From Financial Struggle to Financial Independance

MICHELINE'S STORY ​(Stock Market Investing Case Study 8 of 8)

Micheline started investing in the stock market with $300. Not a lot of money to start with, but it was a start. It is when she began to feel more in control of her finances that she started to save.
​
With her $300, she set out to find a financial adviser but no-one wanted her as a client because of the small amount.  She persevered and she did find one. Today, her account is still with the same financial adviser. Micheline speaks very highly of her; she says she is an extraordinary woman. Micheline was her very first client and of all her clients, proportionately all things considered, Micheline’s account is the most impressive.

Even though Micheline started very small, over the years she consistently increased her deposits until she reached the maximum allowable contribution to her retirement account, then she started a second investment account. 

Her tax refunds went automatically back into her investment account. All extra savings went into her investment account. She consistently deposited in, and never took any money out. With what she has now, she feels there is enough to more than adequately provide for her later years if she wants to live in a nice retirement home. 

But before the $300, there were struggles.

When Micheline separated from her husband, her kids were 11 and 13 years old. At the time, she and a friend who was in a similar situation imagined that surely they could find a property that wouldn’t cost more than their rent if they went in together. So in 1986, approximately 18 months after her separation and living in a rental, Micheline bought a house as a single mother with two young kids, in co-ownership with her friend.

They had calculated everything in great detail and believed they could more than cover the mortgage and related expenses. It was a duplex and there was a tenant on one side whose rent would partially cover expenses.

But it didn’t work out that way at all.

First, the bank wasn’t willing to give a 25-year mortgage; the maximum they were willing to give was 15 years. Also the bank insisted on a 15% down payment, much higher than what Micheline and her friend had bargained for. At the time, the interest rate was 11.5% which amounted to an $800 monthly mortgage payment. But Micheline’s take home pay was $700 per month.

Micheline’s friend who had committed to contribute wasn’t able to do so until three months later. To make matters worse, the tenant was refusing to pay the rent (this went on for six months).  She also couldn’t count on any financial assistance from her ex-husband. 

For the first three months, Micheline scrambled to make the mortgage payments, not to mention all other expenses. She was highly motivated to find a way because she didn’t want to lose the house. She thought through her priorities and her options. Her parents had given her money to buy a new fridge. Instead of using the money for a fridge, she used it to cover the mortgage shortfall. She bought food with her credit card. She made arrangements with the phone company and the electricity provider to delay payment of those bills.

When she noticed the high interest rate on her rising credit card balance, she asked the bank for a $1000 loan to pay the credit card balance. They refused the loan; instead they offered her a line of credit for four times the amount. That didn’t make sense to her – refusing a $1,000 loan and offering a $4,000 line of credit instead – but she accepted the offer because she didn’t want the credit card debt. Micheline used the line of credit to pay her credit card balance, and she gave herself a psychological limit of $1000 on her line of credit.

She never again ran up the balance on her credit card.

Finally, three months later her friend came up with the money she owed for the house, and Micheline was able to catch up with her bills that had been piling up. But she still had the tenant who wasn’t paying the rent.

With her small paycheck and simple money management practices Micheline today can take great pride in her accomplishment. She helped her kids through school, she traveled the world, she build up an impressive retirement account, she contributes to her community, and she enjoys many low-budget activities. She also made important renovations in the house in keeping with its historical character: windows, roof, basement, balcony, kitchen.  Many of these renovations were more expensive than the norm to respect the authenticity of the protected heritage.

That early period of financial difficulty taught Micheline many valuable lessons.

She discovered many small ways to keep her expenses down, practices that she continues to this day.  For example:
 

• She did everything she could on foot, even grocery shopping. She said it developed in her the ability to stay within her budget by not buying extra items that she didn’t really need - she didn’t want to carry a heavy load walking back home.
  
  
• She deliberately didn’t use a grocery cart. This way she only took from the shelves what she could carry. She says she learned to appreciate water as a drink because big cans of juice are heavy to carry home.
  
  
• She decreased the heat in her house to the lowest temperature that she could handle.  She says that practice saved her a ton of money.
  
  
• She learned to pay cash for everything. She made it a habit to use no credit. This way there could be no risk of overrunning the credit card.
  
  
• She learned to use small envelops for expense categories. This is a practice that she saw someone do once and she tried it. It worked for her by keeping her diligent about staying within her budget.
  
  
• She resisted the bank machine card for as long as she could because she didn’t want to become accustomed to withdrawing cash whenever she wanted. She made a point of walking to the bank and standing in line to take out very small amounts of cash.

