Debt: A Love Story

[insominac]

Did anyone see this? Forgive the non-clicky app link

www.wealthsimple.com/en-us/magazine/money-diary-couple-debt-us

So stressful and sad.

[sakoro]

I break out in hives reading about their lifestyle! And I speak as someone who has had to go into consumer debt in the past (but not to this extent).

It sounds like the marketing people got them— they had to live in the new neighborhood with the posh people and so now they need the cars to keep up with them and they have to put their children first etc etc. Yes, they should know better but man did capitalism get them.

[maloney]

I just cannot imagine living like that.

[livinitup]

My mother talks about how hard it used to be to get credit - in the ‘60’s and 70’s. She was married young and it was just the norm to have hand-me-down furniture for a while because you had to save-up and pay with cash. So just about EVERYONE they knew had crappy furniture for a few years (some longer). They couldn’t buy more than a 2-bedroom house. They couldn’t get a car loan after they got their mortgage, so they drove a clunker.

I find the choices the couple made quite mind-boggling. Like, to never pay back your student loans?? Just keep defering? To buy a bigger house because of the third child? To not hold onto any savings when he cashed his 401K and then put the 2K tax bill on a credit card?

But we really have to step back and look at what kinds of consumer protections have beeen stripped away to make it POSSIBLE for people to get themselves this deeply into debt. Who is/what corporations are MAKING money on these ever increasing bad decisions and deeper debt? Because this kind of debt is wide spread and really bad for our society.

[dr.girlfriend]

OMG, I got so stressed out just reading that. They need this board like whoa. Or at least this board as it used to be, before most of the people on it got extremely financially comfortable. ;-)  

The worst part is when their parents gave them the cash to get out of debt and then they got back in it again.  And there seems to be crazy amounts of rationalization going on.  They had to buy the kid's prom tux because they couldn't rent one because they didn't have the cash?  What rental place doesn't take credit cards?

[cabbagecabbage]

OMG, they put medical debt on credit cards. It’s like they know nothing. Those people need to move into a tiny house in a decent school district, sell off everything, and pull their heads out of their asses. Reading that was more stressful than I would have even thought.

[goldengirlz]

I didn’t even know that loans for private school were a thing.

But, yes, this reads like either a parody or a cautionary tale about American consumer culture today. From the new construction house to eating “organic and vegan” everything to the $32k/year private school tuition to the flimsy safety net (cashing out his 401k with nothing to show for it) to the leased cars ... and all of it made possible by easy access to credit.

I don’t know, man. I know that maintaining even a middle class lifestyle is expensive these days, and we have very few social programs to ease the burden. Most Americans are only one major medical issue or job loss away from where these people are now. But these people have lived WAY beyond their means ... for seemingly no reason. I’m trying not to judge, but it’s SO over the top.

[waverly]

Wow they have half a million in debt...And really they don’t make that much 169,000 for that.

Honestly their story sounds similar to a lot of people. Not surprising at all.

No good comes of not facing your problems. It’s just a matter of time until it all blows up.

[covergirl82]

This was my uncle and his wife. They lived well beyond their means and my aunt didn't work. When my cousin had a baby, my aunt bought her a special-edition $1500 stroller from Nieman Marcus. My cousin was in college at the time and not working (the baby's dad was also in college, not working). A few years ago it finally blew up on them, and my uncle, who is a financial advisor (of all things), had to get a divorce to try and separate himself from all the debt (I think most of the credit cards, etc., were in my aunt's name).

I watched my sister go into credit card debt almost immediately after graduating college (and continued to accrue cc debt for a few years, I think she just paid it off a few years ago, after being in cc debt 10+ years), and I vowed to live within my means.

Thankfully, MH is not a big or impulsive spender and while I can have my moments of impulsive spending, we've made it 12 years together without going overboard with debt. (And we have been fortunate to have not experienced job loss or pay cuts or huge medical bills during that time.) I agree with goldengirlz, though, that most "middle class" people are one or two paychecks away from disaster. I wish more middle schools and high schools would include more instruction around personal finance and money management, as I worry that many kids don't receive this education at home.

We recently had to drop something off at the house of one of DS's friends, and it's in a nice, newer subdivision. The kids were saying how nice the houses looked, and DS said he'd like to live there, and I told them that I agreed, they did look really nice, but the mortgage for one of those houses was more than DH and I wanted to burden ourselves with, and we should be content with the house we have (which I really like and am perfectly happy with) and we need to be careful not to live beyond our means or stretch ourselves financially.

