Wednesday, January 14, 2015

Surviving a Financial Reversal



I called a friend today to wish her a happy birthday and found her in a funk. She said it wasn’t so much her age that was bothering her (today she reached the big round number that’s exactly halfway between zero and 100), but that she never dreamed that she would be where she is at this point in her life.

You see, like so many of us, she lost her job several years ago. She had weathered unemployment before; it was common in her industry, and she’d always found another job quickly. But that last job she lost turned out to be her last full-time job in her industry; despite applying for work everywhere and networking whenever possible, she hasn’t found a full-time job that pays anywhere near what she used to make. As a result, she’s been through foreclosure and bankruptcy, and has lived in a series of rental houses and townhouses while trying to make enough money from side jobs to stay afloat and keep her two growing children in food and clothing (she’s a single mom).

One of her comments to me was that she never dreamed she would no longer own a house at 50. I understood completely. I turned 50 the year after my husband had to close down his business and we were forced to sell our family home to stay afloat financially. We didn’t know where to go; we just had to find some place cheaper than our hometown. So we moved to a lovely vacation town four hours away, rented a house near the beach, and began to research what we would do next. That’s how I spent my 50th birthday, far from most of our family and friends, living in a rented house with no idea of where we would go next.

One of the things I shared with my friend is that we’re not alone. Many, many people are casualties of the economic disaster of the past eight years. And while some may have asked for trouble by buying houses they couldn’t really afford or spending all their home equity on vacations and clothes, others, like my husband and I, were debt-free but lost our income through no fault of our own.

Just recently I met a woman whose healthcare-related family business was wiped out as a result of the Affordable Care Act. She and her husband had to sell the gorgeous historic country home they had so painstakingly renovated years earlier and move to a tiny ranch in the closest town. Like my friend and I, she knows what it’s like to lose your home and belongings because of financial reversal.

That said, it does no good to wallow in our misery, even when we meet others in a similar situation (misery does love company, you know). After an initial grieving period, it’s important to move on. No, you didn’t expect this to happen, or to be where you are at this point in time. But stuff happens. And of course, it could be worse. If you and your family are healthy, you’re fortunate indeed.

To recover from a big financial reversal that changes your life, you have to look for the silver lining. I was inspired to write my downsizing eBook after realizing all the good that came out of being forced to sell or donate more than half of our belongings in order to fit into the little ranch house we finally ended up in after being forced to sell our family home.

For years I had been mentally overwhelmed by a basement, garage and house filled with the clutter created by a large family and two home businesses, but never found enough time to deal with all that stuff. Our three moves in four years forced us to do so. As a result we now live with far fewer belongings, yet we’re surrounded by our most valued and useful items without being burdened by clutter.

Better yet, we no longer have the specter of financial ruin hanging over our head. Our income may be much smaller than it was ten years ago, but so are our expenses. What a relief to have reached a point where life seems more manageable!

And as we face our senior years (something my friend is surely doing today), we realize that living with less stuff and less expenses is something that will make life easier as we age. As a bonus, we can already spend more time doing things we like to do because we spend so much less time on the care of a big house and yard. If there’s one thing I know for certain, it’s that time is becoming more precious the older I get.

So my advice for my friend, corny as is sounds, is to make lemonade when life gives you lemons. Instead of lamenting what you once had, or where you thought you would be by now, accept reality and move on. Make the changes you need to make and enjoy the benefits that come with them. Why waste energy thinking about what might have (should have) been when you can be using your energy to enjoy life now? There are good things about your current situation, but you’re going to have to make the effort to find them…..and celebrate them.


Monday, January 5, 2015

Why Procrastinators Should Live in Small Houses



I’m a procrastinator.

I’ve been one all my life. It’s a habit I’ve been unable to break, no matter how hard I try.

On a related note, I’m also guilty of excessive optimism. I see things I want to read or make, and I buy them and set them aside for “someday.” My optimism is seen in my belief that I will ever get to the book or project. Usually, I can’t find time for it, or by the time I do, it’s not as appealing as it was when I bought it however many years before.

When we downsized, I had to wave the white flag and admit defeat by giving up many unread books and unfinished (often unstarted projects). It was hard to admit that I’d blown it, and in a few cases, it was painful to let go of something I still wanted to read or make. But I’ve forgotten most of what I had to give up at that time, so it’s not that big of a deal.

That said, I’m still an optimistic procrastinator, and I still see things I want to read or make. But I don’t buy most of them, simply because I don’t have the room to store them until I get to them.

You see, when we lived in a big house, there were oodles of parking places for these items I thought I was going to need someday. They sat in those spaces collecting dust until I was finally forced to get rid of them when we had to give up the big house and downsize.

Now we live in a very small house, and there’s not a lot of room to store anything. I still buy things that I plan on reading or making, but not very often because there are few places to put them when I get home. As a matter of fact, I’m getting ready to go through everything again to see what else I can give up. Then I’m going to read or make what’s left (and very soon, because this small house won’t let me hang onto everything like I used to). Now I read something and then give it away, or make something and give it as a gift. Should I decide to keep something I’ve read or made, I’ll have to get rid of something else to make room for it.

