Stuff vs Freedom

Lately I’ve been observing a difference in our diverse circle of friends and acquaintances. Some of them talk about making payments, and some of them talk about making investments. Some talk about pay day, and some talk about dividends. Some want to  go to the mall – others want to take a walk and chat about life goals.

I’ve nicknamed these two types of people Earners and Spenders. I hope you can guess which we are striving to be! We earn money and save a lot of it in our bank accounts. Our money in the bank gets loaned to people who are spending faster than they are earning, and they borrow for cars or credit cards. We are earning much faster than we are spending so we get to also earn some of the interest that the Spenders are paying to the bank for the opportunity to spend our money.

We invest the savings, too. Our money in the stock market (via mutual funds in our retirement and brokerage accounts) is used to buy pieces of companies that are earning money as well. Some of their earnings are given back to us because we own a piece of the company, which comes in the form of dividends and investment growth.

There are Earners and Spenders. Spenders say “Oh, you live in THAT neighborhood? It has too many chain link fences for my taste.” (I swear to god I’ve heard this.) And Earners say “Nice! You are still driving that car? Mine’s a 2004, I win!” Earners can earn money and eventually not work, by saving more and spending less. Spenders are always spending too much and will never be able to not work – or at least not until the government can give them a (tiny) paycheck.

Essentially the Earners are loaning their surplus money out to the Spenders (in the form of banks). The Spenders have stuff while the Earners have freedom. Which are you? Which do you want to be? Which do you value more – stuff or freedom?

ps/ obviously these two categories are broadly generalized, and everyone falls somewhere in between the two absolutes.

Multi-Level Marketing Scams Prey on Women

It’s about time that I weigh in on all of the multi-level marketing schemes (scams) that have been blowing up my social media lately! I’ve been noticing quite a trend here as well – I keep hearing from friends and acquaintances about their exciting new business opportunity – and I, too, can earn thousands of dollars in my spare time!

So let’s back up a step. Multi-level marketing companies are the ones that don’t have retail stores – they sell their products to local consumers, who in turn, market them to their own networks of friends, family, and acquaintances. They make money selling these products, but they also make money from recruiting others to sell their products as well. I think it began with Tupperware and Amway, but with the rise of social media these companies have exploded.

Just in my own network, I’ve got friends selling: jewelry, candles, make-up, skincare products, stickers for your fingernails, vitamins, weight loss shakes, stickers for your body that will somehow make you lose weight, cooking products, essential oils, purses, cleaning products, children’s books, and of course the soft, stretchy neon leggings that everyone loves.

But Who Is It?

The thing is, I’ve noticed a suspicious coincidence in who is buying into these businesses, and hence, who is selling their products.

It’s ALL women. #bossbabe

And in fact, among my network, it happens to be all women with children. Many of whom are either stay-at-home moms, teachers, or have some sort of job that allows them a bit of free-time. Things have been tight lately and a little extra money wouldn’t hurt, right?

These predatory companies are marketing “entrepreneurial business opportunities” to women and promising them the flexibility of a work-at-home job, with unlimited income potential. They avoid words like “pyramid scheme” and instead use happy terms like “network marketing”. They don’t give you facts about income or success – they just show you the photo of the fancy conference in Florida they just attended! And many of them require minimum purchases each month, where you just go deeper and deeper and never make a profit.

Emotional Manipulation

But leaving aside for a moment the super misleading money side of the equation – I’m equally interested in the emotional side. Specifically, the fears and insecurities these companies are exploiting, to get women to buy from, and into, these schemes.

Look at that list up above again – they ALL play to women’s fears of not looking traditionally beautiful or thin enough, not being a good enough mother or wife, or not having a perfectly clean, decorated home. All under the guise of feminism, and empowerment, and “living your best life”. Be your own boss!

The products are insanely overpriced, and the pressure at “purchasing parties” is usually awful. I have walked in the door to a skincare party and been given a quiz to tell me all the things that were wrong with my face – and of course the corresponding products that would fix me.

The underlying theme is that you are not enough. Not the way you are today, at least. If you would just buy this product – and it’s expensive because it WORKS – then your life will change. I’ve been asked if I don’t care about my health? I’ve been asked if I don’t want the best for my family? This is an INVESTMENT IN YOUR FUTURE. #girlboss

You should do this for your family. Hubby not on board? Do it anyway! He’ll stop complaining when you’re making more money than he is! WINK.

