Yesterday, I indicated some of the specific mechanics that I adopted to turn my financial situation around, and I’m happy to say that my finances have never been better. The solution to the problem, though, is much greater than mere financial tools. Even though I was able to discover and apply tools to solve my specific financial problems, the real solutions came from within, the lessons I truly learned from a lifetime on the road to financial armageddon.

The most important lesson I learned in my life is that the well being of your future self (and your future family) is more important than anything frivolous right now. Whenever I make a purchase now, this thought echoes through my mind. Is having this item now more important than the cost of this item could be in the future? I imagine the path my life could lead, one that sees me losing my job or facing a desperate situation, and I can’t imagine that buying a magazine or a chocolate bar now will do anything at all to help that future me - but not buying the magazine or the chocolate bar will help him.

Whenever you spend money, try to imagine if you lost your job next week. Will it still seem like a worthwhile purchase if you’re jobless? If it won’t, then you should strongly reconsider your purchase.

The second lesson I learned is if money is out of reach, I’m not tempted to spend it. I used to tell myself that I would save $100 a month, but then I would see something I wanted and I would know that I could easily have the cash with just an ATM card swipe and, before I knew it, I’d be strolling down the street with another purchase. Now, my monthly budget doesn’t even mention the saving at all - it simply goes away into an inconvenient to access account (meaning I can’t just withdraw from it if I’m out shopping) for when I truly do need it. If I come in under budget for a month? I sweep that money into the savings before I’m tempted to buy something unnecessary.

Perhaps the most important lesson was that I don’t need to put up appearances of being rich. I still worry about personal appearance, but I’ve learned that grooming and cleanliness really are 90% of the battle - if you’re clean and solidly groomed, you still carry a solid impression without dumping thousands of dollars on expensive suits and dresses. I also don’t need to show off the latest gadgets to impress; I can impress by simply being comfortable with being myself.

It all boils down to one thing: money and material things don’t make me - I make me. Once I figured that out, money became merely a tool in my life, one that allows me to take care of what’s really important to me, like the long-term health and happiness of my family. And that’s the real lesson I learned on the road to financial armageddon and back - I learned what was really important after all.

Want to jump quickly to the other Road to Financial Armageddon posts? Here’s an index to help you out.

#1: The Earliest Mistakes
#2: Early Profits … Lost
#3: Cash & College
#4: The First Taste of Real Money
#5: Love & Marriage
#6: The Yuppie Years
#7: Here Comes Baby
#8: Meltdown
#9: The Road to Recovery
#10: What I Learned

Yesterday, I described my financial meltdown, when I reached a point where there was more money going out each month than coming in with no real hope for redemption without a change from within. Then, thanks to some inspiration, I made that change.

The first thing I did was I laid out every single expense I had each month and asked myself what I could do to reduce them. I piled all of my credit card bills together in one place, my student loan bills together in one place, and so on. I then called each of the credit card numbers and simply told them that I am going to transfer all of my balances to one card and would they like my business? The first couple pulled my credit report and didn’t comply, but the third one did. I then proceeded to consolidate my student loans into one loan, and set up an automatic payment plan. With these two moves, I eliminated about 75% of the interest I was paying each month.

The next thing I did was I set up a loose monthly budget that I re-evaluated and tightened at the end of each month. I had so little idea of where my money was actually going that I didn’t actually save anything for the first two months - I just made large debt payments with my money. Once I realized where all that money was going, I was prepared to make even bigger changes in my financial life.

Once I understood my budget both in and out, I put strong caps on all of my frivolous spending. I allowed myself to spend a bit on entertainment, but I strongly budgeted it. I also began to cut down on frivolous spending even on things like groceries, where I taught myself how to shop in a much more frivolous fashion using tools like coupons and shopping lists.

The biggest step was making clear short term goals for myself. I clearly stated that I wanted my credit card debt gone and I wanted a two month emergency fund and I developed a week-by-week plan for getting that done. As I met the goal for each week, I began to develop a sense of pride as I watched my debt disappear much quicker than I would have ever thought possible.

