Do you have more month left at the end of your money? You aren’t alone. Rising prices and rents/mortgages have created financial struggles for many families.
I empathize. There is a good chance that I’ve been right where you are – maybe even worse off. Fortunately, I’m not in that position now, but I can definitely remember what it was like.
I can’t tell you specifically what you’ll need to pull yourself out of your situation. I don’t know what your exact struggles are. But what I can do is share with you what my struggles were, how I coped with them, and what I learned along the way. And hopefully you can glean a nugget or two and apply these lessons to your own situation.
“For He makes His sun rise on the evil and on the good, and sends rain on the just and on the unjust.”Jesus
When I married my wife in the mid-80s, both of us were low- to mid-income earners with no assets and some debt. This meant that purchasing a home just wasn’t a possibility for us at the time, although it was an ultimate goal. After thinking on it, I came to a core realization: Nobody else was going to make anything happen for me. If it was to be, it was up to me. God gave me hands, feet, and a brain for a reason. Asking Him for help is great, but asking for help while doing nothing on one’s own is disingenuous.
So, I decided to learn about financial stuff. This did nothing for me in the short-term, but I knew it would pay off in spades later on, which leads me to my second core realization: It is critical to think about the long term. Yes, the rent needs to be paid today, but I somehow needed to make time to consider and plan for the future, even if (especially if) sacrifice was required today.
Thinking about the long term inspired me to get into the housing market. But how? With no down payment it didn’t seem possible. Fortunately, I was an out-of-the-box thinker, which highlights my third core realization: If the traditional way of buying a home wouldn’t work for me then I needed to think outside the box to get to where I wanted to go.
I started approaching people who were selling their home and asking if they would consider lending us the down payment. I found two sellers who would do that for us and ultimately purchased a home from one of them.
After negotiating an unsecured loan from the vendor for part of the down payment, we then had to come up the remainder, using our car as collateral on a separate loan. Without a typical down payment, that meant funding the purchase not only with a traditional first mortgage, but also a second one. It was one of the best things we could do when considering the long term. However, having to cover payments on four loans made it one of the most financially difficult times of our lives.
We couldn’t afford drapes, so we taped newspapers to the windows. There were no taps on the tub/shower and I only owned one vice grip, so showering meant using the vice grip to first turn on the hot water and then to move it to turn on the cold.
The house came with tenants in a basement suite, but they were horrible tenants (e.g. throwing piles of garbage out the kitchen window rather than using a garbage bin inside). The place was a dump, magnified by our tenants’ actions, but it was ours. After evicting the tenants and renovating the suite, we now owed a fifth loan as some of that renovation funding came from family members.
Some might say that we were reckless in taking on so much debt. However, in each circumstance we weighed the financial benefits (both short- and long-term) and we could see the long-term benefit of our actions.
To recap: Five loans. Two low-income jobs. A beater car. A beater house. And a mountain of debt.
At least most of our debts had a fixed rate, so we knew the interest would not go up for some time. This was a conscious decision. Even though the cost of a longer-term mortgage was higher, we felt we could not afford the risk of an increase in payments in the short-term.
When one is having financial difficulties, there are really two options: decrease spending and increase income. We had already decreased our spending as much as possible. No cable. No cell phones. No subscription services. Only what we considered to be the highest priority items remained.
I should point out here that we weren’t struggling so much that we felt we needed to go to the food bank. Some of you reading this may be there but take heart: it can get better. Although we didn’t need to go to the food bank, we were struggling enough that we could not afford to buy all the groceries we truly wanted. Money was very tight. We had multiple envelopes that we used as a budgeting tool. On payday we would set aside a certain amount into the entertainment envelope, a certain amount into the grocery envelope, until all our income accounted for. If the envelope didn’t have enough cash in it for our normal groceries for the week, that meant it was rice and beans (or some other cheap staple) until the next payday.
While this was a stressful time, it forced us to check our attitudes. The simple reality was that if we ranked our financial situation to every other person on the planet, we were very near the top. If we looked to history and included all the people who had ever lived on the planet, we were near the top of that list, too. Our situation (as much as it didn’t feel like it sometimes because of where and when we lived) was infinitely better than how most people on the planet, both past and present, had to live. We might not have felt like it, but we were blessed.
This led me to core realization number four: Learn to be grateful. Gain some perspective and look for things to be grateful for. A grateful attitude made our situation bearable.
Since there wasn’t much more we could decrease (although if push came to shove we would have found a way), over the next five years or so we looked for opportunities to increase our income. Over time we received raises or moved on to better jobs. And slowly, very slowly, things got better and better. We paid off the family debt first, then focused on the debt with the highest interest rate. Once that was paid off, we moved on to the next highest.
After each milestone we breathed a little easier. After many years, we found ourselves in good financial shape. If you’re in a similar situation now, rest assured this can happen to you too. It will take time and dedication, but you can do it.
Next month I’ll share some practical tips to decrease expenses and increase income. In the meantime, I hope you can learn from, apply, and pass on some of the lessons I learned during my time of financial stress.
Arnold Machel, CFP® lives, works, and worships in the White Rock/South Surrey area. He is a Certified Financial Planner with IPC Investment Corporation and Visionvest Financial Planning & Services. In 2022 he was named as one of BCs Top Wealth Advisors by The Globe & Mail, and Visionvest (his firm) has been voted Best Investment/Financial Advisor by Peace Arch News readers for the past two years in a row.
Questions and comments can be directed to him at firstname.lastname@example.org or through his website at www.visionvest.ca. Please note that all comments are of a general nature and should not be relied upon as individual advice. The views and opinions expressed in this commentary may not necessarily reflect those of IPC Investment Corporation. While every attempt is made to ensure accuracy, facts and figures are not guaranteed.