Show Me the Money!?

Outside of the truth that you are already enough, these companies are not going to make your life better. In fact, statistically speaking, they are very, very much more likely to leave you worse off than you were before you bought in. Hopefully you’ll escape the party with a $200 eye cream and feel guilty for a week. (probably you’ll also get another eye cream next month and not realize it was a subscription – oops) But worst case scenario you buy into the hype and leave with a “starter kit” for this “new lifestyle” – which will set you back hundreds if not thousands of your hard-earned dollars – and many women actually go into debt for this! (Because the bigger your investment, the bigger your commitment to success!)

But you don’t have to take my word for it. Here’s an independent report I found that was created for the Federal Trade Commission: “As a general rule, the more a new recruit invests in an MLM program, the more he or she loses. This, of course, is true of most any scam.”

Here’s my favorite line in the report: “One can do much better at the gaming tables in Las Vegas. And a person need not risk his or her social capital – treasured relationships with friends and family one has spent a lifetime cultivating.”

According to this report and others, 99.6% of multilevel marketing “businesses” lose money! If you are lucky enough to beat those odds, maybe just buy a lottery ticket! (ok but don’t do that either) But seriously – all my friends that have bought into these scams, have lost money and cut their losses within a year or two. But here’s the real issue: they make you feel like this is your fault. You didn’t work hard enough, you didn’t “turn off the tv”. You just feel guilty and embarrassed for failing, and you quietly slink off. That’s what I did after I bought into a makeup scam back in college. I had a party or two, lost my $500, and quit. But I was lucky. I wasn’t stuck with a garage full of last year’s leggings and $10k in debt.

Bottom line: multilevel marketing companies are viral and predatory. Please, girlfriend – don’t fall for it.

(The statistics in this article were taken from this report created for the Federal Trade Commission.)

What the heck is Stewardship?

Stewardship is a super old fashioned word, one I didn’t hear until I began attending a church in my 20s. Churches tend to speak in metaphors, and euphemisms, and old English. Like “the body of Christ” and “fishers of people”.

Stewardship literally means taking care of something, but in church it means “thank you for giving us money”.

But seriously, communities do need money to be sustainable. If we all donate a portion of our income, we can support amazing initiatives that would be very burdensome or impossible for just one of us alone. All of us together can send people on mission trips, give hundreds of blankets to refugees, feed the homeless people in our community, provide sanctuary to those in need.

So for me, stewardship is not a guilt trip. It’s a call to arms – pacifist, metaphorical arms.

But giving money is not easy when you don’t feel like you have enough. Ten years ago, my husband and I were barely keeping our heads above water, and there was no “extra” to save, let alone give away. It felt like we always reached the end of our money before we reached the end of the month. At that time I was 25, we had just bought a house, and a dog, had lots of debt, and no clue how to budget our money or plan for long-term expenses. Luxuries were taken for granted, and shopping was a fun social activity. Needless to say, stewardship was not on our radar.

But then we attended a financial class at a local church. It changed how we handled our money, and it made us intentional about where we were spending. We realized that it was important, it was imperative, to know where our money was going and to plan and tell it where to go. We began writing down a monthly budget. We opened savings accounts and began sweeping money to the savings account FIRST, instead of hoping we had some money leftover to save. And we also began tithing to the church.

A funny thing happened when we began giving money away. My mindset changed from scarcity to one of ENOUGH. Giving away helped to be grateful for the things we had, and I no longer took for granted special dinners out or even clothes shopping at the thrift store. I began cultivating a spirit of contentment. I quit being a consumer and began being a citizen of a community. For where your treasure is, there your heart will be also.

This isn’t about giving more than you’re comfortable with in the hopes you’ll be blessed with more. Donating money is a sort of leap of faith. But so is being a member of a church, or believing in God in the first place. It helps you to open your mind, and your fist, and your wallet. Donating money is a vote, a vote for the person you want to be, your best self, and the world you want to live in. And every time we donate, and every time we have enough afterward, it reinforces the beliefs we hold about ourselves and the importance of supporting our community.

Even if you don’t feel generous, or don’t feel like you have enough, if you start acting as if you do, and voting with your dollars, it becomes closer and closer to the truth. At a certain point, a switch will flip, and you’ll realize that it’s all God’s anyway. For the Earth is the Lord’s and all that is in it. And God doesn’t need your tithe. But it will change your heart when you give it.

