I had a bit of a financial epiphany over the weekend.
I have a well-deserved reputation for being a tightwad. Part of it is in my blood; I’m largely of Scottish descent, and Scots just tend to act that way. But I think part of it is what I observed growing up.My wife and I were sitting at my mom’s kitchen table, and for whatever reason, we were talking about my teenage years. In 1988, we moved to a new subdivision in Fenton, Mo. Fenton is a boomtown today, thanks in part to urban sprawl and also because of its first-rate school district, but in 1988 it was still largely an industrial town. Lots of people worked there, and not many wanted to live there. But in the late 1980s, the McMansions started sprouting up like weeds, and lots of families started moving there, ours included.
We talked about our neighbors, and something immediately occurred to me. Most of them were in their early 30s. They were the same age I am now. Not only were they my age, but they drove new cars, and most of them had at least two kids. Meanwhile they were trying to make payments on houses that cost $125-$150,000 at the time. According to inflation, they should cost a quarter million today. Not only that, though, in 1988, interest rates were a lot higher–10 percent wasn’t uncommon according to my quickie research.
Dad could afford that lifestyle–barely. He was a doctor and had been practicing medicine for 15 years. But even we made sacrifices in order to afford to live in that house.
The problem is, I shouldn’t say "even." Most of our neighbors had nicer furniture than we did. Some of them drove fancier cars. And their kids had bigger, costlier toys.
The absurdity hit me. I wouldn’t even try to compete with the lifestyle of a 45-year-old doctor. Not at 33. I make enough that a bank probably would let me have a mortgage of a quarter mil. I could lease cars that don’t depreciate quickly in order to keep my monthly payments down. But there wouldn’t be much of anything left at the end of the month, and I could probably forget about retiring any earlier than 73 (which is what Social Security is saying my retirement age should be). Just because I could make the payments doesn’t mean I should.
I wondered why so many of them got together every weekend and drank themselves senseless. And I don’t think I consciously ever realized I was living in a neighborhood full of people living way over their means–even the family next door, headed by a young dentist trying to establish his practice with five kids and a wife who insisted they needed a Jaguar.
Suddenly, sitting there at the table, telling old stories, I realized why that woman was such a psycho. She couldn’t pay her bills.
And that was also probably why another neighbor wouldn’t go anywhere without a thermos full of wine, and why another young couple who lived nearby smoked pot every Saturday night.
They had everything any reasonable person could dream of having at 32, but if anything at all ever went wrong–a layoff, an extended illness, or a serious injury–they would be in serious danger of losing it.
For whatever reason, I never measured my lifestyle against them. My first few jobs didn’t make me a lot of money, but they let me do pretty much anything I wanted. I had a nicer apartment than Dad had at a comparable age. I could go out to eat any time I wanted. I could buy a new computer every year if I wanted to, as long as I didn’t go overboard on it, and for a few years I did. I drove small cars, but there were always at least two or three cars in the parking lot that weren’t as nice as mine, so I was content to drive my 1992 Dodge Spirit. When it died, I got a 2000 Dodge Neon. It wasn’t a status symbol, but it had power locks and windows, which were two things Dad’s 1981 Chrysler LeBaron didn’t have. It had a nicer radio too. And that LeBaron was supposed to be a luxury car.
My lifestyle was far ahead of where Dad’s had been at my age. And not only that, I had money left over at the end of every month.
There were two things I wasn’t happy about. At the time, I didn’t have a steady girlfriend. And my apartment rent was going up by about $50 a year but the management company wasn’t taking care of the place. When stuff broke, they fixed it halfheartedly, and I didn’t want to pay $575 a month to live in a slum.
When my rent hit $575, I told them I wasn’t going to pay it. They offered me a seven-month lease at about $550. Conveniently, I had enough in the bank for a down payment on a house, and I figured I could afford to pay a couple hundred more every month for a mortgage. I just didn’t want to throw that kind of money away on rent.
So I bought a house. There was a neighborhood about a mile away that reminded me a lot of the neighborhoods I grew up in. I found a house about the size of the house we lived in before we moved to St. Louis. It cost more than I had planned, but it was big enough that I could get married and have a family there and not have to move again. I hate moving. Plus, it was (and still is) in a good school district, all the schools are close by, and anything I could need was close. I didn’t know it right away, but in an emergency, the nearest grocery store AND the nearest car repair place are both walking distance.