[dr.girlfriend]

Nov 22, 2018 19:50:20 GMT -5 covergirl82 said:

my uncle, who is a financial advisor (of all things)

[dr.girlfriend]

I can't stop thinking about this post. I'm trying to think how they can even get out of it. Bankruptcy is probably an option, but I don't know much about that, and I don't think it'll impact the student loans.

1. Put all the kids in public school. If the oldest is going to prom, he's old enough to babysit after school.
2. Cut that ridiculous spending on food, and do meal planning with a strict food budget
3. She needs to get a job in her field, if she's even able to...I don't think kids go to prom before high school, which means she's been out of the field for at least 15 years.

I don't think they can afford to sell their house right now. I can't imagine what's going to happen to that oldest kid...he's probably thinking his family is financially secure, and that he's going to college, and he's going to have a hell of a rude awakening. They are doing their kids no favors with their denial.

[aprilsails]

Those people are honestly just dumb. Like, really, astoundingly dumb. I’m sorry, but I just read the last instance where he kept a leased vehicle because of some mirror damage and I’m shocked. You can return a lease with $1500 in body damage, minimum. How do you not call the dealership and ask?

They seem to be purposefully avoiding getting answers and help so they can ignore their issues. Which begs the question- how are they in this incredible neighbourhood with super rich neighbours but sending their kids to public school is not acceptable? I’m so confused.

[lilypad1126]

I can’t believe how far their heads are in the sand on this. Especially the student loans. I get that it’s scary and overwhelming, but man, you cannot outrun them.

I also can’t believe how the wife is letting the husband play “games” with paying the bills. Just hearing that gave me anxiety. I have control issues, I know, but no way would I let my H do that.

Having said that, I am certain that their story isn’t as unique as we’d like think. In my own family, my aunt spends more than she can my uncle bring in. She retired 7 years ago and her spending went UP, not down, because she had more time to shop. Ironically, they spend NO money on their house, which is falling down around them. But she has to be the grandma who buys her grandkids the latest and greatest and newest. It’s sad, and I have no idea what they are going to do when they start needing more medical care.

[goldengirlz]

Nov 23, 2018 11:17:47 GMT -5 aprilsails said:

Those people are honestly just dumb. Like, really, astoundingly dumb. I’m sorry, but I just read the last instance where he kept a leased vehicle because of some mirror damage and I’m shocked. You can return a lease with $1500 in body damage, minimum. How do you not call the dealership and ask?

They seem to be purposefully avoiding getting answers and help so they can ignore their issues. Which begs the question- how are they in this incredible neighbourhood with super rich neighbours but sending their kids to public school is not acceptable? I’m so confused.

I’ve seen that happen when all the rich people choose to send their kids to private school which takes resources away from the public and lowers test scores. Also, if everyone else is sending their kids to private, maybe they felt pressure to “keep up.”

The family in the OP kind of reminds me of the one in this piece: www.theatlantic.com/magazine/archive/2016/05/my-secret-shame/476415/

Basically people rationalize their insane spending (like insisting that their food be completely “organic and vegan”) because it’s for their kids and if they don’t do this for their kids, then their kids will be in the same trouble that they are now.

That’s just one piece of the puzzle (beyond easy access to credit, stagnant wages and our threadbare safety net) but it’s one that hasn’t been mentioned yet.

[aprilsails]

Thanks goldengirlz - That makes sense. I live in Canada so we don’t generally see the same school inequality (generally) since funding is managed at the provincial level and not local. If you pull your kids out and go to private school here you still pay the same taxes to fund the public schools in the area.

[kadams767]

Nov 23, 2018 11:45:23 GMT -5 goldengirlz said:

Nov 23, 2018 11:17:47 GMT -5 aprilsails said:

Those people are honestly just dumb. Like, really, astoundingly dumb. I’m sorry, but I just read the last instance where he kept a leased vehicle because of some mirror damage and I’m shocked. You can return a lease with $1500 in body damage, minimum. How do you not call the dealership and ask?

They seem to be purposefully avoiding getting answers and help so they can ignore their issues. Which begs the question- how are they in this incredible neighbourhood with super rich neighbours but sending their kids to public school is not acceptable? I’m so confused.

I’ve seen that happen when all the rich people choose to send their kids to private school which takes resources away from the public and lowers test scores. Also, if everyone else is sending their kids to private, maybe they felt pressure to “keep up.”

The family in the OP kind of reminds me of the one in this piece: www.theatlantic.com/magazine/archive/2016/05/my-secret-shame/476415/

Basically people rationalize their insane spending (like insisting that their food be completely “organic and vegan”) because it’s for their kids and if they don’t do this for their kids, then their kids will be in the same trouble that they are now.

