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My Tiny House Saved Me From Financial Disaster

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I’ve been back and forth on writing this post for a long time, 5 months in fact.  Baked into this story is a fair bit of embarrassment. But in the end, I know that many people out there have been put in similarly compromising positions and this might be helpful.

This is the story of the worst financial disaster of my life.  The story starts with me working with an accountant for the first time in my life.  I’ve always done my own taxes, but things have gotten very complicated now with owning multiple businesses, a small army of contractors, etc.  I earn very little from this website, it’s my other ventures that bring in most of my income.

Tragedy Strikes:

I had submitted everything to my accountant way ahead of time and he had informed me that my taxes for the year would be around $3,000.  Not great, but as a self employed person you usually get pretty slammed with taxes.  From there I made a lot of decisions about spending, planning and budgeting for the next year.  I was feeling really good.

Then I got the bad news in a phone call….   “Ryan I’m so sorry, we made a mistake with your taxes, you don’t owe $3,000, you actually owe, $30,000 in taxes.  We made a decimal mistake”

I was at a total loss for words.  I was sick to my stomach. I felt hopeless.

I eventually calmed down and started to think.  This was a problem, a problem that had a solution.  It was a budget that needed to tighten the belt in a way that I had never done before.  So I broke out my computer and started a spreadsheet that allowed me to fully understand what I owed and when.

Identifying two important facts:

1. I needed to come up with a lot of cash, which I now had a real world number for

2. I also understood that timing was going to be a huge factor.

The name of the game for me was to earn more income while I timed very precisely spending to meet all my commitments.  Certain bills weren’t due for several months and my taxes weren’t due for about two months because I had done them so early.  Each time I paid a bill I had to quickly ramp my account back up in a perfect way so that I could be on point for the next bill.  This meant that there were times I’d be close to zero, but it would be part of the plan.

The ripple effect… of Death

The real chaos came from the fact that I had some other big bills coming up, having to pay $30k in taxes all of sudden was creating a ripple effect that left unchecked, would spell disaster.  A lot of my planning deals with working with cash flow, I don’t get a steady paycheck since I’m self employed.  This means I earn money and have to make it last until the next time I get paid.  Timing is so critical and a shock to the system of this magnitude was devastating despite me having a solid emergency fund.

The main considerations to my budgeting:

  1. Understand my expenses down to the dollar.
  2. Understand my income, but operate under the worst case scenario
  3. Develop a strategy to increase income, assumed most would fail
  4. Remove costs that weren’t critical, go as lean as possible
  5. Stick to my budget no matter what

The big thing here was understand expenses and income, but operate in the worst case scenario when it came to my income projections.  For expenses, I used my real fixed costs and projected variable costs with 6 months past data

I then needed to come with a strategy to earn more income fast.  What this meant was I needed to get two big projects I had been casually working on out the door, I had to hustle a second income from somewhere and I had to make this happen quick.  This lead me to my first lesson:

Lesson Number One:

I’ve learned that sometimes it comes down to income, not expenditures.  This is a particularly tough pill to swallow at times because when we talk about budgeting, debt and savings its often a discussion of what we can cut out.  The truth is we can cut out all the fluff, go very lean and still not have enough; that is what happened here for me.  What this means is that we need to work on the other side of the equation: income.   I realized that was the case with me, cutting lattes would get me no where.  I need to earn more to make this equation work.

How I Boosted My Income:

As I mentioned I was able to get two projects out the door, but I didn’t stop there.  I operated under the assumption that most of my efforts would fail.  With that mindset I knew I needed to move on a lot of ways to earn income to find a success.  So from there I looked at my skills and sent some emails to connections offering my services.  I was able to land a business coaching gig and a marketing strategy coaching session.  I did a few other things, but you get the idea.

Lesson Number Two:

One thing I realized at this point was I’m pretty good at a lot of marketable skills .  This brings us to the second lesson: be valuable.  Whatever this means for you is the correct answer as long as you can do some thing and people are actually willing to pay you for it.  For me I realized I have experience in building businesses and marketing.  I can do these things and the outcome of that activity is I can earn other people money.  Hence I’m valuable in my own way.  Think about how you are valuable, because everyone is, the trick is identifying that talent and who you’ll sell it to.

How My Tiny House Saved Me:

Through out all of this it struck me how different this time in my life would have been if I been in a traditional housing option, namely renting.  Right now the average rent in my city is around $1000 a month with utilities.  What compounds this fact is that if I had been renting I would have not be able to pay off my student loans earlier so in addition to rent and utilities, I’d also have to content with a $250 student loan payment.  This all would add up to me needing to come up with additional $5,000 on top of the $30,000!

