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My Tiny House Saved Me From Financial Disaster

why-youre-broke-tiny-house

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?

3 Tips To Save Big On Your Tiny House Build

Understanding how a home comes together is important  when it comes to saving time and money, but really knowing how it all comes together means won’t just save you a few bucks, but thousands.  Here are 3 ways I save major cash during my build.

1. Buying materials in larger chunks

If you know how it all goes together, you can plan ahead in your material purchases.  Most big box stores will actually give sizeable discounts.  For me, I was able to save 15% on everything just because I knew how my house was going to go together.  That meant I saved $4,500!

2. Knowing how design choices impact your build

When I totaled up my total house weight, I realized that if I could shave off 100 lbs it would allow me to get a smaller trailer that was $997 cheaper.  I decided to go with a fiberglass shower pan instead of tile and save almost $1,000!

3. Design for efficient material usage

When you build a tiny house things are best done in 4 or 8 foot spans.  This is because most materials come in these dimensions.  Plywood comes in 4 x 8 foot sheets, walls are framed at 16 inch intervals, 3 x 16 = 48 (or 4 feet), etc etc.  If you work with these dimensions in mind, you can save time with less cuts and money with better material management.

 

Here’s the point: A greater understanding of building saves thousands of dollars. 

how-to-build-softcoverThat understanding is exactly why I wrote my new book: How To Build A Tiny House.  I designed this book to give you step by step instructions on how to build your own tiny house using any set of plans or your own design. I give you the background knowledge to expertly navigate the building process with confidence, avoid common mistakes, and answer your questions at every step.This guide is for the absolute beginner.

 

 

Want to learn about building, save thousands & build your dream home with confidence?

 

Learn more about How To Build A Tiny House
Click Here

 

Things That Shouldn’t Impress Us Anymore

Recently I came across a great article from Joshua Becker (read it here) which captured a set of ideas that had been swirling around my head for a while.  The article was called 7 things that shouldn’t impress us anymore.  It talked about status symbols and how they shouldn’t be held up to such a high importance for us.

organizational-debtI think what struck me about most of the list is that ironic thing about the brand name of your clothing, big diamond rings, fancy cars and a big house is that most folks who these things are important to, can’t afford them.  Most – read 90% of Americans – folks achieve these status symbols through accruing debt.  I have a distinct memory of my neighbors who were very concerned with the things on Joshua’s list, one day fell on hard times.

The house of card fell very fast for them, their cars were taken because they were on lease, the home ended up in short sale and my neighbors lamented to me about all the credit card debt calls they got.  While this is just one story about a neighbor, it is really the story for many people today.   The truth is the average American household carries $15,762 (source) and 76% of Americans live pay check to pay check (source).

What is more, conspicuous consumption shouldn’t not impress us any more, but it should evoke a very different reaction – sadness or empathy – because it is almost always done on the back of debt.  People are extending themselves in ways that has been shown to break up marriages, bring massive amounts of stress and leave people in a hole they often can’t get out of.

Think about it, not only should they not impress us, but depress us.  What does it say about the status of our culture when people are willing to take on crippling debt just to impress a stranger?

Obviously I’m preaching to the choir here, tiny house folks focus on small spaces to get out of debt, we re-evaluate our spending choices and have taken steps to shed our consumer culture.  Inherently having nice things isn’t bad, even having brand names, nice cars etc isn’t a bad thing; we just need to know the why behind all of it.  The trap is when people say “that’s what I thought I was ‘supposed’ to do.”

Live your life with intention, with purpose behind each decision, each choice.  That choice could be living in a tiny house or it could be a 1,200 square foot house with a fancy car.

Your Turn!

  • What things do you think we shouldn’t be impressed about anymore?

 

If I Had $1M To Further The Movement

what if questionI was sitting on the porch of my tiny house the other night thinking about tiny houses and the movement when the question floated into my mind: “If I somehow became the steward of $1,000,000 to further the tiny house movement, what would I do?”  It’s an interesting question and I really like thought experiments like this.  So, here is what I’d do:

I think an important first step would be to establish a tiny house proof of concept with a city and create a model that other cities could follow.  I would most likely start in my hometown of Charlotte, mainly because I know the codes better and have some good connections with folks that I’d need to leverage in order to make my plan successful.

I’ve had some preliminary conversations with some community development leaders, developers, lawyers and a few political figures at the point, but have yet to take it much further because the later phases of execution would require funds that I simply don’t have.  So I’d start a dialogue with some key people and then also contract the services of a few people, primarily lawyers that have experience doing community development.  I don’t think things would need to get pushed into the court room, but a few of the lawyers I have in mind know the landscape better than I do, they have the personal connections, they know what meetings you need to show up for, they know who other follow on votes and they know the process.  These things are valuable to the execution of the plan.  I figure it will take about $50,000 in contractor fees, mainly because most of the people would be lawyers ($200-$300 an hr).

Running Total: $50,000

From there I’d work with these people to start conversations with the city about getting a program started where we would essential do a trial run on a particular piece of land for a tiny house community.  I figure about $5,000 in fees, filings, paperwork, etc.

Running Total: $55,000

land_for_sale_29cConcurrently I would be shopping for land, somewhere in the 10-20 acre range of which I have about 5 locations that would be ideally suited for this project.  The key here would be land that could be rezone for a cluster housing setup and located within a 30 minute drive of downtown Charlotte.  The location would be key.  Most people today want the amenities of a city and Charlotte is a decent sized city to meet that need, plus land is relatively cheap and still available.  For the land I’d be looking to spend up to $250,000 which would be the home of the community and a common house that would also later be used to run training events, meetings, etc.

