Debt payoff report: September & October 2017

Woops, forgot to post in September, so this is a combined report. September and October definitely weren’t as thrilling as August since we didn’t have a big chunk of money to throw down, but it felt good to keep moving forward with extra payments. I started my side hustle which is both fun and a direct line of income going straight to debt. My husband and I have started to eye what steady state extra payments should look like going forward and I think we can definitely out do what we did in September and October.

But anyway, here we are:

  • Starting balance: $154,470
  • Regular September & October monthly payments: $3,818
  • September & October extra payments: $990
  • New balance: $150,363 

Really looking forward to crossing the $150k mark by the end of this month! It’s also worth noting that when we re-financed our loans 2 years ago our starting balance was $200k, so hitting a $50k milestone is pretty great. It feels daunting that we have 75% more to go, but also encouraging that we have momentum and motivation on our side now. Onward!

Economic Empathy and the Women’s Convention

This may be a strange place to write these thoughts.

Here, I am supposed to write about how to ensure my own guaranteed comforts, the financial finagling that’ll grow my share most quickly, or most completely. And as I write these words, I realize that’s not entirely incompatible with the dominant thought I took away from the first Women’s Convention of my lifetime, but it’s hard to marry.

The term/theme that echoes and screams for attention and intention is Economic Empathy. I have long felt its absence in the world, but never had a word for it. Didn’t know it was an actual thing. 

Now that I do, the concept is pretty clear: work to understand and actively feel the financial constraints of people in different scenarios. The focus is on haves really considering the experience of have nots – at the ballot box, when shopping or dining, when hiring, etc. Even when it comes at a personal cost. Or especially then?

An example. As I walked through a small marketplace called Social Justice City, among my purchases were 4 artisanal chocolates. They were made in Detroit, and I felt good about supporting a local small business.

Later the same day, I learned that the scholarship recipient we’d selected in an essay contest had flown from CA with $3. Total. For a three day trip away. She was entirely at the mercy of the conference and her hosts to feed her. To get around.

The fear that induced in me was palpable, but I could imagine it.

Could someone who’d never been without? Who’d never had to consider the ‘what next’ plan of not being able to afford general basics?

And how can I best work toward a redistribution of wealth — or wellbeing — while also working to solidify my family’s assurances (if we can ever claim to have them)?

I know a few ways. Shop with stores and eat at restaurants that pay ethical wages; support small businesses; frequent neighborhoods and cities whose local economies could use a boost. And does paying my housekeeper extra before she takes her kids to Disneyland count? Or would all that money (to her, at the struggling boutique, etc.) be better spent affecting policy? Or in the hands of a nonprofit?

Maybe my goal should be to tighten all spending – most of what I do, if I am honest – that is done with neither intention nor empathy. Or, frankly, with an eye on the investments that’ll secure my future.

This shit is hard. Any thoughts?

Broke vs. Poor and Paying it Forward

So many times in my young, broke life, someone else’s generosity changed the game.

Whether it was a trip or simply a meal out with a friend’s family, or an indulgent meal paid for by an aunt or uncle while I was in college — even the expensive wine and cheeses or celebratory meals my first boss hosted, which I now realize were write-offs that should have been salary! — put a little steel in my spine. It polished my step.

The moments, big and small, exposed me to finer things or let me relax and enjoy in a way that was so hard on my own dime. The warmth to my soul, even now, brought by the gaze and gesture of someone else’s giving, provided a few lessons that I hope never leave me on this money journey.

First. Being broke is barely related to being poor.

No matter how many overdraft charges or late payments I had in my thriftless 20s, I never doubted I’d have enough to eat. I feared making rent, but knew I would never be homeless or put in a compromising position to find a place to stay. And throughout my life I was exposed to riches: amazing arts at the hand of the public programming in SF, home ownership, books on shelves, transit that let me get around, food from every corner of the Earth. Each of these, and especially all of these taken together, make for a very different path. One that points up and has continually boosted me along the way.

The other is the profound gift of extending access.

