debt

Invest This!

/ lovizmytrio / Leave a comment

Sometimes I wonder if financial planners are out of touch with reality. Because I have read so many articles in magazines, online, heard it on the news—the best ways to invest, to save money, to cut back. Now I know they’re educated, I know they’ve been trained in what to say, and most of them have a good deal of experience, but I’m sick of reading the same old things.

The one that bothers me the most is: put money into savings first, and then pay off debts. That makes no sense to me. Why should we let debts add up, along with their ugly interest rates, and not eliminate them as quickly as possible? The same thing applies to their advice about mortgages (the biggest debt of all, right?). They always say to save money in Roth IRAs, 401Ks, or other retirement accounts, and then save six months’ salary, before paying extra on the mortgage.

I get the retirement thing, I do. I realize how important that savings is, and how quickly it will disappear having seen many of my grandparents’ generation foot the exorbitant bills in assisted living homes. What I don’t understand is how the average family has enough money to sock away six months’ worth of living expenses. Really?

For us, that’s $3100 a month. We can barely pay our bills after I have money set aside for retirement, let alone SAVE money. And I mean it. We don’t have many debts other than our mortgage. Every year at this time we’ve piled up some debt on our credit card that we must use the tax return to pay off. The rest of our tax return goes into savings, but it quickly depletes in the ensuing months. Can we live a little, just a little, please?

I have figured this out time and again. It would take us, saving every remaining penny from our tax return, more than six years to save six months’ worth of living expenses. That is absurd. Are we supposed to stay locked at home, never take our kids swimming or roller-skating or on the inexpensive family-visit road trips our family takes, just to have this little safety net?

What makes more sense to me, and what I have seen both sets of grandparents and my parents do, is to pay extra on the mortgage. We may not be able to pay that much (only $50 for us right now), but I bet it will add up. The previous generations of my family may not have been highly educated financial planners, but they all paid their mortgages off early and reaped exemplary rewards from this: early retirement for one set, selling one house and paying cash for another for the other two sets. Doesn’t that make more sense than socking all your money away? Your home is the most accessible investment of all.

It’s not that I spend all my time reading financial advice from people I usually don’t agree with. But as a one-income family in a world of doubles, I’m a “frugalista” who’s always looking for another way to pinch pennies. The way I see it, I’ll stick with what I know we can afford, and what I have seen firsthand success with, rather than “investing” in the advice of strangers who seem to have no idea how anyone could actually live on what we live on. (Side note: the one time a financial planner did come to our house, he about shit his pants, after driving up in his Mercedes, when we told him we had no car payments. Is this really the person I need to be listening to?)

Consumerism on Presidents’ Day

/ lovizmytrio / 1 Comment

We went to the mall today. Packed with shoppers. We almost never buy anything there other than a shake that we all share from Chik-Fil-A. We take the girls to play on the little play area and peruse the puppies in Pet City and to kill an afternoon without spending more than $5. Isabella had to go to the bathroom and suddenly we were in the back of Macy’s when we started looking at all the nice leather sectionals that were $2000. “When we get our tax return,” Bruce joked. Who has $2000 to spend on one piece of furniture? And that was the sale price, the Presidents’ Day sale.

We started walking out and the girls examined the plate sets, the men’s shirts, the towels and sheets. “Hey, this isn’t the mall, this is like a regular store!” Isabella announced, having never really been inside one there before. Everything was on sale, we could have got some real deals, $20 dress shirts instead of $40, a $15 lingerie Valentine set, already marked down the day after. All because… because why?

Why do we have the day off today? Have we all forgotten? Here we are stuffing ourselves with fast food concoctions and filling our shopping bags with sale items and doing anything but taking a moment to realize why this is a federal holiday. This is the typical American interpretation of a holiday: consumerism.

I’m sure Lincoln and Washington are turning over in their graves right now. What were they fighting for anyway? What have we forgotten in the course of 230 years? Is this really what freedom and equal rights and human sacrifice have all amounted to? A winter clearance of coats and boots in every store countrywide?

Sometimes I ask myself, what has this country come to? How is it that the things that sustain us—the buying and selling of goods—are the same things that destroy us? How can we simultaneously prevent and prepare for a recession, just as Einstein once asked the same question about war?

When I buy anything, I am wrought with guilt. I think about the person in China who made my product and a hundred others like it for a dollar a day. Instantaneously, I think of the store-owners and employees who will be out of work if I don’t buy more. I think of the destruction of natural resources from the production of each item. And I think of how spoiled we all are, how we think we need more than what we need, and how my children’s future will be impacted by this.

But today, as I witnessed sale after sale in honor of Presidents’ Day, all I could think about were arguably the two most influential presidents of all time and their idea of the American Dream. Did Washington read the Declaration of Independence to his suffering troops during the winter at Valley Forge, did Lincoln sign the Emancipation Proclamation and take the first step towards equality, for us to save a few bucks and add to the debt and environmental nightmare that we’ve been swimming in for years? And if this is how we honor our presidents, the leaders of this great nation, where is our country headed?

I can’t answer that question. I can only reach out and take my girls’ hands and lead them out of the mall. Perhaps this is the first and most important step to guiding the next generation in the direction of the real American Dream: the dream our presidents had, once. The one about freedom. Not consumerism.

