When the imminent birth of your first child is around the corner, whether you planned them or not, odds are that your mind goes a little crazy. You wonder about how to take care of them, if you will be a good parent, and probably whether or not you have enough money to support another life in your household.
If you are like me, you mind goes a lot crazy.
The Story of My 2016 Downward Financial Spiral
Our New House
We planned to have our daughter, but even so, you cannot plan for the mindset you go into as the due date draws near. To show you where my mind was, I have to backup to the fall of 2015 to explain our financial situation then.
We had just gotten married that summer, and were ready to buy a house and get our lives started. Within two weeks of starting to look we had found the house for us, and put in an offer that was accepted. After a month of fighting with the lender who kept telling us we were border-line not able to get the house because of our debt-to-income-ratio, we signed the papers.
One of the things we had to do in order to get them to accept our application for the loan was pay off my wife’s car, which had $4,500 left on the loan. This tipped our debt-to-income-ratio just enough that they accepted it. This with adding a much-needed new garage door (the garage had stable doors on it) completely wiped out our savings. At that time we literally had less than $100 in the bank.
Since we had already been trying to conceive by this point, there was no turning back on that decision, and we wouldn’t have wanted to. What they say is true. If you wait until you are financially stable to have a kid, you will never have one.
The Loan Winter
This left us with basically no money as winter hit, and with winter always comes more expenses. Higher utility bills from running the furnace. Less income for me because it was off-season for weddings, and I filmed weddings on the side at the time. Winters are much harder than summers.
By the time January rolled around, we getting through by the skin of our teeth. I was enrolled in my MBA program, and it was time to take out the next set of loans for the next semester. I remember breathing a huge sigh of relief when the loan disbursement came through.
Not only did I use the money for classes, but I maxed out the amount of loans they allowed me to take in order to help pay bills and get through the rest of the winter.
Feeling relief because you are going way farther into debt isn’t a good solution here folks.
Mistakes in Business
As wedding season rolled around, my mind began to spin on how I could scale my business to the point of being able to stay home with my family and still run a wedding videography business, which required frequent travel to meet clients and film the wedding. What followed was a string of bad decisions to try and scale too quickly.
I started by making my company an LLC. I didn’t want to be sued, and forming an LLC made it easier to hire employees. LLCs in Illinois cost $600 at the time, plus the $99 per year for the registered agent. Now they cost $250 to form, but that is neither here nor there.
In order to raise the money for the LLC I “Borrowed” money from my business by offering clients a 5% discount on their wedding video if they paid me now. This pulled in several clients, and I had enough to for the LLC. The problem this created was that I haven’t been able to pay myself in the business since, as I am always playing catch-up from making that move.
So now I was working in a business that I wasn’t being paid for. I decided that I needed employees, and thus needed a payroll system. I paid for Quickbooks for several months, which isn’t cheap. I set up jobs on Indeed to try and find videographers, and I started paying the state for Worker’s Comp fees on employees I didn’t have, which is insanely expensive. I did this because I thought that I was an employee of the business, and I had my cousin in line to be hired as well.
Turns out that being an owner means you are a member of the LLC, and you don’t have to classify as an employee. It was also easier to just hire my cousin on contract when I had work for him. So that was a ton of money down the drain for failing to scale.
There were various other mistakes in misplaced advertisements and spending money on other business ventures that weren’t wedding video related, namely starting up a crowdfunding site that never took off, but the biggest mistakes are mentioned above.
Preparing For Baby
On top of all my other financial debacles, we decided that we needed new vehicles to prepare for my daughter’s arrival. We had just paid off my wife’s 2 door car the previous fall, but that was the problem, it was only 2 doors. I was driving a tiny Chevy Spark, and so we thought we needed new cars to prepare.
I took a beating in selling my car, because greedy people take advantage of people in desperate situations. I paid too much for the Ford Focus I got to replace it, and I needed to get rid of it ASAP.
My wife’s car deal was worse. It turns out in 2014 they switched the body model of the Chevy Impala, and hers was the model worth less. I made the mistake of asking the car salesman why the car was listed at the lower price that it was when it was Blue Booking for more. I had quoted the wrong model. He smiled to my face and laughed all the way to the bank. We traded the paid-off car in the deal for less than it was worth.
4 bad car deals later we had 2 baby-ready vehicles. On top of this we had to decorate a nursery and buy other odds and ends baby stuff like cribs, bouncers, pack-n-plays, a swing, bottles, pacifiers, bibs, and so much more.
Needless to say my head was spinning all year.
What I Learned From All This
While I hope that you aren’t in quite as bad of a predicament, if you are reading this post odds are that you are in some fort of financial situation that you are hoping to fix. If this is the case then welcome. You
Even though I am no financial expert, I feel that I have some valuable experience to share from all of this that may keep others from getting into a similar situation. If you are interested, I have a book coming out this fall about my learnings from my year of financial crisis titled “Parent’s Guide to NOT Going Broke”.
I would love for you to keep in touch and receive news on my upcoming book, and I’d love to hear any feedback or stories you have of your own financial crisis as well.
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