Whether you just received a stimulus check, your tax refund or a bonus at work, it’s probably burning a hole in your pocket. What was the first thing you did after seeing the new balance in your bank account?
Did you swipe over to Amazon and start scrolling through your Save for Laters to see what you could buy next?
Are you planning on a mini shopping spree for new clothes, home decor or something shiny?
Have you started booking your next vacation or looked into a new vehicle?
Maybe you’re preparing for your next renovation project or elective surgery...
No matter what you WANT to spend your money on, if you’re a small business owner, it might be wise to think about it for a while. If your income is inconsistent, planning ahead for slow periods, unexpected health problems, family emergencies, unanticipated maintenance for your home or vehicle, global pandemics, economic recessions and life’s other expensive surprises insures your future self will be thanking you later!
Growing up, I learned a lot from my family’s business. One of the most impactful experiences in my childhood was learning to answer a prehistoric landline to dissuade bill collectors calling to remind my parents of their past due balances.
SPOILER ALERT: they were already well aware, and these calls only served as a stress inducing reminder that they were struggling to get by with one income from a family-owned small business.
I always thought to myself—‘I want to be really successful and have an awesome job so I can pay all my bills early, never use credit cards or get loans and enjoy vacations, shopping and fancy meals without feeling guilty.’
As I grew up, I realized even a college degree didn’t guarantee this kind of stress-free financial lifestyle, quite the opposite actually. But no matter how much debt I accumulated trying to live like I had my life together, or how small my income was, my goals never wavered.
My goals always consisted of:
Paying off all of my debt.
Never talking to a debt collector on the phone again.
Traveling and living without worrying where the next dollar would come from.
Here’s how I paid off ALL of my debt, bought my own house with one income and developed my sustainable, cash-rich lifestyle.
The Downward Spiral of Becoming Debt-Free
Let’s clarify a few things first. My debt started in college with credit cards. Once I had enough credit and enough debt, I thought it would be wise to get a line of credit at the bank to consolidate my debt and pay one bill instead of dealing with 5-7 every month.
I chose a small, in-state college where my efforts in high school and my family’s low income granted me a free ride. I actually got paid to go to school. Ahhhh, the glorious memories of “check change” rolling in each semester!
Around the middle of my junior year, my debt was out of control, even after the line of credit consolidation strategy. I paid off those credit cards, but then I maxed them out again on top of completely using up my line of credit from the bank. So, since I didn’t learn my lesson the first time, I decided to try again. I stopped in the financial aid office on campus to see about taking out a student loan to consolidate my debt. I was approved, and I felt so smart.
Of course, the moment that money came in my first instinct was to go do a little shopping, then pay off my credit card balances and visit the bank to get flush with my line of credit. That money was gone in a few days, and my part time job was not enough to sustain my frivolous spending habits.
I started using my credit cards again, and quickly found myself approaching graduation and the onset of student loan payments with no job prospects and no money to relocate after the school year ended. Luckily, my family helped me get on my feet when I decided to move out of state and start my life in the real world in a new place with a fresh start.
The struggle continues as I continued to tread water paying off my debt with what felt like so much money as a first time, full time employee working for a double digit hourly wage. When you’re used to earning minimum wage with a few annual 50¢ raises stacked on for sticking around a retail job for several years, anything beyond $10 felt like success. But like P Diddy said, ’Mo money, mo problems!’
My debt kept getting paid off, but I kept buying more stuff too. When the recession hit in 2008, I lost my job and started learning how to live off unemployment. I took my job loss as a sign that I was meant to be self-employed. My first full-time adventure in entrepreneurship began.
I decided making jewelry to sell on Etsy would be my new beginning in business. Quickly, the over saturated market in this new online marketplace revealed I was not the only creative entrepreneur with this idea. I started posting a few of my thrifted vintage finds in my shop, and things shifted almost overnight. They started selling fast, so I switched gears and began listing more flea market finds and thrift store threads.
