My Personal Finance “Aha” Moment

Personal Finance Aha Moment

The following blog post is part of The Road to Financial Wellness blog tour. The Road to Financial Wellness is a three-month, grassroots campaign promoting financial empowerment on a national level and encourages people to pursue their dream lifestyle. Find out more about local events near you.

My Personal Finance “Aha” Moment

I’ve been writing about personal finance for the past 4 years and I’ve lived it in varying degrees throughout. At first the blog and my personal finance style was all about spending, but saving by getting deals or freebies. Over time it evolved into saving for retirement, paying off my student loans, car, and house, building an emergency fund, and even branched into minimalism and living a simple life. Even though I was more than 3 years into my personal finance journey, one of my biggest “aha moments” didn’t occur until just last summer, almost exactly a year ago.

I started out 2015 by taking a risk. I took a pay cut and left a secure job in a good field to go after my dream job in an entirely different field. It was a calculated risk: I was almost debt free and had a good amount of emergency savings. I did my research and was certain that this career was what I wanted.

Unfortunately it didn’t work out. Six months later, in the summer of 2015, I found myself unemployed.

This was my aha moment: Everything I’d been blogging about for the past three years…it was time to practice what I preach and put it to the test.

I did eventually start to receive unemployment and had some compensation for a military disability rating, but otherwise that was it: A house to pay for but no true income, no spouse bringing in additional income, and no family nearby to fall back on if things got really bad.

Fortunately I had a few things working in my favor:

Emergency Savings

My goal had been to get my emergency savings up to $20k, but they were only around $15k when I lost my job. It was still better than nothing, enough to give me some peace of mind while I pounded the pavement looking for jobs. Fortunately I only had to dip into emergency savings a few times and was quickly able to put the money back.

Very Little Debt

My recent goal had been to pay off my car and I was able to complete that earlier in the year. The only debt I had during my time of unemployment was my mortgage. I could not imagine having to pay for a mortgage, car payment, student loans, or credit card debt on top of my monthly expenses during this period.

Low Monthly Expenses

In part because of the lack of debt mentioned above and also due to the financial habits I’d developed over the years, I had very low monthly expenses. No gym memberships, expensive cable, debt, and so on. We all have our “things” and mine are books and coffee, which were easy to put on pause for awhile. Having low monthly expenses allowed me to stretch my unemployment dollars a little farther and know that my emergency fund could last me several extra months if needed.

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Minimalism

I really started getting into my minimalism journey at the beginning of 2015 and by the time I lost my job, I was far enough into it to have realized that it takes very little to make me happy. I had realized that I don’t need money or things to have fun and enjoy life. I had a bike to ride, a dog to walk or take to the park, and a library full of books to read out on my deck. All the makings of a nice summer!

While it may seem like minimalism is the least personal finance-related item on this list, it’s actually the thing that has had the most profound impact on my financial situation and perspective. It has completely changed my view of money, material possessions, and what brings me joy. That has allowed me to truly feel free and that has equated to some serious financial savings.

A good financial picture is like having insurance or a fire extinguisher #TheRoad2016 Click To Tweet

Personal Finance Aha Moment

Feeling Empowered

In the end, I was unemployed for 3 months. I borrowed from emergency savings just a few times. Overall, I made out ok, but I learned a big lesson. All the work I’d put into getting my finances together, paying off debt, building savings…it was worth it. My period of unemployment was exactly the reason why I have worked on my finances. A good financial picture is like having insurance or a fire extinguisher…you hope you never need it, but you still want it there just in case. When you need it, you need it.

Having a financial plan allowed me to take a risk and gave me the opportunity to chase a dream. Even though it didn’t work out, I wouldn’t change the experience. I’m grateful for the chance and I would not have bounced back as easily if it weren’t for my financial picture. When I’d rather buy more books than move money into savings, I think back to the summer that I put my finances to the test and how secure and empowered I felt when things fell through.

Your Aha Moment

What was your personal finance aha moment that helped you realize the importance of getting your finances together? Comment below!

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59 Comments

  1. Great stuff!

    Our personal “aha moment” was almost the opposite of yours. We had consistently done well and work, gotten raises, changed jobs to higher paying ones, and moved up the middle class grouping. But a few years ago we looked around and saw ourselves living in a house way larger than we needed, filled with stuff we rarely use, rooms we (literally) never used, and paying quite a lot for it all.

    We reached a point of rather high salaries but since our spending had risen inline with the raises, our net worth really wasn’t growing. At that time we made a decision to yard sale almost everything – all the way down to basics – and to sell the big fancy house to downsize into a much smaller (about 1/2 the size) one.

