How to Lose Your Savings To A Lawyer And A Mechanic

2013

Starting net worth: $9,000

Income

Leslie: $21,500

Ben: $28,500 finally hired as a full-time teacher, stop all other side gigs (except tutoring).

The madness of my work schedule in 2012 taught me to find a better way to approach work. All my life, my family had tried to instill a strong work ethic in me, but I think they were off the mark just a bit. See, to my parents, success came after hard work. Sometimes it came after grueling work. When things got bad, you worked even harder.

But 2012 taught me that working harder is not the answer. At the risk of sounding like a cliche, 2012 taught me that I had to work smarter, not harder. I needed to increase my efficiency. I needed to decrease the amount of time I actually spent working.

This was doubly true, now that my daughter was about to be born.

How We Saved Money

This was the year of ‘pay yourself first’. This is probably the best advice will ever hear on saving. ‘Pay yourself first’ means this:

The moment you get paid (we get paid once per month) transfer a chunk of money out of your normal checking account and into a special account. This special account is only for your spending goal and nothing else.

So we created a second checking account at our bank and called it “Home Account”. Then we set up an automatic transfer to move a pre-set amount of cash into it each month.

Here’s the beauty of this system: You never miss the money. You never see it come into your account. You never see it leave. You painlessly adjust to having slightly less money each month. This guaranteed a steady flow of cash to keep fixing the house and we noticed no change in our standard of living, even though if I remember correctly, we were setting aside something like 40% of our take-home pay.

We needed to save and renovate at this high rate because we were racing the clock. We had to be out of the apartment by August. And our daughter was due in April. And we needed to get out from under that high-interest loan.

Our daughter was born in April.

We moved in at the end of July.

How We Spent Money

We hoped to have a mortgage in place within the year to get out from under those high-interest loans, but a lein on the property prevented this. We had purchased title insurance when we bought the house–thank God–but it was still a nightmare to get the insurance company to pay. We ultimately had to hire a lawyer to dig into it who charged us about $2,000 for maybe two hours of work. This, and a new transmission in my car, cleaned out the last of our emergency fund.

So budgeting had failed us entirely. I mean, how do you budget for stuff like this? In the end, budgeting will save you a few dollars here and there, I’m sure. But life throws serious expenses your way. Two hours of work from our lawyer wiped out almost all of the money we had saved in the previous year. Budgeting caused us an enormous amount of stress and led to no gain whatsoever.

But we ultimately got our house appraised for about $160,000. We took that mortgage, paid off the high-interest loan, and opened a Home Equity Line of Credit.

If it sounds like this was a good investment, it was not! It looks like we bought a house for 60k and it was worth 160k, a profit of 100k. But that’s illusory. Our ‘investment’ is costing us interest and we still have repairs that need to be done. Even over time, the house will probably not appreciate faster than the interest on the mortgage.

Would we do it again, knowing that it was not a good investment? YES! Financially, there are some bonuses, namely that line of credit and a tax deduction on interest.

Non-financially, we live in a beautiful valley. We have a large, beautiful yard, about an acre with a stream. From my living room window, I look out on a ranch that boards horses on one side and a two-million-dollar mansion on the other, and in-between great rolling fields that turn into literal amber waves of grain each fall.

So, just like with our honeymoon, many financial experts will shame us for this. But it was so worth it. It’s not about money. It’s about quality of life.

Other spending: Car loans. Baby stuff. So much baby stuff.

Assets

Equities @ Cost: $0

Cash/Equivalents: $0

Ending net worth:

$0

On to 2014 ($0 – $2,000)

Back to Income Reports

Closing Thoughts

Another priceless lesson learned. Hard work and hustle can lead to nothing.

The world doesn’t owe you a dime just because you work your tail off.

But hard work, hustle, and intelligence… That might be worth something. Stay tuned.

The second prong of our three-pronged strategy is right around the corner.

But first…

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