Access can be to experience or introductions or places or food that sits beyond the reach of another person. Now, as a person of means, I think about that in all kinds of ways. In how and where I spend – on the products of artisans? In small businesses? With women or minority owned establishments?

Sometimes, though not as often as I can. And sometimes (often?) beyond what I need.

But when I consider how much of our culture trains our gaze up – to more and more security, to growing and preserving wealth, to expanding and even exploding expenses – I want to keep track of how high up the pyramid I sit. That even when I felt broke and out of control, I started near its peak and have only climbed. Part of my definition of value is to pay it forward and spread it out.

My goal now is to increase consciousness, so I am not simply spending frivolously or as a quick serotonin hit, but with thought and intention toward these values, and toward more traditional goals.

Mine. Yours. Ours?

My husband and I are back in the Midwest this week to visit my family and to attend our five year business school reunion. Five years. There are so many things that have happened in my life over the past five years that I’m thrilled about – namely an incredible husband, a great career and a beautiful daughter. I live in a breathtaking part of the country, I married into an awesome family that I get to live near and I have my health.

But damn, I did not think I would be $150K in debt 5 years out of business school.

When we graduated I had about $40K in student loans to pay back and my husband (then boyfriend) had – gosh I don’t know – north of $200K I think (he got two masters degrees)? Anyhow, once we each started working we dutifully began our respective monthly payments and planned to each be done in 10 years. It didn’t really cross either of our minds to accelerate our payments (um and we went to business school – eeks. Embarrassing).

What was killing us though was the interest rate. Student loans coming out in 2012 were at horrible rates – ranging from 6% to 8%. We each re-financed and got better rates a year later and thought we were good. We probably would have continued on that way paying tens of thousands of dollars in interest over 10 years, just accepting that as our fate. But then my husband found an even better student loan consolidation where the fixed rate on a 10 year loan would be 2.75%. The catch – we would have to consolidate our loans together to qualify and the loan would be through a private bank.

My first thought was hell yes to 2.75% fixed! But then it sunk in that I was tying myself to significantly more debt and that by moving to a private loan we would no longer have the security of government loans that let you take hardship periods of time if you end up unexpectedly unemployed. I was nervous, but we both knew the savings on interest was absolutely the right thing to do (phew, some business school education setting in). So in the fall of 2015 we consolidated and re-started the clock on our 10 year loans once again.

I’d love to say that at that moment I nobly decided to split our loan payments with my husband 50/50 because of love! Commitment! A shared future! But I’d be lying. We pro-rated our payments relative to each of our debt because that felt “fair” at the time. But a couple of months later my husband unexpectedly got laid off and started at a new job that paid a lot less. Like – a LOT less. We both knew the job had great potential – a sales job with uncapped commission – but it would take time to build up his client base. We began lumping all our expenses together and just each contributed as much as we could. I think we probably split everything 50/50 generally, but there were likely months that I paid more than half.

And it wasn’t until we went through this experience that it dawned on me that we had to stop thinking about debt and income as mine vs. his. We had taken vows a year earlier in front of friends and family to join our lives – what’s mine is yours, what’s yours is mine. We had shared dreams for our future – why exactly did I think I didn’t have to share in the work to get to those dreams? And so when my husband’s income stabilized, we just kept moving forward with money in one pot and left the pro-rating in the past. It felt great to save so much on interest with our consolidated loans and we definitely felt more like a team financially by the time we welcomed our daughter into the world.

Yet this was STILL not when it occurred to us to pay off our loans faster. We were sittin’ pretty on stable incomes, a great interest rate on our student loans – and hey, we don’t have that ‘bad’ credit card debt, so we’re good, right? Everyone takes at least 10 years to pay back student loans…right…?

