Thanks so much for the thoughtful and encouraging comments on yesterday’s confessional post. I was surprised by how emotionally draining it was to write all that down and as soon as I published it I thought of some other points I wanted to make (and that were alluded to or mentioned in a couple of the comments).
First, I don’t know if we should have been approved for the house initially. It was a ridiculously small amount of money as mortgages go. I think our big mistake was not taking out a loan for the entire appraisal amount (still quite small) and then putting the extra money right into the improvements and paying off existing (small) credit card balances from the get-go. I don’t know. I do know I didn’t feel we were ready and that I was nervous about not having any savings. But MD’s family was down right obnoxious about “asking” us to buy it from his grandparents (because otherwise they wouldn’t have a place to hold freaking Christmas…yeah) and I was so sick and tired of living in a far-flung suburb that had completely inadequate traffic control or freeway on/off ramps that made a 20 minute drive into downtown over 45-50 minutes during rush hour. And with a dog, looking in our preferred neighborhood, we were looking at about $700-$800 per month in rent (in 2001) for places that were old, non-updated, or had rickety excuses for fences, or in which the layout was just weird. In one, you couldn’t sit on the toilet until you had closed the bathroom door. I was kind of willing to make those sacrifices but MD wasn’t at all and I wasn’t willing enough to convince him. We had been looking for a new rental for over a year and the house really did seem like a bargain, especially when the payment on our original loan was just under $800.
Second, I know our spending habits were irresponsible for many years. But I also know that the amount of money we spent should have been able to be paid off by now. I’ve now cashed out my 403(b) twice. We’ve refinanced, taken out a low interest bank loan, transferred money to low interest credit cards, but we cannot get the credit card monkey off our backs. Why? Well, in addition to both our (older) cars needing over $1000 in tlc this August (and my mom’s funeral expenses, whee) and paying over 50% more in insurance premiums this year, plus still paying off all the deductables and shit that are STILL popping up from MD’s surgery in May, we just can’t get ahead. And if you can’t get ahead, you will inevitably fall behind again.
And there’s the issue of trusting our financial institutions. It shouldn’t be easier to buy a house than a car. You should be able to invest your savings in a money market account without worrying about losing it, or having it frozen right when you might need to access it. Of course we should exercise common sense, but that brings me to another issue. Education. Family finances aren’t typically taught in school. And your parents can tell you over and over and over and over to have 3/6/12 months of savings in the bank, but how many people actually listen to their parents? Conventional wisdom has it that it is smarter to own than to rent, but conventional wisdom forgets to mention just how many unexpected home-related costs the average household can rack up in a matter of months. I’ll never forget my blood running cold when we realized that the plumbing under the kitchen sink was fucked, and I knew we didn’t have the money to fix it. Fortunately my dad was able to cobble it back together and to this day, part of the pipes are propped up with a selsun blue bottle. It works well unless for some reason the bottle is knocked out of place and then there’s a leak but it’s usually easily fixed but shoving the bottle back in place. But before this brilliant solution was arrived upon, all I could think of was, we needed to be able to use our kitchen sink. And no one was going to come fix it for us (ok, my dad did but you know what I mean).
And finally, there’s the issue of just how far your paycheck can stretch. My gross income is as high as it’s ever been, but like I said our insurance is more expensive for crappier coverage. Our daycare costs almost as much as our original mortgage payment. Food. Gas – good lord, gas. And AEP has apparently petitioned the PUCO to raise prices by 50% in the next three years to, in part, update its infrastructure. Air conditioning may be a luxury for some, but I like breathing and my asthma demands A/C April-September(ish). And why the hell should I have to bear the brunt of infrastructure costs?
Here’s the thing. I’ve said it before and I’ll say it again. I like having money to spend. I like supporting capitalism to a certain extent. But if I don’t have any money, and my neighbors don’t have any money, and the people the street over don’t have any money, and so on, there’s no money going into the system. Fixing health care, lowering energy costs (which is years down the road because oh, whoops, we haven’t invested in R&D, I mean, what a waste of taxpayer dollars), making daycare affordable, making sure people don’t loose their jobs for taking sick time THAT THEY’VE EARNED, raising the minimum wage – all these issues that are central in the lives of the middle and working classes – fix these things and we’ll have money to spend again.
Hell, a carefree trip to the grocery store would be a great place to start.
I feel for you. I understand why people are very big on Capitalism, but from someone living in a “socialist” system (I say this in quotes because compared to true socialist nations, Canada is a hybrid of socialism and capitalism), there is a lot to be said for the safety-net of socialised medecine, government-oversight of financial institutions, etc.
I hope your troubles work themselves out. It can’t be easy.
