Money Lessons From Families Who Went Broke

Money Lessons From Families Who Went Broke

Four families who lost it all share the important financial lessons learned the hard way.

By: Lorraine Allen

Hindsight is often 20/20, it is said. And for families who have gone broke, the lessons they learned are crystal clear when they look back on the major financial mistakes they made that got them to that scary place.

Pay close attention to your daily spending. “The biggest mistake we made was not paying enough attention to how much we spent each day and each month,” says Sheila, a mom of four. And other moms who landed in the same boat agree. This is a common mistake people make. The lesson they learned, in the end, was to “count your pennies, all of them. They each matter equally,” says Sheila.

Don’t fall victim to credit card dependence. Another lesson learned by families who hit financial ruin is to be “very, very careful with credit, and credit cards,” says Darren, a mom of two. We are raising our families in a world largely functioning on the use of credit cards. But the families I spoke to learned the hard way that credit is not “free money.” Far from it! “The interest can really add up, especially if you’re not careful about interest rate spikes and late fees,” says Darren. “The best lesson I learned is to not use credit cards at all -- or at least, only use them in real emergencies.” And, she adds, “my husband loves to tease me and remind me that new clothes are not an emergency.” She recommends using debit cards linked to your checking account “so you cannot overspend,” she says. Amy, another mom of two, said that after their debt had gotten out of control, they learned from financial advisers to consolidate it all, and set up a strict, regular monthly payment plan to pay it all off as fast as possible. “Never miss a payment” is another key lesson she says she took away from it all.

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Always save. “When my husband lost his job, my dad got sick, our car was dying, our boiler broke, and our 0 percent interest on our credit cards expired and jumped WAY up, all around the same exact time, we had to rely on our savings, and it was way too little to save us,” said Elaine, a mom of one. It does not matter if you can only save a couple of dollars a week sometimes -- it all adds up, and everyone needs a real financial safety net. “Experts recommended having at least six months worth of savings, meaning enough to cover six months of bills in case you lose your job suddenly, or you’re struggling,” Amy says, citing what she learned from the financial advisers they spoke to after going broke. “We sold a bunch of stuff we had no more use for, we got a smaller home, we got rid of one car, we cut back on entertainment and activities for a while. It’s been a major adjustment,” she says, “but we are living within our means, and we’re finally saving -- which makes life less stressful, and more fun.”

What’s the most important financial lesson you’ve learned?


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Lorraine Allen is a writer, and mom and personal chef to one spunky 6-year-old girl with severe food allergies. You can enjoy their delicious recipes and follow their amusing family cooking adventures at
Feeding Lina.

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