Fast forward to this past August to me attending the Lola Retreat with my two sisters-in-law. I was inspired to attend because Mrs. Frugalwoods was speaking and I had been a long-time fan. I also loved the idea of women getting together to talk finance. I thought it would be energizing, inspiring and I would learn some practical saving and investing skills. But what I hadn’t anticipated was meeting a bunch of regular-hey-they-are-just-like-me women talking about achieving financial independence in their 30s. Paying off massive grad school debt in a mere 3 years. Retiring early and living off investments. Talking about their “FI Number.” Say what? You mean that stuff isn’t just for the people who blog about it? What do you mean you paid off your student loans EARLY? Suffice to say I left inspired, but I also left with a fire under my ass and a bit sheepish. We weren’t doing enough.

And THAT is how we got to where we are now. Shared debt. Shared income. Shared goals. Shared vision. We aren’t a finely tuned machine yet, but we are much more motivated than we have been before. I’m impatient and want it all done now, but my husband keeps me in check reminding me it’s still a massive task ahead of us. But we don’t have to be complacent or just accept our student loan fate as “that’s just the way it is.” Let’s hope at our 10 year reunion we’ve got a different debt story to tell.

 

Lifestyle changes

So I have this fantasy. I picture myself the embodiment of financial discipline. I pack our lunches everyday, I don’t buy clothes, I manage our household expenses with precision. I in-source, I frugalize, I scrimp.  And at the end of the month I have ample extra cash to which I apply dutifully to our debt. I maintain this discipline effortlessly and without much noticeable disruption to our life and then reveal to my husband a short time later – ta da! I did it! I just tried a little harder, made extra payments that you somehow didn’t notice and guess what? WE ARE NOW DEBT FREE!

I’m going to be honest that there have been moments (years, really) where I truly thought “If I just optimize our spending a little better we can get there…”

And then I woke up.

The reality for us is cutting out lattes and cooking at home simply isn’t going to get us there. Yes being more disciplined with our budget helps, but the truth is our fixed costs are way too high compared to our income. Which is what launched us to take a good honest look at our fixed expenses in the first place and make some bigger lifestyle decisions.

Lifestyle Change #1: Housing
We live in a really expensive part of the country. Bizarrely, our rent is considered reasonable because we have stayed in the same rent controlled apartment for 3 years, but it’s still way, way high by any normal standards. Further, we will outgrow our apartment at some point if we want to expand our family.  So our first change: move to my husband’s childhood home.

We are incredibly fortunate that this is even an option. My husband’s dad lives in the city (where we live and work) in a paid off home that is too big for him at this life stage. He very generously has offered to let us live there for a few years to save money. In exchange, we will rent him a smaller 1-bedroom elsewhere in the city at a cost that is lower than our current rent. There are a TON of questions yet to be answered with this plan (exactly how long will we stay? what sort of improvements will we make to his home while we’re there? how does us living in this home affect my husband’s sisters – Lady Red and Lady Gold? and so forth). But as of today, the plan is to move there next summer with the goal of saving $1k on rent a month. Boom. That’s the kind of expense slashing we need.

Lifestyle Change #2: Childcare
As a bonus to moving to my father-in-law’s home, there is a magical co-operative nursery school up the street that we would love our daughter to attend. My husband and his sisters went to this school as children and Lady Red’s children go there now. Further, because it’s a co-operative model, it is presumably more affordable than our current childcare situation. I say “presumably” because this is, yet again, a plan that is not fully formed. At face value, the preschool is much cheaper every month than the nanny share we are part of now. But the school is only a few hours a day, so we will still need childcare for the rest of the work day. I’m hoping that we can once again share childcare with another family for the non-preschool hours (although it makes me weep to think about leaving our current childcare provider – she will simply be too far away to make it logistically possible) and save money on this large fixed expense, but honestly I’m prepared for this to be cost-neutral. Ha. I guess I shouldn’t list this as an optimization quite yet, but one can hope. It will certainly be a lifestyle change.

Lifestyle Change #3: Side Hustle
Our three biggest expenses are housing, childcare and our loan payment. As I’ve detailed above, we are working to make those costs lower and of course our loan payment isn’t going anywhere. My husband works in sales and has varying commission from month to month, but in general, our fixed expenses make up about 80% of our net income each month. You don’t have to be a math wiz to know that isn’t great. So what does that mean? We need to make more money.

