Monday, October 24, 2011

Where We Got Stuck Financially

Yup, we messed up.

Not huge. Yet. But... we probably caught it just in time.

It seems the majority of people run into trouble because they don't have savings, or put too much on credit cards, or just don't plan for a rainy day. And then the rainy day happens, they're hit with a catastrophe, and... ruin.

But... we hadn't done any of those things.

We did have savings. We had a savings account. We had extra savings. We had little to no credit card debt (meaning we paid off what we put on there).

And there was no major catastrophe.

Which is why... for months now... both of us have been lamenting over where our money was going.

FireMan accused me of overspending. I shot back reminding him of what he had spent money on.

Now... being totally honest, the realization of what happened is kind of a "duh" moment for both of us. Basically it's something we both knew, in our heads, but didn't really put the pieces together.

You see, when we bought our house last September, our major renovation project, we knew that our mortgage was higher than our previous mortgage. It's a larger house, with 5 times as much land, and since it's a renovation loan we paid a higher interest rate.

But we also knew that after 12 months we could refinance at a regular (lower) mortgage rate, and with the renovations being done should be able to get rid of our PMI, reducing our payments so much that our monthly payment would be the same, or slightly lower, than at our old home. For much more house and land.

That year of sacrifice, a year of a slight tightening of the belt, of not being able to put as much into savings... we knew that. We got that. We accepted that it was worth it in the long run.

So we did it. We made slight modifications to our monthly expenses. Things like replacing cable with streaming Netflix (saving us $35/mo) and the like.

But renovations (as they often do) ended up costing (significantly) more than expected. Enter the dreaded credit card.

And then, we unexpectedly experienced a significant increase in childcare costs overnight.

My longtime readers may remember this.

My parents had been our primary childcare, and had refused payment. We finally gave up trying to pay them, and compensated them instead with nicer gifts for holidays & such. Virtually nothing.

Overnight, we were paying for full time child care. Several hundred dollars we had not budgeted for, added to our monthly expenses.

I think with the stress of what our family was going thru in the moment, even though we certainly acknowledged, and stressed over, this change to our finances, we just weren't in the frame of mind to really accept it and make the changes we needed to to accommodate this change.

That... was our undoing.

The extra mortgage payments we could have handled. The extra renovation dollars we could have handled. The extra childcare expenses we could have handled.

All three happening within a 3-4 month period, increasing our monthly expenses by nearly a thousand dollars - every month - we could not.

We made it. But our savings has gradually dwindled. And our credit card bills have gradually gone up.

So I guess we haven't really made it.

Of course, there have been other things.

Like medical bills. I've had them. FireGirl's had them.
Thank goodness for being on very good health insurance plans. But between copays, deductibles, and medication, we've still paid several thousand dollars out of pocket.

And we've procrastinated on renovations. So here we are more than 13 months since we bought the house, and we still haven't even applied for refinance, because we know certain things won't pass appraisal / inspection as is. Not for us to get the lower rate. And certainly not for us to get the PMI knocked off.

Totally our fault.

So... it wasn't that we had one giant catastrophe. No car accident this time. No lost job. No one time major catastrophe.

But several things within the span of a few months that significantly raised our monthly expenses, without us making significant changes to our lifestyle to accommodate those changes... and there you have it.

We screwed up.

So now we're taking steps to correct it. We've put ourselves on weekly allowances for eating out & ATM withdrawels. We're eating in more. I'm (still) trying to get my coupons more organized so I can save more on groceries.

And we're taking Dave Ramsey's Financial Peace University. We're still in the beginning, but I think that's gonna be really good. It's already changing how we think about money.

Wish us luck, and I'll keep you posted.

As always, thanks for checking in!


'Yellow Rose' Jasmine said...

Good for you, noticing this and doing something and not feeling sorry for yourself.
You have the right attitude and will do well. I've been there with you and it's not fun, but when you see the fruits of your labors it is soooo satisfying!

areyoukiddingme said...

Good luck! It's always nerve-wracking when you have a sudden increase in expenditures. I hope you can make a good plan without too much sacrifice.

Gina aka Slappy said...

We know why we are in financial trouble. I spent years (when I was out of my mind on meds) trying to buy happiness ... it didn't work. So now we are trying to dig ourselves out of serious debt. It isn't fun, but it is teaching us what is really important ... not money ... not things ... people!

Payment Free Life said...

Kudos to you and your husband for taking a proactive approach to your financial life. My husband and I went through FPU a few years ago. It was a great program and got us motivated to get everything paid off. The giving chapter was really inspirational; we left thinking, 'we want to be those people!'

Good luck, stick with it and stick together.

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