Looking forward to the end of the month…wait, did I just write that?!?

This month has been tough financially due to some car repairs, but I’m pleased to note that we haven’t been overdrawn at any point in the month and we have paid all of our bills on time! Tomorrow I should have the bulk of the month’s receipts, et. al., so I can finish the monthly report of our spending/debt-reduction. I’m really excited to see our progress! I think we did great on our goals and I can’t wait to tell you about it tomorrow.

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The Earnings Gap and the Social Implications

I remember the day, about 12 years ago) that I found out that we weren’t going to talk about money amongst the social circle. It was after college and I had asked one of my good friends what he was offered when Microsoft was courting him. He said, “I don’t discuss money with friends.” It was really shocking to me, but I accepted it. After all, he had this great career and I was still working retail management and going to school part-time. And that was my experience all through my college career – I worked full-time and went to school part-time (I’m still doing it now during grad school). And I’ve never made very much money, because I needed to find the jobs that are flexible enough for me to attend classes, and those jobs don’t tend to invest much, because everyone involved knows that it is just temporary. 

But as I’ve gotten older, my husband and I notice that there is generally a very large gap between what we make and what we have discovered our friends make. One of our closest friends makes more by herself than we do put together. Now, she’s been in the same company for 10 years and has an MBA, but we’re in professional jobs, too, just at non-profits. And a large number of our friends own houses (in metro Los Angeles, nonetheless), while we can’t imagine that we will ever be able to afford to buy in this area when the median house price for the County is $360,000 and over $600,000 where we live. I’m sure that this is not uncommon for most people – if you are out there and being social, you’ll probably have a mix of people in your life that represent the whole spectrum of Net Worth. So why am I writing about this?

I’m writing about this because our experience of going through the financial crisises that we have over the last few years has further illustrated the gap between the “haves” and “have-nots” in our social circle. This is shown when we have to decline dinner plans at restaurants, or give homemade gifts because we can’t afford to eat out of purchase the $100 saute pan on the registry. And we haven’t had much luck talking to our friends about our money woes and our very real worry about filing for bankruptcy, because they talk about being broke, or money being tight, but they are also putting away several thousand in savings each month. It is simply two different scales of economy. So, we made the choice to reference it, but not to give details. I think this was a mistake – we should have been more transparent and explained to our friends that “no, we don’t make 6 figures with our combined incomes” and “yes, our total debt is more than we take home in a year.” We should have just told them. I think we were afraid that we would be judged and our friends (and family, to be honest) would think poorly of us and that it would affect our relationship with them. 

I guess this means that my husband and I need to think about letting all of that worry go and have honest conversations with the people that we care about – not ALL of our friends certainly, but I think the burden might not be so heavy if others were walking along side…

Have any of you had those conversations with your friends/family? What was the outcome? Were you surprised?

An Interesting Post

Great post from Christian Weller on Credit Slips:

The argument that all forms of household debt, including credit cards, were caused by irresponsible borrowers has never jibed with the data. For instance, data from the Federal Reserve’s Survey of Consumer Finances show that families became less accepting of debt for conspicuous consumption over time. Also, irresponsibility cannot explain why the growth rate in debt abruptly changed after 2001. Interest rates after all fell much more slowly in the 2000s than in the 1990s. And finally, people would have to plaster the walls of their homes with plasma screen TVs, have a different iPod for every day of the year, and rent out storage units for all of their new designer wardrobes to explain the enormous additional debt that families have taken on.

When we first told my mother about our debt, she said “We’ve been wondering this whole time where all of your money was going.” It wasn’t going for big ticket items, that’s for sure. Our biggest ticket item was a bed ($1,600, which we paid 50% cash for) and the rest of items were school expenses, living expenses and car repairs. Our clothes, electronics, cars and lifestyle don’t add up the debt that we have. Now that we have it all in Microsoft Money, we see that our rent/utilities is the same as the amount we are paying toward commercial debt reduction (around $1,700). 

What do you think about the post (click through above to read the whole thing)?

Loans from Friends and Family

One of the most embarrassing and potentially harmful thing we did was to put ourselves in a position where we owed friends and family money. In our case, we borrowed $6,000 from my grandfather to put together with the $1,000 that we saved for a down-payment on a car the we desperately needed as our workplaces had changed and we lived too far away for any type of public transportation. We had started paying my grandfather back (and with substantial amounts) until we hit some hard times financially. He said “pay what you can” and we did a horrible job of keeping up with our payments. Flash forward to a conversation he had with my mother where he told her that we still owed him money and this is at the top of our radar. We thought that we had been really clear with him over the first  few years that money was so incredibly tight and we weren’t doing much with it but paying bills, but it has strained the relationship and evidently was weighing on him as much as us. 

