Three especially important things happened to our family last year:
- Our fourth child was born.
- We went broke.
- We started our debt-free/FI journey.
It was a big year.
2017, A Year of Reckoning
In April 2017, Señor Firelit and I sat down with our accountant to do our 2016 taxes. At the end of the session, we realized this: come tax day, we would owe $23,000. To our names, we had
- $3000 in our checkings and savings combined
- $10,000 in a 401k
- -$110,000 in student loan and credit card debt
- three, almost four children, ages 1-4
So…not enough to pay our taxes. We were in a tight spot.
Other than our old Hondas, we had no meaningful assets. In fact, we were living for free in my parents’ basement. Originally we'd moved there to help us become debt free or save for a house down payment, but then we stayed because we couldn't afford to live anywhere else.
How had this happened??
Debt Plus No Income = No Bueno
Señor Firelit and I had taken jobs at a particular law firm because of its unusual business structure. It had no billable hour requirements (except, if we wanted firm funded health insurance, we had to bill 1500 a year). It allowed Señor Firelit and me to job share (which we did, roughly 2/3 his time and 1/3 mine).
In exchange for this flexibility, the firm did not guarantee a salary but only paid us a percentage of what it collected from our clients on the work we did. On the amount we received, we were obligated to pay taxes as independent contractors. All of this sounded totally reasonable and was mostly doable until our clients stopped paying.
Without meaning to, my husband and I each worked for some number of months on cases for clients who turned out to be slow (or were unable) to pay. This meant that in the face of our expenses for a family of four, plus our sizable student loan payments ($1700 per month), our upcoming tax payment, and mounting medical expenses–our paychecks were small. Sometimes a couple of hundred dollars, or a couple thousand. Sometimes nothing. So between December 2016 and April 2017, we ate through all of the money we’d saved for our 2017 tax payment (which wasn’t enough anyway), plus our savings.
A Terrible, Horrible, No-Good, Very Bad Payday
I remember one night we got a paycheck that was for $600 or something (pre-tax). It was supposed to have been for thousands more, but one of Señor Firelit's clients had called last minute and asked the secretary to wait to run his credit card until the next business day. For the client, it was a one-day delay. But for us (because of the firm's billing/payday schedules), it meant we had to wait three weeks for that money. And now we had no money for gas, groceries, medical bills, childcare, or our mandatory loan minimums.
I sat on a ratty armchair in my basement apartment and wept. I remember thinking, “If I were a little more emotionally unstable, I would find that guy and hurt him.” I was angry. I felt like I understood why people sometimes do desperate things for money.
2017, A Year of Ramsey
Clearly, I was hungry for change. Of course through googling I quickly found Dave Ramsey. On my first day listening to his podcast, Dave Ramsey said one of his signature truisms: “When the tide goes out, you can tell who's been skinny dipping.” That was us!!
So we did what Dave said. We cut up our credit cards. We had yard sales. We sold my car. I sold clothes on Poshmark and books on Amazon. And we made our tax payment!
Then we decided to tackle our debt head-on.
Like so many, with Dave Ramsey, I began a financial journey that has changed my life and my family’s lives.
But after googling and thinking and reading and working, I’ve realized that I want more than merely to be debt free and “build wealth.” I want to live the life of my very own dreams! I need financial independence to do that. That’s why I’m here.
Our family plan is now this:
- Get debt free
- Get financially independent
The goal of financial independence has provided a light at the end of the debt-free tunnel. And when I feel despondent about the difficulty and length of our debt free journey, I look to FIRE and feel motivated again. I am FIRE-lit!