That’s just one piece of the puzzle (beyond easy access to credit, stagnant wages and our threadbare safety net) but it’s one that hasn’t been mentioned yet.

I think this does happen, but I also think the people in the story are lying, or at the least, exaggerating, about the schools being “bad.”  They’re probably bad in the way that typical white suburban parents think, i.e. their country club friends said they’re bad, those ratings systems say they’re “bad” and there was one minor incident with one of their three kids, so that was that.  Notice the first two were already in private school anyhow.  

That being said, if they weren’t so irresponsible, they could afford the coveted private school.  $15k per year for three kids sounds like a steal.  Did I read that wrong?  

[mcsangel2]

I'm glad it wasn't just me. I was sort of hyperventilating a little bit reading that.

At the very least AT THE VERY LEAST someone needs to tell them the most important thing:

If you don't pay your student loans, they will take it out of your social security and then you will be well and truly fucked if you don't get your shit together NOW.

[goldengirlz]

Nov 23, 2018 11:59:35 GMT -5 kadams767 said:

Nov 23, 2018 11:45:23 GMT -5 goldengirlz said:

I’ve seen that happen when all the rich people choose to send their kids to private school which takes resources away from the public and lowers test scores. Also, if everyone else is sending their kids to private, maybe they felt pressure to “keep up.”

The family in the OP kind of reminds me of the one in this piece: www.theatlantic.com/magazine/archive/2016/05/my-secret-shame/476415/

Basically people rationalize their insane spending (like insisting that their food be completely “organic and vegan”) because it’s for their kids and if they don’t do this for their kids, then their kids will be in the same trouble that they are now.

That’s just one piece of the puzzle (beyond easy access to credit, stagnant wages and our threadbare safety net) but it’s one that hasn’t been mentioned yet.

I think this does happen, but I also think the people in the story are lying, or at the least, exaggerating, about the schools being “bad.”  They’re probably bad in the way that typical white suburban parents think, i.e. their country club friends said they’re bad, those ratings systems say they’re “bad” and there was one minor incident with one of their three kids, so that was that.  Notice the first two were already in private school anyhow.  

That being said, if they weren’t so irresponsible, they could afford the coveted private school.  $15k per year for three kids sounds like a steal.  Did I read that wrong?  

Oh, I agree with you; I do think it was more about “keeping up.” Most likely, the schools looked good enough on paper when they bought but then they realized that very few of the neighbors were going public.

And it’s not just the tuition: all of their spending kind of looks reasonable. Even a $360k house on a $160k salary doesn’t seem all that crazy. I think they spend more on “fluff” than they admit. For instance, she mentions that they buy everything at Goodwill and never buy fancy things ... but then contradicts herself and says the only reason they have nice clothes is because of credit cards. So at least at some point, they were spending well above their means.

[goldengirlz]

Nov 23, 2018 11:58:17 GMT -5 aprilsails said:

Thanks goldengirlz - That makes sense. I live in Canada so we don’t generally see the same school inequality (generally) since funding is managed at the provincial level and not local. If you pull your kids out and go to private school here you still pay the same taxes to fund the public schools in the area.

Schools are funded at the local level here too but parent fundraising often makes up a lot of the difference since school budgets are generally pretty slim. That’s why, even in the same city or county, wealthier schools typically have more amenities than poorer schools. Of course, that’s assuming that parents are invested in the schools to begin with. There are other factors that go into it too but it’s not uncommon in many parts of the country to see neighborhoods with million-dollar homes and mediocre schools.

[kadams767]

Nov 23, 2018 12:07:44 GMT -5 goldengirlz said:

Nov 23, 2018 11:59:35 GMT -5 kadams767 said:

I think this does happen, but I also think the people in the story are lying, or at the least, exaggerating, about the schools being “bad.”  They’re probably bad in the way that typical white suburban parents think, i.e. their country club friends said they’re bad, those ratings systems say they’re “bad” and there was one minor incident with one of their three kids, so that was that.  Notice the first two were already in private school anyhow.  

That being said, if they weren’t so irresponsible, they could afford the coveted private school.  $15k per year for three kids sounds like a steal.  Did I read that wrong?  

Oh, I agree with you; I do think it was more about “keeping up.” Most likely, the schools looked good enough on paper when they bought but then they realized that very few of the neighbors were going public.

And it’s not just the tuition: all of their spending kind of looks reasonable. Even a $360k house on a $160k salary doesn’t seem all that crazy. I think they spend more on “fluff” than they admit. For instance, she mentions that they buy everything at Goodwill and never buy fancy things ... but then contradicts herself and says the only reason they have nice clothes is because of credit cards. So at least at some point, they were spending well above their means.

