Author Topic: reality check please  (Read 6920 times)

skyler

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reality check please
« on: August 12, 2013, 06:23:27 PM »
I have been consumed with trying to get out of debt.   
Accidentally stumbled upon Dave Ramsey's Total Money Makeover while doing research on mortgage refinance two years ago.

My husband and I were living a true consumer life and feeling like we are doing great. We had debt, but ours was "good" debt: two enormous student loans, an overpriced house that we bought in 2004, two cars that we bought brand new, a second mortgage that paid for a our kitchen remodel and many other repairs for our 20 year old house.
In all (without the house) we had over 100K in debt--but never any credit card debt.

I got very interested in Ramsey's debt snowball method and tried to get husband interested also.
He was reluctant because he felt we were doing well. We could afford the mortgage and pay all of our bills, but saved little to none. Neither were interested in investing or gave any thought to our asset allocation--we were both contributing minimum to a 401k thru work, blindly.

The purchase of our second house was one of the worst financial decisions we ever made.
We moved out of our starter home in a great neighborhood in 2004 because hubby stumbled across a very nice opportunity--a house that showed "tons" of potential due to the space available.
It was large--5 bedrooms 3 1/2 baths. That house was the beginning of our stressful life.
First mistake--we did not have a buyers agent. Relied on a relative to advise us in the process.
We thought we got a good deal on the house because the seller came down 10k. However, we paid all of the closing costs and borrowed money from family to put down 15k, paid somewhere around 1k for origination costs and locked in at a lucky rate of 6.5%.

We were the handy kind, wanted to do everything right and fixed/replaced many many things in the house. Every weekend was a trip to Home Depot. Every week we had a to do list. In the process we had two more kids and hubby got himself injured (deep cut) while laying down Pergo flooring.

The water heater went bad, water all over, felt like bottom went out, we had some really bad rain for weeks that ended up flooding our basement and our claim was rejected because we did not have flood insurance. We had multiple trees removed from property for danger of falling. We replaced the roof and repainted the entire house house, tons of money in landscaping hard and soft.
Last year, we refinanced our mortgage and paid $3k to lock in a 2.75% rate.
This spring, frustrated and with no savings we decided to put our house on market. We gave up on the American Dream. House sold in a week.
We lost about 45k  compared to initial price and had to pay all closing costs again, plus a $2500 cash allowance for minor repairs and a home warranty policy for the buyer.

We are finally debt free, mostly due to my obsession with debt. Apparently, I was mustachian before I even found this blog:) starting giving family haircuts (husband plus 3 kids), shopped Aldi  and Costco, cooked all meals/lunches at home, was mindful of combining trips to save on gas and every penny saved went towards debt. I shopped around for insurance, utilities and even dropped cable (during the non football season at DH's insistence). The entire time my husband complaining that he only lives once and we are doing just fine comparing with majority of Americans.
Is he right???

Here are our stats:


We are debt free, but do not own a home-renters.

I have 56k in a traditional IRA.
Husband has 100k in his 401k
We have $4000 in savings
Own two cars worth about 20k together (both vehicles 2008, with less than 70k on odometer)
and one pop up camper worth probably 2k now, but GREAT for our family camping adventures.

Our rent is $1350

DH earns about 65k and I bring in 40k yearly.
Our take home is about 7k a month
Without the debt, we should be able to save about 3k a month with no problem going forward.

I cannot relax now, I am so intense on trying to save to invest more and I feel alone in my quest for security. My husband does not share the urgency of us investing more and getting ready for the kids college, weddings etc...

My goal for being debt free was not really about achieving early retirement, more like retirement with "enough". I know nothing about investing. I don't not know what "enough" is.  I feel that we should save a bunch of cash, maybe like 20k before we can really start investing.
I feel like this is MY project with husband eternally NOT being on the same page as me.

How do we stack up? Am I really going extreme here??
I feel this is not healthy to be so obsessed (and resentful when DH spends money on things I could have gotten a bargain or find alternatives).
Appreciate your feedback.

« Last Edit: September 12, 2013, 11:53:40 AM by skyler »

Lans Holman

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Re: reality check please
« Reply #1 on: August 12, 2013, 06:44:00 PM »
The entire time my husband complaining that he only lives once and we are doing just fine comparing with majority of Americans.
Is he right???