Beyond money considerations living in a tiny house meant one thing that was extremely comforting: I would always have a place to live.  That comfort of knowing that, let me take a deep breath and know I was going to be okay.  To top it off, my utilities are $15 a month with my tiny house and push comes to shove, I could work any job part time and make it if I had to.

Lesson Number Three:

Tiny Houses buy you security, peace of mind and a place to lay your head.  More importantly, it let me say “I’ll be fine” and move from trying to survive to finding a solution.

Once I realized that I would always have a place to stay, I could focus on executing my plan.  The plan gave me confidence, it let me put aside the knot in my stomach and get down to the work at hand.

Lesson Number Four:

With a budget in place, I found that I could move past fear and act with confidence.  Simple things like grocery shopping became empowering experiences because I could buy the food I needed AND it was a positive reinforcement because I knew the money was there for me, that it was part of the plan.

The Results

After all the worry and hard work, it came time to start paying the bills.  I think the daunting thing about the entire process was that I knew the entire plan was going to take 4 months to execute.  This essentially meant that I was holding my proverbial breath for that entire time.  Even though I had a place to live, a budget to rely on, I found it very difficult to keep pushing.

Part of this journey was trying to keep myself above water emotionally.  I knew I was on the edge of slipping into depression, teetering there in a very precarious way.  I felt a knot in my stomach, knowing that the stress wouldn’t end for months at which I’d either make it out barley or crash horrifically.  I carried this with me and it weighed heavily on me.

As I moved through the critical execution phase of my plan I had to trust the plan.  In the budget I trust.  The plan called for at one point I’d have a whopping $256 in my account for a period of 48 hours; After which a payment would hit and I’d ramp up for the next bill.  The whole thing hinged on me hitting things perfectly paying bills and crushing income strategy to face the next big bill.

In the end I was able to earn enough and then some.  Along the way I got hit with some unexpected bills and needed to up my game, to keep pushing and never stop.  At the end of this I have started to rebuild my rainy day fund, which I hope to expand to $30,000 with enough time.

I’m also cognizant that even though I paid those bills, it’s a double edge sword, I now have to pay taxes on the money that I earned to pay them.  A lot of this can be offset with business write offs, but not all.

Your Turn!

  • What tips have you learned from your own tough times?
  • How has budgeting save you?

Five Things To Do Before You Build Your Tiny House

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It’s the final countdown, folks.

I’ve made the executive decision to begin building my tiny house in the spring of 2017.

While that decision is exciting, I realize that I need to get my butt in gear and accomplish a whole slew of tasks before I’m ready to buy a trailer. Today I’m sharing my to do list with you, and I hope it can help you prepare for your build too – whether you’re starting next week or next year. This is part one of a two-part post – so stay tuned!

Step Zero: Be Sure It’s What You Want

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Me, on the porch of Jay Shafer’s original tiny house, wearing unflattering pants.

This seems like a given, but there’s more at work here. If you want a tiny house because you think they’re cute, you might need to do a little more soul searching. If you want a tiny house because it’s the logical next step in creating a more intentional way of living, well…now we’re getting somewhere.

How do I know a tiny house is right for me? Well…

  • I’ve wanted to build my own house since I was eight years old.
  • I love small, cozy, confined spaces.
  • I’ve always been passionate about good design and creating homes full of personality.
  • I want to learn new things, because it improves my life and makes me a better person.
  • I want to feel the pride that comes with tackling a big project.
  • I care about my impact on the environment.
  • It does not make sense for me to buy a traditional home because I don’t know where I’ll end up settling down someday.
  • I’m a tiny person (5’2″) with very little stuff and few worldly needs.

Your reasons might be different. Be honest with yourself and trust your gut! You know yourself and your own motivations.

Tips:

  • If you are going into a tiny house build with your partner or family, agree going in that if anyone decides they’re done with the tiny house life, that you’ll both/all find another living solution. Not feeling trapped will work wonders when it comes to living peacefully together in a tiny house.
  • If you’re on the fence, there are other ways to live smaller without building a tiny house. Even just downsizing to a small house or apartment can dramatically change your outlook.
  • At the end of the day, a tiny house is just an object, and objects don’t change your life for the better. Only you have the power to do that.

Step One: Connect with Tiny House People

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Tiny house people love nothing more than sharing pizza and beer.

