

The Prize: $25 Amazon Gift Card.
How to Enter:

Leave a comment on this post telling him your personal finance tipping point. It can either be the moment you realized you needed to fix your finances or that point where you discovered you were finally in the black. Make sure you leave a valid email address in the comment. This will give you one (1) entry.
Subscribe either to his feed or via email. There will be a secret phrase at the bottom. Email him using his contact form and tell me the secret phrase. This will give you five (5) entries. (Note: If you are already subscribed you can still email him the secret phrase)
If you have your own blog, write about your personal finance tipping point and link back to him. Email him through his contact form with your link. This can be a full-on post or a quick few sentences in a round-up. This will give you ten (10) entries.

You can enter each way once. He’ll put all of the entries into an online randomizer to choose the winner. Entries can be submitted up to 11:59 am Friday, June 13th. He’ll contact the winner to email the gift certificate. If the email address is not valid he will award the prize to the next email address in the randomizer. Good luck!

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