My Credit Score is Terrible – And That’s Ok

So yesterday I was reading about the new “Ultra FICO” and just generally feeling negative about America’s financial industry. If you haven’t heard, now people with really low/ no credit can link all their financial accounts (checking, savings, etc) to try to boost their credit score and borrow money they wouldn’t otherwise be able to access.

This got me thinking – I have no idea what my credit score is! I haven’t checked it for a handful of years. So why not? For what it’s worth, I used the free website Credit Sesame.

I’m not being paid by them or anything, I just wanted to tell you where I got it for free if you were curious. You have to give them a lot of information, and permission to check your TransUnion credit report. And then each month they will calculate an approximate credit score for you. As far as I can see, it’s the same as a whole host of other websites, like Credit Karma and even a few credit cards with a monthly credit score as a benefit.

So I checked my credit score. And it’s terrible.

Okay, well it’s not the worst it could be, but it’s the lowest it’s ever been for me.

656

My credit score used to be VERY close to 850. And I was PROUD. I thought that meant I was adulting really well. I had always been told to be responsible, to “build my credit”, that it would open doors for me into amazing jobs, low insurance rates, and the best deals on future purchases.

Turns out, that wasn’t the truth.

The only thing a high credit score ever did for me was allow me to borrow more money than I responsibly should. The deeper in debt I was, the higher my credit score soared. So when I was at my most irresponsible with money, when I was literally drowning, when we were living paycheck to paycheck with no savings… the credit companies were LOVING IT.

And then, I woke up. I stopped focusing on what other people thought, and stopping pining for the next big shiny purchase. We decided to stop borrowing money for things we hadn’t saved for, and start paying off the things we had already bought but still owed money on. (which was… ummm… everything.)

And as we gained steam, and began really getting a handle on our finances…. Our credit scores began dropping. Mine’s dropped steadily over the last ten years or so. I assume my credit score will continue to drop until there’s basically nothing to report on, because even the old paid-off debts will eventually fall off the report after seven years or so.

Right now, Credit Sesame tells me that there are a few factors contributing to my low credit score. They are giving me an “F” in the areas of Credit Usage (haha, I’m not using credit), Credit Age (umm because zero accounts means no age), and Credit Mix (because it’s hard to diversify zero things). I’ve got a C in Payment History, because I’d always made my payments on time, but currently I’m not making payments (living the dream!). The only area I’m doing well in is Credit Inquiries, because my credit reports are locked and no one can make any inquiries on them. Apparently the fewer the inquiries the better.

I also want to point out that the marketing here is genius. It’s not debt – its CREDIT. Doesn’t that sound better? Much more desirable. Who doesn’t want to “build credit”? I mean, if they called it a Debt Score, and rated my debts, it would be a bit more obvious that it’s not something I really want. But instead, they are gifting you with all this positive CREDIT, that you have to apply for. It’s really brilliant. And they give you a grade and a score, not based on how much you are drowning in debt, but based on your Credit Usage. Doesn’t that sound like you are really being responsible? As if you are using your credit, and your payments are not completely in control of your money.

And the best part? They give you recommendations! So they recommend, to improve my credit score, the number one thing I need to do is….. Get a credit card. Somehow digging myself back into debt will prove that I am a good risk. Because lenders don’t want someone who is debt free! They want someone who borrows lots and lots of money and doesn’t pay it back right away. They want someone who will pay their outrageous interest rate, each month, for the rest of their consumer driven life.

And that’s not me anymore.

Do you agree with me about credit scores, or are you still working to keep yours high?

Excuses, Excuses – The Lies We Tell Ourselves

When I coach people about their money, I can tell pretty quickly if they are serious about making changes or not. The ones who are serious will listen to me. They will step back and really examine their habits. They are willing to make sacrifices. They say “Hmm… let me think about it. I guess we don’t NEED three cars.”

But the ones who aren’t ready – they have a different tune. They have excuses. They have special circumstances. When I suggest re-thinking the cable package, they say “Well how would we watch Survivor?” And when I say, “Isn’t that on CBS? You can get that channel for free” – they say “But we couldn’t POSSIBLY lose the sports station”. But soon they are justifying their addiction to Starbucks because of a busy schedule. And their required gel manicures for a professional office. And their penchant for Whole Foods, ie “If I don’t buy organic I’m basically poisoning myself”.