Sure he is, but so what?  Most americans are in terrible financial shape.  And the fact that you only live once is, if anything, an argument against spending money in order to waste your time sitting on a couch watching people hit each other. 
That said, it sounds like your efforts to reduce your debt are causing tension and anxiety not just with him but in your own head.  If you are feeling "obsessed" and "resentful" that's not healthy.  Getting out of debt should feel satisfying and empowering.  It sounds like it might help if you could articulate a positive vision of what you are hoping to acheive that you can try to get him on board with.  Otherwise he's just going to keep perceiving your actions as stinginess for the sake of stinginess. 
Congrats on all your accomplishments so far, it sounds like you've come a long way.

ChiStache

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Re: reality check please
« Reply #2 on: August 12, 2013, 06:47:00 PM »
Oh wow, I just read your story, and I so admire your ability to turn this huge ship around. You are a badass. I can definitely relate to home haircuts and Aldi shopping and packing lunches all with the debt in mind.

I'm curious about one thing. Why does your husband not quite share your urgency?  Is he ok with the prospect of not helping kids with college and relying on social security for retirement? Maybe if you can understand his vision for the future, you can use his vision to chart a more frugal path.

skyler

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Re: reality check please
« Reply #3 on: August 12, 2013, 07:33:56 PM »

LansHolman
It is irrational why I am in OC mode over this...
Maybe just the  realization that we could have done so much more if I only found MMM earlier ?
Midlife crisis?
Stress over the last years of not having a safety net?
All of the above I think...
 


mpbaker22

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Re: reality check please
« Reply #4 on: August 12, 2013, 07:58:48 PM »

LansHolman
It is irrational why I am in OC mode over this...
Maybe just the  realization that we could have done so much more if I only found MMM earlier ?
Midlife crisis?
Stress over the last years of not having a safety net?
All of the above I think...

This is a classic case of sunk cost fallacy.  The past is the past and you can't do anything about it.  The key now is you're in good financial shape.  You're on your way to GREAT financial shape. 

At a 4% SWR you currently have $6000/year in retirement.  You might want to point this out to your husband.  Is $500/month plus social security going to be enough?  I'd guess that's probably $2000-$3000 total.  By Mustachian standards it's plenty, but make him think about it.

Since you're saving $3K/month, the SWR will go up by 1.44K/year (And that doesn't include any gains on your current investments).  You might want to point this all out as well.

With regards to your comment about saving 20K to invest, now is always the best time to invest.  Once you have more than a few thousand, you're going to be able to purchase stocks at fairly low expense percentages/ratios.  You can search the forums or re-post here for more info.

Dr.Vibrissae

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Re: reality check please
« Reply #5 on: August 12, 2013, 08:34:18 PM »
It might help both your level of stress and getting your husband's support if you can more clearly articulate your goal's/final aim. 

You said you don't really plan to retire early, and you mention wedding's, college and having "enough" but have you really sat down and looked at the numbers? What is enough for: retirement? Contributing to weddings and/or college? Are you planning to do both? For all of your children? How much is appropriate for each?

Just squirreling away money without an idea of what your aiming for isn't going to calm your fears, and isn't going to give the rest of the family a sense of what you're trying to accomplish that they can get behind.  You've come a long way,congrats! Up until now, it's all been about past obligations, but now you have this great opportunity to sit down and reflect on where you want this extra $3000 a month to take you.

Good luck!

skyler

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Re: reality check please
« Reply #6 on: August 12, 2013, 09:08:07 PM »
Dr. Vibrissae
This is all so new, up until now my only goal was get out of debt...Battling our debt while raising three children under 10 was intense--I could think of nothing else beyond what it would be like not to have all this debt.
There was no time for dreaming of anything else, no time to get sidetracked with long term goals...

So here is me brainstorming now that I can :

Would like to be able to retire regardless of whether  SS still exist or not/concerned about costs for long term care

Would like to purchase a small house in cash (husband is burnt out now, does not want to buy, said perhaps a small condo in the city when the kids leave for college...I feel I know so much more now about choosing the right property (cost, location, financing). I am confident I can do better this time.
So that is in 12-15 years.