The icing on the cake was I began to build up some savings so that disasters wouldn’t derail me. I opened up a high-interest savings account and set up an automatic deduction plan so that the money would simply move automatically into savings; all I had to do was mark it in my budget and savings would just happen. Soon, I was seeing the joy of compound interest and the peace of having an emergency fund.

Each of these financial moves helped to get me on track to righting the numbers, but how did I right my soul? Tomorrow, I’ll conclude this series by discussing the real lessons the road to financial armageddon taught me.

Want to jump quickly to the other Road to Financial Armageddon posts? Here’s an index to help you out.

#1: The Earliest Mistakes
#2: Early Profits … Lost
#3: Cash & College
#4: The First Taste of Real Money
#5: Love & Marriage
#6: The Yuppie Years
#7: Here Comes Baby
#8: Meltdown
#9: The Road to Recovery
#10: What I Learned

Yesterday, I detailed the impact of a baby on my downward financial spiral; suffice it to say, the finances were not good. Everything was set up for a collapse and I inched up to the precipice, largely oblivious of how close I was to the lip of Mount Doom.

The most fundamental problem was that I was completely unprepared for the unexpected. A couple months after the birth of my son, several things went wrong at once: my truck was severely damaged, my wife returned to work (causing our child to go into daycare), and some severe family issues occurred all at once. I had absolutely no reserve funds for dealing with these things, so I literally maxed out credit cards covering these demands on me.

As the bills kept rolling in each month, including absurdly high finance charges on my credit cards and the weekly cost of daycare, I quickly found that maintenance costs were eating up almost all of my monthly budget. Between the new bills, housing, food, vehicle maintenance, and so forth, we were having some difficulty keeping afloat.

In truth, I was paying out more each month than I was bringing in, even as I was literally being forced to curb some of my extravagant spending. I was literally ordering bills such that I could pay them as close to the due date as possible (or just a day or two late) to avoid having any checks bounce.

Even worse, my pride kept me from doing sensible things to fix the problems. If I had sat down and evaluated things, I would have realized that I could consolidate a lot of my debts by doing credit card balance transfers and student loan consolidations with automated payment plans. These options would have helped me fight off the debt for a while, but the change needed to come from within me, and my pride wasn’t letting that happen.

The core problem was that I put my own immediate wants in front of my family’s long term needs. I believed that by buying things and spending money, I could introduce happiness and security into our lives, but the actual truth was that each dollar I spent brought more stress and insecurity into our lives. I would buy more things for that short rush of joy and safety that a purchase would bring, but I would be awake at night realizing that things were just about to completely collapse.

So, what finally happened? One night, I came home from work and found five bills in the mail that added up to more than I had or would have for the next two weeks. I literally didn’t have the money to put food on the table at that point. I walked into the house and down the hallway to my son’s bedroom, where I saw my infant son bundled up in his bed taking a nap. I looked at him and realized that everything that I was doing was setting things up to make a very difficult childhood for him, not the wonderful one I wanted. I was worried all the time about money and I had learned that all he really needed from me was my love and attention.

I looked at him and I decided to change things, right then and there. What did I do? Tune in tomorrow to find out.

Want to jump quickly to the other Road to Financial Armageddon posts? Here’s an index to help you out.

#1: The Earliest Mistakes
#2: Early Profits … Lost
#3: Cash & College
#4: The First Taste of Real Money
#5: Love & Marriage
#6: The Yuppie Years
#7: Here Comes Baby
#8: Meltdown
#9: The Road to Recovery
#10: What I Learned

Yesterday, I talked about the period in my life where my wife and I spent money like it was going out of style in order to obtain a “yuppie” lifestyle. Then, that magic moment happened: we took a home pregnancy test and discovered that a little one was on the way. I can remember that night like it was yesterday: we sat there excitedly holding each other’s hands and talking a hundred miles an hour about this child, our child, and what it all meant. I didn’t know it then, but this was to be the event that was the straw that broke the proverbial camel’s back.

The first mistake we made was insisting on only the “best” (read, most expensive) things for our child. We bought a ridiculously expensive crib, multiple layettes, multiple carseats, and so on and so forth. Perhaps the pinnacle of the overspending is when I had a slightly smaller duplicate of my own dresser made for him. We had this vision of a perfect little nursery in our heads and we were going to have it at any cost.