Fear likes to creep into our lives, and fear tells us that our problems are worse than other people’s. Fear tells us that no one could possibly understand, and that our struggles are insurmountable.

Everytime I hear “But my situation is a little different”, I have a chuckle. (If I had a dollar for every time I heard it, I’d be much closer to financial independence!) But when you say that, that’s when I know – you aren’t serious. Come back to me when you are desperate to get ahead in life and willing to cut out a few luxuries. Stop making excuses. #sorrynotsorry

I get it. You are a unique snowflake who has struggles that no one else could possibly understand. But here’s the rub – WE ALL DO. Don’t paint yourself into a corner of debt because your parents couldn’t afford to pay for your college education, so you may as well get a fancy car loan on top of those monster student loans. Life pro tip: you do not need an eight passenger SUV to safeguard the lives of your not-yet-born children.

Yes, you are unique, and so is everyone else. You probably have challenges that some other people don’t have. That’s no excuse not to do the best you can.

Fear has a way of convincing us that we’re so unique we’re beyond help.

If you think that your situation is special, and there is nothing you can do to better yourself, you won’t change your behavior. If you think you are unique, and no one else can possibly understand your challenges, you won’t reach out for help.

I don’t believe there is anyone out there whose situation is so dire that there is nothing they can do to better it. Actually, quite the opposite. If you are in an absolute hole, sometimes a very little thing can really make a big difference. If you have really terrible habits, just a little change can impact your life in ways you didn’t foresee.

I believe in you.

Don’t use your history an as excuse not to succeed. Don’t listen to the fear.

Red flags you are terminally unique:

  • When someone else is successful, you say “Must be nice.”
  • When someone accomplishes something you wish you could do, you say “Yeah but THEY didn’t struggle with” [insert your unique situation here].
  • When someone asks if you need help, you say “You couldn’t possibly understand.”
  • When someone gives you advice you say “That couldn’t work for ME because” and you justify not even trying.
  • And lest you think I am immune from this syndrome – I used many excuses to justify my lavish spending. “I’m a professional Financial Advisor, I HAVE TO drive a BMW and get frequent manicures.”

People who are ready for a change, when their debt and their finances finally become too much to handle, they stop making excuses and start making changes. When you hear someone is successful, instead of thinking of why that couldn’t work for you – ask HOW it could work for you. Instead of comparing how different your lives are, think about how new habits would look in your life. When someone accomplishes something awesome, instead of “Must be nice”, why not ask them how they did it? Chances are you can learn something from them.

Everyone is unique. Everyone’s situation is a little different. How have you used your “special circumstances” to justify your bad habits?

What Have you Already Done?

I recently made a money mistake (more on that later). It wasn’t huge, but I allowed myself to wallow in self-pity and flagellation for a hot minute. Then I remembered some advice I had read recently that I hadn’t yet followed, and I decided now is the time. It was a “productivity hack” and entailed focusing on what you had already successfully accomplished rather than what you had left to do or what you had done wrong.

The premise is simple – by always focusing on your To Do’s, you are never feeling fulfilled and happy and proud of all you have already completed. By always focusing on the future, and what is still to be done, you never take the time to reflect on the past, or pat yourself on the back for what you have accomplished.

Focusing on the future list of goals, or regretting past mistakes, is my go-to tendency. I have an automatic habit of highlighting the one negative thing in a sea of positives. I’m really working to change that internal voice into a more gentler, encouraging version.

So without further ado, and simply to make myself feel better, I bring you a list of my money accomplishments over the past ten years (#humblebrag):

  • Created a workable monthly budget – together! On paper!
  • Read MANY blogs/books on finances
  • Cut up / paid off all credit cards
  • Paid off $40k in debt – car loans, student loans, etc.
  • Paid off $140k mortgage – became completely Debt-Free!
  • Saved 6 months cash emergency fund
  • Saved $5k to replace current car when needed
  • Save and pay cash for every vacation and other variable expenses
  • Create Christmas budget and plan in advance to make homemade gifts each year
  • Paid cash for amazing wedding/ honeymoon
  • Reversed crazy negative net worth to crazy positive net worth!
  • Reduced expenses to live on less than half of our income
  • Max out IRAs every year
  • Max out my 401k too!
  • Purchased term life insurance
  • Created wills and Power of Attorneys
  • Kept good stable job for 5+ years
  • Purchased reliable used car on Craigslist for dirt cheap
  • Canceled cable! Switched to $15/month internet and $10/month Netflix
  • Canceled crazy expensive Verizon and switched to Republic Wireless
  • Canceled all magazine subscriptions and gym membership
  • Canceled crazy expensive car insurance and switched to Progressive
  • Made decision to stay debt-free, never loan money, never co-sign etc.
  • Began giving a tenth of our income to church community!

