My Story

The reason I decided to start this blog was to provide a forum where I can share my experience and my journey working through paying off a large amount of debt while finding ways to increase income to be able to reach financial independence and retire early.

I am in my early 40’s and really just started on this journey around my 40th birthday. I am an average middle-aged male, I don’t have a high income and I do have a lot of debt, and yet have found a way to make it work. I want to share that so others who are like me can see that an average person can do it, so you can too.

About Me

I make an average income. Have never had a six-figure salary from a job. My maximum has been about $55k annual gross salary with option to make a little more with overtime and bonuses. But not a significant amount. I am married with four kids. My wife has been a stay-at-home Mom most of our time together. She started working as a Real Estate agent about six years ago, but has also not been a super-agent, as she is still only working part-time to be able to still focus on our family. But even combined we have never made a six-figure income. But of course family insurance is expensive and living costs are high feeding and caring for a family of six. So actual take-home pay is minimum and we have gone through so many setbacks that we have slowly grown our debt instead of shrinking it.

At about the time I started the journey I will be sharing here, we had over $50k in debt, mostly credit card debt. And none of it was from consumer spending. We don’t have new, fancy cars, or nice furniture or electronics. We don’t eat like kings. It has just been slow debt build-up as we have had to at times put grocery purchases on credit cards, medical & dental expenses, and we did a big move a few years ago which implicated new expenses and restarting my wife’s Real Estate business. At the time of our move, total debts were about $20k. But have ballooned to over $50k in about three years. I have no idea how, but it happened. It is probably closer to $60k if we include our three oldest kids getting braces at about the same time.

The Breaking Point

My life seemed to be crashing in. We moved to be close to my Mother who has MS and we wanted to help care for her. Our housing costs doubled from where we were, although we needed to move anyway as we had outgrown that first house. The debt minimum payments had grown so much with more than doubling our total debts that I had no choice but to work as much overtime as I could. Luckily with the move my employer allowed me to continue working from home for them. That position allowed for overtime as well. So rather than getting a second job somewhere making less, I would just work as much overtime as I could to get extra money to pay our debts and barely get by. I was working 55-60 hours per week for several years. I was tired and burnt out and my body was taking a toll for sitting that long. I was getting depressed and I was not happy. I was not spending much quality time with my family. I would work from 6 am to 6 pm most days, get off work, then help kids with their homework, help my wife with her Real Estate business, help with things around the house, go to bed and start over the next day.I did not want to continue living like this. Life is not meant to be lived in a cubicle (even though I was not in a cubicle at home, but felt the same).

Through a strange series of events I was introduced to Real Estate investing. I had thought about it a few years earlier but never gave it much thought as I never would have enough to use for a down payment and couldn’t take the risk. Well, I started learning more. And the more I learned the more I realized that this could be my solution. I knew that where we moved to had limited working opportunities to get a higher pay with less hours. And we needed to increase our income to be able to help pay down our debts and stop them from growing higher. But how could I possibly save up enough to use for a down payment? I wasn’t even able to save anything with all the debt we had.

Creative Financing

During my steep learning curve on Real Estate Investing I learned of ways people can invest in Real Estate with little  to no money down. Sounds impossible right, well it isn’t. It happens all the time. But I didn’t think I would have the credibility or resources to get the “no” money down option. But I didn’t want to give up. Along the way I learned to have a mindset shift. I had to stop saying “I Can’t” and instead ask “How can I”? So that’s what I did. I realized that I had the ability to borrow from my 401k. Not withdraw, but borrow. A withdrawal would bring tax problems and fines that I didn’t want to do. But I could borrow with no fees or penalties but just pay an interest rate which gets paid back to me anyway. And to top it off, I found a local lender that would do investment property loans with only 10% down.

Through my research I discovered what would work best for me was a small multi-family property. This is a 1-4 unit property. 5+ units is considered commercial property and follows different rules. For my plan a single family house did not make sense. The returns would be expected to be lower and there was a higher risk for my expectations. I’ll discuss the pros and cons in a later post. But a 1-4 unit is considered residential and I found one on Craigslist that was at a low price that based on my calculations would cash flow very well. It was a four-plex. I knew the rents were low and I could manage it myself to save on expenses. And I would only need about $26k for a down payment. The timing worked out great. I had just completed my 40h birthday. We had just filed our tax returns and were expecting a nice chunk back. My wife had just sold a higher priced house and received a good commission. I wanted to be sure I had more than enough cash ready but also didn’t want to take more than needed from my 401k. I borrowed $20k from my 401k on a 5 year payback plan at I think 4.75% interest or thereabout, it was under 5% at the time. So total actual cash out-of-pocket was $6k, which technically wasn’t from any savings since it was partially from our tax returns and commissions just received on a real estate transaction. Plus the rents received and deposits were credited at closing so less cash was needed. I’ll also be discussing how to analyze a rental property in a later post.