Sovereignty

/ lovizmytrio / Leave a comment

If you tease me with this for long
I fear that you will guide me wrong—
inside my veins the blood burns hot
inside my brain images rot

Soothing as you appear to me
stinging my recent memory
you give much less than what you take
and haunt the hallows in your wake

I do not know why you appear
and in my thoughts are always near
you are a debt as Dunbar states
one who at no time hesitates

To remind me of your cruelty
your lack of faith, your sovereignty—
but I will not give in to you
for him, our love, I will cut through.

How to Live on ONE Salary in Today’s World, Day Two

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So, $1200 per month to pay the remainder of the bills for a family of four with two stubborn girls still in diapers? Well, it’s not so hard really if you’re willing to sacrifice a few things. For one, neither of us had a cell phone, gasp! I mean, what is the purpose of a cell phone, really? It’s to communicate during emergencies, and in that case, Bruce could just call me at work. Since then, we have purchased cell phones, but even now, we only use pay-as-you-go phones, paying probably less than $10 a month, TOTAL.

Also, we were not paying for cable TV and at that time had dial-up Internet, which I know isn’t the greatest, but it still worked. These are all simple ways to cut costs: think about what you REALLY need. MUST you watch HGTV or have the highest connectivity, or can you make some sacrifices?

Without those expenses, we still easily spent $500-$600 per month on groceries, but cut our food expenses tremendously by almost never going out to eat, a habit that was admittedly difficult to drop, as we had been accustomed to that lifestyle for six years of marriage. But you have to do what you have to do. Part of that also includes switching stores, though it’s tough to give in to this, and primarily shopping at Wal-mart. Their prices are easily half, and at the very least thirty percent, less than a typical grocery store. Once I discovered this, I knew we had to make that choice, grievances aside.

Back to the diapers… we used cloth diapers, so we weren’t spending $60 a month on diapers. Our water bill may have been a bit higher, but it has always hovered around $60 a month.

So where does that leave us: $540-640… Because of our good driving records and having old cars (yet another benefit of not buying a new car), our car insurance is less than $40 a month. Yes, that’s right people: LESS THAN $40 a month!! Some things, however, are out of our control, such as the energy bill, which can easily rise to $240 in winter months. We have always tried to balance this out by paying $150 every month, therefore crediting our account, even when the bill in the spring or summer is as low as $80. This is just another simple way to cut costs: look at the whole picture and make it work by balancing things out.

Assuming that we had an expensive grocery month, that leaves us with $350 for everything else: phone, clothing, trash, gas, insurance… and tomorrow, the great insurance debate… in my words and ever-so-bold opinions…

How to Live on ONE Salary in Today’s World, Day One

/ lovizmytrio / 2 Comments

I am going to write for several days about a question that I often encounter from many people who tell me, time and again, that they think it is impossible for their families to live on one salary. To me, after so many years of hearing this, I find it almost offensive when I hear people say that. If it is possible for us, why can’t it be possible for other people? We are certainly not wealthy by any means. I make $50,000, but when we started doing this, my salary was just $37,800.

So many people are losing their jobs now that this might be something they not only have to consider, but have to live with. So these few blog posts will be about how we do it.

In 2005 I was happily staying home with my two young children and taking care of another little girl for $550 a month while my husband worked full time earning about $40,000 per year. We had a comfortable life, filled with vacations, and were able to save a little money every month. Then he received the news that his job would be coming to an end within six months, and I knew what I was going to have to do: go back to work. As much as I hated the idea of working and leaving my then-two-and-a-half-year-old and nine-month-old at home without me, I didn’t want to lose everything we had. Part of that everything, as a personal and VERY important choice for us, was keeping our kids out of daycare. Bruce never went to daycare growing up and had a very close relationship with his mother. I, on the other hand, spent my childhood with various babysitters, and have too many negative experiences to count (nothing horrific—just neglectful). So that was one of the many priorities we had in mind when we were faced with this challenge.

We made a plan. The first part, as difficult as this was to accept at the time, was to eliminate all debts other than our mortgage. Unfortunately, the only way for us to do this was to completely drain our $12,000 in savings. We paid off the rest of my small student loans, our credit card debt, and a loan we had taken to put siding on our house. This brought our bills down by $230 a month, which may not sound like a lot, but it can make a huge difference.

One thing that we did not have, which most people do, was a car payment. Both of us had cars and both were long paid off. I think this is the single most important factor determining a family’s ability to live on one salary. In my opinion, there is almost NO reason to ever have a car payment. What is the purpose of a car? It is to get you where you need to go. There is no reason that I can imagine why anyone should ever buy a new car. And if you need to upgrade to a larger car, as we found out later that same year, expecting baby number three, that we would need to do, find a way to make it work! We used our tax refund ($4000) and sold our old Explorer ($3000) and bought a minivan with cash.

So, to return to my story, the only debt we had, and more or less still have, is our mortgage, which in my mind hardly counts as debt. Another thing to consider is where you live. We certainly don’t live in a fancy house in the most beautiful neighborhood around. We live in, gasp, Aurora!! Ghetto central, right? Come on, your home is what you make it. We have never experienced any crime that I know of. We don’t lock our doors—car or house. We live in a quiet cul-de-sac that our kids play out in with the neighbors’ kids just about every day of the year—similar to any other cul-de-sac in any other suburb, but without the fancy HOA or whatever it is that makes people feel so special about where they live. That being said, our house payment is around $1400 a month.

When I first started working, I was bringing home $2600. Ouch. Do the math. That left us just $1200 for all the rest of our bills. Much higher than the 51% or less of the take-home income that you would get approved for if you were applying for a mortgage… But we did it… and if you read tomorrow’s blog post, I will tell you how.