By: Revanche

I forgot we were in debt and other thoughts on money

July 16, 2018

The truth is, we're still in debt While talking to Penny about debt repayment resources, I kept thinking of other bloggers who are focused on debt repayment. Debt was my old life, we’re building resources now – but …. but, wait, we are in debt! Somehow in the last six months, I stopped thinking of myself as in debt. Except I regularly say that we don’t own this house, the bank does, so how did I forget that we owe a TON of money and therefore are in debt repayment hell?

$576,006.92

After a big down payment, and a few payments to principal, we still owe more than half a million dollars. HALF. A. MILLION.

How on earth did that morph into “just another bill”??

For reasons.

One, we’ve always had some kind of monthly payment for lodgings: rent or mortgage. It’s a normal part of our lives the way a car payment used to be. (Not anymore!)

Two, while we’re employed, we make enough to pay the regularly agreed amounts plus a little bit extra every month on time. That’s a whole other world from where I came from.

Because of numbers one and two, three, debt elimination hasn’t been my sole focus. I’ve also been working on investing wisely and building our careers.

It’s nothing like my life when I was paying down debt that wasn’t even mine.

Rewind twelve years: I was on a single salary, working as much overtime as I could, to pay for a full family’s worth of reckless ill-conceived expenses, consumer and failed-business debt. The collection bills, the credit card balances, the final notices stamped with a big red overdue stamp, the towed car, the many flat tires, and the lies. Oh, the lies.

These aren’t part of my daily fear-filled life anymore. I don’t have a ticker on the sidebar with the amount of debt that needs to be repaid in under 3 years so I can get on with my life, feeling the drag as we enter years 6, 7, 8. I’m not juggling seven credit cards and three collections bills.

This doesn’t feel like debt repayment because it’s not miserable.

But it is stressful.

This ma-hoo-sive debt, along with our massive childcare obligations (over $2000 a month for childcare and therapy) leads me to a subject that keeps bothering me, which Liz covered.

While budgeting our money for 2019, it puzzled the crap out of me that I still feel a major pinch. We’re still busting our butts to cover everything: expenses, saving, mortgage repayment, investing enough to generate income replacement, giving enough to help others.  We don’t make FANG money but we can afford our needs and a few of our wants: minor or major, or unplanned.

I don’t begrudge some struggle, that’s normal. It’s just that with our incomes, it feels like I’m doing something wrong. (Mind you, I don’t think that we’re not upper middle class. We are.) I just feel like, on a personal level, I must doing something wrong because on these salaries why are we still juggling? I was excellent at wringing out every last penny when I made half as much, have I gotten rusty?

There’s an element of lifestyle inflation here. We’re not frivolous all over the place but things have definitely changed.

We actually maintain our old cars (growing up, car maintenance was a laugh). We poured capital into mortgaging and renovating this place, and still more cash into paying down the debt. We have two dogs and take really good care of them. Saving and investing have a prominent place in our budget now instead of being dead squeakin’ last.

We travel a few times a year, moderately economizing, to see family on the West Coast. Our daycare isn’t the best or the worst, it has the best hours and access for our family’s needs. We were a one car household for several months but the stress and mental load wasn’t worth the savings of ~$800-1000 annually.

Daycare will end in … something like a year and a half. (I still have waves of “Did we do the right thing??” nausea when I think about our choice of home and school district.) Therapy seems to be helping but progress seems awfully slow and that means we’re going to be paying for at least another year. It’s good to remember those should be temporary costs so there’s hope on the horizon if we both keep our jobs. (That’s not always a given and things are at their shakiest right now.)

For now, even on these salaries, small amounts still matter. If we indulge a bit, we feel the impact. Conversely, scrimping, saving, not replacing old things until they’re worn to hell and back, has an impact. (Am I making all the best most efficient financial choices? Probably not. Sometimes we choose to live a little.) We still have to balance frugality and living, leaning a bit harder toward frugality most of the time.

***

Examining our projected 2019 fixed expenses explains a lot. Cutting back our discretionary spending is important, but wow, these fixed expenses add up fast. Note: as I mention every month, savings isn’t a luxury, it’s an absolute must given my health.

The number of dollar signs represents the cost, $$$ is hundreds, $$$$ is thousands, and so on.

  • Cash savings, $$$$$
  • His 401K, $$$$$
  • His IRA, $$$$
  • Her IRA, $$$$
  • Zir 529, $$$$$
  • Health premiums, $$$
  • Childcare, $$$$$
  • Child therapy, $$$$
  • Mortgage, $$$$$
  • Property tax, $$$$$
  • Auto 1 Insurance, $$$
  • Auto 2 Insurance, $$$
  • Auto Maintenance, $$$$
  • Home Insurance, $$$
  • Home Maintenance, TBD but probably in the $$$$ neighborhood.
  • Earthquake Insurance, $$$
  • Life Insurance, $$$
  • LTC Insurance (TBD), ?

