My Tiny House Saved Me From Financial Disaster


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 and 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 nowhere.  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 and 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 bare;y 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.’  At one point, the plan called for me to 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 saved you?
  1. Thank you for hope.

  2. Ryan,

    Thank you for your post. What is the date of your post? It would be nice to have a date so when reading your posts in the future I understand the time frame. I’ve followed you for a while so I wonder where you found a place to park and live. This is a big issue and one that holds me back at the moment from owning a tiny home. Thanks so much! Carol 10/31/16

  3. Good for you that you’ve pulled this off. I’d like to make the transition from renting to living in my own tiny, debt-free house; the trick is, how to do it? It seems like a Catch 22: you can’t afford a tiny house because of debt, and you can’t pay your debt because you can’t afford a tiny house. If it weren’t for my two cats I’d be living in my minivan, I’m that frustrated.

    • I’m in the same boat. After my last animal companion passed away this summer, I”m selling my house because it’s a financial burden I feel buried under. Looking into tiny houses, they are a huge cost plus finding a place to put it! I”m feeling the Catch 22 as well. I”m so frustrated, every option I”ve looked into wants ALL my money! Decided that living out of my car in a tent is only possible option. A friend will take me in, but in the long run, if she moves, and she will, what will I do then?? AT least I have my tent and camp gear!!!

      • I’m considering options to move into the city from the countryside now. My girlfriend lives abroad so I kind of only have myself to think about, so living out of the car in a tent seems absolutely perfect for me. IF I have to go into the city for a job.

  4. As usual I have not read all of what was written. Not every line. I skipped around a lot. This is what everyone needs to know about taxes. Taxes are very predictable and mistakes are easy to figure out. If you make $10,000 then your tax is close to zero. If you make $30,000 then your tax will be 5 or 6 thousand or less. If someone says that you owe $3,000 when your income was $100,000 or $200,000 for the year then you need to go to a different tax person. Bells and whistles should be going off. In general, unless you are Donald Trump, you pay taxes every year and the amount that you pay does not vary a lot unless there was a flood or a fire or a drastic change in income. Or you got married or divorced. Al

  5. I completely understand you not wanting to post this, and as someone who really screwed up taxes my first year as self-employed, I hope you had an additional lesson: learn at least enough on taxes to ballpark estimate what you will owe (on the high side). Unless your income was pretty low, $3000 is a shockingly low number given that you seemed to not have withholding or to pay quarterlies. I say this because considering this being “slammed with taxes” implies some basic problems with math and no understanding of tax brackets. To have a real tax bill of $30k means that you should be comfortably into 6 figure income, especially with any tax-deferred SEP retirement contributions, self-employed write-offs, etc. So unless you consider <3% owed in taxes as being slammed, the error was first with your failure to budget for taxes (very common with self-employed) and only second the incorrect initial result from your accountant. My first year I did budget for taxes but still was significantly wrong ($12k off… Now I know about the additional tax on self-employed income for FICA, etc… Not a fun lesson to learn). Having learned my lesson, not only do I pay quarterlies, but I also put money aside with each income check that comes in to cover any discrepancies between my rough estimate and actual. If the money isn't needed, then I just move it over into savings/investments.

  6. This is a fantastic article! I am older and have been in a few financial binds. As I was reading it, I was thinking it will help at least one person, but probably several. And, BAM! The very first post was thanking you for the hope. Bow down to you and all self implited people. I do not have the guts. Funby! I justrealized working for ‘the man’is a false sence of security’. I wish you continued success and best of luck to your readers going through tough times.

  7. First off, I want to say I am sorry about the position you were in, having that number thrown at you with a deadline only a few months away. But secondly, I want to say to you that your story reminds me of an article I read several years ago that said anyone can save money–and then proceeded to lay out a budget based on an “average” income. This sample budget gave this person a discretionary income for entertainment that was almost twice as large as my entire monthly income! And all I could think was, of course anyone can save money with that high of income! Let’s see them work out a budget for a single, disabled woman supporting a daughter who also has serious health issues, but has not yet been determined disabled by the SSA, and see if they can find any money leftover to put in savings. And without wanting to be mean or snippy, I just have to say that if you are pulling in enough money to owe $30,000 in taxes a year, which is more than three times my yearly income for two people, you know nothing about true poverty. The kind of poverty where you open your kitchen cupboard, and the only thing in there is an almost empty carton of oatmeal. And FYI, oatmeal tastes just about the same whether you have milk to pour on it or not. And I’m also talking about the kind of poverty where you have to drive your child to another state in a very unreliable car because that is where the closest doctor is who will perform the surgery she needs on a payment plan, worrying the car will break down or she will have a complication on the drive home and you don’t have a cellphone and wouldn’t be able to call for help. I’m talking about the kind of poverty where after that very unreliable car dies completely, you have to figure out how to get to the closest grocery store, which is four miles away, when you don’t live anywhere near public transportation, and you live in a place where winter is extremely harsh and long. I am talking about the kind of poverty where when the roof leaks, you can see mold on the walls, and you worry that a heavy snowfall will make the saggy part of the roof in the kitchen collapse completely. But hey, at least I don’t live in Haiti or Aleppo, right? And now that my response is probably about as long as your story, I’ll just finish with telling you that this is not a personal attack on you. I am simply trying to point out that, yes, we have a serious housing problem, and I am so thankful progress is being made to make tiny houses legal. It is time we stop letting the wealthy say, “Oh, I’m sorry, but no, you can,t build that tiny of a house next to my McMansion. It will lower the value of my home. And, no I don’t really care if you will be homeless or live in some unhappy, horrible place, so long as your problem doesn’t affect me.

  8. I’m going to have student loans to pay off, so a tiny house seems like a good idea, especially considering that reasonable rent is $750 a month without utilities where I live. For less than the price of six months of rent, I could build my own custom home! I already drive a beater and work whenever I’m not in class, and a tiny house would help me keep my living costs really low so I can crush my student loan debt and not be a slave to the man anymore.

    • That sounds so doable. Do it!! 😀

      I lived in my tiny cabin for three months to save up money for traveling. Without electricity or inlaid water. It was heaven 🙂

      Now I’m taking my motorbike licence and plan to live off the motorbike and a tent while working, just driving around and camping in the vicinity of work 🙂 Either that or live out of my car.

      Just to try different things. Getting an apartment for rent is about 800$-1200$, that doesn’t do much good for actually doing something with your life. But everyones gotta stay somewhere!

      What I really liked about the article is that KNOWING you always had your tiny house gave you that spark and calmness to keep cool – you know you’re not gonna sleep outside with all your things. That’s the same with the job I’ve got now – I always knew I could go out and travel and PROBABLY get my old job back, which makes me good money as a process operator. Gotta move forward some time though, working on that now.

  9. Thank you for the article, I have lived it myself— except for the tiny home part. I actually lived out of my van for several months in a large city, had a PO Box, a storage unit, and a gym membership. Recently relocated for work but still not out of debt yet. Sold the van, moved in with ailing family member for now, but BUDGETING SERIOUSLY to pursue the tiny house dream. Thank you for reminding me that planning and discipline will pay off in the end.

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