This, for sure.  I don’t think it’s the normal cost of things like school and housing that are bringing them down, I agree those look pretty reasonable for their salaries.  I also don’t understand how their loans keep getting deferred.  Unless they went to school late(r), they have been out of school for a long time.  That is a heck of a long time to not pay any student loans.  

[Velar Fricative]

Nov 23, 2018 12:07:44 GMT -5 goldengirlz said:

Nov 23, 2018 11:59:35 GMT -5 kadams767 said:

I think this does happen, but I also think the people in the story are lying, or at the least, exaggerating, about the schools being “bad.”  They’re probably bad in the way that typical white suburban parents think, i.e. their country club friends said they’re bad, those ratings systems say they’re “bad” and there was one minor incident with one of their three kids, so that was that.  Notice the first two were already in private school anyhow.  

That being said, if they weren’t so irresponsible, they could afford the coveted private school.  $15k per year for three kids sounds like a steal.  Did I read that wrong?  

Oh, I agree with you; I do think it was more about “keeping up.” Most likely, the schools looked good enough on paper when they bought but then they realized that very few of the neighbors were going public.

And it’s not just the tuition: all of their spending kind of looks reasonable. Even a $360k house on a $160k salary doesn’t seem all that crazy. I think they spend more on “fluff” than they admit. For instance, she mentions that they buy everything at Goodwill and never buy fancy things ... but then contradicts herself and says the only reason they have nice clothes is because of credit cards. So at least at some point, they were spending well above their means.

Yup. We have about $340k left on our 4-year-old mortgage and about $100k combined in student loans left to pay off so when I started reading I was like, "Uhhhhhh, that's us..." But we do make more than they do, don't have CC debt (though we did in the past), we've never not made payments to our SLs, we send the kids to public schools, don't have an impressive house with neighbors we care to keep up with, etc. so then I breathed a sigh of relief lol. But I agree that this doesn't sound like unreasonable (or at least, uncommon) spending on paper for people with high HHI and multiple degrees. 

I think someone above mentioned financial education. I think this couple is far beyond that. Deep down, they understand what they need to do, it's just a matter of facing the truth and making some really tough decisions. And honestly, I think most people out there have an understanding of not spending beyond your means but for many other far more sympathetic households, it truly is that they're spiraling because even basic needs suddenly require taking on debt given that wages are stagnating but everything else is not. 

Also, I'm not surprised about private school as mentioned above. Where I live, you can have kids living in the most affluent neighborhoods zoned into public schools with kids who live in housing projects (this is New York City, after all) and while some of those affluent folks will send their kids to the public schools anyway, more will send their kids to private school if they don't get into a "good" out-of-zone public school. 

[alf17]

Is there a followup story with this. Did they get out of debt?

[mcsangel2]

Nov 23, 2018 13:09:12 GMT -5 alf17 said:

Is there a followup story with this. Did they get out of debt?

The story was only posted 2 weeks ago, I'm guessing this is a current situation.

[dr.girlfriend]

Nov 23, 2018 12:37:33 GMT -5 Velar Fricative said:

Nov 23, 2018 12:07:44 GMT -5 goldengirlz said:

Oh, I agree with you; I do think it was more about “keeping up.” Most likely, the schools looked good enough on paper when they bought but then they realized that very few of the neighbors were going public.

And it’s not just the tuition: all of their spending kind of looks reasonable. Even a $360k house on a $160k salary doesn’t seem all that crazy. I think they spend more on “fluff” than they admit. For instance, she mentions that they buy everything at Goodwill and never buy fancy things ... but then contradicts herself and says the only reason they have nice clothes is because of credit cards. So at least at some point, they were spending well above their means.

Yup. We have about $340k left on our 4-year-old mortgage and about $100k combined in student loans left to pay off so when I started reading I was like, "Uhhhhhh, that's us..." But we do make more than they do, don't have CC debt (though we did in the past), we've never not made payments to our SLs, we send the kids to public schools, don't have an impressive house with neighbors we care to keep up with, etc. so then I breathed a sigh of relief lol. But I agree that this doesn't sound like unreasonable (or at least, uncommon) spending on paper for people with high HHI and multiple degrees. 

I think someone above mentioned financial education. I think this couple is far beyond that. Deep down, they understand what they need to do, it's just a matter of facing the truth and making some really tough decisions. And honestly, I think most people out there have an understanding of not spending beyond your means but for many other far more sympathetic households, it truly is that they're spiraling because even basic needs suddenly require taking on debt given that wages are stagnating but everything else is not. 