I’ve wondered for some time what would be a good side hustle for me. One that didn’t feel like it added stress to my life. One that wasn’t more of what I do during the day. One that didn’t feel like it took a ton of extra time away from my daughter that I already feel I don’t see enough. And that’s when Lady Red offered a perfect solution: work on some organizing projects in her home that she had previously been paying an external professional organizer to do. I loved it! Get to spend time with family and get to do something I already like to do. Further, I’m hoping working on some projects with Lady Red will give me practice so that maybe one day I can make a more formalized side hustle out of professional organizing. This is all new so we shall see – stay tuned.

So those are the lifestyle changes we’re trying to work toward in the next 12 months. It can’t happen overnight and it feels intimidating, but I know these changes can and will serve us better going forward. More deep breaths and more steps forward.

Debt payoff report: August 2017

Ever since my husband and I decided to get focused on accelerating debt repayment, it’s like a light turned on. Or a fire was lit? Something. We are looking at our finances totally differently in just a few short weeks and we’re so excited about the possibilities once we’re free of this load.

Of course, with any new goal there’s always the temptation to do everything at once. I love goal-setting. As soon as we started talking about paying our loans down faster, I basically wanted to cash out all of our savings and apply it to our balance. But obviously that would be a bad idea, so we practiced restraint and identified what felt (to us) like a safe amount of money. We wanted to apply a big enough chunk that it felt signficiant and that it was a marker of this mindset shift, but we didn’t want to dip into emergency savings or cash out some of our longer term investments.

Where we landed was moving some money we had been saving in a fairly low interest bearing account for a down payment (more on our ongoing debate about homeownership at a later point) over to our loan. So as such, here’s our August progress report:

  • Starting balance: $165,923
  • Regular monthly payment: $1,909
  • August extra payment: $9,924
  • New balance: $154,470

We paid a funky extra payment amount with the idea that we would kick-off with a nice even new balance, but mis-calculated how much of our regular payment goes toward interest, ha. Oh well – feeling awesome to start this journey with a big first payment.

It’s definitely not possible for us to make huge payments like that every month, but the idea of multiple loan payments a month feels exciting. This was also arguably the easiest month since no behavior change had to happen yet. Finding how to earn extra income and cut costs will be where the real hustle begins. It’s going to take awhile, but I’m feeling optimistic and looking forward to documenting this journey.

Becoming a Boss

When I graduated, the economy in my hometown had just imploded. I’d studied what I loved instead of what made for a good resume. I came home to my parents’ house, a broken heart and almost 42,000 in student debt. My first job was mucking buckets and lugging arrangements at a florist, and then an internship at an office, doing what I have done since. Both were earned in large part because of privilege and connections. And at $8/hr., I was looking at 5,250 hours of work to pay back my loan. Without taxes or living expenses. More than 131 weeks at 40 hours a week.

The impossibility of it didn’t help my general fuck it mentality about money and even though I went from hourly to salary very quickly, my salary (starting at $28k) wouldn’t surpass my year’s tuition for several years. So.

I racked up tens of thousands of dollars of credit card debt. On lunches and clothes. On life changing trips abroad. On stupid things and fees designed to take advantage of people like me. On bachelorette parties and bad decisions.

It was my secret shame, shared only with my sister. My friends were much more affluent than I, in school and then as they landed high-paying jobs that paid forward for life and savings, while my meager earnings went down a dark hole.

In my late 20s, I learned about personal finance in great detail and my debt started to give me real anxiety. As I neared 30, I was leapfrogging ahead in my career, and revealed my money mess in a relationship for the first time. To my now husband.

He said, “Seems you may have needed the travel and the clothes and experiences to establish yourself as a peer to clients. But now you are there. So you can stop.”

The recognition was a huge gift, and for the first time I saw my debt as something I could actually leave behind.

Through giant raises, a series of bonuses and tighter reins on my spending, I paid off school and my credit cards by 32. Mine was never the story of extreme frugality or of perfect control, but rather of the dogged pursuit to get paid. That continued through marriage, which brought with it two kids, and through the birth of two of my own.

