Author Archives: Claire

About Claire

I’m a writer, declutterer, and lover of fabric, furniture and books (oh, and my laptop!) I especially like to write about decluttering and debt-free living.

Downsizing for Freedom

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

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 metropolitan 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 over ten 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 we 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 got 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.

 

Downsizing for Flexibility

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

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 side 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. 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 book 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

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.