I read a post at the Carnival of Debt Reduction at Money, Matter and More Musings about reducing debt without giving up your Lattes. I had a similar aha! moment years ago and made a drastic change in my lifestyle that made a huge difference in my thinking and finances.
I had made some big mistakes investing in real estate at that time. In the end, I was deeply in debt and had a huge negative cash flow every month. I was borrowing more money every month just to make payments on my properties. I did not have a money to spend on Lattes or going out to restaurants or any entertainment for that matter. But I did live in a beautiful home that we had restored and we drove new cars.
So, what could I do to reduce my debt? I was in the trap of continuing to borrow to maintain my head above water. To the great dismay of my wife (who had put her savings and soul into renovating our home), we decided to sell our home, our new cars and move into one of our rental properties. Our monthly housing payment dropped by $800 per month and we got rid of our car payments by trading our new car for an older model that we could afford to own without financing.
The property we moved into was a 1850 single family home that had been converted into a triplex. It was filthy inside and there were more cockroaches living there then residents of NYC (It took us 3 years of weekly pest control treatments to kill them all). The floors were all crooked and the windows so porous that we had plastic covering over all of them. We lived for a year in the first floor of that house while gutting the second floor down to the studs. The house was always filthy with dust and roaches. We had 3 children under the age of 6 to contend with while doing this work. Later we moved upstairs and lived with no kitchen for a year while we redid the first floor. We cooked everything using a microwave and did dishes in the bathtub.
In the end we had a beautifully restored home. But more importantly, our finances had recovered. We never missed a payment, never had a house go into foreclosure nor declared bankruptcy. It wasn't easy and certainly to some extent very humbling. Our peers could not understand us leaving our 4000 sq ft home for this mess. But your peers won't pay your bills and you can't let them make your financial decisions.
This time of my life was a great character building experience. I think it was one of my better decisions. Sometimes to change your financial situation you have to change your paradigms.
Since then I have gone through ups and downs in my finances, but never found any situation unsolvable. Today, I have grown my Net Worth and am in the best shape financially I have ever been. And, I have never owned a new car since.