When I was earning a multiple of what I thought I’d top out at, salary-wise, I also hated my job with a soul numbing pull. With four kids and a new mortgage, I laid myself off to create a career that would let me better balance among my needs: for self, for family and for money (plus a seemingly endless list of other buckets).

I am about a year into the venture, buoyed financially by a husband whose earning surpasses what I left behind. We overspend and under plan and have together weathered years where we live (big) paycheck to paycheck, with our cash meted out in envelopes, as well as years we’ve played fast and loose and fancy.

A decade since he helped me release my debt despair, and 6 years after paying off my final card, I am working to understand what financial independence looks like with so many dependents. And to earn and spend in ways that best support the world I want to inhabit. All while trying to raise kids who are the Opposite of Spoiled, even as I recognize how many of my deeply held values and fears and strengths come from being raised broke.

This is my money journey.

Love & Debt

When I was 7 years old I had a yellow purse stuffed full of cash. I had a variety of little hustles to earn money – dog sitting, bracelet making, plant watering – and every dollar I made got neatly folded and tucked into that purse. Sometimes I would take the money out and count it, but rarely did I spend any of it.

One day my mom and her friend needed cash to tip the pizza delivery guy and asked to borrow from the yellow purse. She and the friend were amazed and amused by how much money I had managed to squirrel away in that little purse.

I was less amused. I didn’t like seeing my money spent and I reminded my mom for a week exactly how much I had lent her until the yellow purse stash had been made whole once again.

I have no idea why I was like this as a child, but I know that these characteristics stuck with me through adulthood. Earning my own money has always been a source of pride and being careful with how I spend that money is deeply ingrained. When I was 16 and wanted to go on a high school trip to Italy, I carefully calculated how many shifts I needed to pick up as a waitress to cover my expenses completely. A full tuition scholarship to an in-state university and a multitude of part-time jobs resulted in minimal debt upon graduation – an amount I was able to easily pay off a few years later. The biggest debt I ever took on was to go to business school in my mid-20s. But once again, using a combination of finding a program where my tuition would be covered and a careful modeling of how much debt I could take on with my earnings potential, I was confident the hefty price tag of a MBA wouldn’t derail my financial plans.

So how exactly am I sitting here 5 years after graduation with a six figure load of debt?

The short answer is I fell in love.

The longer answer is embedded in the winding path I’ve been traveling as I learn exactly what it means to be in a partnership. A marriage. Knowing my financial self as an individual was easy – my natural tendencies are favorable toward money. But navigating joint finances? The invigoration of shared dreams and the challenges of inherited obligations all wrapped up in a commitment to another person? So much harder.

If I had to characterize our approach to money the past few years as a married couple I’d say at best we’ve been on auto-pilot and at worst I’ve tried to force and cram my money disposition on him. Neither has been doing much for us. Well, that’s not totally fair. We have assets, we have savings, we have been dutifully paying off our consolidated student loans painful installment after painful installment – but we haven’t had a real purpose. We haven’t had that drive toward a goal that we both felt all in and driven by – a vision we shared and wanted to work together to accomplish.

Until now. And that goal is to free ourselves of this debt as fast as possible – all $165,923 of it.

Go.

Saying yes, saying no

My mother calls me a shapeshifter, she has for years. The term was applied with an admiring shake of the head each time I showed up with a different look—different hair, different outfit, different vibe. I liked this description. Now I wonder if I’ve always had many shapes or if I’ve never known who I really am.

I wasn’t aware of wanting to erase myself. But I did want to leave as much space as possible for the people around me to do their own thing, unencumbered by anything I might do or say. I collect people—their stories, their faces and body language when talking about something that moves them. I drink them in. I want to see everything, taste everything, travel everywhere, learn everything. I have a hunger that is hard to assuage. Maybe this is because I came close to dying when I was a young woman. Some of it is certainly a result of that experience. But more and more I think it comes from a need to feel ok in myself. To compare myself to others and understand whether how I feel is normal or whether I’m having a totally weird life inside this skin of mine.