Now, we need to address it directly with him (boy, that’s not going to be fun) and apologize for not making it a priority. And then we need to start making payments – consistently and soon.  We would have started this month, but we had the car repair (extra $400 of expenses) so we are beyond tight. Hopefully April will be a different matter.

We also owe our friends money for their truck that we purchased a few years back. It’s a really old truck (17 years) and we know that our friend charged us more than blue book for it $1,000, but we had another situation where we needed two cars and this was the best answer. We made steady payments until the cancer diagnosis and then the rest of the things (see The Crisis) that caused problems fell into place. So we still owe $250 to them, but we’ve also communicated to them that money is so tight and $250 pays for more than the majority of our food  in a month, so we’ve not been able to make the payments. I think that part of  the reason that we haven’t pushed harder is that we hear from them all the time about the really expensive things they are doing ($800 dancing lessons, just because; $1,500 baby photos; lots of traveling). As my husband and I see our parents once every 1-2 years, we have a hard time when one of them says “we really need the money.” This is incorrect thinking on our part – we know we have this obligation and we really want to be able to pay it and have it behind us. But it makes it hard to have empathy for them. This also brings up a future topic I’ll write about – what happens when the Earnings Gap between families widens.

What has been your experience with family/friend loans?

Mid-month update for March

This month has been one of the toughest so far, due to our car repairs at the beginning of the month. We really needed the net amount of $395 to help pay our bills and keep us in the black, so these next few weeks feel very treacherous. We’re cutting back as much as we can – we’re cutting our food costs back 20-25% and we’re really limiting any leisure activities. 

But, we HAVE been paying down our debt, and with the adjustment in our tax liability and our recent payments, we’ve reduced our obligations by $4,008.52 since 2.26.09. I know that every month won’t feel so accomplished, but it’s good to feel like we are getting *somewhere* in the process. We just really want to get closer to debt-free – and it looks like our current date is July 23, 2012. That’s right – it’s a marathon, not a sprint. I just keep thinking about how great it will feel to give more to our church and to have an extra $1,200/month to save or spend as we need.

State Tax Refund Finally Applied

After waiting 6 weeks, the California State Franchise Tax Board FINALLY applied our refund of $1,019 to our outstanding liability, making it possible that our State Taxes will be paid off in 6 months (September!). The total amount and timeline were both cut in half – which actually moved our “Out of Debt” Date a month earlier.  Very happy to get that news this weekend.

When a line item doesn’t cover the cost

Last week, as I was heading to my friend’s house in very heavy rush hour traffic, my car started revving pretty high RPMs while I was in neutral in a left-turn lane. As we have a manual transmission, I have found that sometimes it helps to just turn the car off and re-start it to kind of “re-boot.” In this particular instance, it wouldn’t restart and I was stranded at the edge of the intersection. Luckily, my husband rescued me and pushed the car through the intersection (no one stopped to help me, not even the people who were stuck behind me in the lane). After waiting 1.5 hours for the tow truck, we were dropped off at the nearest dealer that works on Saturns. 

After waiting about 22 hours after the breakdown, the diagnostics came back and we officially needed a new starter. The dealership wanted $615 to get the part and install it. Since I had seen starters for my car online for ~$145, I felt like this was a rip off and we decided to take our chances and go elsewhere. We were charged $125 for the diagnostic (but, hey, they washed the car, so wasn’t it worth it? No.) but taking it to a local chain ended up saving us over $150 (even with the extra $125 charge).  The dealership came down $100 when we told them that we could have it done cheaper elsewhere, but they insisted that we needed to have an original part.

Now, our car is 7 years old and has 124K miles on it, so it’s about the time that there should be some issues cropping up. And I’m not sure I understand the wisdom of putting a part that is 7 years old in my car, whether it was used or not.  My husband was in a meeting and I couldn’t reach him, so I called my Dad to confirm my thought that it would be perfectly okay to put in a re-manufactured starter. He said that it was fine and that Saturns were meant to drive a little over 100,000 before showing any major issues. 

So we had the work done, adding a high-mileage oil change to the docket, resulting in a $425 price tag to get our car to run. We *do* have a line item in the budget for $30/month for car maintenance…but of course, this won’t cover it. It seems as though we need to re-visit our budget as there are more repairs to be done and my husband drives a 17-year-old truck. 

It couldn’t have come at a worse time as we have major bills this month and the disbursement from my student loan won’t hit until a month from now. Somewhere, somehow, I need to find an additional $700 to make sure we stay in the black with our cash flow. This is what happens when you start closing your credit cards…it’s harder to adjust in the short term.