Beginning in 2009 my world started crashing down around me, my income was falling and my debts were raising. I was in trouble and I knew it and by 2010 I was bankrupt. It wasn't just one problem but many obstacles, one after another that got me where I was. I'm not blaming anyone but myself. If I had done a few simple things none of this would have happened. However, at the time I did blame the Banks for my troubles.
I'll back up a bit, in 2002, I started working in Real Estate as a Broker. I had been a software
developer but after the Dot Bomb (Com) failure in the early 2000s, there weren't a lot of IT jobs so I just switched to real estate. It wasn't long before I started making as much in real estate as I was in IT and in a few years a lot more. I was doing well, in 2004 I started my own real estate brokerage, and in 2006 purchased a house in a commercial zone and converted into my office. Things were good, my own business, my own office, and a 6 figure income.
Most of you reading this know where I'm going with this, by the end of 2008 my income was about half of what it had been. Next, the credit card companies and banks began reducing credit limits or stopped lending altogether and increasing interest rates. I had never missed a payment but my credit lines got cut from $100,000 down to about $16,000. My interest rates rose, in one case from 7.99% to over 36%. In real estate sales, there are always ups and downs and you need savings or a line of credit to survive the down times. I had some savings, about 3 months worth but looking back it wasn't nearly enough and with no credit lines to fall back on the downward spiral had begun. My cash flow went from positive to negative very quick as my income decreased and expenses increased and my savings disappeared. The next thing I lost was sleep.
I started looking for a job in IT and found one near the end of 2009 but by then it was too late. My debt was too large, savings gone, and income 2/3 of what it was before. Ashamed and embarrassed my wife and I filed for bankruptcy. It's humiliating sitting in a huge room full of other people waiting to be questioned by the court about your financial affairs. I just wanted to crawl under my chair.
If there is only one thing you learn from my experience then I hope that it is to have an emergency fund. If I had had that, my situation would have been very different. It's been a long road but today I can say things are very different for me. I do have 12 months of emergency savings, my net worth has gone from a negative $800,000 to a positive $750,000, and I have a passive income stream. My next goal is to grow my passive income stream to equal my current salary. I already consider myself wealthy but once that happens, I will consider myself financially free too.
If I can do it so can you.