Running Total: $305,000

Next once we had the land and the city’s support, I would work the land (grading, access, roads, parking), install infrastructure (water, sewer, solar, internet, gas), then begin construction.  For this I’m assuming $75,000 to meet city requirements.  I’m also assuming they’ll require us to install storm drains, side walks, and a retention pond because of the number of people, it would be similar to an apartment complex in their eyes.

Running Total: $380,000

How-To-Build-a-Great-Team

Once I had the land secured, I’d put out a call for residents.  There would be an application, interview, and selection process.  The goal would be selecting people who would be good stewards of the first location, would have the ability to interface with the public and the media very well, and people who could help us put a good foot forward in the community.  The group would also have to function well as a team, because I would want a community, not disparate individuals that just want a place to put a tiny house or live cheap.  I envision the people selected would go through a lengthy interview process, jump through a lot of hoops and prove that they are the right people for the mission.

With that group I’d want to do some team building, some communications training and community building.  There will also be some media interface training, so that they can keep calm when a reporter tries to pull a “gotcha”, when a detractor speaks out, or when something goes wrong and they need to operate under pressure.  For that I’d budget about $5,000 for various activities and facilitators.

Running Total: $385,000

 From that point I’d design the houses with each of the people using some tiny house designers I know.  The plans would be used to build the house and then either given away or sold as a revenue generator for the non-profit mission of this incubator.

Established Revenue: $1,000 / month

Each house would be designed, built and paid for by this project, but each person would enter into a 2 or 3 year lease on that house.  I’d guess between $200-$400 for rent and utilities a month.

It might be possible that some of the paid work needed to be done by this project could be paid to these members if they had the required skill sets for the job.  This could also aid in keeping the project accessible for low income individuals.

I would want 10 houses to on the property, half to be people bringing their own house, half built onsite built with about half the labor done by the people themselves.  I figure total cost per built house would be $40,000 for the five built on site for a total of $200,000.

I would also have a common house built (about 2,500 square feet).  I figure about $200,000 for that building.  That building would have a large room, community kitchen, a guest bedroom, laundry and toilets.

In this space I’d tried to save a lot of costs here by doing workshops where people come for the week and get hands on with building a tiny house.  Tickets would be pricey because of the time, meals, organizing etc.  I figure $1500 a person.  This would help offset the costs of the houses.  For the common house I’d try to do that with straw bale or ob and again, make that an event that we would sell tickets to.

Worst Case Running Total: $785,000
Target Running Total: $600,000
Established Revenue: $3,500-$5,000 / month

 This would close the initial phase of the first location.  From here the idea would be to document the entire process and produce some high quality materials, media, and website.  These could be used by tiny house people and by municipalities.  I figure there will be some coding, design and material fees with this $5,000.

Running Total: $605,000
Established Revenue: $3,500-$5,000 / month

The next phase would be taking the revenue generated and building that revenue to become a self sustaining non profit.  The hope here is that with the initial $1M we could build an engine that could pump out tiny house havens and develop training for DIYers, Builders and cities to elevate the community.

The remaining funds to kick off the next location and essentially do lobbying on behalf of tiny houses.  I would also look into tiny house financing, developer partnerships and tiny house insurance.  We would develop tiny house codes that municipalities could plug and play for cities and we would help them in that process.

I’m also playing it safe with the budget because things will inevitably be more expensive, unexpected costs will come up and there will be some staffing costs.

Final Total: $850,000
Revenue: $13,500-$15,000 / month

So that is how I’d move the movement forward with an infusion of $1M.

Your Turn!

  • How would you use the $1M differently for the movement?

The Next Housing Crunch May Be Here Sooner Than We Thought

One of the big questions when it came to tiny houses was “is this just a fad because of the recession of 2008?”   Now that we are out of the slump and down the road to recovery we are able to see that it is certainly not a passing trend.  If it was because of the recession, we’d see a slump in metrics, but in the past year the traffic on The Tiny Life has doubled, houses are being built at an ever increasing rate, and media attention has been strong.

One thing in the back of my mind during the whole recession is will we learn our lesson?  While there lies much blame with banks, lenders and Wall Street, the collective population also played their part.  In the end, I don’t think Americans in general have learned much, their actions tell a story that isn’t much different from life leading up to 2008.  I think if you’re reading this blog, you’ve woken up from the “American Dream” to find a nightmare; you get that we need to make changes and by living tiny, you’re taking significant steps to that end.

In the past few months I’ve been following a large number of stories pointing to another recession coming sooner than we expected.  The most recent I saw was this article.  Places like Forbes, Bloomberg, and other big names have spelt out why they think we’ll see a downturn soon.  Estimates range from end of 2015 to early 2017.  Reasons are varied, but all seem to point to the same thing: recession.

Now I’m not going to claim that there will be a recession sometime soon, obviously at some point there will be another, but I think the message is still the same: we know there will be ups and downs in life, how can we best setup our lives to make the journey smoother and less likely to get ourselves into a bad situation?

Hope for the bestPrepare for the worst

With wages stagnating, costs rising, wage gaps ever increasing, wealth concentrating into a scant few bank accounts and our economy being based on an ever increasing capital despite living on a finite planet, something has got to give.   We see these forces in play and know that they aren’t sustainable, we know they will catch up to us at some point.

So far in this life of mine I’ve discovered a few truths:

  1. Building in resiliency in your life will help you today, but also in bad times
  2. Peace of mind is something that is invaluable
  3. The more control we have over our life, our money, our decisions, and our time the better

So what can we do to prepare for a potential slump? 

1. Get into your tiny house

2. Get out of debt

3. Consider your employment, how stable would it be in a downturn and what can you do now to build your network

4. Can you make the jump to solar, partial food production, or other self sustaining practices

5. Can you put away more money for the rainy day we know is coming

 

Your Turn!

  • What are you doing to prepare for the next slump?
  • How are you becoming more resilient or self sufficient?
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