Tag Archives: debt

A Tale of Two Downsizers

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

It is far, far better to willingly downsize your life than to lose everything and to be forced into doing so. I’ve lived the first situation, and have witnessed the second, so I feel that I speak with some authority on this subject.

Someone close to me had a very high income for much of their adult life. I’m talking several hundred thousand dollars annually. Occasionally they would lose their job, which is common in their industry, but they would quickly find another, often at a higher rate of pay, which was also common in their industry.

And so during the 80s and 90s, and for several years after the turn of the century, they lived very well indeed. With houses in two of the five most expensive housing markets in the country, plus land in Hawaii that was going to become the site of their vacation home, they were riding high. There were cruises, expensive cars, designer clothes and shoes, gorgeous furniture….they were living the life they always desired.

Then came a job loss that was not followed by a new job. By then, they were well into their 40s, and soon discovered that getting hired was no longer a sure thing. Before long, one house had to be sold, and then another. The land in Hawaii was sold for a third of its market value. The cars were sold, too, as was the furniture, once a rental townhome became the best possible housing option. But the credit card debt was insurmountable, so bankruptcy ensued.

But they would not give up on getting the dream back again. Even though they own nothing now, they’ve been renting a small place in one of the extremely expensive cities where they once owned a home. They’re working two jobs, and barely surviving. Their sole car is leased, with one year to go. Some of their credit cards are maxed out already; they also owe money to a couple of generous friends and relatives.

I’m very worried about this person, but they laugh off my concerns, even after all they’ve been through. (I could not live with the stress of their lifestyle, and I no longer have the energy to work two jobs, if I ever did.) And with retirement looming around the corner for both of us, I can’t imagine what they’re going to do if they don’t hit it big again (an unlikely event), given their addiction to a pricey lifestyle.

I am grateful for my simple, small house, my paid-off old cars, and having no debts. I don’t know where my husband and I would be today if we hadn’t willingly downsized our lives 11 years ago. I sure wish the person I’ve described here would have done what we did.

(Learn how we and others have proactively downsized our lives in my book, Downsizing Your Life for Freedom, Flexibility and Financial Peace.)

 

Six Reasons Why a Young Family Might Want a Tiny House

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

Many of the commenters on this article wonder why a family would want to live in a tiny house. I can think of several reasons why; they all hinge on the fact that doing so would not be on a whim, but because it makes the most financial sense for a family that’s trying to stay afloat financially in an environment where many jobs are disappearing:

  1. Children need stability. If you have to keep moving to find work, it will be stressful on your children. But if you can take your house with you, as you can with a tiny house, they’ll always be able to sleep in their own beds at night.
  2. Living in a tiny house may be too much togetherness for some, but it beats having one parent with a job living in one state while the rest of the family lives in another. This is an increasingly common scenario and means kids only see one parent on the weekends. But a tiny house can be moved near the parent’s job so that the kids see both parents on a daily basis.
  3. Financially strapped families looking to lower their expenses dramatically (to get in balance with lower incomes) find that their expenses are slashed by moving into a tiny house. No more five-figure property taxes, no more high utility bills, no more expensive home maintenance; it makes a huge difference in your bottom line.
  4. A tiny house can be parked on land owned by relatives or friends; if the family pays a little rent for use of the land, they’ll provide extra income for the landowner. If the family can’t pay rent due to job loss, the landowner can help out the family by letting them live on his/her property until they find work again.
  5. As rent prices go up (an ongoing trend), a family with a declining income must struggle to keep a roof over their heads. But the family that buys a tiny home will never have that problem.
  6. The young couple that wants to start a family but can’t afford a mortgage will find that investing $30,000 in a tiny house (less if they do the work themselves) allows them to get started on raising a family when they want to, instead of waiting who-knows-how-long until they can afford a house.

Some commenters ask why the family doesn’t just buy a used R.V. Yes, used R.V.s can be cheaper, but a well-built tiny house will last far longer than an old R.V. that likely has (or will soon develop) a leaky roof, mildew, or cracked water or waste tanks.

Many of the commenters seem to think that moving to a tiny house is something a family would do for the novelty. But a tiny house is a great alternative for anyone who is struggling with unemployment, underemployment or a dying business. It can dramatically reduce shelter expenses until the breadwinner(s) can get back on their feet again. And it sure beats maxing out your credit cards so the whole family can eat on a regular basis!

Get and Stay Debt-Free While You’re Young

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

This 68-year-old woman had a good income and assets, but thought she was rich and lived like it, buying stuff like there was no tomorrow. She ended up in bankruptcy court. The native Californian ended up moving to the Midwest, where the cost of living was cheaper than it was on the west coast. Now, she finally has a handle on her finances, and sees hope for the first time.

But had she become debt-free back when she had decent money coming in, she could have had a much easier time of things as she approached her old age. This is why it’s so important to work toward debt freedom while you’re young.

We became debt-free at age 44 when we paid off our mortgage. A few years later, a failed business (our main source of income) forced us to sell our house. The proceeds paid for a small house in a cheaper area, and left us money to live off of while we figured out what we would do for a living in the future. I don’t like to think what would have happened to us if we were not debt-free before the business failed.