My business brain knew the higher margins, the lack of direct competition and the demand from this niche market was a recipe for success. I rebranded and started reinvesting my sales income into more inventory. 6 years later, my Etsy shop shipped internationally, doubled all of my numbers consistently every year and felt like my ticket to financial freedom.
Then, life got interesting. In a matter of a few months, I moved back to my home state, started working retail full time and stopped focusing on my vintage fashion venture. My priorities shifted and the inventory felt like a burden. Our living space shrunk to a fourth of what we were used to and my new job and the short amount of time I had after work was dedicated to my young son who was still struggling with potty training.
After accepting a higher paying, yet more time consuming job, my hopes of Etsy Success completely dissolved. The per diem and mandatory overtime cheered me up, not to mention the new weekly pay days. I felt rich and ready to finally finish paying off my debt so I could buy a house.
Steadily, I paid off my credit cards and started cutting up retail store cards. I focused on paying off the accounts I couldn’t use again once they were paid off to break the cycle of maxing out my previously paid off accounts. This seemed to work, but I was still wrapped up in spending instead of saving.
My philosophy was ‘you can’t save money while you still have debt. That money saves you more by eliminating interest instead of earning interest.’ It’s not wrong, but it’s not entirely true, even if interest rates for savings accounts are complete crap.
Regardless of my flawed money mindset, I eventually paid off several student loans and the majority of my credit card debt. I had about $12,000 left. Then, I was laid off and started receiving low earns/unemployment again.
I was fortunate enough to be living rent free with a car my dad had paid off for me. Unfortunately, he had passed away about 7 months earlier leaving me without any sort of financial safety net if I found myself in yet another costly crisis. It was time for me to really grow up and learn how to leverage all the knowledge I gained paying off debt, budgeting and trying to work towards investing in a more stable future.
Since the major bills like rent and a car payment weren’t a problem, I strategically focused my efforts and my limited income on pre-paying monthly bills to create a cushion. I knew you can save money by avoiding late fees and you also get some discounts when you pay things like your car insurance in advance. Buy 5 months, get one free sounds like a bargain to me! The peace of mind you’re afforded just by eliminating a few monthly bills is illuminating!
Soon, there was flexibility to start paying off more debt since my only other expenses were food and basic essentials like occasional toiletries and cleaning supplies. We even got to celebrate Pizza Friday’s again—delivery, not DIY! We didn’t have much, but we had enough. With my excessive spending laying dormant and my perspective shifting to what truly matters in life after a loss and the hard earned advantages of digging into grief to heal—life finally felt promising again.
Feast or Famine for the First Time Homebuyer
After my unemployment ran out, I found out about a new position at my old company. Soon, I was working mandatory over time, making more hourly, but my per diem was off the table. Instead, my commute was eliminated, so I only had to drive 20 minutes round trip to work instead of 1.5 hours, which saved me time, gas and maintenance on my high mileage vehicle. It felt like a decent trade off.
I had a better grasp on my budget. My debt was below $10k, and my weekly income, plus the absence of those big monthly expenses—rent and a car payment—meant I could throw as much money as possible at my debt and really double down on trying to buy a house.
We started seriously looking for a new place to live while I meticulously updated an excel spreadsheet each week after receiving my paycheck and promptly paying down whichever bills I had ear marked to eliminate next.
At first, I focused on paying off the tiny, quick win accounts to build momentum and knock out the easy balances under $1k. Then, I was down to 5 accounts. I was using the snowball method, but I still allotted slightly larger payouts to the accounts I was maintaining instead of paying the monthly minimums. Mainly, I did this because I get quite OCD about numbers so I liked having balances in $25 increments while $50 or $100 balances looked even more satisfying.
EXAMPLE: I’d pay $77 towards a $1277 account even though the minimum due was only $24. Paying $27 would bring it to $1250, but if you’re gonna do that, why not pay the extra to see those glorious double zeros and feel that much closer to financial freedom?
