Save Money By Losing It All

The Power of Financial Freedom

Bad things happen…sometimes to good people. But it’s how you look at these events that can make or break you.

I’m not talking about putting on rose colored glasses and plastering a fake smile across your face. It’s a waste of my time and yours pretending to be happy when you’re not.

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What I’m talking about is perspective. A glass half-full view of the world.

I want to tell you a story about my friend Robert. Long time readers might remember his story. Robert is a smart guy who made some very bad financial decisions.

In the beginning he made a string of really smart financial moves that netted him a decent amount of profit and cash. He bought a townhome just before the real estate boom. Then he moved in two roommates to help him pay his mortgage. Robert was living well. He was flush with cash and fully funding his 401(k) every year.

At some point though, Robert forgot about the power of financial freedom. After a few years of living well Robert decided to trade in his mid-sized sedan (that was only four years old and wasn’t giving him any problems) for a high-end European SUV. But he wasn’t done paying off the old car so he rolled that payment into the new MUCH higher one.

Then he decided to tap into the equity he had built up in townhome during the real estate boom. He took out a home equity line of credit (HELOC) against his townhome and used it to buy prettier furniture and went on a five star Caribbean vacation with his new wife.

When they got back from vacation he moved his roommates out and put his townhome on the market. Robert had done so well with his townhome that it was worth about double what he’d paid for it just four year ago. Feeling like a real estate expert Robert went ahead and bought a MUCH bigger home for him and his wife in a speculative area.

Now Robert had a higher mortgage payment, no roommates to help him pay for it and higher utility bills. The icing on the cake came about eight months after he moved into the new house when his wife lost her job and the ability to help pay the bills.

When I originally told this story nearly two years ago Robert had blown through all his savings and tapped into his retirement funds trying to stay afloat and keep his new home. It didn’t work. The real estate market crashed, the value of his home fell by nearly 50 percent and the only work his wife could find was out of state. Eventually they had to short sell the house. Robert had lost all of his financial freedom.

It was so sad to see Robert go through all this. He has been a good friend to me through the years (at one point I was one of the two roommates helping to pay off his mortgage) and is a good person. When I got laid off from my job Robert helped me with my resume and gave me a great recommendation.

I am happy to report there is a happy ending for Robert and his family. It’s been nearly a year since all this happened and now Robert and his family are once again glass half full kind of people. He reintroduced the power of financial freedom into his life.

Robert and his wife moved to New York where they both found jobs. They have not bought another property and are instead renting a house. He got rid of most of his ‘stuff’ (including his overpriced SUV) and is once again fully funding his retirement accounts.

He’s happier even though he down-sized nearly every aspect of his life. No longer does he have the pressure on him to pay for all that ‘stuff’.

That’s the power of financial freedom. It’s living comfortably within your means. It has nothing to do with a specific dollar figure of class status.

Think how financial freedom could benefit you. Imagine waking up tomorrow without a mortgage payment looming over your head, car note is paid off, retirement accounts fully funded for the year, no debt to speak of and every bill paid off in full. How wonderful would all that feel? The financial stress would melt away and fear of losing everything would be a distant memory.

Financial freedom will do that to a person. Ditch the bigger is better mantra and assess the areas of your life that you overspend in.

?    Open a Roth IRA account today. Contribute as much as you can and begin fully funding your retirement.

?    Check out billshrink.com to see what bills you are overpaying for. Cable and cell phone plans are notoriously confusing and add up to hundreds of dollars a month in bills. Take advantage of the better deals they suggest to cut down on your cash outflow.

?    Visit mint.com for free financial planning. Use their financial tools to help manage your day to day expenses. The pie charts and grafts make it very easy to see what areas you are overspending in. Use this information to better manage your finances and become financially fit!

?    Any extra ‘stuff’ you find put up for sale on Craigslist or Ebay. Use the money you make to pay down debts or start an emergency fund

?    Prioritize your debts by what interest rate you are getting. The debts charging you the highest interest rates (usually credit cards) should get paid off first followed down the line in descending order.

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Keeping Money in Your Pocket,

Nancy Patterson

One Response

  1. Cheryl

    Great info ~ as always. Article about Robert’s experience very helpful. Having had a “Robert moment” myself, NOW recovering little by little. Love Nevada, where I live now. My glass half-full, self-employed SOLIDLY ~ no car yet :(
    but I’m getting there!


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