Tag Archives: forced downsizing

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.)

 

Career Loss Amplifies the Need to Be Completely Debt-Free

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

We paid off our last mortgage when we were 44, one year earlier than this guy says you should pay it off.

His reasoning is this:

“The reason I say 45 is the turning point, or in your 40s, is because think about a career: Most careers start in early 20s and end in the mid-60s,” O’Leary says. “So, when you’re 45 years old, the game is more than half over, and you better be out of debt, because you’re going to use the rest of the innings in that game to accrue capital.”

I agree with him, but let’s take it a step further. For an increasing number of people, “the game” was over by the time they were 50 or 55 or 60. Their job went overseas, or they were let go in a downsizing, or younger people willingly to accept much lower pay were promoted over them and then they were sent packing. Now they’re working at a job beneath their capabilities and earning far less than they did in the career they spent most of their life on.

When you’re in that position, there’s no time to “accrue capital.” You’re in survival mode. And when you’re in survival mode, the very best place to be is debt-free. When you own your home outright, no one can kick you out unless you don’t pay your taxes (which is why if you’re forced to downsize your life, you should move to an area where you can afford the taxes). So you’ll always have a roof over your head.

We were forced to sell our paid-off house five years after we paid it off, because a career loss meant that “the game was over” for us, and we could no longer afford the skyrocketing property taxes. We did not reinvest all the money we made from the sale of that house in a new house; in fact, we spent less than a third of that money on the next house.

This worked out very well for us. But the point is, we had the option of doing this because WE WERE AND ARE DEBT-FREE. So whether your “game” ends at 50 or 80, pay off all your debts as soon as you can, including your mortgage, and you will be in the best position you can be.