This endless hunger, this searching, this wanting inside me means I don’t often say no, I say yes. Yes to drugs, yes to picking up and leaving on vacation. Yes to fancy dinners, to another round of drinks, to another partner. Yes to things I should say no to, and then yes again because I don’t want to be governed by should. I’ve been feeding a bottomless need for more. More life, more feelings, more knowledge. And money flows through my hands, making it happen. I don’t like limits. When someone tells me I can’t do something it makes me want it that much more. And I’ve lived most of my life sneaking around the limits, keeping secrets, telling myself that the happiest I am is when I can do what I want.

My approach to a budget was and is “How much more than zero do I have?” I took out some loans for college, the rest my parents covered. I made increasingly more money over the four years, working in restaurants and bars. Not one dollar I made ever went into savings or towards my loans. I spent it all. It hasn’t changed, despite being a 40-year-old married mother of four. My husband came into the marriage with no debt other than mortgages. I still owed some on my student loans, plus I had credit card debt. I’d been to many countries, had wild and fun adventures, eaten many great meals and a lot of truly great cups of coffee I didn’t make myself. I had a 403B with some good money in it, the result of following a friend’s advice years ago about maxing it out. That’s the only good thing about money I’ve ever done. The rest I spend.

Turns out, I don’t really know what I want. Turns out, the limits are there whether I acknowledge them or not. Turns out, there might be happiness that comes with recognizing the self that I have and making choices that honor my own values—even if it means saying no to things I want. I’m starting to see that without saying no I give all my power away. Everyone has limits. Why don’t I know mine?

A deep anxiety has been my constant companion, causing medical issues for years long before I recognized that the constant monologue running in my head  had a name. The relentless assessment of situations–wondering how to be, how to be liked, what other people want or need, how to be a good wife, how to be a good mother, how to be a good girl who doesn’t make other people mad—it’s been eating me up from within. My deep self has been here all along, waiting to be noticed, sending me messages folded into illness and depression. Shame runs through me like fat marbling meat, judging myself for not being good enough, comparing my insides to other peoples’ outsides, wondering where my lack comes from. Throwing out the desire to be happy because I decided it wasn’t even a thing a person could be.

I’ve been committing to learning to pay attention to my deep self for the past seven years. It’s hard work and regularly frustrates me with how slow the progress is. On good days, I see and feel how far I’ve come. I’m not sure exactly what the end goal is but I think it’s to feel better. Whole within myself. And it doesn’t matter whether my teacher is my yoga instructor, my therapist, or a good friend. The message keeps coming down to the same thread to follow: what do I want? It embarrasses me that I don’t know.

Money has long been a source of shame. Shame due to debt. To being bad with money. To not knowing what I was doing. To having to admit to mistakes. To not paying attention—paying unnecessary fees, dipping into overdraft, living paycheck to paycheck. My shapeshifter ways have worn me down.  I struggle with appreciating what I have, the grass always very much greener somewhere else. I turn in circles, wanting to buy special treats for my kids that I wanted as a child and then feeling guilty for not living more simply, to not teaching gratitude. I’ve been so afraid of making the wrong choices that I haven’t made many choices at all. A choice implies saying yes to one thing, saying no to another. I’ve just said yes, yes and more yes. Even if the money runs out. Even if it feels bad as often as it feels good.

I thought my money problems were something to be dealt with separately. Attending a financial conference created by women for women brought things into alignment for me, showing me that I can work on getting my shit together financially and be working towards the same goals I’ve been reaching for in other areas of my life. Even though facing my finances scares me, it feels more concrete and achievable than fixing some of the other things in my life that need fixing right now. My marriage mostly. And my self. So I will keep taking hesitant steps forward, trying to remember to listen to this true voice inside of me, asking her “What do you need? What will make you feel good? What will give you ease? What will give you joy?” Let’s say yes to those things. And no to the rest. Is that possible?