The little things added up as well. We bought him lots of toys, only to find out that free toys are often much more entertaining. We bought piles of wipes and diapers and such without understanding that we were spending our baby budget in nonsensical ways.

Now that we had all this stuff, we found out we were sorely unprepared for the day-in day-out costs of having a baby. Diapers, formula, wipes, clothes that he seems to outgrow every day; it’s a continuous cost that you’ve basically committed yourself to for, oh, the next eighteen years or so. We were completely unprepared for this new financial reality and we soon found that we didn’t have nearly as much money as before.

The lifestyle changes that the baby brought also brought a second wave of changes on us, and accounted for a second mistake: we spent money instead of coping with our lifestyle changes. For instance, we started eating take-out most every night simply because we were spending so much time with the baby and his night-time feedings were making us both worn out. We also travelled quite a lot when he was about three months old simply to show him off to others instead of inviting his many well-wishers to come and visit us, which would have been cheaper and more convenient but was alien to our lifestyle of showing off.

The real problem was that we were unable to separate what our child actually needed from what we wanted. We deluded ourselves into believing that buying all of this stuff for him was actually going to benefit him. The reality of the matter is that it doesn’t matter if it is a $50 crib or a $1000 crib, he’s still going to stand up in it and chew on the railing and he’s still not going to remember it when he’s four years old. The only difference that it makes is to us, so that we could feel some sort of parental glow when we saw it, but the child in the crib ended up counting for more than the crib ever did.

If you haven’t put the pieces together yet, things were just about to collapse. Bills were piling up left and right and it would only take a few things for the whole house of cards to collapse. Let’s just say you should tune in tomorrow for part eight in this series. It’s titled “Meltdown.”

Want to jump quickly to the other Road to Financial Armageddon posts? Here’s an index to help you out.

#1: The Earliest Mistakes
#2: Early Profits … Lost
#3: Cash & College
#4: The First Taste of Real Money
#5: Love & Marriage
#6: The Yuppie Years
#7: Here Comes Baby
#8: Meltdown
#9: The Road to Recovery
#10: What I Learned

On Saturday, we learned how love and marriage caused me to sink even deeper into a financial hole I was digging for myself. I had hopes that as a married couple we would begin to get our financial house in order, but it was not to be.

My first big mistake is that I bought wholeheartedly into the “yuppie” lifestyle. We started buying excessively nice furnishings for our apartment: a big television, a new couch, a surround sound system, everything new in the kitchen, a new dining room table and chairs, a new bedroom set, and so forth. The scary part was that most of this stuff was replacing older but still usable stuff. Everything had to be new and nice and classy, and we paid out the nose for it.

Actually, we didn’t directly pay for it at all, and that was the second problem: we began to finance this “yuppie” lifestyle using nothing but credit cards. We were already in a fair amount of debt after our wedding, but we proceeded to rack up several thousand dollars in credit card debt buying all of these new things in a very short time. The sad part was that we didn’t even look at thrift at all - we had a gorgeous dining table, but it was stacked full of credit card bills.

We both wanted to live in a small town, so we made our third mistake: we lived in a place that maximized our transportation expenses. We worked in large cities that were separated by about thirty minutes, so rather than living in one or the other of these cities, we instead moved to a town in the middle. This meant that rather than giving one or the other of us the inexpensive convenience of using public transportation to get to work, we both had to maintain vehicles with gas, repairs, insurance, and such. This quickly became a giant money pit that wore us down over a long period.

Even worse was the lack of availability of local services. Our only choice for groceries, for example, was either a twenty minute drive or a very expensive local grocery store. Either option meant that each time we bought food, we were losing money by living where we were at. Given our lifestyle, though, it shouldn’t surprise anyone that we regularly spent atrociously high amounts on groceries because of this factor, without even giving it a second thought.

We also both chose this most inopportune time to get involved in financially expensive hobbies Rather than choosing hobbies with a low cost per hour of enjoyment, like reading, we chose hobbies with a high cost per hour of enjoyment (I collected DVDs, actually). This made for some very high monthly entertainment expenses, far beyond anything reasonable for our incomes to maintain.