For an extra $100 a month, it just made sense. I bought the house. And every night, I filled up that Dodge Neon with everything that would fit, drove to the house, and unpacked. Several friends with vans or pickup trucks helped me move the stuff that wouldn’t fit in my tiny car.
Even though my 1-bedroom apartment was stuffed to the gills, it wasn’t nearly enough to fill a 3-bedroom house with a living room, family room, a study, and a basement. But it didn’t take long for that problem to solve itself. Several people offered me some nice furniture. They were hand-me-downs, but there wasn’t anything really wrong with any of it. Before I knew it, the house was full.
A couple of years later, the right girl came along too. At first she wanted me to get nicer stuff. The problem was, even though I’d gotten promoted to a server administrator at work, they were still paying me my old desktop support salary. The house had wiped out my savings, and I couldn’t really take on another monthly payment on anything. We fought about it a little. I showed her how little was left at the end of every month, and I argued that everything in the house was nicer than anything my parents had at my age. For that matter, most of it was nicer than the stuff they had when I was a kid.
She relented. I don’t know how happy she was about it then. But she didn’t complain.
A few months after we got engaged, I lost my job. I was mad about it. I was convinced I would lose everything I’d worked for. I guess for a minute I thought I was like those neighbors.
But because I’d lived within my means, I survived and soon I ended up with a job with a competitive salary for the first time in my professional career.
Something else came out of it too. The day we got married, neither of us had a job. We started a small business out of necessity. Our final paychecks made the mortgage payments during that summer, and we used our wedding gift money to get the business going. Soon it was bringing in enough to make our utility payments and buy groceries. When I got a full-time job, she took the business over and I helped out at night and on weekends. It allowed her to not have to work outside the home. There are probably things she could do that would make more money, but she doesn’t have a lot of stress, and she enjoys the flexibility.
The odd thing is, we’ve been able to upgrade our lifestyle on the cheap. For example, there are three light fixtures we’ve been wanting to replace for a long time. This weekend I found two light fixtures at a yard sale for a buck apiece. My sister rolled her eyes when I told the story, but these fixtures don’t fit the yard sale stereotype. A sticker on them says they were made in February 2005. Home Depot still sells the same fixture (or something extremely similar) for about $30. That’s not terribly expensive, but $1 is a lot less than $30. The third fixture we need to replace is smaller. We can get something that will look fine with them, and look much better than what we have, for under $20. The result will be a significant upgrade in how the kitchen and living room look, at well under 1/3 the price.
That $60 savings may not sound like a lot, but we’re constantly finding ways to save a few bucks here and there like that. We’re never the first to have anything, but it seems like we always end up getting whatever it is we want or need, and meanwhile we’re socking money away and whittling down on that house payment.
Judged against the standards of my neighbors in 1988, one could argue I’m a failure. I drive a five-year-old car and most of the time I use a six-year-old computer, and the four shirts I bought in 1998 to comply with my then-employer’s dress code are still in my rotation today.
But let’s look at things another way. Not only do my wife and I have nicer stuff than my parents had when Dad was 32, we also have an easier time finding money for necessities like groceries. She can shop at the health-food stores even though they’re more expensive. As long as nothing unexpected happens, we’ll own everything outright and have absolutely no debt–no student loans, no car payments, no mortgage–well before I turn 40. I stress over some things, but money isn’t one of them.
In my early 20s, I watched some of my friends from high school rack up massive credit card debt. At least it seemed like massive debt at the time. I knew then I didn’t want to be like them, at least not in that regard. Now I know that the average American family has $9,900 in credit card debt. That’s about what one of those friends owed, and about twice what another one owed.
I know who I want to be like. I want to be like my wife’s parents. They paid off all their debt sometime in their late 30s or early 40s. Today, when my mother in law sees something she wants, she doesn’t think about it. She can just buy it. Not only that, she’s retired, and she’s nowhere near 73.
I’m not saying I want to buy anything and everything I see on a whim. But not having to think much at all about money seems really nice.
And I guess on some level I’ve known that for almost 20 years, since I was in my early teens.