As I get ready to divulge this very intimate part of our financial lives, what you are about to read is a story that has not been told to anyone – until now. This is a part of our lives and finances that we have kept silent. However, it is time to share as it is something that played a major role in our financial demise and something that can be a warning for all.
After about ten months of living in our first house and beginning to feel the financial obligations we had committed ourselves to was finally catching up with us. The reality that not only had we gotten ourselves in loads of debt in a short time period, but our monthly bills was exceeding that of our income. We were both working full-time and yet we couldn’t seem to be meet our financial obligations at only 1.5 years into our marriage. We were in trouble and needed to find a solution – and FAST!
That is why, when a co-worker of mine invited me to a direct sales event that I eagerly accepted. I was obviously presented with a money making opportunity. 🙂 I had been a customer and using this company’s products for so long that it seemed to be the perfect fit. As the speaker kept assuring during the event – it was only a “small” investment to get started.
Alex was initially hesitant but quickly warmed up to the idea thinking it could be one of the answers to help us meet our monthly bills. The more I learned about the company however, there was really much more involved in terms of the investment. Although the initial start-up fee was small, it was presented to me a couple of week’s later of the importance of carrying stock on hand which would allow me to make better sales and better customer service. If I wanted to make this opportunity a business I really needed that inventory! It made sense at the time, and so we invested in the top inventory at the time which set us back by $6,000. But this was an investment that would pay itself back very quickly. Right?
First, let me be fully honest that I enjoyed being a sales rep for this direct sales company! They had fun and great parties. The meetings were very motivational and encouraging. But after that $6,000 investment, I just couldn’t stop spending to build my business! I placed orders each month beyond what I was actually selling to keep up my “active” status and beat my monthly goals. I invested in the travel to the out-of-town conferences, the expensive products as gifts/incentives for others, the business supplies (which was a large expense in this company, more than expected!), etc. I think you might be getting the idea. Each month I was actually spending more and more between all of the above factors than I was bringing in which was putting us into more and more debt.
Then the time period came where my upline thought it was time for me to “promote” myself and be able to go to the next level. I mean in fact, I was meeting/beating my monthly goals up to this point (even though I was investing 100% back into the business)…. so why not work just a little more to give myself a promotion? Honestly, I didn’t hesitate in thinking that I could promote myself and wanted to move up the direct sales ladder.
There were two things I was working towards to promote myself: earning a “free” car and being an area director. I worked harder than I ever had investing at least 60-70 hours a week. How did I work that many hours on top of a full time job? I didn’t. I had quit my job knowing this would be the business venture to get us out of all our problems – if only I would fully invest myself into it.
I was selling and recruiting like crazy. It was a several month process and towards the end of each month, to stay qualified for the next level and the free car, we needed to sell (i.e. order from the company) a specified minimum amount. As I would evaluate those last few days of the month and work as hard as I could to meet that goal, I would still find myself a little short of the production needed. This meant that I was again ordering more than I sold, and in some months a lot more than I sold. I justified this investment by saying to myself, “Once I have the car and get to the next level, I will give myself a raise and drive for free. It will pay off!”
Several months later I finally “earned” the free car. This company offered several levels of free cars, and this was the first level car – so the cheapest model. I remember the day I picked up my “FREE” car from the car lot. It was a very exciting day and there were many fellow reps that were there to support me and cheer me on. But the cost I paid for my “free” car had only just begun! This free car had put us several more thousand in debt (first from all the extra money I invested just to get to that point)! But I was going to make it up now that I had that free car. I was still working towards the next level in terms of status, but life was much better now that this free car was in hand!
This is where the rubber meets the road…… I was driving this “free” car. I loved being able to tell others that I had a free car, what fun it was and the fact that I was driving this free car gave the assumption that I was actually making money and a lot of it. At least that is what I assumed when others in this or any other company that offered free cars was making!
So you may have noticed that I have been putting the word “free” in quotations. This implies something that I have subtly stated, I had already in some sense invested a significant down-payment in purchasing this car by much of the product that I had bought to meet our production. But as I mentioned, I justified it that I would have this car, and then be able to sell the product later to pay it back.
That is not exactly how the “free” cars work in this company. To keep driving a “free” car, you had to continue to meet that minimum production level. I was pregnant with our first child, and extremely sick from the pregnancy, not to mention exhausted from working so much (you will find out the significance of this pregnancy in another installment of this series). I had envisioned working towards this free car, and then being able to sit back, enjoy the rest of my first pregnancy, and sell the product to pay back my debts on my credit cards to get this “free” car. But what I didn’t clearly realize that I had to continue to meet those requirements each month that I had this car. If I did not meet production, I had to pay the lease for that month.
