Prior to my freak-out over paying off our mortgage, we had the sort of well-stocked emergency fund that I urge everyone to build, and especially variable income having, self-employed folks like us.
A full six months of months of expenses were socked away for minimal life support + a growing pot of savings for an anticipated vehicle purchase in the coming year. This buffer was fantastic for taking the edge off of financial stress. It enabled us to manage money from a higher level, taking the big picture into account, rather than on the ground putting out small fires all the time. That is no way to live for decades on end. I, on the other hand, have been steering the ship while looking out over the course of a year, instead of week to week, providing an ever-increasing sense of freedom. Though my crops are harvested weekly, providing some consistency, our general economic well-being has come to resemble a degree of seasonality reminiscent of traditional agriculture.
Through no shrewdness on my part, we gradually evolved to a big-picture year-long overlook of our finances out of necessity. The flexibility this provides has been significant. Unexpected. It’s now fun to make big, audacious decisions; course corrections – choices, if you will. Rather than being a source of fatigue, these choices have become a source of enjoyment. Like Marie Kondo urges the would-be tidy individual to simply choose possessions that bring them the most joy, I’ve been gifted with the opportunity to allocate financial resources to the areas that will bring us the most fulfillment. I’ve eliminated, in mindset at least, all expenses. What about the electric bill, you ask? Due to the nature of my business growing microgreens under LED lights, ours is somewhat significant (not crazy).
Well, I don’t think of this as a bill. We are merely paying for a valuable service that greatly enhances our lives. Refrigeration, but one example, is fantastic! We are making a choice to spend our hard-earned money in this way. This is a subtle shift in mindset, but it keeps us from feeling like victims when the statement of usage arrives each month. In fact, the power company is kind enough to allow us to pay for our consumption a month after we used it. Interest free! The same goes for our water and gas. I love clean dishes, bodies, and the ability to water my crops simply. Lets compare this to what my friends at Creaking Tree Farm, north of Lutsen, have had to endure:
These pictures were taken a couple years ago, and they’ve worked crazy hard to massively improve their situation: a major greenhouse was added, recently they sunk a well (I still don’t understand how they previously grew a farm without any running water when I visited – collected water fed these drip irrigation lines), and I can tell by their Instagram photos that the soil has visibly improved. These pioneers also built their own home while tending to very small children in addition to all this, and had no basic services supplied to them (water, power, etc).
I’ve made no secret of the fact that I would love to live out in the woods like this. My wife has saved me from all this backbreaking work, however. And so, if I’m going to live in the city, I choose to delight in these marvelous services rather than take them for granted. It only took five minutes with Ian at his farm to see what the tradeoffs would be. Thus, I’m happy to pay a hundred bucks or so for electricity, and a bit more for water and gas (both sustain our lives – clean water and heat – duh). These are automatically charged to our credit card, and I just pay the balance each month, keeping an eye on the big-picture dollar amount to make sure our total monthly spending stays below the prior month’s income.
I actually look forward to paying for garbage collection, which I’ve reduced to an annual occurrence, receiving a small discount in exchange for paying in advance.
With fixed expenses cut to almost nothing, I finally have the freedom to operate our finances the way an operator of a hydroelectric dam might control the floodgates. If a large rain is forecasted, she’d increase the flow of water through the turbines to provide increased capacity in the reservoir. The same goes for increasing demand for power, and the reverse for decreasing demand.
Not being one to waste a crisis, we determined that we might not require an additional vehicle next year when the kids get their licenses. Perhaps we can make do with our 13-year-old salvaged vehicle and share it effectively. After all, it sits parked most of the time. This calculation almost certainly will change over time. That’s ok. We won’t become a victim of circumstances when that occurs, but will simply work out a solution if and when the need arrives. For now, admittedly irrationally, we’ve chosen to funnel these resources, and more, into the mortgage.
And so, without further ado, here’s a current snapshot of our ever-evolving emergency fund:
- One month liquid cash (enough for minimal life support)
- Three months locked up in cd’s until early next year (perhaps a mistake, but we locked those in when it became apparent that interest rates would dive to zero)
- Ample liquidity available to be pulled from our Home Equity Line of Credit (HELOC), which is where all incoming funds are funneled. As a result, we no longer have a traditional mortgage, and have only a very small balance accruing just 23 cents of interest per day at 2.5%. And, if you can believe it, I’m still laser-focused on wiping this out. The businesses receive revenue about double that of our income, so this enables us to store significant sums of cash within our home’s equity prior to those funds needing to be deployed elsewhere. Thus, our balance will behave somewhat elastically, much like one’s belt at Thanksgiving. (Yes, banks can indeed close the equity line in a crisis, but we’re letting it ride). It’s also possible to essentially make no payments during an emergency, by simply putting money in and taking it out later for expenses. Once we pay this sucker off, we’ll rebuild cash reserves to 6 months of expenses.