Instead, I should’ve used the extra $50 towards the $4963 balance I was focused on paying off because it had the highest interest rate. Or even towards the $785 student loan I’d be free of for good once it was paid off. I still occasionally used my credit cards when my bipolar disorder sent me on a manic “treat yourself” shopping spree or a depressed retail therapy trip when I’d get triggered by setbacks or circumstantial grief bubbled back up.
Eventually my income outweighed my broken spending habits and the costs of my mental health. We found the house we wanted to buy. My debt was under $5k, and my credit score was only 30 points away from qualifying for the loan I needed to become a first time homebuyer. I felt like a grownup. I felt like I had figured it all out. I felt like my dad would be really proud of me and what I had accomplished. I felt like I finally had my shit together.
My credit score hit the bullseye and as soon as I reached out to my realtor and my mortgage broker, I learned our dream house was under contract and on track to close soon. It was a punch to the gut. We started house hunting again.
Within a month, a house we previously fell in love with the year before, only to quickly watch them take it off the market before we could go look at it, was reposted at a lower price! I immediately scheduled a visit and put in my offer while standing starry eyed in the backyard before we left the property. After some negotiating, I was under contract and saving up my down payment.
It took 3 months and a lot of extra overtime, but I managed to pay off more debt, cover all the costs of buying a home—earnest money, inspections, appraisals and fees—and save the rest for my down payment. The whole time, I didn’t buy anything else but food and gas. It was so hard not giving in to the excitement and buying things here and there for the house. But I told myself once it was a done deal, I could buy whatever I wanted once those keys were in my hand.
Maybe I should’ve been more specific about this spending stipulation, because within a week of closing I maxed out 2 credit cards and got a new one at Lowe’s to dig into redecorating and renovating my new house. I thought, ‘oh, I’ve been so good, and I have a great pay off system. This is a good investment and the rewards will be endless when I come home from work to my beautiful home, sweet, home!’
We painted more than half of the 2500 square foot farmhouse, including the ceilings in most of the rooms, invested in ceiling fans and fancy tile to redo the downstairs bathroom. We quickly burnt ourselves out on projects, got everything moved in and shifted gears towards buying stuff to make up for all that lost time not buying stuff so I could buy the house.
6 months and $6500 in new debt later, obviously not including my new mortgage ($160k) I found myself laid off and collecting unemployment again with no intention of returning to the high paying, severely unsatisfying industry that had taken a huge toll on my morals and my health.
Once again, I thought it was a sign I had to dig into being my own boss full time again. Only this time, I had a mortgage to pay for and almost no income to get my business started. I had missed my old Etsy days, and remembered my favorite part of the experience came a few years in when I started networking with other local makers, creative entrepreneurs and Etsy shop owners.
We’d meet in person or talk online or for hours on the phone about our businesses. We’d share knowledge and I quickly found myself giving them tips + tricks I had learned along the way to drive down my costs, increase my brand value and reach more online traffic with less effort. Helping them with their business was more satisfying than working on my own business. I decided to try using my marketing degree and my long history of teaching others to make a living as a business coach.
Cash is Queen
Quickly, you realize how overwhelming it is to be seen and heard online. It takes a ton of time and effort to maximize your exposure until you get the formula right.
During the last year and a half of my job, I had been investing in a bunch of online courses and resources for my business venture without really knowing how to monetize it or serve a good niche who was willing and able to pay for my offerings. I wasn’t completely sure what those offerings should be—coaching, online courses, books, products, in-person workshops, or some combination of all the strategies I had been studying.
One thing I did know was the vast amount of free information out there wasn’t going to help me get rich, it was distracting, it was overwhelming, and it was slowing me down! I needed to cut the fat. I had to build a lean, mean business machine.
This time I would create a sustainable business with a lifestyle that reflected my knowledge and past experiences while focusing on my ideal future without compromising the things that matter most in the present moment.