The end result is that we lived like real consumers, digging ourselves further into debt while we wandered through our 20s. Then we made an even bigger financial decision: we decided to have a child. Little did we know the financial impact he would have on our situation. You can find out all about it tomorrow.

Want to jump quickly to the other Road to Financial Armageddon posts? Here’s an index to help you out.

#1: The Earliest Mistakes
#2: Early Profits … Lost
#3: Cash & College
#4: The First Taste of Real Money
#5: Love & Marriage
#6: The Yuppie Years
#7: Here Comes Baby
#8: Meltdown
#9: The Road to Recovery
#10: What I Learned

Yesterday, we learned about my immature behavior in handling a large steady income. I was starting to sink further into debt without really acquiring any assets, and I was building up a lifestyle based around extremely poor spending decisions. Yet, I was about to embark on a path that would make matters much worse.

I was about to fall in love.

I wound up falling in love with an acquaintance from my high school days. We were in different social circles then, but we kept bumping into each other and finding that we had a significant overlap in terms of interests, personality, and mutual friends. Soon, we were dating and before long, wedding bells were about to ring. And I was about to jump off of a financial cliff.

I erred right off the bat by presenting a grossly inaccurate picture of my personal finances. I gave off the impression that I was making significantly more a year than I was. Although my wife was not a gold-digger in any fashion, my treatment of her in the early days of our courtship set the bar pretty high, and through my own egotism, I refused to lower that bar even though it was killing me to maintain it.

The second mistake I made was that I set the engagement and wedding expectations way too high. Rather than sitting down with my bride-to-be and talking about some realistic expectations, I not only allowed but encouraged those dreams to take root and grow. The end result is that there was too much spending on the engagement, the wedding preparation, and the wedding itself.

Before you start thinking to yourself, “Wow… what a sucker!”, I want to point out that these mistakes were entirely my own doing. My bride-to-be often encouraged me to spend less than I was spending on many things, but I was too caught up in my own spending glut to realize it.

The big, big mistake came after the wedding, however: I vastly overspent, beyond any reason, on our honeymoon. We flew to London first class, stayed in a suite overlooking Hyde Park for a week, ate like kings and queens, attended lots of shows, and basically drowned ourselves in excess. Then we repeated that week in Edinburgh. I had a credit card with a huge limit on it and just put everything, no matter what, on that. I didn’t even try to keep a running total or even look at prices at all beyond a perfunctory glance.

Needless to say, when we returned home and I saw the bill, I nearly choked. I resolved to get this paid off as soon as possible, but now we were a young married professional couple. Did I turn our finances around, or did I continue down the path of destruction? Tune in Monday to find out.

Want to jump quickly to the other Road to Financial Armageddon posts? Here’s an index to help you out.

#1: The Earliest Mistakes
#2: Early Profits … Lost
#3: Cash & College
#4: The First Taste of Real Money
#5: Love & Marriage
#6: The Yuppie Years
#7: Here Comes Baby
#8: Meltdown
#9: The Road to Recovery
#10: What I Learned

Yesterday, we watched as I stumbled through college making a series of classic financial errors. Yet I finished (albeit in six years) with a pair of degrees, and I was able to find work utilizing both of them. I was suddenly making more money per year than my parents had made combined in any year, ever. Surely the lessons of my childhood poverty would instruct me on how to be thrifty with my windfall? Think again.

Rather than living thrifty, as I had observed growing up, my financial windfalls led me into a giant buying spree. I bought a monstrous television, a state-of-the-art computer, a brand new vehicle, tons and tons of DVDs and music and games of all kinds, expensive gifts for my family (including buying my niece a computer for Christmas)… I bought and bought and bought and bought, because I had learned as a young child that happiness comes from fulfilling every whim of your heart.

Now, this wouldn’t be so bad, but my spending quickly spiraled out of control. I was making a lot of money, but I was soon spending more than I was bringing in. I got a couple credit cards and it wasn’t long before I maxed them out. I just kept buying stuff I didn’t need without any rhyme or reason because I didn’t understand what it all really meant.

It wasn’t long before I was making minimum payments on the cards in the area of $200 a month simply to cover all of the foolish things I had purchased. You would think that this might be a wakeup call, but it wasn’t… I would just pay the bill and then go buy something else that would bring a few moments of joy.