That’s why I think small houses are the perfect homes for procrastinators. They force us to use things or lose them.

Tuesday, December 30, 2014

A Small House Should Cost You Less, Not More!



While at the public library, I saw a book about small house living. It was full of very modern and expensive-looking new small houses with lofts, stone siding, high-end appliances and pricey floors. I felt like the author and publisher were missing the point.

One of the biggest benefits of small-house living is that it keeps your costs down, freeing up your money (so you can stay solvent) and time (so you can do other things instead of working like a dog to pay for an expensive house). Having a small house filled with expensive features requires a certain level of income that an increasing number of people don’t have anymore. So it seems silly to focus on so many showy small houses with inevitably large price tags.

Small houses were once very much in vogue, and can still be found all over the country. Now that small houses are making a comeback, people are realizing that an older, well-built small house in a good neighborhood makes more sense than anything else in the real estate market. Unlike condos, there are no HOA fees or rules. Unlike large homes, there are low utility bills and property taxes.

Some of the houses in that book I saw had fancy stairways with backless steps made of metal. Many existing small houses also have two stories, but I prefer a ranch. It’s a lot easier to move into a one-story house than a two-story house. Also, as I age, I can see that someday, steps will become my nemesis. Many other baby boomers are coming to the same conclusion, so I think ranches will be extremely desirable for the foreseeable future. 

In any case, once you age out of the need or desire for a large house, small-house living becomes very attractive, whether you want a basic small house or one of the modern ones like I saw in the library book. It just makes so much sense in the times we live in now.

Monday, December 22, 2014

Downsizing for Freedom



Our downsizing experience was driven by a desire to regain financial peace, but another by-product of it is that we gained a lot of freedom.

Did you know that freedom is scary? At least it is after years and years of falling into a familiar pattern. In our case, we always had to live near my husband’s job. Even after he started his own business, we had to stay in the area because that’s where his contacts (potential clients) were. This meant that we lived in the same general area for nearly 30 years.

Then economic change reared its ugly head, his business closed and we had to find a new place to live. Where? Anywhere. Sounds great at first, but for us, having far too many choices was scary. How do you determine where to go when you don’t even know how to support yourself anymore?

We did have a couple of small Internet-based businesses, but we could live anywhere we could get Internet access, so that didn’t really help us narrow down our range of choices.

In the end, we chose to move to an area where we often went on vacation. We rented a lovely house (quite cheaply because we were signing a one-year lease instead of a summer lease), and figured we would eventually buy a house there. But while we loved living up the road from the beach, we learned that it was not the right place for us to live full-time. The natives weren’t very friendly to outsiders, and we got lonely.

We ended up leaving after two years, and we did so easily because we had the flexibility of being renters. The experience helped us see that our ensuing freedom was quite wonderful. Having had a few years to think, we were ready to take advantage of that freedom. We traveled to different places, looking for a new hometown, and finally found one.

That was nearly six years ago. In the new town, we rented a lovely restored house from the 1920s. Both of us had always wanted to live in a historic house, but weren’t crazy about the time and money involved in restoring and keeping up one. Instead we got to spend two years in an absolutely beautiful old house, and whenever something went wrong, we just called the landlord. Now that’s freedom!

While living there, we had time to get to know the town and its people, and found that we were comfortable with both. When the landlords told us they wanted to put the house on the market, we used our recently gained knowledge of the town to find and buy a very small house in a great neighborhood for cash. Our utility costs (and our property taxes) are quite low, giving us the freedom to live on a relatively modest income in comfort. Should we decide to move elsewhere, this house shouldn’t be hard to sell, or we could rent it out for a few years.  That flexibility, in addition to the financial peace we still have, is due to the freedom we found by downsizing.

(My downsizing eBook has 20 reviews, 4.5 out of 5 stars, on Amazon. Learn more HERE.)



Monday, December 15, 2014

Downsizing for Flexibility



As I said in my last post, for years I’ve kept a record of how much money we spend each month and each year. It includes categories, which is very helpful because you can see which categories are becoming too large and eating up too much of your money.

In our case, it was obvious which category was becoming too large, and its growth was beyond our control: housing.

The irony here is that we had paid off our house several years earlier. But the property taxes had been going up from 5-10% annually, and were approaching $600 a month. My husband’s business was declining, so the bulk of our income was shrinking. Once he had to close the business, how would we pay nearly $7000 a year in taxes? (Since he’d worked in that industry for over 30 years, he wasn’t trained to do a different high-paying job; $10 an hour at Home Depot was not going to be enough to cover our expenses.)

We didn’t want to risk losing our paid-off house because we couldn’t pay the property tax, so the issue of downsizing finally became very real for him as well as me. We had to find a cheaper place to live; once we did so, we could figure out the income end of the equation.

Downsizing wasn’t an easy decision, even though it was an obvious one. It meant moving away from nearby family and friends because we had to go some distance to find housing that we could afford in an area that we knew and liked. But doing so gave us a lot of flexibility in terms of figuring out what to do next.

If you’re in this position, or suspect that you are, you’ll need to crunch numbers even though you already know you need cheaper housing. You need to find out just how much money you spend each month vs. how much you earn; then you can determine the number that qualifies as an affordable housing cost for you.