***

I don’t generally compare myself to others but when I hear fellow bloggers talking about keeping their monthly spending down to $2000 a month, my curiosity radar perks up. Could I get us there?

Today, the answer is a grand stinkin’ not until that mortgage is dead and gone but I’ll stay on the hunt for ways to reduce our monthly obligations and total debt because it’s a good exercise.

In the meantime, I’m mulling over starting a social media account that’s focused entirely on the debt repayment journey. We’ll see if I can free up any time to make that happen.

:: How are you keeping costs under control? What do you have to cut out in favor of higher priorities?

20 Responses to “I forgot we were in debt and other thoughts on money”

  1. Stephanie says:

    This post speaks to me! We don’t have any debts at this point except for our massive mortgage (ah the joys of living in pricey areas…don’t forget the property taxes!!!). But it just feels like a monthly expense that’s just part of our lives. And then that childcare bill arrives every month and takes most of the rest of our money.
    We’re also upper middle class, and lucky to be earning what we do, but wow, our costs have definitely ballooned since graduating, when we had low rents and no daycare. But we’re also keeping in mind that eventually certain expenses like childcare will drop off. And we hope we chose our school district well, too!
    Stephanie recently posted…We skipped past the starter homeMy Profile

    • Revanche says:

      UGH I wish I could forget the property taxes! I don’t count them in the debt tally but I definitely allocate a huge chunk of our paychecks every two weeks toward that bill. We are incredibly lucky to have the options that we have, so I always want to show that, but whew. It is hefty.

      But for the first time ever, the payment feels like a normal monthly bill because if we weren’t paying the mortgage, we’d be paying something for housing in the form of rent. It’s like the utilities – it was going to happen one way or the other.

  2. Kay Lynn says:

    It looks like you’re in good shape to me. I wouldn’t stress about the mortgage because it’s so much better than paying rent and you live in a high cost area.

    I remember being house rich, cash poor in my 20’s and 30’s and over time my mortgage amount became small compared to new homebuyers (thanks to California property value increases) and the value kept going up.

    • Revanche says:

      I keep taking the long view but what that means is, instead of being optimistic, I find myself expecting the next 50 years to be much less kind to us in some significant way (massive earthquake, drought cycles, SV bust, something to drastically reduce the economy or value of CA land) rather than thinking that this will pay off over our lifetimes. I hope I’m wrong, though!

  3. SherryH says:

    This rings so true to me. Life isn’t easy when you’re dead broke, but it is simple: The answer to “Can we afford…” is “No.” But when circumstances improve to the point where you can afford a little bit more, then you have to make choices. And because you can afford some of the things, but not all of the things, IME it can feel tighter than ever.

    Our circumstances have increased slightly this year, in part due to MrH increasing his rates, his clients having more work available for him, and our younger son working and contributing. And I’ve been working hard to balance the influx between building savings, paying down debt, and scheduling long-delayed home and car repairs and other important but not urgent matters like replacing MrH’s disintegrating shoes. Basically, I’m working to consolidate our position so we’re in a better position to ride out the next slow spell or emergency. Because they will come.

    I’m trying a new strategy to reduce our credit card balance faster. Instead of paying all the bills at the beginning of the month and not using the card, we’re paying the amount of certain bills (water, electricity, cell phones, internet) and planned expenses like the car repairs to the card at the beginning of the month, then using the card to pay them as they come due. This drops the average daily balance, which drops the month’s interest, which brings the balance creeping down ever so slightly faster. Every little bit helps.

    Eventually I’d like to get a rewards card for groceries and gas, to be paid in full every month, but I’m not sure we’re there yet. Getting there, though. 🙂

    • Revanche says:

      There is something to the simplicity of simply not having choices. I don’t EVER want to go back but I will acknowledge that much. 🙂

      Let me know how the new strategy works!

  4. It will get easier with daycare expenses gone!

    We are definitely helped by low housing costs. Our property tax bill is pretty high, but the house itself only cost $265K when we bought it. (Assessed for tax purposes ~400K, probably worth $360K or so if we tried to sell it.)
    nicoleandmaggie recently posted…Pondering getting a new mattress: Any advice?My Profile

    • Revanche says:

      I know, I keep thinking that if we DID ever have a second, the blow of that returned daycare bill would make me cry.