 
Taken together, the above practices enabled Micheline to pay down the 15-year mortgage in 10 years, at which time she bought back her friend’s half by taking out a 25-year mortgage that she paid in 14 years. The rent from the tenant covered the mortgage payment plus 50% of related expenses.

She was 56 and it was worth it to her to take a reduction in income for the gain of life enjoyment.

Micheline retired from her job in December 2007 with a pension equivalent to 38% of her salary. At the time, she evaluated her option of staying longer to get a better pension, but she concluded that staying another eight years wasn’t worth it for the few extra dollars of pension in exchange for the risk of burning herself out. In any event, she much preferred to enjoy life sooner rather than later and she notes that with the smaller pension, she saves on income tax since her tax bracket is lower.

Looking back on the difficult times...

Micheline believes she was able to achieve financial wellness and independence despite her low income because she could see her situation from a global view point, she had a vision of what she wanted from a long-term perspective and she was able to break everything down into small chunks, solving one small problem at a time.

Also, she learned to give herself some rewards, as small as they might be.

For example, when she felt overwhelmed by the financial struggles, she bought a $20 bus ticket for a day-trip to Montreal. She chose a sector she wanted to visit and she set out on her mission to enjoy the sites. At the end of the day, she went to the second-hand book store was across the street from the bus terminal to pick up a couple of books to read on the bus ride back.

In addition to dealing with her financial pressures, Micheline also battled cancer, as if she didn’t already have enough challenges.

Her life experiences taught her to take one small problem at a time when it was too overwhelming.

Micheline believes that because she perceived her difficulties as challenges instead of insurmountable problems, the process of finding solutions as an adventure, and the solutions as compromises instead of sacrifices, it made the difference in how she approached the difficulties and how she felt about her situation.  For example, she recalls in the early years when money was very tight, she bought a book about edible weeds and she sent her kids weed picking on the neighbors’ lawns. She presented it as an adventure and an opportunity to learn about what was readily available for free that could be eaten in a salad.

There were many positive influences in her life.

She says her mother was, and still is, the Queen of recycling. She thinks her mother invented recycling, she was that good! Micheline learned about stretching her dollars partly from her. 

She also learned about paying down her mortgage as quickly as possible from her real estate agent who had explained how to do it and why it would make a difference. There are also business people in her community that she admires greatly. She says she learned a lot from them over the years by observing how they managed their affairs. She is grateful for their counsel and she says they are amazing business people.

Micheline prefers to maintain a positive outlook on things. 

For example, to her, thinking “I’ll travel when I win the lottery” is a depressing thought because what are the chances she’ll win the lottery, she asks herself. She decided she wanted to travel but she wasn’t going to wait for the lottery.  She remembers that her grandfather used to say “when I’m retired I’ll travel the world” but he never did because he died at age 62 before retirement. She thought to herself, that’s not what I want. So she resolved that she would travel, no matter what.  And she did travel to her heart’s content. Micheline visited Japan, she’s been all through Europe, and she traveled the United States and Canada from one end to the other.

Every day Micheline enjoys going out for a coffee at a local coffee shop close to home. She reads the newspapers available there, she enjoys the heat since she still keeps the heat down in her house, and she sometimes brings work (for example when she participates in writing contests). It costs under $2.00 for her coffee and she feels good about contributing to a local business.  She goes to the community swimming pool every day. And she likes the community library.

She also enjoys going out to the restaurant once in a while for a nice meal and a glass of wine.  She loves movies so she never misses the film festivals. She is also an active volunteer and participant in her community.  She visits family and friends regularly and she continues to enjoy her travels.

She says “choosing simplicity” isn’t about living poor; it’s about deciding what your priorities are. 
 
Based on her long experience, Micheline offers the following insights and practical tips:
 

• Have a vision of what you want and establish your priorities.
  
  
• In difficult times, look at your situation from a global perspective, and then break it down into smaller pieces. Tackle each piece one at a time.
  
  
• Take it one step at a time when you are feeling overwhelmed. If you try something and it doesn’t work, don’t be too hard on yourself because it didn’t work. Realize that not all solutions work for everyone.
  
  
• Create small victories. It is very important to give yourself some rewards.
  
  
• Find the positive in everything. For example, instead of looking at a difficulty as a struggle, see it as an adventure to find a solution.
  
  
• Create moments to appreciate the positive side of life.

---

* Case study based on December 4, 2015 interview conducted by Y. Gagnon
​