If you have followed my story at all, you know that my wife and I started our lives together with $18,000 in debt and struggled to make ends meet. After a brief financial scare, we realized that debt was not our friend and we did everything possible to get rid of it. 14 months later, our hard work paid off. We were completely debt free – vowing never to go into debt again…
And then, it happened. I didn’t even see it coming, but all of the sudden we had a balance on our credit card, and we weren’t able to pay it off. We were $750 in debt and it freaked me out.
How Did We Slide Back Into Debt?
A few months ago, my wife was left without a job. Since we were renovating our house, we did not have a lot of money in reserves, but we still weren’t worried. After all, our budget allowed us to live comfortably on my income alone.
We still continued to tackle our house project (which costs money of course) and we also decided to buy some living room furniture. This was our ultimate downfall. The furniture set cost somewhere around $1,800 and we had the money in our account (just barely), but we figured that we’d better just put the expense on our credit card in case there was an emergency.
A few weeks passed and we received a pleasant surprise. My wife landed a new job! It paid well and had great benefits. It seemed like a dream come true! There was just one problem. We were still operating with one vehicle, and her job was nowhere near mine… It was time to buy another car.
At the time, I think we had $4,000 in our account. That means that to stay out of debt, I would need to find a dependable car for $2,200. I searched and searched for that good deal – just ask my dad-in-law. We drove 75 miles to look at a truck that was painted with rainbow sparkles (those sparkles didn’t show up on the Craigslist photo)… I found my ride for $3,300 – and that credit card did not get paid off.
I was able to find a few bucks from some other ventures, but our card was still left with a $750 balance. I never thought it would happen, but it made me realize just how easy it is to slip back into debt!
My mistake was innocent enough. We initially had the money to pay for that furniture, but life happened and our money was needed for other necessities. It wasn’t like we were spending it on a lavish vacation. We needed it to continue to survive!
Be sure to watch your finances a little more closely than I did with ours. Don’t assume that you know what the future will bring. Unexpected events happen all the time! Tomorrow, our water heater might stop working, our basement might flood, or maybe we’ll find out that we have a water leak. Each of these events could do some pretty serious damage to my pocketbook!
Even if you’re renovating your house like me, do your best to keep the proper reserves in place. The experts say that you should have an amount in savings that’s equal to 3-6 months of expenses. It’s a wise thing to do, and I’ll follow the rules of finance much more closely from now on. I hope that you will too!
Have you ever made a bad financial move? What did you learn from it?
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.