To recap: we’re drowning in hundreds of thousands of dollars of debt, have negative equity to show for all our work and money spent, are running a negative monthly budget, and need to fix this fast! We began reconsidering the things we had bought and were still paying for on credit and whether these were really necessary or just wants. Outside of our house, which I’ll come back to, our most expensive purchases were cars.

We initially thought like most parents do when they have kids, that we needed to have new cars because they were safe, reliable, and nice; and we wanted to provide our kids (and by extension, ourselves) with “the best”. But safe and reliable aren’t mutually exclusive to new cars. Used and less expensive options can provide the same qualities as new, nor is a “top of the line” brand necessary for great reliability (read my 2009 Honda Fit post for some anecdotal evidence of this). By now, the initial excitement from having new cars was gone, and they had become just “our cars”. The realization hit that unless we planned to buy a new car every year, we had better get over not having a new car! We also realized that our kids, especially when they’re young, certainly don’t give a crap about what vehicle they’re riding in. All that mattered was if it got us where we needed to be, reliably and safely.

Delving into our spending habits beyond cars, we realized other brand name gear and fancy stuff that we seemed to care about didn’t have to be new or the most expensive to do the job, and we certainly wasted a LOT of extra cash on other stupid purchases. Being honest, top brand names are about marketing and only meant to impress others, and there’s usually an option for half the price that works just about the same. Any issue of Consumer Reports shows plenty of evidence to support this. Our daughter certainly didn’t care about brand names; she was an infant, and until later in life when peers entered the picture (you know, the ones that need to boost themselves or try to make others feel shitty about their “lack of”), we had nothing to worry about. In fact, as parents, we owed it to her to show that material things didn’t matter in this world and that brand names and insisting on always buying new are only bullshit to impress others.

So all the crap that had us buried in debt, didn’t matter at all, and the asinine facade of trying to impress others and keep up with the Jones’ ended for us. Within a few months, we had sold my wife’s motorcycle (that she was no longer riding anyway) and both new cars, and we purchased a 6-year old Dodge minivan for $7000. While we only had about $3000 from the vehicle sales combined after paying off the loans, we were able to borrow the remaining money at 0% interest as an introductory offer on a new credit card. As planned with our improved cash flow, we were easily able to pay it off within the year before interest kicked in! We started focusing on value when a purchase was needed and were more willing to accept hand-me-downs. These changes alone greatly improved our finances, but it was just the beginning.

The new education I was getting via audiobooks on my hour long commute together with having a child brought a new attitude about the value of time, specifically the time I gave my previous and current employers, each of which required an hour plus commute each way. The reason we initially accepted that commute and built the house we did was because it was a great new home that we wouldn’t be able to afford if it was closer to our jobs. When we purchased the house, we both had hour long commutes each way, but we were so enamored with a new house that it didn’t matter. Again, we thought this is what good parents should do, buy the best stuff they can for their children, and we certainly had this in mind when initially agreeing to build a new home. But the reality is that a child’s best life isn’t about things, it’s about the love and memories parents provide; and the more time, not things, that parents can give to their children to create great memories with them, the better their children’s lives will be.

A few of our discussions at this time centered on remembering our childhoods and that we both grew up in typical middle class homes. As we started seeing our house as a liability that robbed us of wealth building potential, we discussed whether a new 2100 square foot, 4 bedroom, 2 1/2 bath house was really necessary. I had grown up in a similar size home, but one that was older and a little rough around the edges. My wife had grown up in a smaller home of similar age and condition, but neither of us had ever wanted for more or felt our homes were a detriment or hindered our ability to feel safe. They were our homes, and we came to realize that no matter the age or what the outside or inside of a house looks like, it is family and memories that make a house into a home.

It took almost a year after my daughter’s birth, but we finally decided to put our house up for sale and rid ourselves of the $2100 mortgage payments. While we initially had kept my motorcycle since it was paid off and saved on the monthly gasoline bills, a few months after listing the house we sold it too since I was riding much less, frankly fearful that I was one bad or angry driver away from my daughter being raised by a widowed mom.

During this time, I was reading a lot of the Rich Dad, Poor Dad books and thinking that real estate may be our ticket to getting out of debt and the rat race for good. I started imagining our path; buying a fixer-upper house to build equity and purchasing rentals with our newly found savings. While this initial plan wasn’t followed to a tee, it turned out to be HUGE in our financial turnaround and my early retirement.

Coming Next – To Sell or Not to Sell