Even with the wealth of information available online, you’ll still have questions that can only be answered by people who have gone through the building process. Also, tiny house people are just plain cool and interesting and definitely worth knowing!

I’ve been lucky to meet so many wonderful members of the tiny house movement through my work, but to get here, I had to seek them out myself. As an introvert, this is much easier said than done. In the beginning, I had to do a lot of hunting to find other people who were just as excited about tiny houses as I was.

Tips:

  • Meetup.com is a goldmine. If you’re in a major metropolitan area, chances are high that there is a tiny house enthusiasts meetup nearby. If there isn’t one already, why not start a group yourself?
  • If there isn’t a tiny house meetup group, search for related groups about minimalism, gardening and permaculture, or prepping, and you’re bound to meet other people who are interested in tiny houses!
  • Tiny house events are popping up all over the country, and they’re a great way to meet cool folks. If you’re pretty convinced you’d like to live tiny, the Tiny House Conference is a great place to make friends and ask people your questions.
  • Don’t just hound people on the Internet, begging them for a tour of their tiny house. Form strong give-and-take friendships with tiny house folks just like you would with anyone else.

Step Two: Pare Down Belongings

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I once owned over 300 books. I now own 30.

Paring down your stuff is a huge part of living the tiny life. Last summer, I moved to Charlotte from Boston, and I took the move as an opportunity to bring only the things that could fit in the back of my Honda CRV. I got rid of two thirds of my clothing and 90% of my books – something I thought I could never do – along with decades’ worth of accumulated crap from my school years. It was surprisingly easy to distinguish trash from treasure once I got in to a rhythm. Driving down the highway to my new home, with a trunk full of my most precious possessions, was a liberating feeling.

Tips:

  • “Have nothing in your house that you do not know to be useful or believe to be beautiful.” – William Morris
  • For analytical minds: try the box method. Empty the contents of a drawer, closet, etc. into a big cardboard box. Each time you use an item from the box, it can return to the drawer. Whatever remains in the box after three months is something you don’t need in your daily life and you can safely donate it.
  • For intuitive minds: If you have more of an emotional attachment to objects like I do, I highly recommend the book The Life-Changing Magic of Tidying Up by Marie Kondo. It has gone viral for a reason, and I couldn’t have decluttered without it. That book is worth its own blog post, which I will write soon.
  • Budget enough time for this crucial step. One tiny house family I know took a whole year to declutter.

Step Three: Assess Needs

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Dee Williams’s petite vardo at the 2015 Tiny House Conference.

This is what Dee Williams from Portland Alternative Dwellings calls “playing anthropologist.” A lot of what we think we need in a home is marketed to us through building trends and realtors. A tiny house is a chance to shed the excess and create a home that fits you like a glove. For this step, I wrote a big list to brainstorm all my weird quirks and how they affect my interaction with my living space.

For instance, I noticed that I never use more than two stove burners at a time, but I do use my oven very frequently (roasting vegetables is the most reliable way to trick myself into eating them). For me, an oven would be a necessity.

I find that I spend most of my leisure time lounging around in bed rather than on the couch. Aside from sleeping, I do all my reading, drawing, writing, and music-listening in bed. I’ll probably forgo a lounge space in favor of a dining area, and design a luxurious sleeping loft that will double as my creative haven.

I also dye my hair monthly, so an open shower stall won’t work for me unless I want to flood my whole house as I rinse out the dye. I think a stock tank bathtub would work well for me.

Tips:

  • Try the Post-It Note Method: Stick a Post-It Note next to each doorway in your home. Every time you leave a room, write down what it is that you’re doing in each room. After a month or so, get a glimpse into how you actually use your space.
  • Design for the life you have, not the one you want. This is the equivalent of keeping “skinny pants” in your wardrobe. You want to feel comfortable in your home, not guilty.
  • If you have hobbies or accoutrements that require a lot of space, consider outbuildings or off-site storage, or outsourcing that hobby to a different location (e.g. an artist’s studio).
  • Remember: our needs are surprisingly few and easily met.

Step Four: Figure Out a Floor Plan

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My latest tiny house layout, which I have already overhauled completely.

Right now, I have a folder on my desktop with 39 scanned, hand-drawn floor plans. To be fair, I’m a big nerd and I’ve been drawing these for four straight years. But whether it’s digital or on paper, it’s important to translate your design ideas into a visual medium.

There are lots of great ready-made tiny house floor plans on the market. We’ve reviewed our favorite plans to help you pick the one that’s right for you – click here to check it out. But because everyone’s needs are different, don’t be afraid to modify an existing plan to better suit your lifestyle.