Sometimes by focusing on how far we’ve already come, we can find more motivation to keep going. What’s on your list of “Done” money items? I bet it’s longer than you think!

My Biggest Money Mistake

We bought a house in 2007. Yes we did. Right when the loans were easiest to get and the market was pretty much at its peak. Probably the worst time to buy a house, in the history of house buying. But what did we know – I was 23 years old! Spoiler alert – somehow this story has a happy ending.

We got SO lucky, in many respects. We had a good realtor who cared about us and taught us about real estate throughout the process. She made sure we didn’t go really overboard with the houses we were looking at (the bank pre-qualified us for a ridiculous sum). We found a house in a great neighborhood, that was priced low and had been for sale for a while. We even negotiated, based on all the work that the home needed.

However, the whole thing was still a dumpster fire. Here is a top ten list of the huge mistakes we made:

  1. Had no savings or emergency fund AT ALL – not a dime to our names.
  2. Put no money down. (see #1 about being broke)
  3. Rolled the $2k closing costs into the loan – remember, because we were broke. Hey, fun fact: that $2k would have cost us $4,670 if we had taken the full 30 years to pay off the mortgage.
  4. Purchased a house that needed a TON of work with no money in the bank with which to actually do the work.
  5. Initially applied through a large bank (Shout out to Chase, the worst bank in the world) who didn’t give a shit about us and happily took our application and appraisal fees and then decided the home did not qualify for a loan like a week before closing. So we double paid these fees.
  6. Purchased a house after having a crappy job for approximately four months.
  7. Had about $40,000 in consumer debt! And did I mention NO savings?!
  8. Were a very young new couple (together less than a year), unmarried, and had no wills or life insurance.
  9. We also had no budget – no sense of where our money was going, or what we could afford.
  10. We had no furniture, household items (we didn’t have PLATES), or equipment to upkeep a house (um lawnmowers are expensive) and no money with which to purchase these things.

I just want to say right now that I am fully aware how badly this situation could have worked out for us. If either one of us had suffered a job loss, or any sort of medical issue, accident, etc. we would have lost the house. If we decided to break up (we were not yet married), one of us couldn’t afford it on our own. There’s no doubt about it. We lived paycheck to paycheck, drowning in debt, and we would have been in a very tough spot.

I do not judge for one second those who have been through a foreclosure and the loss of their home. We did not make the right decisions – WE JUST GOT LUCKY. We were able to keep our jobs through the 2008 downturn, we even got raises and promotions over several years. We both stayed healthy, thank God. The market improved, and our neighborhood increased in value. We educated ourselves, and stumbled our way through paying off our debt and saving more of our income. We grew together instead of apart, and we landed on the same dreams for the future to build our life on.

After a very long journey, we paid off the mortgage on our little fixer-upper. But it did require some sacrifice (#firstworldproblems) and our friends thought we were crazy.

Have you ever made a huge money mistake, that may or may not have worked out okay in the end?

FIRE is Crazy – and We’re Doing It Anyway

I started this blog to document our journey toward Financial Independence and Retiring Early (FIRE). I wanted to be able to look back and say, yeah, that’s how we did it, that’s how we felt, and it was totally worth it! I also wanted to have a place where I could point people (in real life) when they were incredulous about our (crazy) plan. If I can help others along the way, that’s just bonus points!

First, some clarity: the acronym FIRE stands for Financial Independence and Retiring Early, but the biggest misconception is that you are saving all your money in order to quit your job and sit around. FIRE has evolved to mean people who are passionate about creating investment portfolios that will support them in whatever future venture they may pursue. It may not necessarily mean immediately quitting your day job, it just means the option to stay or go without monetary considerations. It also means not being stressed about money, and having the ability to be generous and live abundantly.

So my definition of FIRE mostly entails Freedom. The freedom to choose to work for someone else (or not)… the freedom to stay up late and bake cookies just because… the freedom to start a blog that perhaps no one will ever read.

