I was in a car accident last week, and learned yesterday that my car was totaled. I can still feel a hint of tightness in my wrist as I type this and occasionally pick the scabs on my leg from the scraping of the emergency brake pedal, but on the whole I came out of the situation extremely lucky to be unharmed (my passenger and the other driver were fine as well). At the same time, my financial picture completely changed in the matter of a split second of the other driver running a stop sign right in front of me.
I was doing this ride to make money. Ever since leaving my job last year I have been driving for Uber as a flexible way to cover my expenses while starting Mindful Cents. It became one of the most enjoyable things I’d ever done to make money, and I enjoyed serving as a multi-purpose designated driver and tour guide of our beautiful city. It also served as a great networking opportunity and I was able to meet many of our neighbors that I had I likely would have never met otherwise. The flexibility was a great perk to be able to earn money at times that worked best for me and not need to re-arrange schedules to accommodate for fun events, vacations, and our dog boarding side hustle, among many other things. I always knew that there was a big risk that came with being out on the road more often and that it could all end abruptly, but odds were it wouldn’t happen to me, right?
Fortunately, there were a series of good decisions up to that point that mitigated the financial impact of the event that can translate well to many situations, most notably the current COVID-19 situation that has brought our economy to a screeching halt.
The debt I have incurred in my life instead has been applied to an appreciating asset. I bought a condo a year into my working life in 2013, when prices for buying real estate in Florida were admittedly extremely favorable. Due to life circumstances I only lived in the condo for one year before renting it out to tenants, where it has since made me money while I slept. In large part to never having a car payment for the duration of my condo ownership, I was able to completely pay off the condo a few weeks before the accident occurred, resulting in an increase in the net take-home rent and removing a big expense in my life.
Let’s start with the car itself. I bought the car for $6,000 cash with no debt incurred on a
depreciating asset. As a result, I will not owe additional money as a result of this accident, but instead be able to deploy the full amount of the insurance settlement as I see fit. Had my car been brand new and totaled with a debt outstanding, there is a good chance I would be under water and in a world of financial trouble with no car. Instead, I will see a large cash infusion from the insurance settlement with flexibility on where to deploy the money.
Lastly, and what I feel is the most important reason I feel prepared to adjust to this loss of income source, is my budget. It is a constantly evolving process, but every day I ask myself if every line item in my budget brings joy or value to my life, and is there a cheaper alternative to the line item that will bring me the same value. I am a big believer in the popular saying “the things you own end up owning you”, so I am extremely picky when it comes to bringing things into my life and always making sure the benefit outweighs the cost. I’ve learned that minimalism allows you to adjust to adverse circumstances much faster than if you were weighed down by debt and clutter, and frees up your mind to adjust to other ways you can be of value to others and eventually make an income as a result.
That is why financial freedom and minimalism are important to me: when you have assets that do the hard work to make money for you, while at the same time removing the needless “stuff” and debt that suck up your limited time and resources, a financial “emergency” becomes much less of an emergency and you increase your ability to be financially flexible in times of crisis. Even if there is a temporary loss of income, there will be much less stress involved in figuring out how to meet your basic needs.
I encourage everyone, and especially those affected financially by COVID-19, to take advantage of your current free time to review your spending habits and figure out if your spending truly brings you joy and adds value to your life. If there are things you are spending repeatedly on that do not add value, take this time to break that spending habit and notice if you miss those things at all. There are a lot of things that we are temporarily sacrificing like restaurants and other social gatherings to flatten the curve, so take this time to discover other free things that bring you joy and let others know about it when social distancing won’t need to be practiced any longer. And
most of all, remember the things that have been taken away and don’t take them for granted when they come back, because it can all be taken away again in a split second.