I remember the point of my financial meltdown very vividly. It wasn’t as much a meltdown as a wakeup call that things could no longer continue the way they were going if I wanted to live a successful life. I was working for what seemed like peanuts and my wife and newborn daughter were at home. Money was tight, but we weren’t starving by any means. We covered basic expenses, but charged luxury items to a credit card and paid for them over time. My decision to return to school added significant expenses to our budget, and again we financed a large portion of my tuition and books compliments of Visa. The minimum payments began to rise, and my income stagnated.

Things Began to Tighten Up

Do you remember those classic action movies like Indiana Jones or Star Wars where the heroes are trapped in a room, and suddenly the walls began to close in from all four sides? That sort of sums up our situation about ten years ago. At first we had plenty of space, despite low earnings and no savings. Over time the walls began to creep in. Student loan repayment, current educational expenses, credit card minimum payments, a car payment, insurance, medical bills from the birth of our first child, etc, etc. all began to eat away at our monthly income.

The Soggy Hotdog

I don’t remember the exact date, but I remember the events of the day like it was just yesterday. It was a normal day on the corporate treadmill. I arrived at work and logged on to my credit card account online to discover I was over the limit - doh! I knew that would come with a $29 fee and could potentially reset my interest rate again. I was kicking myself for using the card to pay for new cell phones earlier in the week. Oh well, I’d make a big payment to bring it down under the limit as soon as I got the rebate from the cell phones. Lunch time rolled around and I headed out to the nearest fast food restaurant. I never carried cash, so I drove around to the first window and handed over my check card. Declined. What? That couldn’t be right. I had over $100 in my checking account (or so I thought)! So there I was at the McDonald’s drive-thru with a dead check card, an over-the-limit credit card, an empty wallet and exactly fifteen cents in the change holder in my truck. Embarrassed, I made up some excuse about it being a new card and drove away apologizing for the mix-up.

Now that I had wasted the first twenty minutes of my lunch break there was no time to head home for a bite to eat. I had no money, and no snacks back at work. I opened my wallet and found my Chevron gas card. It was the one card that would still work. I drove to the closest Chevron station which had a convenient store attached. I went inside and got two of the worst hotdogs I had ever eaten in my entire life. The buns were under the hotdog rotisserie and the condensation had turned them into a soggy mess. I’m still not sure the hotdogs were even real meat, and the mustard was watery. I charged the $2.12 to my gas card and returned to my truck.

As I sat there in the heat eating those crappy hotdogs a wave came over me. No, not just a wave of nausea. I was too smart to live this way. Here I was forced to charge my lunch on a Chevron gas card because I was too irresponsible to properly plan for meals, food budgets, etc. It was time to grow up. I choked down the remaining lunch and returned to work, thoroughly disgusted with my financial life, and with a bad case of indigestion.

A Lifetime of Learning Begins

That night while surfing around for information on money management, I discovered a website by some guy named Dave Ramsey. I began to listen to his archived shows online. I subscribed to financial magazines such as Kiplingers Personal Finance and Money Magazine. Reading personal finance books became a side hobby, though it wasn’t until much later that I really developed a taste for this genre. My television was often on CNBC or Bloomberg’s. My favorite section in the newspaper became the “Business” section. I started reading old Wall Street Journals at work when my boss was finished with his copy. I wanted to learn everything I could about money, even though I had none. One day I would have money and I wanted to know how to handle it better. I had learned nothing in high school about personal finances, and chose to make bad decisions early on because I bought into the mentality, “I can always pay it off later.” Later never came. What did come was a small mountain of liabilities that trapped me in a dead end job for years because I had no options.

Our story is a cautionary tale for newlyweds. In our excitement to live the lifestyle of our dreams, we sacrificed much of our future. We are still not completely debt free, but have made that our number one mission. And when we do reach debt freedom, we will never go back - and I mean NEVER!

So there’s my story, I’m interested to hear your “soggy hotdog” moment?

#1 - Create a conducive environment for growth. The most important step in gardening is to prepare a bed of fertile soil for your plants to grow.

