One of the biggest psychological barriers for me to overcome to get the level of determination I have now to open this brewery was m-o-n-e-y. As a technology worker for large corporations for the past dozen years, I've been well compensated. I've never made lawyer or doctor money, but I've always made enough to support a family of four and pay a mortgage (with rental income as well) in Chicago, which is not a very cheap place to live. It took at least two years of gradual acquiescence, one bout of breast cancer, and one firing from a job to realize that I just don't care about wealth anymore. I don't need a BMW (nor do I want one) and I don't need a four bedroom house. Ok, I technically own a 5 bedroom house, but our apartment has two bedrooms, the other apartment is rented out, so there's that. My point is, at this juncture, I'm a honey badger. I don't give a shit.
Read this previous entry for more on that fear stuff: Fear Factor
Ok, so I'm not frightened of the prospect of a significantly lower household income, but I'm also not stupid. I have no intention of losing my house or go into bankruptcy due to lack of income. So, if income is lower, what do you do? You lower expenses. And what is my biggest expense? Children! We're going to sell the children!
We're not selling the children, I'll need them to squeegee the floors in the brewery. What I'm really going to do is refinance my mortgage in order to significantly lower my monthly payment. I'm not going to go into details on my mortgage but I think it's worthwhile to share the general idea with others in case they are in the same conundrum of following dreams vs. poverty. It doesn't have to be either/or, you just have to prepare.
Because mortgage rates are at historical lows, it seemed logical to look into refinancing. My current mortgage rate is low – very low – and the rate had been unbeatable for years. Because of these new low rates, and despite the fact that I'm 9 years into my current mortgage, I called my trusty mortgage broker. She is the same mortgage broker I've used for about 10 years now and whom I trust completely (and many are not trustworthy, FYI). It only took a few minutes of talking with her to discover that I could lower my monthly mortgage payment by over 25% with a new 30-year fixed mortgage. That's a lot of money per month.
At this point, the question many people might ask is, "Why would you want to start your mortgage all over again after 9 years? Don't you realize how amortization schedules work?". Oh yes, I know. I'll be starting all over and paying all that interest on the front end of the mortgage again. Sounds like a dumb idea, right? Well, first I'll point out that because the interest rate is so low, I'll actually be paying about the same amount of interest for the new loan as I would if I were to stick with the current one. More importantly however, even if I were to pay significantly more interest over 30 years, I've managed to solve a much more important issue: cash flow.
Cash flow is very important in business and in personal finances. As I delve more into my business plan, I'll be discussing the importance of cash flow. Negative cash flow is one of the, if not THE, main reasons small businesses fail. The same principle applies to personal finances. If your spending outpaces your earnings, you're in trouble.
If you are dreaming of opening a brewery and you feel your hands are tied financially, search for solutions. You can do it. This new mortgage gives me and my family some significant breathing room and will lower our stress significantly as this venture takes off. That, my friends, really is priceless.