It’s possible that you can find more affordable housing nearby. If housing costs aren’t exceptionally high where you are, you may be able to go from a big house to a smaller one, or from a house to a townhouse or condo.

Another option is renting. That’s what we did, and I must say we enjoyed the break from homeownership. Renting is also a great way to buy time while figuring out your next step.

Whether you buy a more affordable home or rent one, trying to put yourself in the black (or stay there) is always a good thing. Earning less than you spend is the only way to find financial peace; it’s worth whatever changes you have to make to your lifestyle.

Making those changes is where flexibility comes in. Releasing yourself from high costs gives you the flexibility to move anywhere, work anywhere, live anywhere. As you consider the possibilities, you realize that downsizing isn’t just about finding a cheaper place to live. It’s about changing the path that you’ve been on for years to do something different. I share stories in my eBook about people who have been able to pursue their dreams once they realized they had to downsize their lives.

So many people find themselves trapped in order to maintain their lifestyle. By downsizing, you’re no longer tied to one way of living. Even if your housing costs aren’t climbing like ours were, or if they are but you can afford them, downsizing might let you switch to a career you like better that pays less, or move to an area where loved ones await.

The flexibility that lets you consider such possibilities is a wonderful by-product of downsizing.

Next: Freedom

Monday, December 8, 2014

Downsizing for Financial Peace

Freedom…Flexibility…Financial Peace

Though I put those reasons for downsizing in the title of my eBook, they didn’t occur in my life in that order.

The freedom part had been an ongoing issue. With a big family in a big house, and despite organizing and donating things to charity over the years, there was still a ton of clutter in our house, and I never seemed to find time to deal with it. But it weighed on my mind daily, and I sometimes dreamed of waking up to find most of it gone.

The flexibility part did not come into play until much later, and it was actually the financial peace part that caused the entire downsizing episode.

I knew we would have to downsize a few years before we actually did so. I told my family about it, but they either didn’t believe me or didn’t want to believe me. But I knew.

How did I know? And how can you know if you’ll need to downsize in the near future?

It’s all about the bottom line. You have to know how much you spend, how much you earn, which number is larger, and which way the trend is going. It’s really that simple. But it takes effort to figure out the first part, how much you spend. Not a lot of effort, but regular effort.

For many years, I’ve kept track of what we spend in a notebook. (Younger people not so set in their ways might want an app for this, or even just an Excel file.) I round off amounts to the dollar, and categorize as I go along. I use one sheet of paper for each month, and I write down our expenditures under the following categories:

Utilities
Property Tax
House Insurance
House/Yard Costs
Health Insurance
Dr./Dental/Medical
Church/Charity
Food
Entertainment/Out to Eat
Car Insurance
Car Gas
Car Expenses/Repairs
Disability Insurance
Life Insurance
Books/Newspapers
Gifts/Cards
Cell Phone
Misc.

At the end of each month, I add up the numbers to get a grand total of what we spent that month. And at the end of each year, I add up the monthly numbers to see not only what we spent in each category that year, but how much we spent for the entire year.

You can imagine how much my husband enjoys hearing how much we spent, given that he prefers not to think about how much anything costs him.

But I’ve always felt that it must be done, and by doing so year after year, I had a good idea of where we were at financially, and where we were headed. By the year 2004, I could see that despite our debt-free status, we were spending more money than we earned (the difference was coming out of savings). To make matters worse, our annual income was declining, because my husband’s business was slowly dying.

For me, it was like being on a hill, watching a car coming from the north and a car coming from the south heading toward each other on a one-lane road; you just knew what would happen very soon.

As I said, my insistence that we were going to have to downsize did not make me popular. But it gave us time to talk and strategize about what we might have to do, and as time went on and the numbers showed more clearly that we were spending more than we were earning, even my husband came to see that something would have to be done. To live in denial would only make things worse.

Besides, we had experienced many years of earning more than we spent and saving the difference. That’s where we found financial peace. And we wanted to get back to that place.

Next: Flexibility.

Friday, November 28, 2014

It's Black Friday.....



...and I'm glad to be snug in my cozy little house. I also slept well last night while others jostled for position outside of big-box stores and malls, looking for those great Black Friday bargains.

I guess I've always loved sleep more than shopping, because I've never gone out on Black Friday. Seeing video of people fighting over gigantic TVs doesn't exactly encourage me to get out there, anyways.

But the main reason I don't go shopping on Black Friday is the same reason I shop very little these days: when we downsized, I got rid of so much stuff, and I don't want it back!

I like open floor and counter space, closets that are only half-full, drawers that close easily. I've found that if I don't go shopping, I'm not tempted to bring things home, things I really don't need.

As for Christmas gifts, I'm trying to give gifts that don't create clutter; I'd hate to think my family members might feel stuck with something they don't really need just because "Mom gave it to me and I'll feel guilty getting rid of it." That's how people end up with houses full of stuff.

So I'm getting them gift cards as well as consumable items like gourmet food, items that they'll enjoy but don't clutter up their homes. The fact that I can buy these things without leaving home is a bonus!