When my wife and I approached our financial meltdown, our financial planning and spending was in pure chaos. We both spent according to our whims and we tackled bills and such without any real pattern or consistency. Neither of us had any real idea what the other was doing financially, and we certainly didn’t have any big dreams that we shared beyond the nebulous “let’s build a house in the country” idea that we’d floated in a very vague sense for a long time but never bothered to make any more concrete.
Since then (about two years), we went from living in a crackerbox apartment to owning our own home. We’ve eliminated somewhere around $30,000 in debt (and rising fast). Even more importantly, we worked together to find options that made us both happier in terms of our careers and home lives and we settled in on some big goals. We’re on the same financial page, too – we both have a pretty strong grip on our current financial state.
How did we make this transformation happen? It’s a transformation I’ve alluded to on here before and one that many readers have asked about. Here’s how we did it – and how you can do it, too – step by step.
Step One: The Moment of Change
My moment of change was very specific: a long night holding my infant son and realizing that I needed to make some financial changes in my life. After that, I became really committed to change – I read tons of personal finance books, sold off a bunch of my stuff, and so on.
The only problem was that this was a personal epiphany – not one that my wife had shared with me. I already had my individual moment of change, but my wife had not. So, all I asked her was this: “Could we sit down and figure out where we’re at in terms of saving for a house?” She was a bit uncomfortable, but she agreed, and we sat down and simply talked about it.
I think, for her, the revelation that we were so far away from ever having a house of our own, even though we were making solid money, was the moment of change. I remember a Saturday afternoon a few weeks after my own revelation, sitting at the kitchen table with my wife as our son napped, going through our financial statements. More than anything, I remember her reaction as we rubbed away at the surface of things, looking at the stupendous amount of debt we shared and how small the assets we held actually were, and I remember saying, “We’re not going to be able to get a house any time soon. We’re not even close… we’re in trouble.” And I remember her shuffling through all of the papers, collected together for the first time, with a really worried look on her face, the kind of worry that I’ve almost never seen.
The important part – the part that made all of this work – is that we experienced this moment of change together. She knew I was scared. I knew she was worried. And because of that shared experience, we realized that we needed to work together to make some big changes in our life.
This is a difficult talk to have for many people, so here are some tips on getting started and how to follow up on it to reaffirm your relationship.
Step Two: A Commitment to Honesty
Prior to that talk, we never paid any attention to each other’s bills. If a credit card bill came in the mail with my wife’s name on it, it was simply something I didn’t touch, and vice versa. I had little grasp on her financial state and she had little grasp on mine.
We decided that this had to end – we needed to be fully on the same financial page. We adopted a new policy: anything that came in the mail could be opened and looked at by either one of us, no questions asked. If we talked about any money issues, we were allowed to say what was on our minds without any consequences in terms of hurt feelings or anything like that.
Something was financially wrong in our lives, and our best hope for fixing the problem was each other. We realized that every secret we kept from each other and every feeling we kept inside for “tact” was blocking us from going where we wanted to go. But where did we want to go?
Step Three: Shared Dreams and Individual Dreams
We spent a lot of evenings then talking about our dreams. What did we want to do with our future? We shared a dream of having another baby, hopefully a little girl and of someday owning a home. We had a lot of different dreams, too: I harbored dreams of being a self-employed writer and I also wanted to take some wonderful international vacations when our children got older. My wife had different dreams: she wanted to live way out in the country, she dreamed of being in our own house before our second child was born, and she harbored some long-term dreams of going back to school to pursue her master’s degree.
These were nice dreams – and surprising ones, too. In some ways, we had similar visions of where our lives were going, but in other ways, our dreams were very different. One thing we both realized, though, is that our dreams weren’t going to happen if we didn’t make some changes. We were throwing away our dreams on $50 meals, piles of electronics, tons of books, and lots of other unnecessary stuff.
Step Four: How to Compromise Without Giving Up Your Dreams
We tried to figure out which of these dreams were the most important to us. We decided to buy a less-expensive house first, live there for a while, then eventually build a house in the country like the one my wife dreamed about. We decided to go ahead and have a second child as well, and we recognized that in order to live out our other dreams, our first step was to get financially stable, with our debts gone and a healthy emergency fund. Without those things, we wouldn’t be able to have the freedom to allow me to chase writing dreams or for my wife to ever go back to college.
Our first step was to focus in on the dreams that we actually shared. That meant we decided to focus intently on our dreams for a house – that became priority number one.
Our second step was to builld a firm financial base for the things we wanted to do down the road. If we actually wanted to do things like take great vacations, look at new career directions, and eventually buy a patch of land in the country and build our dream home, we couldn’t continue to throw money down the rat hole of expensive debt repayments and stuff we didn’t really need.
Step Five: Turning Dreams Into Long-Term Goals
As we talked about these dreams, we realized how effectively they led straight into some medium and long-term goals. Here are the four big ones we committed to early on.
Our first goal was to build an emergency fund. We wanted to get a few months’ worth of living expenses in the bank so that our plans wouldn’t be derailed by things like car repairs.
Our second goal was to get our spending and debt both under control. Basically, this meant eliminating high-interest debt while weaning ourselves from a life filled with purchasing.
Our third goal was to start saving for our down payment and eventually buying a house. Once we built up that emergency fund and eliminated some of our most onerous debt, our savings would be redirected towards a down payment.
Our third goal was to smooth out any bumps in our credit report and maximize our credit scores. This meant paying every bill on time and getting our debt-to-credit ratio in shape.
Step Six: Turning Long-Term Goals Into Short Term Goals For Both of You
These sounded great and we both knew that achieving these goals was what we really wanted, but they were so huge and so nebulous that we realized we’d never make it based on these ideas alone. So we set some short term goals to help us with the day-to-day reality of things.
I found weekly goals helped me the most. I’d make pledges like “only one after-work stop this week” or “only $20 in entertainment spending this week.” I found that with small goals like this, I could accomplish them easily and also easily see how they were helping with the big goals. Plus, if I achieved the goals for a few weeks, I found that this new behavior was quickly becoming my normal habit.
My wife functioned better with monthly goals. She’d target things related to monthly bills, like “make a $300 extra payment on this credit card this month.” Then she’d use a gut check each time she went to spend to help her get things more in line. This doesn’t mean she abandoned all spending (neither did I), but seeing how this little move really fit into a bigger context really helped.
Filling our weekends with frugal projects helped, too. We did things like purge our media collections, install CFLs everywhere to cut down on energy use, learn how to cook at home and prepare foods for the upcoming week, find free things to do in the community, and so forth. We instituted money free weekends to teach us how to entertain ourselves together without spending money.
We constantly talked about and shared our successes on little goals – and big ones, too. It was great having a partner committed to the same things I was committed to. Without her, it would have been much more difficult to succeed.
We also looked for simple ways to move forward on our other goals as well. I was already committed to writing 1,000 words a day, but I didn’t really share it much at all and it wasn’t focused – it was mostly haphazard journal writing. I made more effort to share my writing with others, and with my growing passion about our financial recovery, I started disclaimer-statement.info to just practice my writing and share the experiences with others. I didn’t think that this would ever be a significant success – I mostly started it just to work on my own writing and share what I was thinking about.
Doing these things together encouraged us both to stick with it – not only were the goals short and manageable, but we both had cheerleaders and we both saw how they fit into our bigger dreams.
Today is the day to get started. Sit down with your spouse, find some shared inspiration with that person, set some goals together, then work together to make it happen.