Tag Archives: Debt-Free

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.

 

 

 

Why My Twitter Profile Picture Looks Like Carlotta Vance

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

I chose Marie Dressler for my Twitter profile photo in homage to her character, Carlotta Vance, from the classic 1933 film, “Dinner at Eight.”

Carlotta is a woman who once had fame and fortune, who knew what it was like to live in luxury. But in the movie, she is no longer young and beautiful, no longer pursued by men who want to woo her with furs and diamonds. In fact, as her career wanes, she finally reaches the point where, as she tells her dear friend Oliver Jordan, “I haven’t got a sou!” Yet she faces life with courage, concern for others, and as you see in the clip above, a sense of humor.

The character of Carlotta is a role model for me. Over the last decade or so, the lousy economy has dealt my family some hard blows. We lost a business and had to sell our family home. Our income is nowhere near what it once was.

It’s often tempting to feel sorry for myself, and sometimes I do. But most of the time, I want to be like Carlotta. I want to face the future with a sense of hope and charity.

In that spirit, I wrote Downsizing Your Life for Freedom, Flexibility & Financial Peace. It’s had a good response, and I’m grateful. Now I’m writing another book related to it that I hope will also help and encourage others.

Times are challenging for many people these days. I want to help others by sharing what my family has learned, and by telling everyone that being proactive about change, especially change you didn’t ask for, is the best way to get through hard times and keep enjoying your life.