    The change was so drastic that we were able to pay cash for the small place! Now our utility bills are lower, our insurance is lower, plus many other costs, and it takes us much shorter of a time to clean the house! :))

    Most people don’t realize just how many HENRYs – “high earners, not rich yet” – are out there. Just because someone has a high income does NOT mean they are wealthy. Many still spend almost everything they make… just like we did for a long time.

    • That is fantastic! I’ve been on quite a minimalism journey myself the past year or two and am preparing to move and downsize in 3 weeks! I cannot wait for a more simple life. Less expenses, bills, maintenance, commute, time, gas money…just surrounded by the things that really matter to me the most!

  2. I couldn’t agree with you more on this! My husband and I use two separate banks for the purpose of saving. We have a certain amount that goes into a savings/investing account that doesn’t have checks or a debit card attached to it. We literally have to go to the bank to pull out the money. But, we always have it if we need it. We’ve been able to save wuite a bit doing that.

  3. Words to live by, “A good financial picture is like having insurance or a fire extinguisher…you hope you never need it, but you still want it there just in case.” I agree 100% and teach my children the same. No one can see the future and know what difficulties we may face ahead. It’s always good to be prepared. I think it’s important to let our children see us struggle sometimes and let them know why and what we could’ve done to prevent it. My oldest is 19 and he’s saving 40% of his check each week. I’m so proud. I don’t have to worry about him financially.

  4. My moment came when I was trying to build a “budget” with my Learnvest Planner and he said to me that there just wasn’t as much money coming in as there was going out. I knew right then that I had to whip things into shape!
    Emilie Burke (@burkedoes) recently posted…Life Lately // Week 23My Profile

  5. My aha moment was when I saw how much more I could put in savings once a debt was paid off. This enabled us to save more than we needed for a down payment and have extra money for repairs on the house we’re buying.

  6. I could not stop reading this! Thank you for sharing this. I felt like I could relate, as we are living on one income this year because of our situation of being in a foreign country and me not being able to work. I can’t say we were as well prepared as you, but it’s definitely been a process!

    • I don’t think we can ever be as prepared as we might like! But I think your experience will be so worth it in the end.

  7. Thanks so much for participating in the tour! My aha moment was when I graduated with $68,000 in student loan debt from NYU and couldn’t find a full-time job. I realized I had to get my act together! A tough, but rewarding lesson.

  8. That’s awesome that you were so prepared! I would say my “aha” moment came after I landed my current job. My first “real” job after finishing grad school paid horribly, and I assumed that as long as I could get a better job, things would probably be ok. After I started my current job (which came with a big raise), I ran the numbers and realized that we still couldn’t afford a home. It occurred to me then that even if I could find another new job that paid a lot more, I still wouldn’t be “ok”. My student loans are so high that I would need to be making well into the six figures to not be burdened by my debt. That was when I knew that I should live with my parents and pay the loans off as quickly as I can. Once I started that, I got serious about frugality and minimalism. Minimalism has been huge for me too. It’s much easier to pay off debt or build savings when you realize how little you actually need in order to be happy.
    Jen @ Frugal Millennial recently posted…June 2016 GoalsMy Profile

    • Heck yes on the minimalism! Your story is inspiring…it’s great that you had that realization before things really went downhill.

  9. Such an inspiring post! I think that minimalism is such an important part of finance and living a happy life. People seem to think that it’s all about living without but really it’s about learning to appreciate what you already have. It’s only by reflecting and being grateful for what we already have that we can find true happiness. Thank you for sharing.

  10. We had the same aha moment. My husband lost his job in January and we were not prepared. Since then we both have made BIG strides to payoff debt and save money. It is so very rewarding!

    • I’m glad it turned out to be a turning point for your finances! It is very rewarding to feel secure when things like that happen.

  11. Somehow, the fact that I grew in a tight-income family made aware of what money means at a very early age, and I have always been extremely good at managing money. Nonetheless I have seen first hand what happens when you we are not careful with your finances. With the exception of unexpected income loss, sickness, or any justifiable situation, the reason why people go into financial distress is simple: People want to live a lifestyle above what they make. If I make $25 a year, I simply can’t live and spend like if I make $50….

    This is a great article Heather… thank you for sharing your stories with us!

    Joyful Savings recently posted: Why Should Everyone Have a Budget! [Download Your FREE Budget Template]

    • You’re right…it really does come down to living within your means! When you try to live like you make more, that’s where the problems begin.