I agree that we are not taught personal finances in a forum of real learning. I grew up knowing we were poor, because we could not do the things other people did, but we always had vacations to our cabin, presents under the tree and other things that I wondered how they appeared when we were so poor. It was a mixed message my parents sent to me. Money was this thing that always made my parents argue and stress about. They lived and still live paycheck to paycheck, rob Peter to pay Paul.
I vowed that I would not replicate my parent’s finances. I enjoyed a small bit of time where I was credit card free! Imagine that! But then I went down a family road of finances that we are working our way out of.
Education is helpful in this area. I actually picked up a book on how to teach your children about budgeting and money. It seems geared for the preteen age group. I want my children to know more about money than I did.
But here is another big thing that really gets in my crawl….
People who are able to manage money, seem to have money. They didn’t have to take out student loans, or finance their home 100%. There was money from their parents, so they didn’t graduate with student loans to pay off. This really burns me up when people with money begin to tell me how irresponsible I am or how I just need to budget better. Damn it if I had two pennies to budget I would. But my reality is that I don’t have the money to start with. I started my adult life in the hole, not even ground level.
Instead of putting my money in savings, I had to pay off college debts, still paying by the way. When we sold our house, we didn’t make a profit, because we made what we owed. Unlike other people who have a 20% down payment when they make a mortgage payment it goes further into the principal and when they sell, they have the ability to walk away with a greater profit. Which of course allows them to put more money down on the next housing purchase, again setting them ahead instead of back.
This really does bother me, because I don’t think we are able to start our life with a fair chance when we are saddled with student loans, car loans, etc. It is hard to get ahead in this fashion. So what is the solution? I don’t know but saddling our new professionals with huge student loans to pay off isn’t the best answer.
Another really big issue is that our society is a 2 income society. Both partners are required to work in order to afford their lifestyle. The mortgages are calculated on these figures and all other credit decisions as well. Now what happens, when the child comes along or one of the partners loses their job, or has medical issues? The budget requirements are based on a 2 income household. I think this is a dangerous scenario. I don’t think modest living should require 2 incomes. And by the way, I think my friend Allyo lives well within her means. I don’t find her way of life extravagant. She should be able to afford her lifestyle on her income alone. It is sickening that she is having a hard time.
When I was working, we were making well over 6 figures combined and we had invitations to upgrade our lifestyle with tempting offers, but I knew that one day I was going to not work for a while. So we tried to force ourselves to live only on my hubbie’s income. It was hard, but we are still trying to make it work and figure it out. I never want to be sucked into living on 2 incomes if possible. Any money I make is for extra’s. Well ideally this is the goal, but for now, we are scraping day to day to just feed the family.
Ideally, I know what I want, but it seems the society at large is not set up that way. We seem to create this illusion that all people can attain, but the small writing would say otherwise. It demands a 2 income household, doesn’t allow for childcare that costs almost as much as a mortgage payment or more and it doesn’t allow for any deviance from the formula of healthy working partners getting raises. It also doesn’t allow for rising gas prices that were not accounted for. It doesn’t allow for inadequate public transportation that is not reliable and not available for many American’s. It doesn’t allow for those people who choose to live in the suburbs for safety reasons, or higher quality of living assumptions and then kicks your rear because of the rising gas prices. It doesn’t allow for the fact, inflation is not being kept at bay with cost of living raises. Or the fact that bonuses which are sold to you at the job offer, don’t come anymore.
We were led to believe many things about our economy and the stability of what we could rely on. This all is a huge mess and it is not because we are stupid, but ill informed from our government that seems to be more interested in making their own profits and settling their personal vendettas.
UGH UGH UGH. I have resigned myself to not rely on anyone but me. It seems a person needs to be a medical expert, an accountant, a house repair person, a lawyer, a teacher, a business consultant etc. I find that people who are supposed to do a particular job are not proficient or reliable anymore. So I have learned the hard way to do it myself. I stay on task to those I do pay to assist me. There was a time you could trust your doctor, you could trust your lawyer etc. It seems these days are long gone. Where is the future going and what will it look like?
Another rambling sorry for the long comment, but I agree, more education. There are too many people in the same boat, so this isn’t an individual problem, but system wide.
I didn’t comment on the last post, but we also had an ARM. We have 2 more years, so we will probably be able to refinance with an OK rate by them, but it is stressful not knowing what will happen.
I have been watching a lot of Suze Orman since our money market fiasco and it makes me feel like I have a slightly better understanding of what is going on. But still, financial things are so complex, I don’t know that my future financial stability should be relying on my own sketchy understanding of how things work.
I don’t know what else to say except that if you ever need an ear to bend or someone to run numbers with you can always call me.