Money lesson: Similarly, investments require an environment where they can thrive. Faithfully contributing money to bad investments, or a bad brokerage, will do nothing but increase losses over time. Take some time to investigate the various brokerage houses and fund managers before deciding where to invest.

#2 - Select the right mix for optimal growth. Some plants tend to do better when surrounded by other certain types of plants. Some plant varieties are good are warding off insects (such as marigolds). Carefully selecting the right combination of plants could improve the entire garden.

Money lesson: Selecting the right types of investments makes for a more balanced, well-diversified portfolio. With my own finances, I have a blend of tax-free and tax-deferred retirement accounts from both my employer, and things I have opened on my own. I also have a couple cash accounts for short-term savings goals, and conservatively invested taxable funds for longer term goals short of retirement.

#3 - Tend to your garden often, but don’t over-do it. Plants need two basic things to grow - water and sunlight. However, many new gardeners with good intentions kill crops by over watering, or watering too frequently. These overactive gardeners would see improved results if they backed off a bit. Deep watering plants every few days encourages a deeper root system as plants dig down through the soil in search of water.

Money lesson: Overactive investors who constantly make changes to their accounts likely see diminished returns when compared to those who buy and hold for the long term. A few active traders can beat average market returns, but keeping up with single investments requires a lot of homework. If you are like me we have other things competing for our time, so a healthy dose of long-term investments set on auto-pilot lowers the hassle factor.

#4 - Be patient - results don’t come overnight. It took nearly two weeks of faithfully watering and tending to my square foot garden before I began to see green sprouts poking through the soil. It would be unrealistic to expect juicy, plump tomatoes to magically appear two days after planting the seeds.

Money lesson: It is also unrealistic to expect double-digit returns on investments in only a couple months. Select a strong portfolio, contribute to them often and check up on them every few days, but don’t obsess over the results in the short term.

#5 - Keep invaders out. The biggest threat to a square foot garden is from outside invaders, namely insects. Aphids, moths and slugs can wreak havoc to a vegetable garden, chewing away on leaves and fruits.

Money lesson: “The Tax Man” can take chunks out of your profits by eating away at your returns. Be careful when selecting investment vehicles to be sure you are not overly exposed to taxes. Taxes are a part of investment life, but some careful planning can reduce the amount of “fruit” you have to share!

#6 - Don’t be afraid to harvest profits. When fruits are ripe for the picking you must be ready to harvest them. Nothing spoils a garden faster than over-ripened, spoiled fruits and vegetables hanging from the vine. You’ve worked hard to produce these crops, now enjoy the fruit of your labor.

Money lesson: When investments, particularly those outside of retirement accounts, produce a sizable return you need to ring the register and take those profits. It is tempting to let the investments sit to try and earn even more, but this plan usually fails when the investment begins to make a declining correction.

#7 - Prune back overachieving crops. In one of the garden squares (top right) I planted sugar snap peas. They took off! So much so they soon were crowding out my tomato plants. I pruned them back a bit, but they came back with a vengeance. I realized that they were probably not the best crop to plant in a square foot garden, so I transplanted them and planted squash in the empty square.

Money Lesson: It is a good idea to rebalance your portfolio at least once a year, particularly if one of your funds has grown significantly. For instance, when the real estate sector was booming a few years ago many investors saw the value of REITs, or similar real estate related investments, increase considerably. These investments quickly represented their largest fund asset. To rebalance their portfolios many fund owners sold off a portion of REITs, investing in other funds to bring individual fund balances back in line with their desired asset allocation mix.

#8 - Get rid of poor performing crops. Poor performing crops take up space and provide low yield. My strawberry plants were not producing, while other crops were taking off. I ultimately made the decision to cut my losses and remove all but two strawberry plants (lower left square), making room for new investments in a variety of peppers.

Money lesson: Many times investors hold on to poor performing investments for too long, either because they don’t want to record the loss officially, or because they hope the investment will regain some value and lessen the financial hit. When you are stuck holding an investment you no longer believe in, cut your losses. Use the loss to offset some gains you registered from another investment. Use the proceeds to fund a new investment you have researched and feel confident will be a winner over the long term.

To learn how to build your own square foot garden, read my popular post, How to Build a Square Foot Garden.