Don’t get me wrong, this was a huge risk. We would not have been able to afford a failure. Most people would suggest you don’t invest in real estate or really anything until you are debt-free and have a strong financial position. But I knew I would never get there and the numbers on my calculations were excellent. I knew I could raise rents and they would be even better. Once I could get it stabilized it would cash flow at about $1,000 per month with me managing it and it was a fairly new building that was updated by the previous owner so there should be minimum repairs needed soon. I was still considering backing out the night before closing. I was scared to make a huge mistake. But I fought through the fears. I knew I had to take the first step and I knew the numbers made sense. I would be foolish to pass on this opportunity. So we continued. It has been the best decision we’ve made in our financial journey.

My plan was to not touch the cash flows but to let them build to reinvest in another. There were a couple months when money was very tight and I needed to pull from that account. So I paid myself a management fee and it helped keep us afloat. It was a lifesaver for that reason. And it was bringing in about the $1,000/month I was expecting. About a year and a half later, I was able to recycle those cash flows and buy two more four-plexes in another state. The returns were better and prices lower and I found another bank there that would do a low down payment. Once those are stabilized and rents raised they will also bring in about $1,000 per month of cash flows each, after paying the property manager. Now with an extra $3k per month of income I can now attack more aggressively our debts. Plus with over one year of property management experience of my own, I was able to start managing other properties for other people, creating another income stream. I had made a lot of connections with other investors and realtors and lenders during that year and a half and I continued to learn more about real estate investing and financial independence that I was becoming the local expert on these subject and people were coming to me. They bring me deals and I offer to help others learn. I had realized my dream in this time and set out a five year (or less) plan to be debt free and financially independent so that I could support my family on the real estate and other income and no longer have to work even 40 hours per week so that I could spend what little time I had left with my children before they leave the house.

Financial Independence

After purchasing the second and third properties together, I realized that I probably could pay down our $50k debt in about one year and potentially even reach financial independence in about two years instead of five. And I no longer had any fear about investing in Real Estate. We are still on that path but I know we will get there. Much of this blog will be dedicated to Real Estate investing as a major component of Financial Independence. There are many ways to achieve FI but I and many others strongly feel Real Estate is the fastest way to get there. I will discuss the reasons why in a later post. That’s not to say it is the only way to get there, but for a lower-income earner, especially with a high amount of debt, it can be our saving grace.

During my growth stages I tried to share what I was learning with my family as well. As a finance major I had always tried to be smart with my money, but when life happens you do what you have to do to survive. I didn’t want my kids to make the same financial mistakes so I wanted them to learn all that I had so they could start off better than I did. They understood and were appreciative of the information but I could not get them to read any of the books I had read. I even offered to pay them to read them, but even that would not incentivize them. So that is part of why I started this blog as well. To provide a place where they, along with the rest of the world, can learn from what I have to share and will have a place to come back to in the future when I am no longer around and in case I happen to die earlier than expected as my Father did and not be here to help guide and educate them.

I’m certain that most people are in a similar situation as I was/am and for that reason it is hard to relate to other personal finance people who talk about financial independence as being possible but they were earning a high six-figure salary. Doesn’t seem too hard to live off half your income when you make $150k+. So I speak for the common person and will share all the tips, tricks, and other resources to help others improve their financial situation to get moving on the path to FI in multiple ways to help you discover what works best for you. And at the same time hold me accountable for my own progress. I will be sharing my incomes, debts and overall financial position. I will do my best to answer questions or concerns and will also take advice from the readers. I want to provide what people want to know. I hope to get more young people involved as well from the early teenage years so they can start planning early in regards to schools and scholarships and how to avoid the pitfalls of the late-teen/early-adulthood that get you into debt. I want nothing more than to help others feel good about themselves and move toward a better financial position than where they were when they started. It is easier to walk the path of FI together with the support of other like-minded people. WE CAN DO IT!