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luckily we played it safe. we didn't borrow a lot and put very large down payment down.
if one of us loses our job, one salary can hold off indefinately. Of course our lifestyle would have to be scaled down a lot. Also we want to expand our family which can impact our goals (we are not getting any younger too).
If I lost my job tomorrow we would still have one income. But with our expenses, our emergency fund would last only 3 months. After that, I'd have to start piling on debt and use the HELOC or withdraw from roth ira's.
I'm writing from a somewhat historical perspective.
When I sold my house last year and relocated away from the area it was due to the very real threat of financial ruin. Our non-discretionary spending was very high and I knew that if I suffered through a job loss my family couldn't have survived. Fast forward to January of this year and my company decided to exit from the market segment my group serviced. As a result I was laid off.
Had I stayed on Long Island we would've needed to try and rent the house out almost immediately in order to not lose it. By this time we would have been another $12k - $20k in debt as well and our house would've lost nearly 10% in value from what it sold for. I doubt we would've survived and would very likely have filed for bankruptcy.
Fortunately where we now live this was almost a non-event. Our monthly expenses are less than half of what they were on Long Island and because we shed so much debt we have very little to manage. I've been able to pick up some consulting work which is providing enough money to fund the budget. I'm mindful of just how lucky we were to get out when we did.
If I lost my job tomorrow, we could easily live off my wife's income. We bought our house in the mid 90s and have 80% equity in it and could pay it off today if we wanted to, but it's a low 5.5% rate for another 8 years, so we'll stick with the payments. House still needs quite a bit of work, but we pick a project each year and get it done without taking out a loan. This year is the kitchen...most likely will be a bit more than $50k. Cars are 10 and 12 years old, but are well maintained and run great.
We've been living relatively frugally for the past decade and haven't taken a real vacation since 2001...putting most of our money into home improvements and investments. We dine out a lot and love sampling different wines and with one pet and no kids, we don't need much to be happy.
Just an informal poll to see how my Long Island neighbors are doing. If you were to lose your job tomorrow, how long could you last before you were in desperate trouble? Has the "mortgage crisis" affected your personal standard of living?
For us these are two distinct questions: 1. has the mortgage crisis affected us, 2, what if we lost a job.
#1 - Yes, the crisis has affected us, but "by proxy." We're planning to move, but because of the "crisis," our house has depreciated a ridiculous amount. We bought in 2005, put down a large down payment, and took out a fixed-rate mortgage. We had no idea that others weren't doing the same. Watching our home devalue this way and not knowing when/if it will recover, at this juncture in life, hurts us financially and emotionally. The uncertainty of the market has changed the way we spend and the decisions we make. We are extraordinarily insecure about the amount of money we put into our home.
#2 - If we lost our job. It's sort of moot because one of us could get another job, though I am home with our son now while my husband works. If neither of us could get a job we'd survive a little while, but it sure would hurt!
Last edited by Jennifer06; 03-30-2008 at 01:08 PM..
If I lost my job tomorrow, we could easily live off my wife's income. We bought our house in the mid 90s and have 80% equity in it and could pay it off today if we wanted to, but it's a low 5.5% rate for another 8 years, so we'll stick with the payments. House still needs quite a bit of work, but we pick a project each year and get it done without taking out a loan. This year is the kitchen...most likely will be a bit more than $50k. Cars are 10 and 12 years old, but are well maintained and run great.
We've been living relatively frugally for the past decade and haven't taken a real vacation since 2001...putting most of our money into home improvements and investments. We dine out a lot and love sampling different wines and with one pet and no kids, we don't need much to be happy.
I find in heartening that there are people like you out there who are in strong financial positions because of smart planning.
I am curious though how it is that you've so aggressively paid down your mortgage and can afford a $50k renovation. I mean, if I didn't take a vacation in a typical year, eliminated the car payments and cut down on non-critical spending I doubt I could generate anywhere near that much money to fund a project. Actually in adding it up we typically spend $3k total in vacation activities in a given year. Add in an approximate $7k in car payments and maybe another $10k by trimming discretionary spending and I don't even come close to half-way.
I don't know anyone from Long Island save the upper-class friends I have who can afford to do something like this.
I found this article from Newsday yesterday, pretty interesting. So important to have good financial planning.
Middle class Long Islanders turning to food pantries -- Charity, Long Island, Newsday -- Newsday.com (broken link)
I find in heartening that there are people like you out there who are in strong financial positions because of smart planning.
I am curious though how it is that you've so aggressively paid down your mortgage and can afford a $50k renovation. I mean, if I didn't take a vacation in a typical year, eliminated the car payments and cut down on non-critical spending I doubt I could generate anywhere near that much money to fund a project. Actually in adding it up we typically spend $3k total in vacation activities in a given year. Add in an approximate $7k in car payments and maybe another $10k by trimming discretionary spending and I don't even come close to half-way.
I don't know anyone from Long Island save the upper-class friends I have who can afford to do something like this.
Appreciate the kind words...back in 1995 our home which is now worth $500k only cost us about $180k. We put down 10% and had a 30 year mortgage, but after 5 years or so, we refinanced to a 15 year mortgage and a lower rate, dropped the PMI (house appreciated) and now owe about $100k. We also paid for our current cars during that time and have not had car payments for the past 5 years, so we've been able to save more each month than we otherwise would have had we bought a new car every few years.
Thankfully, our salaries have gone up quite a bit since we bought the house and we max out our 401k and 403b, plus a Roth account, and we're still able to save a good amount after tax each year to put towards home improvements. We have a detailed expense log to keep track of where the money goes, and it's not like we're not spending money. Last year's net expenses were over $70k, or about $6k per month. Besides the mortgage payment w/property taxes (about $2k/mth), food, insurance, auto and energy/utility costs are the biggest expenditures in the budget. We could certainly cut this down a bit if we had to, but it is what it is...we're just tracking expenses at the moment, not trying to budget our spending at this time.
Our goal is to save enough now so that we can retire in our early 50s and have no mortgage payments. We're both extremely debt averse...never carry a balance on the credit cards and only buy things we have cash on hand for.
I found this article from Newsday yesterday, pretty interesting. So important to have good financial planning.
Middle class Long Islanders turning to food pantries -- Charity, Long Island, Newsday -- Newsday.com (broken link)
I feel for those that are truly in a crisis but I have yet to come across somebody profiled in these Newsday articles that would not have benefitted from simple math or some reading comprehension when it came to the contract they signed. I am not saying that those truly effected beyond their control do not exist, but Newsday has yet to show me somebody who is not part of their own problem. The single mother in this article is truly in a bind because her ex has stopped providing child support, if he ever had. That has as much (if not more) to do with her budget issues in supporting her children as rising costs do. She should be focused on wage garnishment and putting the deadbeat Dad behind bars until he commits to his payments.
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A role model?