We were at a point where I tried the first couple of months to work very hard make production minimums again. I thought it would be better to spend the amount in product that could be resold than make that month’s car payment. Come to find out, this car payment for the lowest level of car was $450 a month – a great deal more than we have ever spent on a car payment. My “free” car was all of the sudden not so “free.” By the third month of driving my “free” car, it was becoming extremely taxing on our finances plus very stressful on our marriage as Alex and I were not seeing eye-to-eye because I kept believing the day would come where we would see the return while he saw the continual payments spent each month in addition to all the money we had spent up to that point.
Reality hit me hard when three months into driving this “free” car, I was pulling funds and anything I could out of anywhere to meet production. My mom was a supportive member of my team and she had been doing as much of what she could to also order more and help me meet production. She called on the last day of the third month, when I was out of ideas on where to come up with more money. She said, “Cassie, your father and I were talking and we are willing to go get a loan for me to order more stock, then I will just plan to sell it later and pay it off, but that way you can make your goals.” My heart sank so far into my stomach that I thought it was going to fall out.
I realized at that point that not only did I drag our own already pathetic finances and debt load through the mud some more, but I was dragging others along with me because they believed in “my dream”! I was not being realistic with myself or others around me. I begged her to not order any more product and to not get a loan and I would figure it out on my own.
I hung up that phone feeling so incredibly sick to my stomach and my head was spinning as I was being hit with many thoughts. I had a few good friends, as well as co-workers, and others on my team that I knew I was pressuring so hard to get them to order and pushing them to work harder all for the sake of meeting my production. It took me back two years before when I was a new rep and the co-worker that recruited me called me on her last day of her final month to qualify for her car. I had just invested $6K the month before (which was almost her full production in just my initial order) and just the next month she was in a panic and sheer desperation begging me to order more products otherwise she would not be getting her car. I remember feeling so bad. I recall how torn I was as I had just placed my big order and really had not sold a thing yet. But I also remember not wanting it to be my fault that she did not make it….. so after prodding with Alex and finding an available balance of some sort on any credit card, I did order. I remembered her celebration when she earned her “free” car. It all came back to me during conversation I had with my mom.
I fell to the floor with so many overwhelming feelings and I started bawling! I laid my heart to Alex and how we couldn’t do this anymore. I had to stop buying product just to make production and I had to stop pressuring my team to order. He laid his heart out to me about the concerns he had been harboring about this whole mess and it was one of the first days that we started communicating about our financial despair. Alex had been biting his tongue with the dream I had. He had been desperately waiting for that day.
I decided I had to stop what I was doing and I had sell what I had before I could invest another penny. I was no longer the golden child. I didn’t make production for three months and I had to pay the $450 lease. I didn’t want this “free” car or this burden anymore. If I did not make production, they would pay my $450 lease from my commissions generated from my team. After my commissions from my team were exhausted, the company started sending me bills to pay the left over lease from the past few months. I couldn’t pay it so the company would repossess my “free” car.
I remember the day perfectly, we had actually just had our first baby (I had that car for 6 months) and we had just come home from the hospital the day before in our “free” car. Our pastor came over for a visit, and while he was there…. a big tow truck carried off this beautiful shiny new car. I couldn’t even explain to our pastor what was going on as I was so filled with so much embarrassment and shame.
In the end, I lost my car, my team (as I had to maintain a minimum personal orders to keep my team) and I was stuck with thousands in product and worse – MORE DEBT. I slowly sold most of the product off over the next few years, most of which was sold at my cost to recover my fees and then finally, I sold it for a big loss, but getting something was better than nothing. I couldn’t pay off all of our debts that we had accumulated from this venture. We had to pay this out of our pocket.
This experience was a life long lesson that was well learned. This business cost us thousands in the end, not to mention the many, many hours of work, stress, and the strain on our marriage. Please know that I am in no way saying that direct sales are a bad idea for everyone. In no way am I stating you can’t make any money in them. What I am recommending is that you count the cost and really determine whether you are in a financial situation to turn the opportunity into a business while determining at which point you will cut loose and stop investing foolishly. And the suggestion that as Alex always like to remind me, when it sounds too good to be true – it probably is.
If you’re new to the series or just want to catch up, please check out our whole Deep in Debt to Debt Free series!
- Part I: The Newly Unthrifty Couple
- Turning Our Apartment Into an Unthrifty Home
- It’s A Crystal Affair
- The Show Me Just How Much Debt We Can Get Into State
- The Most Insane Way to Buy a Car
- Our Seven Debtly Sins of Eating Out
- One Year Later and Our First House
- Will This Business Get Us Out of Trouble?
- Why Didn’t This Couple Realize What They Were Doing?
- The Baby that Saved Us Financially
- You Want Us to Eat What?