Financial Wake Up Call Moment

As I look around the world today, still convinced that America is in for a huge financial wake-up call, I see many, many people still wandering around in status-quo spending,telling themselves that they’re just fine. And I get it. Hubby and I did this for many, many years. We leveraged whatever credit we could gain to get the stuff we wanted to have. We thought that the amount of credit banks gave us was an indicator of our success in the world, and we wore those badges proudly with new cars, nice clothes, fancy homes, etc.

We told ourselves the old lie: “We can make the payments just fine, so it’s all good.”

That is, until the job layoff. But funny enough, that wasn’t our financial wake-up call moment. We still continued to tell ourselves we’d be just fine, and made the smart SO not smart move of using our plethora of available credit to make up for the difference in income between hubby’s salary and the unemployment check.

It was nice. We could continue to live as we’d always lived: financially cozy without much consciousness of our spending.

You would’ve thought that living on substantially less income and not knowing when hubby would work again would’ve been our rock-bottom wake-up call. But it wasn’t. Not yet.

Our Wake-Up Call Moment

Then we moved out of suburbia into the country, and something happened.

I think it could best be described as “taking the blinders off.”

In the country, we didn’t have nearby neighbors known as the Joneses to keep up with. And being further away from the neighbors we did have, we couldn’t see what they were spending their money on.

Suddenly, we didn’t have so many people around us to compare ourselves with. We’d spent years comforting ourselves with the “everyone’s doing it, mom” theology. Now“everyone” was far away, and we were left alone with our pile of debt and no one to compliment our cars, our home, our clothes or our status.

It was just us, staring face to face with tens of thousands in credit card debt. 

And that, my friends, was our rock bottom wake-up call. We started to wonder how we’d make these payments if hubby got laid off again. Yep, that would suck. We’d be in big, big trouble was the answer.

And since there was no one nearby to comfort us with the “it’ll be just fine” message, we had to face the fact that if a job layoff happened it really wouldn’t be just fine. Not in the least.

It was that stark realization – the one that foreclosure, bankruptcy and all those other not-so-fun things could become a reality – that induced our financial wake-up call.

Don’t Wait for a “Forced” Wake-Up Call Moment

My prayer for the millions dealing with loads of consumer debt and bloated mortgages today is that they don’t wait for that “forced” wake-up call of a job layoff or other disaster before they start making a plan to dump the debt and build a more secure financial situation for themselves.

Take a few moments today to honestly analyze your finances and see if your financial situation really lines up with your dreams and goals. Then make a plan to reduce debt and increase savings if needed.

No one is immune to a job layoff or decrease in business income. Or major league medical or other expense. Begin the work of preparing yourselves today so that your potential rock-bottom, wake-up call moment will end with a real-life “we’ll be just fine.”

How to Build a Financial Fortress

Here’s how you can begin those preparations.

1. Assess Your Situation

Sit down today and make a spreadsheet listing each of your debts (liabilities) in order from smallest to biggest. Then list your assets (savings, retirement, homes, cars, etc.) and their values in order. Subtract the liabilities from your assets in order to get your net worth.

2. Make or Assess Your Budget

If you have a budget, look it over to figure out if you can or should trim costs somewhere in order to improve your money situation.  If you don’t have a budget, make one. Make the first budget based on what you spend, and another one based on what you could be spending in order to make your money situation more secure.

3. Cut Costs That Aren’t Value-Based

Go through your budget line-by-line and analyze each non-necessity cost. If the expense is in line with your financial goals and dreams, keep it, but if it’s not, consider reducing or eliminating it. Example: If meeting your financial freedom goals is more important to you than watching cable TV, get rid of the cable, even if just for a time.

Ask yourself before making any expenditure: Is this expense worth me delaying my financial freedom date?

4. Put All Extra Cash Toward Consumer Debt Reduction

If you’re carrying consumer debt, commit to putting all extra monies toward paying it off. Use the Debt Snowball or Debt Avalanche to help accelerate the process.

5. Decide Which Fork You’ll Take Once Consumer Debt is Gone

Once the consumer debt is gone you’ll have a choice to make. You can either keep putting all extra monies toward paying off the mortgage, split extra monies between mortgage and savings, or put all extra monies toward building up an emergency savings account and maximizing retirement contributions.

The right answer is different for everyone, so you’ll want to sit down (with your spouse if married) and have a long discussion about what financial milestones really matter most before you can make your decision.

6. Stick With the Plan

As Ruth shared here, perseverance really does pay off. After only 4.5 years of working her plan, she and her DH are well on their way to retirement, and Ruth is only 53! That is huge, my friends. In another few years, Ruth will be able to leave work and pursue her dream of a career in writing, and just over 4 years ago she was deep in debt with no plan or way out. It’s never too late to begin a journey out of debt.