Also, I'm not surprised about private school as mentioned above. Where I live, you can have kids living in the most affluent neighborhoods zoned into public schools with kids who live in housing projects (this is New York City, after all) and while some of those affluent folks will send their kids to the public schools anyway, more will send their kids to private school if they don't get into a "good" out-of-zone public school. 

I agree.  You KNOW they had to get some pretty heavy-duty financial counseling as part of their debt consolidation process.  It's crazy to me that they described hiccups in getting the debt consolidation payments credited as some huge hardship ... I mean, I know that's not ideal, but you're backing out on a ton of your debt, you should be prepared to deal with some guff regarding it.  I felt like there was an underlying message through this whole thing of, "We don't want to feel poor, so..." but...yikes.  I know I've gotten in trouble for saying it on here before, but in today's world, three kids is a luxury.  It means you pay for several in daycare/aftercare if you both work, or one of you stays home.  It bugs me that she, with a law degree, has to be home for the kids (even though they are all in school now) but the dad works a full-time job and bartends on the side -- when is he able to spend time with the kids?  It's like they are using the kids to justify their poor decisions.

[RandZB]

We’re packed like sardines with four kids in a 3 bedroom house because we bought a house in a fantastic school district before we even had kids. I’d love to move to something a little bigger but the area is booming and I don't want to spend $500k on a house that cost $300k three years ago. Bankruptcy is the only way they’re getting out of that hole. But I don’t think it will help them. They’ll be right back in it before long because they don’t want to experience any discomfort. I need a drink after reading that.

[insominac]

Yep, three kids in a HCOL is a luxury. Being underemployed by choice is a luxury. And yes, I kind of rolled my eyes at the instead of a tux rental we bought a suit at Nordstrom situation. But it also reminded me of when I felt over my head with finances - to see that negative checking account balance and wonder how I was going to make my way to the next paycheck. But that was me in grad school. Not me with 3 children in a home.

I would be so depressed if I borrowed money from my mother who scrimped and saved her whole life and was right back in the same situation. They seem appropriately chagrined by that. But it still hasn’t impacted anything. :/

[edavis]

What is most shocking to me is that they bought a four-bedroom house in a HCOL area, in what is apparently a fancy suburb (neighbor driving Jaguar, et al), at the absolute height or near-height of the market, for just...$360k? How the hell did they get that deal? Can these numbers possibly be accurate?

[mcsangel2]

Nov 23, 2018 18:14:39 GMT -5 edavis said:

What is most shocking to me is that they bought a four-bedroom house in a HCOL area, in what is apparently a fancy suburb (neighbor driving Jaguar, et al), at the absolute height or near-height of the market, for just...$360k? How the hell did they get that deal? Can these numbers possibly be accurate?

I thought that too, at first, but didn't they say they bought in 2007? I seem to recall the housing bubble had already burst by then, even if it wasn't at bottom yet. Brought to you by my memories circa early-mid 2005 when we bought our first home, during the final run-up of peaking prices.

Otherwise I have no idea how you get a house in a NE suburb for that price.

[edavis]

Nov 23, 2018 18:47:46 GMT -5 mcsangel2 said:

Nov 23, 2018 18:14:39 GMT -5 edavis said:

What is most shocking to me is that they bought a four-bedroom house in a HCOL area, in what is apparently a fancy suburb (neighbor driving Jaguar, et al), at the absolute height or near-height of the market, for just...$360k? How the hell did they get that deal? Can these numbers possibly be accurate?

I thought that too, at first, but didn't they say they bought in 2007? I seem to recall the housing bubble had already burst by then, even if it wasn't at bottom yet. Brought to you by my memories circa early-mid 2005 when we bought our first home, during the final run-up of peaking prices.

Otherwise I have no idea how you get a house in a NE suburb for that price.

Yeah, the housing market was definitely on the way down in 2007. I also bought that year and we got a decent deal. But I have a three bedroom in a nice but not fancy suburb, my house needed a LOT of work, and it was a heckuva a lot more than $360k.

[insominac]

Nov 23, 2018 18:14:39 GMT -5 edavis said:

What is most shocking to me is that they bought a four-bedroom house in a HCOL area, in what is apparently a fancy suburb (neighbor driving Jaguar, et al), at the absolute height or near-height of the market, for just...$360k? How the hell did they get that deal? Can these numbers possibly be accurate?

Yeah I didn’t understand that either. I personally consider HCOL to be $600k -800k starter homes and VHCOL to be $1 mill + starter homes, and some areas SF area, NYC, parts of LA to be in their own horrible category. Lol