- Most of our business supplies will carry us through the end of the year. To ensure we didn’t run out of critical necessities that could impair our ability to earn income in their absence, I bought in virtually everything we’ll need for the foreseeable future:
I also received 100 pounds of sunflower seed (shipped the same day that the Bay Area supplier in California went into lockdown!). I have enough spicy mix to carry me well into 2021, and pea seed, being pricy and bulky, sits at two months – 120 pounds. Our seed storage room represents a lot of potential income.
- We also bought in a large supply of expensive panels for Shawna to paint on, and other supplies totaling in excess of a thousand dollars. Of course these dollars are multiplied several times over when invested in this way.
- These painter pants are 21 years old. They make me look like a bit of a schmuck, but I’m a pretty good housepainter. I’ve only pulled them out of storage when necessary, but they have proven to be a source of immediate cash when needed. I recently put these on for a nearby job that became available. Given the state of the economy, I decided the extra income would be wise. So far we’ve thrown 100% of it into the HELOC.
- Our family garden:
Let me say, it felt fantastic to get out there on Memorial Day weekend (when that snap was taken) like your average family gardener, and plant like any old hobbyist. Previously I planted for market, which is a different beast altogether (I was out there planting when snow was on the ground for one thing, using low tunnels of plastic on hoops to keep things warm). That 3-day weekend was the best in recent memory (only later did I learn of a horrific event occurring to our south).
I felt a sense of jubilation that was perhaps owing to the fact that I left the farmers market. I haven’t really experienced what an actual weekend feels like in years, let alone three full days off from work (aside from some watering of microgreens). Every day can blend together like any other for those in self-employment, particularly for farmers. For the first time in memory, I (we) experienced the perfect balance of productivity and leisure (see family hike two posts ago). Getting the garden planted was a major accomplishment, and it was so weird!
I hardly know how to plant for an individual family, so I had put the task off. Previously, the task of planting was crazy simple! I merely dumped seed into the hopper of my top-of-the-line precision seeder, and walked up and down the 25-foot long garden beds several times. I could plant 225 lineal feet in just two minutes with minimal thought. The current task, on the other hand, had me caught in a bit of analysis paralysis. In the end, my vast oversupply of seeds enabled me to move forward most extravagantly. I wasn’t working with over-priced seed packets. Rather, I have 40,000 or so beet seeds in a large bucket, for example. How large of an area does a family need of these? I have no idea. We simply marked out a space, and I broadcast a portion rather liberally prior to sprinkling dirt back over them. I probably 10X’d a normal planting, but that’s just fine. We will thin harvest as needed, adding tiny beets and greens to smoothies. The same went for the other crops.
Suffice to say, it was marvelously freeing to simply put seeds into the ground. My experience growing microgreens, seeing thousands of seeds readily shoot up each week, has shown me that these things want to grow. God has packed them with everything they need. Just add water. No need to overthink.
A month from now we’ll be harvesting lettuce and spinach. This has tangible value in meeting our base needs, so it can rightfully be considered part of our emergency fund.
- And so can the freezer full of grass-fed beef grown by my friend Amy Roper from the market, and also quite a bit from Terri Thell at Four Quarter Holdings. There’s even a gigantic heart in there (looks more elephantine than bovine) that my wife became squeamish about, but if push came to shove, she’ll figure out a way to extract that latent nutrition for our benefit. Used judiciously, we probably have a 3-month supply of meat.
Given all this largesse, and more, we can tighten our expenses down to a previously unimaginable degree when necessity requires austerity.
Not that I’m fully relaxed or anything. There’s a major roof repair that we’ll need to attend to at some point, involving our sagging roof. $20k? That’s a gigantic number that we might have to pull from the HELOC when the time comes. Not perfect, given my stress over any debt emergency, but we’re fortunate to have the option.
Oh yeah. Paintings! We have tons of these things on the wall, such as this one that is just about ready to come off Shawna’s easel following about six painstaking weeks of work. This one sold, rather unexpectedly when I shared it on Instagram, but there are several others on her website. Some of these sit around for quite a while, months or years even, but then the right person discovers them at just the right time.
It would have been a great time to be raising chickens for eggs (about one each per day!), but last fall we decided to take a break. Alas, our emergency fund is less than perfect. Some day we’ll get there…
FYI, this is kind of a rough draft of a chapter in a crazy ebook I’m working on currently. I started writing this to get all this crap out of my system. Not sure if peeps want to read this sort of thing or not, so I’m putting this out there….