  5. Gah the cost of living is just crazy! Home ownership mortgage debt is just something that is so hard for me to speak to. One one hand I’m debt-free, like, totally free and clear. But, so you know that I’m not rubbing your face in it, I’m kind of somewhat jealous of people who DO own a home sometimes. Even if that does come with mortgage debt. It’s a weird fence I sit on. If you are at a point where you can’t squeeze out any more cutbacks on daily expenses, then it may be a choice of either accepting said mortgage debt and be at peace with it, or strive to try and move out of the high col area. 🙁 I think it might be easier to go with option A.

    • Revanche says:

      I completely understand that mental tug of war. I don’t mind making my peace with it as long as I’ve thoroughly considered if it makes sense to do so and eventually that may be what I have to do.

  6. Joe says:

    Hang in there. In a few years, the childcare and therapy expense will be gone. It’s a tough time for you guys right now.
    I feel stuck in the same loop sometimes too. Our COL isn’t as high, but it is still higher than I’d like. It seems like the only way to reduce cost is to move to a cheaper area.

  7. Leigh says:

    Over a half million dollars is still a LOT OF DEBT! That number looks so terrifying, to the point that it can numb you into no action? 18 more months with daycare feels like an end that you can see though. It’s so easy to talk about mortgages like they’re not really debt, yet they’re often the largest payment you make each month – I know ours is.

    It would be really hard for us to get our monthly spending down to $2000 a month since even ignoring our mortgage, that’s how much we spend on housing. It’s still a good exercise, but $2000 is an unrealistic target. Right now, it mostly feels like we are economizing on travel (i.e. can’t randomly go on last minute trips without having set aside general travel budget for months) and trying to have less carefree personal spending. We also only have one car, but that feels less like scrimping and more like a thing that doesn’t make remote sense to have a second one or buy a newer one since the existing one works fine.
    Leigh recently posted…2018 Goals Midway Check-inMy Profile

    • Revanche says:

      Luckily(?) my reactions don’t trend toward paralysis, just heartburn. Yay? Taken out of context, YES that number is terrifying.

      I wonder why I thought you were one of the few who managed to get your monthly expenses down to $2000 a month, perhaps I misread that Twitter conversation.

  8. NZ Muse says:

    I know it is objectively a huge number …. but it seems… reasonable for your area?

    I do know that many of my peers have higher HHI than we do and that stings a little, but it is what it is, we get by with frugality. Haven’t got daycare costs to factor in quite yet but that is definitely daunting.

    I think even while renting $2000 a month wouldn’t really have been realistic for us given rents where we are, but $2500-3000 would have. These days the mortgage alone is over $2000 a month so… yeah…

    Weirdly my parents never seemed to maintain their cars while I was growing up (or maybe they just did it while we weren’t looking – out at school etc?) and this honestly skewed my perceptions, I went out on my own literally not realising that cars needed maintenance, fluids, servicing!
    NZ Muse recently posted…The one question I hate being asked, as a pregnant woman…My Profile

    • Revanche says:

      For our area, yes, we’ve made real inroads. It’s just …. a big huge ginormous number, objectively.

      Perhaps $2000 a month was overly optimistic … 🙂

      I also didn’t know that cars needed regular servicing until my early 20s!

  9. Clare says:

    I want to follow said social media account!

  10. SP says:

    I came back to this, because we are in a similar boat… Large mortgage, but it doesn’t feel like debt. No daycare yet, but it is coming and a little terrifying!

    So, yes, mortgage is debt, but it is directly tied to an asset that can (in theory) be liquidated if you are willing to pay rent instead. That is the main way I’m OK with the large mortgage debt. The same argument could be made for an expensive car, I suppose, so my way of seeing it isn’t totally logical. But it isn’t the same as educational or consumer debt, where the money has already been spent and you aren’t able to trade in your asset to clear a debt. To me, it is a case where a monthly payment just seems to make sense, at least in the near term.

    • Revanche says:

      It’s very true that it’s still an asset that can be liquidated. My concern is mainly that the conditions under which we might sell could be adverse. A scenario: one of us loses a job because of a recession and can’t get another. We can’t make payments on time and decide to sell. But as happened with several friends (admittedly not in the Bay Area but I still don’t see what fundamentally makes this place so special that that wouldn’t change), say we can’t sell for anything near what we bought it for, if at all. Some were forced to sell at a loss and some were nearly financially devastated because they couldn’t sell at all. So I keep seeing that worst case scenario and it makes me want to sock away more cash just in case even though that’s a silly way to hedge against financial chaos.

      I temper this worry with knowing we will do the best we can to reduce the mortgage overall, enough so that job loss wouldn’t devastate us financially.

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