A Little History
We live in an uncertain world and we have for a long time. Those of us who are millennials don’t even know what job security is outside of something we heard or parents and grandparents discuss as part of the “good old days”.
As a young adult of the great recession, my introduction to job uncertainty came early given that I graduated in 2007 and launched a financial services career. While I landed a full-time job within 2 weeks of graduation, I did not have a chance to celebrate my 1st anniversary when Bear Sterns crashed and lay-off started quietly happening. Initially it was nothing to worry about as upper management targeted poor performers and those with questionable attendance records. However, as 2008 progressed and interest rates went on wild roller coaster ride, the Lehman crash came a few short months later, things got real.
The stock market crash increased the urgency to mitigate losses and the leadership began to run out of bad performers to terminate. It seemed as though every week, someone would get a tap on the shoulder early Monday morning and we’d never see them again. Things got so bad that I would talk to my mom on Friday afternoons and I would say: “Another week, another paycheck. I don’t know if I’ll survive next week, but they at least owe me a week’s worth of work.”
Even then it didn’t hit me that something was wrong with the way I was living and that I had to make a change. I was preoccupied with saving for a house, establishing my career and working on building relationships. However, once I bought my first home, I knew that I had to do anything I could possibly do to keep it. I invested a lot of money acquiring the house and I was moving away from a less than desirable living situation. That really opened my eyes to the changes I needed to make.
The Roommate: I knew that I could live on the money I was earning because I made sure to not over extend myself with the house purchase. However, I also knew that I had way more space than I needed and I should find a way to maximize it all. My first order of business was to get a roommate. After negotiating on rent, we settled on an amount that totaled 45% of the housing costs (mortgage, HOA dues, all utilities). She did not know that as she was simply negotiating what was in her best interest, but it worked out very well for me. I was the sole owner of the house, building equity, reaping tax advantages of home ownership and paying less than 60% to enjoy all of that.
Retail: But the roommate benefits did not end there. Shortly after, I found out that she was the manager of a retail store that sold expensive items (I’m being purposefully vague). She had a lot of personality issues (she turned out to be a total bitch) and had constant turn over on staff and I saw an opportunity there. At the time, my then boyfriend (now husband) was in the military, stationed a few hours drive away from me and we were limited on when we could see each other. It did not make any sense to just be at home all day doing nothing. There are so many times we can get on Facetime with each other just say “watchu doin’?”. Her and I talked and I got myself a side gig at the store. I was grossing between $700 and $1,000 a month working Saturdays, Sundays and the occasional holiday. I got a buck over minimum wage plus commission.
Having a paycheck that was going right into savings was addictive and I was hooked! That was the missing piece from my life back in 2009-2010. The peace of mind that an extra stream of income brought really changed my perception of money.
Marriage: My roommate and I eventually clashed as she did with everyone else at the store and I lost that source. She also moved out within a month of me quitting and I also lost that source of income. But by then, I had built up a nice cushion of savings and I was well on my way to bringing my bank account back to pre-down payment levels. However, 2 months after that departure, my husband turned in his DoD issued equipment and drove a U-Haul bursting at the seams down to Massachusetts and just like that I had a dual income household. When he came, he brought 2 streams of income with him. He not only got a job within 3 weeks of leaving the military, he also collects a pension from his time in the service.
Rental Income: Not long after we got married, we found a good deal on a house. The elderly couple who was going through a divorce, simply wanted to shed the last thing they had in common and we took full advantage of that. But that wasn’t our only big decision. We still had to decide what we would do with the condo if we couldn’t qualify for a loan with the condo loan on my credit report. Through some miracle, we were approved and decided to rent out the unit. I began advertising the condo for rent as soon as the closing date was set. On the morning we closed, we came home with both our integrated loan disclosure and a signed 1-year lease for a rental amount that was $300 more than the operating costs to maintain the condo. Not only could we continue to reap the benefits of home ownership, on one of our properties, someone else will be building up the equity for us.
Investments/Savings Dividends: We are certainly very diversified in our investments. We have money in real estate, stocks, mutual funds, high yield CDs, peer-to-peer lending. We are finally starting to see small cash payments from our non-retirement investments unrelated to real estate. Recently we started seeing some cash dividends from various sources being deposited in our accounts.
Raises: While these don’t count as additional income sources because they are from the same source we’re looking to reduce our reliance on (9-5 paycheck), their power cannot be denied if used wisely. We both were blessed enough to receive material raises over the past year and what we have chosen to do with that income has made a great deal of difference in our lives. Instead of inflating our lifestyle, we used the funds to accelerate debt payments, mostly my student loans as they are the ones with the highest interest rate. While I don’t consider pay increases from our day jobs as an additional source of income, I believe that the way we used them to reduce our debt and increase our savings rate should have a similar effect on our peace of mind by reducing our burdens and giving us one less thing to worry about.
Although I will stop there, this is not the end of the list. I will come back with Part 2 to reveal additional income sources, how we got them and how we’re putting them to good use.