Tips:

  • Carry a measuring tape with you wherever you go. Measure chair heights, counter widths, the rises and runs of stair steps – it’s important to know common dimensions of different elements so you can accurately plan for them.
  • Measure yourself! Know how much space you need to feel comfortable. My needs as a 5’2″, 130 lb. woman will differ from the needs of a 6’3″ 275 lb. man.
  • Don’t forget to design space for your clothes hamper, kitchen trash can, recycling and compost bins, suitcases, bulk paper goods storage, brooms, and other cleaning implements.
  • Include empty storage space in your design. Because you’re alive, you’ll probably still acquire new things after you move into your tiny house. Give yourself some wiggle room.
  • Strive for an excellent design, not a perfect one. If you stress too much about getting things absolutely perfect, you’ll never get off the ground.

Step Four-and-a-Half: Work with an Expert

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Great ideas always begin on a napkin.

Optional, but highly worth it. Even if you have a pretty strong grasp on what you’re doing in terms of your design, it never hurts to have an expert offer their advice. At the Tiny House Conference after party, I hungrily listened to Lina Menard and Ethan Waldman as they gave me feedback on my tiny house design, which I drew on a napkin in pink pen. I’m currently collaborating with a professional plan designer and draftsman to hash out a solid layout and set of building plans, which is terribly exciting!

Tips:

  • Try to find experts who have experience building tiny houses. It’s important for folks to have the skill of translating theoretical designs into tangible structures.
  • If you can’t afford a consultation, buy or borrow a copy of A Pattern Language. It’s a great manual for learning the psychology of vernacular architecture (a.k.a. how to build a house you feel good in).

Step Five: Create a Budget

Christian and Alexis of Tiny House Expedition made their dollars stretch during their tiny house build.

Christian and Alexis of Tiny House Expedition made their dollars stretch during their tiny house build.

Ideally, if you’re ready to build within a year, you should have enough funds saved up to at least get started. If you’re not careful, a tiny house can become a money pit if you don’t budget and track your expenditures.

My plan is to build in stages. I’ll first finish the exterior, so that the unfinished inside is safe from the elements. I can then take my time finishing the interior and saving up for some nicer appliances. Since I live in Charlotte and it’s pretty warm here, I might even move in early and live in the house while I’m still working on it to pour even more money into the build. I’m planning for the build to take a long time, but I know I’ll have a more rewarding learning experience that way.

In terms of saving money, it’s important to have a savings account just for your tiny house so that your funds don’t get mixed up and accidentally spent. I know that I’m the kind of person that will spend all my savings if they’re accessible and unallocated. I use SmartyPig.com to keep my tiny house savings separate, which is free and easy to use and I can’t recommend it highly enough.

Tips:

 

So what are the next steps as I move toward building my tiny house? Tune in next time for part two of this topic!

Your Turn!

  • Which step will be the easiest for you?
  • Which step will be more challenging?

Living On $20,000 A Year

I found this great article on living frugally and thought it was a good read.

Do you avoid a lot of the expenses that many of your peers spend money on, such as technology and meals out?

For the most part, yes. I have a lower-end Android phone because I needed a new phone. I went as cheap as possible. I don’t own a car, I rely on public transportation, and sometimes biking. I have a laptop, because I need it for writing. I do have Internet access because it’s pretty important to get online. My only extra bill is Netflix, and I’m considering getting rid of that. I don’t go out to eat, or just for special occasions. I cook for every meal. I don’t drink coffee. I try to stick with water. I do go out to bars, but not every night. That’s my best way to meet people and experience cities.

What’s your typical meal?

I usually buy a pound of beef and a package of chicken and make easy Mexican dishes. I get some vegetables and mix it all together and throw it on a tortilla. I do a lot of pasta dishes. When I’m working, I usually pack a lunch, I make a sandwich plus chips or cookies to get me through the day. Then I get home and cook a fuller meal. I try to have a good mix [of food] so I don’t get sick. My brother taught me little tricks to take different ingredients around the house, like seasonings, to make a sauce that’s different and more unique, to give yourself different tastes.

What about clothes?

Once or twice a year, I might get a few new things, like an extra pair of jeans or pants, or a couple shirts, but I still have shirts I wore to college, so they’re six or seven years old or older. If a job requires certain clothes, then I’ll buy clothes for that. I maybe get one new pair of shoes a year and make them last as long as possible. I mostly shop at cheaper places, like thrift stores or Salvation Army or Goodwill. Those are good places to hit up.

Read the rest at here