The freedom and peace of mind of having “enough” is absolutely priceless.

I would say that the Hubble and I are more than halfway toward our Financial Independence goal. We’ve paid off all our debt including the mortgage, squirreled away a nice Emergency Fund, and begun to save a big portion of our income toward early retirement. We’ve saved about half of our total goal. The journey so far has taken about ten years, but that was starting from a net worth of about -$180,000 (yes that is a big fat negative). I don’t expect it will be much longer – the beginning is always the most difficult part. Just getting the wheel moving in the right direction was a long, slow slog.

But now it’s rolling right along, on its own, the interest gathering interest until eventually, our money will be making more money than we are. Ahh, the power of compounding.

I do want to address a few of the most frequent questions/arguments I hear when we talk about our goals of FIRE.

  • “But I like my job. I don’t want to retire early.”
    • This is my favorite. It’s the misconception that on the day you hit your magic number you will be forced at gunpoint to march into your boss’s office and tell her to take this job and shove it. Come on! Stay at your job, if you want. The point here is CHOICE. Most jobs would be infinitely more enjoyable, or at least tolerable, if you knew you could walk out at any time without fear or regret. You could take risks, only accept the projects you really wanted, move into a new more challenging industry or role. So save up a big pile of money, and keep working if you want. Best of both worlds!
  • “What on earth would I do all day if I quit my job? God, I’d be so bored.”
    • First of all, I think it was Abraham Lincoln who said that only boring people get bored. But second, the world is huge place that you have explored approximately none of. Get out there. Stretch yourself at yoga or try painting or something that scares you a little. Get your hands dirty. Volunteer for your favorite cause. Clean out the garage. Do the thing you said you would do if you only had the time. Remember when you were a little kid and the world was so exciting to learn about? When did we become so dependent on someone else telling us when to wake up, how to dress, and what to do for the bulk of our waking hours?
  • “What about health insurance? Good luck if you break an arm.”
    • So there are a lot of different health insurance options. We’re going with a medical sharing plan, but the Affordable Care Act is also really viable if you have a limited income. (As you know, health insurance in America seems to be constantly in flux so we’re keeping on eye on this unpredictable variable, but I just need the courage to change the things I can.)
  • “You will definitely run out of money. Then you’ll be screwed!”
    • So I mean – worst case scenario, and the market really crashes for a lot of years straight as soon as we quit our jobs, and our investments just dwindle to the point of failure. What on earth will we do?! Umm… we’ll go back to work. Which would just be the worst thing in the …. Oh wait. Actually, that would just put us right back where we started, and right back with everyone else. Except we would also have all this knowledge and probably still more savings than the average American.

There are a lot more objections that I’ve heard over the years, online and in real life. Most of them boil down to trite cliches or downright jealousy.

Have you ever had a goal so audacious that everyone thought you were crazy?

How Much Money Would Change Your Life?

Have you ever played with the thought experiment “What if I won the lottery?” Even though we don’t ever buy tickets, we’ve still had this conversation once or twice. It’s a fun What If game that sets you to dreaming and may even lead to some great discussions about priorities and goals. Another version of this game is “What would you do with a million dollars?” and usually involves some version of quitting your job with flair and buying large and unnecessary consumer goods.

I just read a great book called Hand to Mouth: Living in Bootstrap America by Linda Tirado. It’s about being poor in America and the challenges and struggles that go along with it. In the Introduction to the book, she defines the terms she uses throughout:

Poverty: A quarter is a miracle
Poor: A dollar is a miracle
Broke: Five dollars is a miracle
Working class: Being broke, but in a decent location.
Middle class: Living in a nice area with personal furniture, able to purchase other items, and not (constantly) worry about homelessness.
Rich: Anything above the prior.

I really like her definitions (do you?), and they got me thinking. After you are no longer Broke, and five dollars is no longer a miracle… what IS a miracle? What constitutes a life changing amount of money when you are Working Class, Middle Class, or Rich?

Under the Working Class definition above, I’d say about $500 would qualify as a pretty significant windfall. This would establish a small Emergency Fund that could end the cycle of payday loans or other predatory lending stopgaps that people resort to with no other options. It could pay for a nice new suit for that job interview, or new tires on your car to get to a better job further from the bus route.

