Today I bring you a guest post, written by Derek Sall, a well-known blogger and speaker at LifeAndMyFinances.com. His road to wealth is different than what I typically preach on From Cents to Retirement (as I love debt), but that is exactly why I invited Derek over to write an article on being debt free and provide you with a new perspective once in a while. Check out how Derek and his family are succeeding financially, even while his wife stays at home with their young daughter. Take it away Derek…
Ever think about living on just one income? I mean, do people really still do that? Is it financially possible?
One word: absolutely.
My wife stays at home with our daughter while I work a job that earns far less than $100k, and we still chunk $2,600 into savings every. single. month.
Sound impossible? It’s not, but there’s definitely steps that you’ll need to take if you want to get there.
How We’re Killing It on Just One Income
Your eyes are already rolling, aren’t they? I know, I know, you’re getting prepped for me to preach to you about minimalism or the tiny house movement, right?
While I don’t think either of these things are inherently bad, they just aren’t for us. Instead, we decided to succeed in life via a different avenue: by getting out of debt.
Step #1: Beginning with the End in Mind
Before anyone can succeed at anything, I firmly believe that they need to know their ‘why’. What’s their purpose in what they’re doing? How will their actions make them a better, happier person in the end?
Our why – our reasons for taking action on our finances – was to live a very traditional, simple life. One where Liz would stay home with our kids, where I would go to work, and where we’d live relatively basic, but happy lives. This doesn’t just happen these days. Not with the rising cost of education, healthcare, and the general cost of living. This future euphoria of ours wasn’t just going to fall into our laps by chance. It was going to take some very intentional planning.
But you know what? We were up for the challenge. We always are. 🙂
What’s Your Why?
Our ‘why’ was to get my wife home with our child, but this might not interest you in the least. Before you even think about moving on to step #2, you’ve got to figure out what it is that’s going to make you move!
What do you want more than anything else in this life?
- Retiring early?
- Working a job you love instead of one you dread?
- Setting your kids up with a beefy college fund?
- Or maybe, it’s just to have the option to do whatever you want down the road!
Find your ‘why’ and your drive will improve dramatically. Things will absolutely change in your life. Ignore this step, and your dreaded life will continue as usual…
Step #2: Getting Out of Debt
So….this is pretty much the opposite plan that Benjamin talks about here on this blog, but that’s okay. There’s more than one way to financial stability and independence. In fact, we’ve already mentioned four in this article alone!
When Liz and I met, we had roughly $20,000 in consumer debt and another $54,000 in mortgage loan debt (I say we…but we all know the truth…it was all mine). The payments on those debts totaled about $1,500 a month. Pretty steep on a $3,000 a month income.
Almost immediately, we decided to tackle this debt head on. I did everything imaginable to make a few more bucks here and there:
- I wrote articles for bloggers,
- mowed lawns,
- flipped some cars, and
- Liz became a pro at living on the cheap.
We cleared all of our debts in just two years! Suddenly, our payments went away and we didn’t owe a single cent to anyone.
How Much Debt Do You Have?
Step back for a second, grab a pen and paper, and start writing out your debts:
- Car loan – $$
- Credit card balance – $
- Student loans – $$$
- Personal loans – $
Total up the entire loan amount and then total up the monthly payments.
Pretty ugly, huh?
Now what if all that was gone. You don’t owe anyone a single penny and every dollar that comes into your account is earmarked for you – not a creditor, not the bank, and not the dealership – it’s all yours to do whatever you want to do with it!
It’s 100% possible.
Just enter your info into the debt snowball (you can find it in the related article above), figure out how much extra you could pay on your debts each month, and then take a look at how long it would take. I know it’s scary, but for most people, they’re actually surprised at how quickly they could get out of debt.
Step #3: Increasing Our Income
When we got out of debt, our drive didn’t stop. We knew there was more work to do to make our dreams a reality. We needed to develop some more income!
Our main goal: keep stock-piling money and use it to buy a rental property with cash.
Ha, yup. You heard that right. Not only do we go against the grain by paying off all our debts. Now we’re investing in real estate with cash!
On November 30th, 2015, we stroked a check for $81,000 and bought ourselves a fixer-upper – a 3 bedroom, 1 bath house in a pretty decent part of town. Today, just two years later, that property is worth $140,000 AND it’s improved our cash flow by $10,000 a year as well.
On top of this, Liz has started a photography business on the side. The dollars aren’t huge, but they’re something! And, I’ve got a bit of income coming in from my personal finance website.
Currently, we have just one day-job, but by working hard and constantly thinking of other ways to make money, we actually have four active streams of income!
How Could You Increase Your Income?
We decided to ramp up our income with a rental property, photography, and a personal finance website, but these avenues might not be right for you. Everyone has their own unique talents. All you have to do is discover yours and figure out how to make money with it.
Here’s some ideas that can get you started:
- Furniture refurbishing
- Singing or playing an instrument (for weddings, church functions, night clubs)
- Phone repair
- Website builder
- Buying cheap, selling at retail
- Cutting/styling hair
The list could really go on and on. Once you figure out what you’d like to do, tell everyone you can and just get started! If you do well, they’ll refer you to their friends and the ball will just keep on rolling!
Step #4: Constantly Re-Investing
While I believe that the first three steps are necessary to live a stress-free, balanced life, this step is the key to actually building wealth with it.
When I started mentioning our plans of renting out real estate a couple years ago, many people were supportive (which was nice), but I noticed a trend when it came to their comments:
“Rental income sure is nice. We had a rental to help pay for our kids’ college years ago…”
“We made a few bucks with our rental property – heck, it even helped fund our vacation – but it just got to be too much of a hassle.”
In other words, they all earned a bit of income, but they missed the most crucial step — re-investing with it. Most people just use the extra money to spend on depreciating assets, which really defeats the purpose of having another stream of income – and in my mind, it just wastes it!
Liz and I saved every penny from our first rental property. AND, we also stashed away as much as we could from my full-time job. Because we were so aggressive in doing this, we’ve already saved enough money to buy a second rental property. In fact, we’re closing on it this week! This will double our rental income and will allow us to buy a third house (with cash) less than two years from today – and remember, we’ve only got one full-time job!
When you constantly re-invest and let your money work for you, life just gets easier and easier.
What About You? How Would You Like to Have Just One Full-Time Job?
It’s your turn. Now you’ve learned another method to kick-butt financially, and it’s super simple to get just started and succeed.
- Just set a goal,
- get completely out of debt,
- build up some passive income on the side, and
- re-invest again and again and again!
Seriously. Anyone can do this. What are you waiting for?
Remember…if you do nothing today, nothing will change tomorrow. Make a change, however, and your future can be whatever you want it to be. Just continually drive toward your goals and you’ll get there!