Monthly Archives: February 2018

Downsizing for Financial Peace

By Claire Posted in Debt-Free, downsizing, My Books, Personal Tagged , , , , , ,

Freedom…Flexibility…Financial Peace

Though I put those reasons for downsizing in the title of my book, 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
  • Miscellaneous

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 had begun 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 industry was moving to China.

For me, it was like being on a hill overlooking a one-lane road, watching a car coming from the north and a car coming from the south heading at top speed toward each other; 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. 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.

What You Must Do If You Ever Hope to Retire

By Claire Posted in Debt-Free, Retirement, Simpler Living, Small-House Living Tagged , , , , , , ,

The recent ups and downs of the stock market should be considered a warning to those of us in our 40s and 50s who intend to retire before long. If your retirement money is invested in the stock market, even in index funds, you could suddenly lose some or all of it, and your retirement plans will be postponed or might even be destroyed.

After reading this cautionary tale, I got to thinking about how even the best-prepared folks can be wiped out if they haven’t taken enough precautions. The fellow in the article has been a hard worker all of his life. He had a great job with a solid (and famous) company, and thought he had prepared well enough for retirement. But now, at age 70, he’s living in a leaky RV and working exhausting, low-paying jobs, like spending ten hours a day as a temporary worker in an Amazon warehouse.

Clearly, this man is smart, not lazy, and he’s had some hard luck (including the illness and death of his first wife). But after finding a new love (someone who also lost all her investments in the 2008 financial crisis) and marrying her, their lives together became even harder.

What else could they have done to prevent having to spend their so-called golden years keeping their ancient RV running while they travel around the country looking for work?

The clues lie in the sixth paragraph:

By the time Barb and Chuck got married in 2009, they were upside down on their mortgage and grappling with credit card debt.

This led to bankruptcy and a forced downsizing of almost all their possessions. We undertook a preventive downsizing, and that was painful enough. So I can imagine how much tougher a forced downsizing must have been for this couple. After I read this article, I told my husband, “There but for the grace of God go us.”

The first clue, being upside down on their mortgage, is common enough nowadays. But it used to be common wisdom that you always pay off your mortgage before you retire. That way you have a roof over your head, no matter what else happens. Middle-aged people who are upside down on their mortgage either financed more house than they could afford, or used their house to fund a lifestyle they couldn’t afford via a home equity line. The takeaway here is, pay off that house before you retire!

The second clue, grappling with credit card debt, is a problem for people of all ages. We’ve had a lousy economy for years, so many people put basic expenses on their credit cards and pay only the minimum monthly payments. Add in those who used credit cards to live beyond their means in order to impress themselves and others, and this couple has plenty of company. But if you plan to retire, having credit card debt is a very bad idea. Those who have never learned to “pay cash or live without the item you want to buy” need to do so ASAP, and long before they actually retire.

Ultimately, retiring with any debt at all is a risky proposition. In retirement, you can willingly live with far less and still be comfortable and secure. The couple in our cautionary tale shows you what could happen otherwise.

 

 

 

Small Homes: The Right Size

By Claire Posted in Small-House Living Tagged , ,



If you like the idea of living small, of creating your own living space, of keeping down costs or even coming out of a build or renovation debt-free, Small Homes is the book for you.

It’s full of stories about people who used their hopes, dreams and ingenuity to create modest-sized homes (about 300-1200 s/f) for themselves and their families. Some of the homes sit on incredibly beautiful pieces of land, others do not, but all of the homeowners featured in this book worked hard to make affordable, sustainable homes for themselves.

The book makes ample use of photos, which are so valuable in a book like this. Many of the homes appear quite cluttered, which is not my thing, as I live in a small ranch that I try to keep uncluttered by having only what I need and using storage wherever possible (I’ve written a few books on that topic myself). But these homes are so winsome that I can appreciate them despite wishing they had more closed cupboards, or furniture with storage.

Most websites, books and magazines that feature small houses show impossibly expensive fixtures and furniture, completely impractical ideas for the average person. But this book is just the opposite: you’ll find lots of useful ideas that require ingenuity more than dollars. Several of the homeowners in the book outfitted their homes with sturdy furniture they found at garage sales or thrift stores. Some incorporated only things that were given to them. Their homes may not look like something out of Better Homes and Gardens, but they have charm and personality. Most importantly, their low cost lets their owners live the kind of lives they want to live instead of spending their days chained to a cubicle doing work they hate so they can afford to keep up with the Joneses. What encouragement for those of us who prefer freedom over having a big income!

I’ve enjoyed many of Lloyd Kahn’s previous books and highly recommend them, but I think I like Small Homes best because there are just so many clever yet modestly sized homes in this one.

Surviving a Financial Reversal

By Claire Posted in Clutter, Debt-Free, Personal, Simpler Living, Small-House Living Tagged ,

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 ten 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 me, 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 me, 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.