Monday, April 26, 2010

Walking on Sunshine

I used to hesitate to talk about money on this blog. I still don't believe in sharing anything that's too personal - especially about my marriage and family - but I can't help but feel that I'm doing people a dis-service by not talking about it at all. We don't talk about money as much as we should. I think we all have things we can learn and things we can teach. And I honestly hope that by talking about it just a little bit, I'll be able to accomplish both (because we sure as heck don't have it all figured out yet).

But despite being students of family finance, we are seriously on a roll here... First Briony's RESP. Then setting things in motion to complete our estate planning. And now making some changes to my personal loan that are going to make things SO MUCH BETTER.

I came into our marriage with a dumb personal loan. It was (and still is) our only debt, with the obvious exception of our mortgage - which I put into a different category anyway, as do most financial experts. I used to hate myself for that, but the cold hard facts are that Geoff is almost eight years older than I am and had more years to get his shit together. My single loan (pun unintended but hilarious anyway) isn't huge but included the remnants of a car loan, a handful of student loans, and - most significantly - all the medical bills that weren't covered by insurance when I was having a series of surgeries during my university and 'early career building' years.

By the way, can you believe that I made $20k - GROSS! - a year working 40+ hours a week as an agency copywriter back in the day?! It's all paying off now, but STILL. That's just WRONG. And it seriously explains the loan.

So back to The Loan. It's the thorn in my flesh. And more than anything, it represents BLACKNESS to me. It represents the hardest years of my life - and the sickest, both physically and psychologically. It feels oppressive and I don't want it in my life anymore. In a perfect world, it was supposed to be gone before I got married (which didn't happen). And it was DEFINITELY supposed to be gone before we had a baby (which OBVIOUSLY didn't happen). But now it REALLY needs to go.

I've been diligently making payments on it, even through my mat leave and getting my business started and all that fun stuff. But I am thoroughly sick of it. I know that the things it paid for - my education and career, our family car, my HEALTH - are all things that benefit my family today and that it's not as selfish as it feels. But I still want for it to be gone. And so Geoff and I sat down this week and did some math. One quick phone call to my credit union allowed me to transfer over the money I didn't owe in 2009 taxes as a principal-only payment, and at the same time I also added on 'bonus' little principal-only payments that will come out on the same day as my current bi-weekly payments. The result? My loan will be paid off in less than ten months. LESS THAN TEN MONTHS. By the time the snow melts at the end of next winter, my family will be debt-free (again, the mortgage doesn't count).

It feels good. It feels dancing around the house good. It feels even better that we'll accomplish this while still making contributions to Briony's RESP and putting money away into savings + planned spending accounts (even people trying to be debt-free need vacations, hehe).

Now let's back up for a second...

We read an article last year about how your 20s and 30s are 'debt accumulating' years and then your 40s and 50s are 'debt repayment' years. It really encouraged the reader to think about your 20s and 30s as years when you're acquiring assets and paying for a lot of 'extras' - going to university, buying a house, getting married, having kids, etc. - and to not sweat it because you have some good decades coming when you can clean it all up before retirement. The article succeeded in making us feel better for a minute. But there's a fundamental flaw in any plan that makes you feel like it's totally okay to just buy whatever you can 'afford' on credit with the attitude that you can just pay for it 'later'...

We're pretty big Gail fans here, and her approach is essentially the opposite. Plan like a pessimist so you can live like an optimist. Figure out what you can afford and only spend that. Save for the things you want. Live with the goal of being debt-free (mortgage doesn't count). Once your bases are covered, spend the excess on whatever the heck you want to.

I think that Geoff + I have developed an approach that respects both opinions. We love Gail's approach, but we also realize that we did a lot of things very, very quickly (and not necessarily by design). Doing the wedding + the house + the baby + the new self-employment thing all in the space of two years is full-on CRAZY - and we'd be the first to admit that. And life doesn't always work 100% ideally. Because of that same truth, we both hesitate to defer all our happiness and fun 'until we can afford it' because that tomorrow is not always guaranteed and I can't imagine anything sadder than looking back on your life and wishing you'd lived it differently. But BALANCE is the key. And we've made some big decisions - like keeping a very affordable mortgage - so that we have that flexibility in other areas.

So YAY for being debt-free. But we already know that our victory will probably be short-lived. It would be awesome to put money away for the next five or six years so that we can pay cash for a new car. But there's not a chance in hell that my car is going to last that long. And while we definitely do make use of public transportation + walk whenever we can, we simply need to have a car. So we know that we'll be taking out a loan for that at some point. And it sucks, and Gail would agree that it sucks, but we're not going to beat ourselves up over it. We'll just make sure that - whatever our solution is - we can afford it.

This time around, it might not be debt-free FOREVER. But if the mere possibility of it happening in the next year (however temporarily) feels this good, then I know we'll do it again - and come closer and closer to maintaining that as our standard. And maybe we don't have to do it PERFECTLY yet. After all, we're still in our 20s and 30s :)

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Now it's your turn... I'd love to hear about your financial victories, or goals that you've set for yourself. What systems and philosophies have worked for you?

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4 Comments:

At April 26, 2010 11:49 AM, Anonymous Marilyn said...

It's the 'teacher' in you coming out:) What a relief for you to know a long-term debt has an end in sight. Your long term planning sounds reasonable to me. Our parents paid cash or didn't buy it so we mostly did the same thing (except for mortgages). I think we often made 'necessary/responsible' rather than 'enjoyment' decisions so could have spent a bit more along the way on fun things.

 
At April 26, 2010 12:20 PM, Blogger Lindsay said...

It does feel good... And knowing that we'll save $1,000 in interest on the loan feels even better :)

I'm in awe of people who can pay cash for everything. It's just a completely opposite way of thinking compared to western society at large... But it's definitely something to think about, isn't it? It seems like half the people we know threw a 'cheap' Mexican vacation on their credit cards or line of credit this winter.

 
At April 26, 2010 2:41 PM, Blogger Elleah said...

We hate debt, but sometimes it's unavoidable. We needed another vehicle this year, so we ended up adding it to our mortgage and when we redid our mortgage, our interest rate went down, so in the long run it will save us money! We kept the mortgage for the same number of years, so our payments are just a bit higher now. It's much more affordable for us than trying to make loan payments in addition to our mortgage payments.

 
At April 27, 2010 8:51 AM, Blogger Kari-Ann said...

All I can say is - marry a farmer. It starts to feel a bit like Monopoly money when we get doing farm books. The only advantage is that land is one of the very few things you can buy that actually continuously goes up in value, and doesn't fluctuate as insanely as commodities. So even if we completely sold out tomorrow we'd be up money. But carrying around such UNBELIEVABLE amounts of debt is VERY tough for a girl who never took out a student loan and didn't even have a credit card until she was working full time. I'm the one who came into this relationship with no debt and actually some very healthy savings so it's certainly been interesting adjustment.

I just can't imagine what marrying a farmer is like for someone who didn't grow up in that lifestyle..

 

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