  12. Such a great read! We are working to pay off debt now so that we can have more financial freedom. We’ve lived off one income before when we had our first child but as soon as I became a working mom about two years later instead of continuing to live off one income we started living off of both. We’re now working to get back to living off of one income and we know that we can do it b/c we’ve done it before. Reading other people’s journey is always helpful and gives me the encouragement to stick to our goals.

  13. Our aha moment was more of a process for us (my husband and me). There’s something really depressing about working all month long, day in day out just to stay afloat and not have much to show for it except bills and debts that need to be serviced. We just got so tired of it all, we’d had enough. While we’re still working on becoming completely debt free it has been quite a journey for us, tough, unrelenting, harsh but for all that we’ve learnt and the changes we’d made in our lives (for the better) I wouldn’t have it any other way. 🙂
    Natalija Cameron @ Frugal in SA recently posted…Homemade Vs. Store-BoughtMy Profile

    • You describe the journey so well…it’s definitely tough, but well worth it. Congrats on all your hard work and progress!

  14. I’m pretty sure it was when I was completely burnt out working for the circus and I realized I HAD to because of the student loans I was paying back. I realized I had to set myself up to never be trapped anywhere I didn’t want to be again.
    Mel @ brokeGIRLrich recently posted…Financially Savvy Saturdays #145My Profile

  15. Great post. I have had a few aha moments, but my most recent one was looking at my 401K statement. How could it be so small after working for 20 years? At the same time I stared reading some personal finance blogs while finishing off my credit card debt and I realized- I can be saving SO much more of what I earn. I am managing to save about 20% of what I take home now but I would love to get it to 40%.

  16. I appreciate your honesty! It’s nice to see the flipside of ‘do what you love and the money will follow’ (because let’s face it, that is not a foolproof formula).

    I had a bit of an aha moment when I realised just how many people were making a serious living online, and (somewhat) passively (ie not just working online, but selling courses, products etc that didn’t mean they were directly trading money for time). Realising that you don’t necessarily need lots of capital upfront to create passive income.
    NZ Muse recently posted…Link love (the looking back edition)My Profile

    • That’s a great turning point! I can relate. Once I got into blogging, I was surprised to discover a whole new world of passive income!

  17. I would say mine was realizing that, once my wife and I were both out of college and had student loan payments, we were essentially living paycheck to paycheck with no emergency fund. This was a tough time but it really motivated both of us to side hustle and to make more at our 9-5 jobs. Fast forward a few years down the road and we have an emergency fund and have made big in-roads from an income standpoint.

  18. Such an important reminder about having those financial things taken care of. Obviously, you can’t plan for the unexpected, so if you’ve been working hard paying off debt, saving money, etc. you are going to have a much easier time if something unforeseen happens. Thanks for the great post.

  19. My aha moment was when I lost my job also and just moved out of my parents house! I realized the importance of having an emergency savings. Now, if I have to pul from my savings I get major anxiety!

  20. Hi Heather! I love that you were able to try for your dream job- that’s freedom isn’t it? We’re also learning about how our decision to live simply is the key to financial peace. We’ve been living on my part time income for 6 months now and only dipped into savings for taxes. It’s not ideal, but we’re not struggling and I’m so thankful for that!

    • That does sound wonderful! I’ve been embracing a simple lifestyle too lately and it’s amazing how it impact finances and many other areas of life!

  21. This safety net is exactly what I look forward to once we’ve got our debt paid off and our emergency fund built up. My financial epiphany came towards the end of last year when I began to understand how much we’re actually paying in interest every month. Before that, I guess I thought most of our payments were going to principal and that we were doing just fine – WRONG! I was also tired of texting my husband and telling him that we were officially out of money for the month, and that we had to wait 3 or 4 days until we got paid again. That happened more than once before I finally took responsibility and fully took over our finances.

    • Sounds like you’re back on track! I can relate with the interest! I remember when I bought my house being shocked at how long it took to shave $1,000 off my mortgage because so little went towards principal!

  22. I have had dozens of Personal Finance Ah-Ha moments but I would say the biggest one is: Debt Takes Away Choices. When you want to change careers for instance or relocate or help someone else who is struggling, these choices become limited when you have lots of debt. In your example, you had little or no debt which gave you the option to try a new career. If you had lots of debt that would not have been possible!

  23. Being currently unemployed with no savings or emergency fund to go to, I think now is definitely my ‘aha’ moment! As soon as I can get a job, I will start putting money away like you did, so I’m not stuck in this situation ever again.

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