If you are Middle Class, about $5,000 would be enough to change something. This would establish a significant Emergency Fund, or help to pay off high interest credit card debt. It could help you to begin buying in bulk to save money, or pay your car insurance or property taxes in six month payments instead of monthly (usually a significant savings). It could allow for a class to get a new certification in your field, or just ease the anxiety of living paycheck to paycheck.

If you are Rich, you’ve got all the money you need, and it would take a good chunk of money to cause you to change anything about your life. I am very fortunate to count myself in that category. I wouldn’t change a thing about my life unless I received some sort of windfall of about $500,000 or more. This would put us squarely into the Financial Independent category, meaning we would no longer have to earn income to live on. We could survive off our investments and passive income alone. Meaning, we would be free to quit our jobs and pursue more travel or passion work.

So what about you – how much money would it take to change your life? Where do you see yourself on the continuum from Poverty to Rich? Do you agree with Ms. Tirado’s definitions (and my own additions)?

The Gift of Desperation

I stumbled upon a new idea this week and it really resonated with me. I heard a recovering alcoholic say that his mental disease had brought him so low that he was given the “gift of desperation”. He said that only when he reached this bottom was he able to completely let go of his need to drink and to turn his life around.

Tony Robbins once said, “Change happens when the pain of staying the same is greater than the pain of change.” This is the same idea.

I feel like the gift of desperation is sometimes needed in finances, as well. You have to feel a pinch, some kind of pain before you will do the hard work of changing your behavior. If it just feels great to go deeper and deeper into debt, and you are able to buy whatever you desire with no consequences, everyone would always continue to do so. But sometimes, there is a moment where you look around and feel buried by the mountain of debt. You feel chained with no choices, and you decide to change something about the way you spend your money.

I remember the exact moment I received the gift of desperation. I had a student loan, a car loan, and a credit card balance. I had a mortgage on a fixer-upper, and a job I hated. My car needed new tires and my tooth had a cavity that needed filled. We were making ends meet, but barely. I thought we were fine – it’s like not we had creditors hounding us. We were skating by with minimum payments on everything and no savings. We had just replaced all the windows in the house with a 12-months same-as-cash loan.

And then, I received a statement in the mail from the window company. I began reading the statement and it said that no payment was due – YET. But it also said that if we were not able to pay the full balance – over $7,000 – by the time the 12 months was up, that the bank would retroactively charge us an insane amount of interest, backdated all the way to the day we bought the windows. The kicker? Nine months had already passed and we had made zero payments. I freaked out. It was a “come to Jesus” moment – there were a lot of tears.

You see, I didn’t know the rules of the game I was playing. And in my fear, I couldn’t see any way that we would be able to make all our minimum debt payments and also pay the balance of this purchase in full in the next three months. I broke down. I got desperate. I began searching for a better way. I talked to my husband. I got some books at the library. I pulled out a calculator. I began looking at our spending, trying to find the things that we could cut to make this work. We spent about $100 on a money class that we took together. We started writing down a plan for spending. We argued about what was important. We got serious. We had a garage sale. We cut a lot of other things out. It was really hard, and it was worth it.

After a long road on the debt payoff journey, we reached the end. We celebrated – it felt great. And then, we coasted for a bit. We bought a few big ticket items that we had put off – new flooring for the house, a new(er) car, a better computer. We got a bit lazy and didn’t really have any goals besides our regular savings. But then… I began feeling a new type of desperation. I had switched jobs, but this one wasn’t much better. It was still a small cubicle, in which I was held captive all day, and had to report for pointless meetings and fill out meaningless self-assessments. I was feeling hopeless, staring down 30+ more years of working under clueless managers and feeling chained to a life of corporate drudgery. Even the “perks” felt completely arbitrary. A bigger cubicle? A fancier title? A window in my prison? I began searching for a better way.

That’s when I stumbled upon the FIRE movement. I began to see a light at the end of the tunnel, finding a different way forward, outside the regular forty year corporate career path. Giving up the little things that don’t matter for a life of freedom in early retirement became the goal. And that’s the journey we’re on now. We’re totally debt-free and living frugally to squirrel away as much money as possible, to afford an extremely early retirement.

***I do want to include a small caveat that I am not talking about depression. I don’t see any gifts in depression and most times it does not stir you into taking action; in fact it may do just the opposite. Desperation is not depression.

Have you ever been given the gift of desperation?