Be able to give more (Guess I can start now)

Help with kids college expenses (while encouraging their academic success and maximizing chances for scholarships/grants).

Contribute to my daughter's wedding, nothing crazy, just be able to do something (we have one girl and two boys).

Just a few thoughts, not placed in order of importance... this feels therapeutic :-)
Who would have thunk it???






SunshineGirl

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Re: reality check please
« Reply #7 on: August 13, 2013, 09:29:52 AM »
Phew! You've just completed a huge, stressful, multi-year-long house/debt project, and based on the emotion in your post, I suggest that you relax for a little bit and enjoy your newfound debt-free life. Pick a percentage of savings you're comfortable with and save it, and spend your time making your family life fun and fulfilling. With 7K in income, no debt, and $1350 in rent, you should be able to save quite a bit going forward. The time for you to be so anxious is over. Just be prudent and thrifty, but know that you're at a place (debt free) that many people never get to.

Concerning your husband, what does he want to spend money on - things or experiences? Hobbies? Vacations? Try to understand what's behind his push-back, and see in what ways he may be right.

I don't know -- it just sounds to me like you need to recover a little bit from the stressful years you've had with that house. I sensed bitterness and a lot of anxiety in your post, but that can all be laid to rest. Some joint goal-planning would be a good exercise. And congratulations for coming as far as you have!

Villanelle

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Re: reality check please
« Reply #8 on: August 13, 2013, 09:51:58 AM »
Would your husband be amenable to having some mad money to do with as he sees fit, with no input or judgement from you?  He might be less resentful if he felt he had control over some of it.  Right now, it is all your idea and your plan and he's being dragged along.  Giving him $100 a month doesn't sound like it will hurt you much (now that the debt is gone) but it might make him feel like he can "live" a bit more.

Also, find out what is important to him.  You've made a great list of your priorities, but what are his?  I think it would help to make room for his desires in the plan.  If he really values a family vacation every year, then make that happen.  That's not any less valid a priority than wanting to pay for a kid's wedding, even if it feels less important to you.  Make room for his goals (and let him see that all the scrimping and saving will allow him to have things he wants) and he's much more likely to get on board.  It might slow FIRE by a couple years, but if it makes it worthwhile to him, then those years will have bought you harmony and cooperation, which seems like a worthy investment. 

Riceman

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Re: reality check please
« Reply #9 on: August 15, 2013, 04:12:52 PM »
After becoming frugal, you are now saving 3k a month.  Your question seems, to me, to be "should we a) relax and become less frugal (get the cable again), b) stay at the same pace, or c) push further down on the gas and save more?"

To me, the clear answer is B or C--you cannot afford to let up and start saving at a lower rate.  Your husband earns a bigger paycheck and he's already 50.  His top earning years might be ahead of him, but it's tough to assume more than 10 - 15 more years of him earning that paycheck.  Given you have 150k now, and you have 3 kids living with you who will go to college, the only way you're going to get to the 800k - 1 million that will give you a retirement without having to rely on SS is if you continue to save at your current 3k rate or higher and both work until you're 60-65.

Do the math with your husband and celebrate that your standard of living is still pretty good despite saving 3k a month.


skyler

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Re: reality check please
« Reply #10 on: August 15, 2013, 06:39:01 PM »


To me, the clear answer is B or C--you cannot afford to let up and start saving at a lower rate. 

Good point, thanx Riceman!

skyler

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Re: reality check please
« Reply #11 on: August 17, 2013, 09:02:39 PM »
The time for you to be so anxious is over. Just be prudent and thrifty, but know that you're at a place (debt free) that many people never get to.



thanx SunshineGirl...appreciate your encouragement...
It is slowly sinking in that we are debt free...just wow..
Skyler

SunshineGirl

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Re: reality check please
« Reply #12 on: August 18, 2013, 02:07:28 PM »
Wow, indeed! The trick is not to get tempted from this point forward to go back into debt.

Sofa King

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Re: reality check please
« Reply #13 on: August 18, 2013, 07:19:04 PM »
I so admire your ability to turn this huge ship around. You are a badass.


I concur!