This post is from staff writer Holly Johnson.

It’s been a long time since I’ve been broke, but I can still remember exactly what it felt like. I can picture all the ugly details of the way I used to struggle; the empty bank account, the awkward moments, the feelings of despair…. And honestly, one particularly awkward conversation with my sister still plays clearly in my mind to this day:

“Hey sis, I’m coming into town this weekend,” she said innocently. “Maybe we could go grab dinner.”

“Ummm, let me think about that for a second.” I struggled to find a tactful way to tell her that I couldn’t afford it.

It’s been about ten years since then, but at the time I was 22 years old and flat broke. A series of bad decisions meant that I was trapped in a desperate situation that felt nearly impossible to get out of. And although I was going to school part time, I was living off a full-time job that only paid a whopping $9.15 an hour. Oh, and it gets worse.

Bad decisions have consequences

Have I ever mentioned that I once bought a $22,000 car while making just a little over minimum wage? The resulting $500 monthly car payment meant that almost half of my take home pay was being spent on transportation. And by the time I realized what I had done, it was much, much too late. Since I had always had wonderful credit, I refused to let a car repossession ruin everything in one fell swoop. I was (and still am) stubborn. So, instead of letting the car go, I struggled. This often meant that I didn’t have the money to put gas in my car or to go to the doctor. And I certainly didn’t have the money to go out to eat with my sister.

“Sorry, I don’t have the money to go out to dinner,” I said with shame and emotion I may never forget.

“You can’t afford to go to Applebees?!”

<insert awkward silence here>

I could tell by my sister’s tone that she thought it was ridiculous that I couldn’t afford to eat at the cheesy neighborhood bar & grill. And honestly, I thought it was ridiculous too. Living so close to my means meant that I was always just one step away from disaster. One day off work, one prolonged sickness, or one unfortunate incident had the potential to leave me completely desolate. I knew that I had to change something. Unfortunately, I struggled to figure out where to start.

The truth about being broke

Shortly after realizing I couldn’t afford to eat at Applebee’s, I learned the truth about being broke. As much as I didn’t like it, I was going to have to make some drastic changes in order to improve my situation. So, I sucked it up and moved back in with my parents. As sad and pathetic as that must’ve looked to outsiders, I knew that this was my chance to get on solid financial footing. Since I no longer had to pay for living expenses, I used the opportunity to start paying additional car payments. I also began cleaning houses on the side while I went to school. I would often make $1000 or even $1500 payments on that stupid car, and I felt a sense of victory each and every time. It became a matter of principle. Every inch of my being wanted to pay off the darn thing, and I was itching to mail in that last and final payment. Fortunately, it was only a matter of time.

After a year or so at home, my car was completely paid off, and I pledged to drive it into the ground. Well, I ended up owning it for seven years before the events of getting married and having my first child necessitated a family-friendly (used) minivan. However, I still learned an important lesson from the whole ordeal. When I finally sold it, I was shocked to learn that it was only worth $2,500. I couldn’t believe it! I cringed at the thought of all I had given up for that car. After all, I had just spent several years of my life living like a pauper to own a car that lost 90 percent of its value in seven years. And, for what? The unfortunate truth is that I did it for no reason at all, except perhaps the opportunity to learn a lesson that I may never have learned otherwise.

What I learned from being broke

Being broke gave me an entirely different perspective on cash flow, debt and my own financial well-being. I learned that there was a big difference between looking like you have money and actually having money. I also learned about living within my means and the real-life consequences of unplanned purchases. And most importantly, I became willing to do anything and everything to make sure that I was never broke again. Once I was out of debt, I pledged to never let that happen again. I promised to rise above my situation and start with a clean slate. And I did.

Of course, things haven’t gone perfectly since then. As I’ve written about many times before, my husband and I took the concept of lifestyle inflation to a whole new level in the early years of our marriage. Fortunately, we’ve reigned things in over the past few year years, and we’re now building wealth like never before. We’re debt-free aside from a small mortgage and we’re hell-bent on staying that way for eternity. And even though I’ve strayed several times since becoming an adult, some of the lessons from that part of my life have stuck with me. Here’s what I learned from being broke:

  • Don’t rely on one income stream. I was never going to get ahead while relying on one full-time job for my entire livelihood. In fact, I never really started making progress against my debt until I started picking up cleaning jobs on the side. Sure, cleaning houses wasn’t much fun. But the truth is, the extra income that it brought in completely altered my financial situation over the course of a few years. Now that I’m older, I still strive to have several streams of income coming in. I started a profitable blog with my husband and have secured a multitude of part-time jobs that create a full-time living. I’ve also diversified my investments as much as possible including the acquisition of rental properties. I’ve learned that having one “job” means that you’re only one step away from not having a job at all.
  • Only you can solve your problems. As I look back, I realize that I would probably be much better off if I had filed bankruptcy and taken the car back to the dealership. I could’ve easily bought an old beater to drive around. It would’ve taken time, but I would have eventually restored my credit rating back to its former glory. Although that sounds tempting, I know that I wouldn’t be where I am now if I had chosen that path.
  • Live below your means. In retrospect, I now realize that spending half of my income on transportation is absolutely ridiculous. What was I thinking? Unfortunately, I wasn’t. Amazingly, I never once crunched the numbers to see what the real cost of buying that vehicle would be. Now that I’ve been broke, I realize how important it is to live below my means. And now that I make more money, I choose to live much further below my means that I really need to.

Life after broke

The truth about being broke is that it can be exhausting and demoralizing. And although that part of my life caused a lot of heartache and embarrassment, I’m so glad that I was able to learn all of those lessons firsthand. Now that I’m on the other side, I use those experiences as motivation to continue my quest for financial independence and security. And now when someone calls to ask me to dinner, I have a choice. And when I say no, it’s not because I don’t have ten dollars in my bank account or because I’m saving to pay my electric bill. It’s because I’ve been broke and I want to make sure that I’m never broke again.

Have you ever been flat broke? If so, what did you learn from it?