Little changes can add up. But sometimes they don't add up to enough.
You can trim expenses, sell excess stuff and work a second job. But if you're still not where you want to be, perhaps a much larger change is needed.
Maybe you need to get out of a dead-end job. Perhaps your whole industry is dying and you should consider a new career. Or maybe you're living in the wrong place to get ahead or have a decent quality of life.
One thing you can be sure of: Your finances won't change for the better on their own.
Taking big leaps can be uncomfortable and even scary. I know. I've made several, moving first to a job in Anchorage, Alaska, and then to another in Southern California, then going to night school to study financial planning. Each change was difficult and wrenching at times, but each one left me far better off, financially and personally.
The same is true for people I interviewed for this column. A few made counterintuitive choices. One person switched to a less lucrative career; one couple moved from an economically vital area to one that was more depressed. Each person left a comfort zone, dealing with fears and uncertainty, but all are ultimately glad they did.
If you've been contemplating a big leap this year, maybe you'll find some inspiration here.
Leaving worries behind
The Southern California natives lived in Montclair, a suburb of Los Angeles, when their first child was born. Claudette quit her job as a benefits administrator to stay home with the baby, and the Gangers were just able to manage on Alan's salary as an accountant and controller for a local company.
But when they looked a few years out, the picture was grim. The public school their son would attend had deteriorated sharply in recent years. Moving to a better school district would mean taking on a bigger mortgage, which would require Claudette to go back to work, and they couldn't swing private-school tuition on one income.
The Gangers didn't want to leave their extended families, particularly Claudette's mother and sisters, who lived nearby. But they soon realized that moving to a less expensive area would allow them to live the life they wanted at a price they could afford.
They searched for areas that had affordable housing, good schools and a reasonably robust job market for Alan. Eventually they chose Spokane, Wash. They sold their California home near the peak of the real-estate market in 2006, paid cash for a modest home in their new city and paid off their other debts, including credit card bills and car loans.
"We purposely bought only as much house as we needed," Alan said. "Our rewards, in addition to no mortgage, are no car loans and no more credit card balances. And much more flexibility financially. A $10-$12-per-hour job will pay our bills in a pinch."
The Gangers' new, lower-cost lifestyle allowed them to accumulate savings, which helped them survive four months of unemployment when Alan lost his job last year. Having that emergency fund made the wait for a new job less stressful, Alan said, and allowed him to spend "some serious quality time" with his now-5-year-old son and 20-month-old daughter.
The move required some big trade-offs. The Gangers' budget doesn't allow for much travel, so to get together with relatives, the relatives have to come see them. So far, they have, Alan said. Also, the Gangers realize it's unlikely they could ever afford to move back to Southern California, because the difference between the two regions' home prices is so great.
"That was a tough part of it," Alan said, "especially for my wife, who's really close to her family."
Three years later, though, they still believe they've made the right choices. Identifying what was most important to them -- their family -- made the rest of the decisions easier, Alan said.
"This has truly been a life-changing decision for the better," he said.
Living better on less
The couple had been spending everything Martin earned as a Marine Corps officer and then some, which wasn't unusual in their circle, Kate said.
"People would go out, and they would buy these big houses," Kate noted. "They would jump into the lifestyle that their parents worked 30 years to build."
Martin and Kate (who asked that their last names not be used) didn't buy a house, but they did rack up $5,000 in credit card debt on top of two car loans and the student loans that got them through college.
So while Kate was relieved when Martin decided late last year to quit the military -- "in our four-year marriage, he'd spent more time away than at home" -- the prospect of having no job, no savings and significant debt was scary to them.
"We knew in this economy that jobs would be hard to find," Kate said, "and whatever he did find would not pay close to the nearly $80,000 in pay and benefits he had been expected to bring in that year."
To get ready, the couple cut their spending 10%, and Kate started working two jobs, one at a deli during the day and another at a restaurant at night. By the time Martin returned from a seven-month deployment in Iraq, the credit cards and one car loan had been paid off, and their savings account balance had topped $12,000.
Then the couple took a real leap of faith. Without jobs, they moved to an area five hours away, using much of their savings. Then they cut their spending an additional 5%.
Martin applied for a job with the local police force, as one of hundreds of applicants for 53 posts, and got hired. Kate found work as a part-time preschool teacher. Their combined income is about $46,000, but they continue making progress paying down their debt and saving for retirement.
What's more, their quality of life has skyrocketed, Kate said. She got her husband back.
"He went from being gone over half our marriage on training or deployments and working 60-70 hours a week while he was home to working just 40 and being home every night," Kate said. "To me, that is more than worth the sacrifices we had to make, and the stability that it has returned to our marriage is the true wealth that we have gained from this transition."
The simpler life is a debt-free one
At the time, it seemed like an oddball move, going from an economically vibrant area to one that has been economically depressed since the iron and copper mines shut down in the 1960s.
But Doug was recruited by a startup software company that was based on the Upper Peninsula, and he was intrigued by the challenge. He was no stranger to reinventing himself. When his original tool-and-die trade started shifting overseas, he taught himself computer-controlled design and then moved into training and support for engineering software.
The couple knew they were making a leap of faith, as there was no assurance the startup would survive. In fact, Doug is no longer employed there, but things have worked out anyway.
Doug now telecommutes for a Minneapolis company. Lisa, an attorney, originally planned to quit her job. Rather than lose her, her law firm authorized her to open a satellite office, where she still works.
And the couple's finances are in better shape. Although food, gasoline and insurance are more expensive on the Upper Peninsula, finding other ways to spend money is actually a bit harder, Doug said. "We . . . don't have the temptation of big-box stores and restaurants around every corner," he said.
"In 11 years of living here, we have managed to pay off all of our debt, including our auto loans and mortgages of $170,000, and we now live debt-free," Doug said. "This was not our original intent, but as we lived a . . . simpler life, it created a vacuum of saving."
"We are both thankful for taking the plunge and moving from the 'big city,'" Doug said.
Before you leap
- Think about where you want to be in five years. Where would you like to be financially and personally? How do you want to feel about your work, your family and your money? What is most important to you, and is that reflected in the way you're living now?
- Can you get there from here? Are you on a path to get to where you want to be, or are you pretty much stuck? Remember, if nothing changes, nothing changes.
- Consider the possibilities. The instant you say "I can't do that" or "I won't consider that," you've cut yourself off from possible solutions. It might be a real outside-the-box option that leads to the life you want.