Even that could have been at least somewhat overlooked except for the fact that I had no savings plan whatsoever. I was saving absolutely nothing of what I was bringing in. Even though I had more money than anyone in my family could imagine, I was actually living paycheck to paycheck because I was spending so much on frivolous things.

Perhaps the biggest problem was that I allowed myself to appear much richer to my family in friends than I actually was. They began to have this impression that I was just made of money - and it just wasn’t true. But I felt this desire to keep up the charade because… well, because it made me feel good. I thought I was an inspiration, particularly to my nieces and nephews, and a source of pride.

To sum it up, I became a complete consumer. My focus was on buying things immediately that would make me feel good and I believed that the future would just take care of itself. It is a stage that I fear many people find themselves in today, a stage that I was eventually forced to move myself out of by seeing the financial havok that I had wreaked not only on myself, but on my family as well.

I allowed this spending to continue on for a while, even as other things in my life were changing. I began to date a wonderful woman and eventually we decided to get married. If you’re thinking “Uh-oh,” you’re probably right. Tune in tomorrow to read the whole sordid story.

Want to jump quickly to the other Road to Financial Armageddon posts? Here’s an index to help you out.

#1: The Earliest Mistakes
#2: Early Profits … Lost
#3: Cash & College
#4: The First Taste of Real Money
#5: Love & Marriage
#6: The Yuppie Years
#7: Here Comes Baby
#8: Meltdown
#9: The Road to Recovery
#10: What I Learned

Last time, we reviewed the mistakes I made during my earliest days of dealing with my own finances, and it was clear that I was already showing some grave errors in financial planning. After high school, however, I found my way into college, an environment where I would have an opportunity to learn many things, including the meaning of financial planning. Unfortunately, I made just as many mistakes there as I did in high school.

I would have never gone to college if I had not been blessed with a four year full tuition, room, and board scholarship. I had no college savings at all, so my opportunities for education boiled down to burying myself in financial aid, praying for scholarships, or preparing to directly enter the workforce.

Yet this was the source of my first mistake: I had no idea of the value of my college experience. I was the first person in my family to go to college, so I didn’t have any idea what to expect when I went to college. My belief was that you just took a few classes and goofed off a lot, because this is usually the “pop culture” attitude towards college. So (for the first few years, at least), that’s what I did. I goofed off and took classes and really didn’t think about what it all meant.

What I should have done with this huge financial gift is spend my first year really focusing on determining what I really enjoyed doing, then spend my remaining years working to excel in that major. Instead, I almost completed a major in a half-hearted fashion, realized it wasn’t for me, and finally started to get my head on straight by about the end of my fifth year.

That was my second mistake: I went for longer than I needed to, and I let the student loans finance that extra time. I spent two extra years in college after the end of my full scholarship, completing two full majors and building up a substantial amount of student loan debt. I took out the biggest loans that I could in order to be able to prop myself up in a very nice apartment with only one roommate, which is still perhaps the nicest place I’ve lived in in my life. It was all financed by loans.

My third mistake was not taking advantage of all of the opportunities the college experience gave to me. Rather than seeking out interesting meetings and organizations and extra classes that could have personally and professionally benefited me, I spent my spare time in the dorms playing GoldenEye or out on dates. Given the opportunity again, I would have loved to invest time in organizations where I learned how to speak in public and debate or attended some of the countless free talks and seminars or volunteered my time to a worthy cause instead of burning days sitting at a computer playing Warcraft II, but I didn’t know any better.

The end result is that I left college two years late, saddled with two years of student loan debt, with only my education and nothing extra to show for it. I did manage to not put myself into credit card debt during my college years; those stupid moves were yet to come. How did I start down that path? Tune in tomorrow to find out.

Want to jump quickly to the other Road to Financial Armageddon posts? Here’s an index to help you out.

#1: The Earliest Mistakes
#2: Early Profits … Lost
#3: Cash & College
#4: The First Taste of Real Money
#5: Love & Marriage
#6: The Yuppie Years
#7: Here Comes Baby
#8: Meltdown
#9: The Road to Recovery
#10: What I Learned