"House-poor"
(Or, The Story Of The Last Five Years Of My Life As Told To Mostly Strangers)
Let me start out by saying this: I make a lot of money. I'm not trying to be egotistical here, I'm just stating a simple fact. My job tends to pay a good amount, because it's hard to find folks with that perfect mix of hardware and software knowledge (and curiosity) that working on embedded computers requires; and on top of that, I know I make a bit more than the typical engineer with my experience in my field, because I work for an excellent small company that treats employees like actual people instead of resources.
And yet, we are always short on cash.
After I graduated from college, I started working for the place I do now, and loved it. I was reeling in the dough, still living with my parents, setting aside a bit for savings but mostly spending it on fancy computer equipment and other high-priced toys for myself. When my wife proposed to me (yeah, that's the kind of person she is) I realized we would need a place to live, and I didn't want to rent, so I went off house-hunting. I finally found a little place in Aurora that was charming, if a bit of a fixer-upper. I saved up for the down payment and bought the place.
Back during the big tech bubble, I thought our company was impervious: after all, our work primarily dealt with hardware, not these ridiculous Internet startups with more vaporware than sense. I hadn't realized that our main customers were in the telecommunications industry, and you all know what happened there. Our work dried up so fast we got whiplash, and I still remember the haunting e-mail telling us all that we were going to have a company meeting and that attendance was mandatory. Now, attendance had never been mandatory for a meeting before, so I knew something had to be up -- maybe salary cuts across the board or something like that. I wasn't expecting layoffs of the entire company save for a skeleton crew.
And so, for one year, I was unemployed, though it certainly wasn't for lack of trying to find a job. I took several contract jobs, made a debacle of a website (see "biting off more than you can chew"), did some Visual Basic work for a family friend, to pay the mortgage. Meanwhile, food, gasoline, and other bills went on the credit cards, which had a ludicrously low APR and ludicrously huge limit due to my previous lifestyle of purchasing a bunch and paying the whole balance down each month. My wife and I got married, which gave us some cash to get by and gifts to furnish the house. We had a determined resolve that things would look up eventually, and then we could get back on track and pay down that accumulated debt. My wife got a mediocre job doing promotional materials for a slave-driver of a boss in an office that probably violated every OSHA standard on the books... but it was money, and that's what was important.
But through it all, we made some costly mistakes. We stubbornly maintained the lifestyle I had when I was employed, confident that we could pay it all down as soon as things got back on track. We did not cancel satellite telvision, nor the mobile phones. We still shopped at Dominick's instead of Aldi. I bought a laptop for my wife with the excuse that it would make her work easier. We got a Playstation 2 and a Gamecube for each other as presents. We brought in two boarders, friends of ours, who moved in with the express purpose of helping us pay things down -- finding out shortly afterward that they too were unemployed, in the IT field, and lazily avoiding looking for jobs of any sort. And I, being the soft heart I was at the time, stuck my head into the sand, figuring they were just down on their luck like we were and would eventually pay us the months of rent we were owed, not to mention the cost of the food we had to buy. The credit balance grew larger and larger as time went on.
Things did get back on track: my boss called me, exactly one year to the day after the layoffs, saying she had a project she'd like me to work on, and that she'd hire me back on at the same pay level I was at before. In early 2002, this was virtually unheard of given the job market. I lept at the chance, and started receiving paychecks again. Eventually my wife quit the job for the psycho boss, and got a much better job in the city, doing stuff she loved to do and getting paid a great salary for it. Now we were making far more than we needed, and significant chunks of our debt were being paid down.
Except that my wife and her new boss didn't get along well at all; she called him on bad management decisions and generally made her opinion known to the company. He grew angry that she was not putting forty-five to fifty hours a week in on a regular basis, and eventually terminated her. Now we were back to just my salary, except that there was this additional credit card payment on top of the other bills. Around that same time, my wife was diagnosed as bipolar. Being fired from the job she loved so much destroyed her self-esteem to the point where she could not hold down another job. I'm not the most stable person either, and when either of us is depressed, what's the first thing we do? Buy stuff to cheer us up. Not huge things, usually, but small things, $10 or $20 at a time, maybe a new CD or DVD. Things that seem innocuous but add up terrifyingly quickly.
Over the course of the intervening time, I have gotten several raises. We have refinanced the house twice. And we have completely maxed out our credit. Amazingly, both of our credit scores are still on the very high side of "Fair", or the low side of "Good", for throughout all of this I have not missed payments. But there is no safety net there anymore, no "overdraft protection transfer" to kick in if we make mistakes now. I suppose that's what scares me the most.
No, what scares me the most is that it happened so gradually, so easily. It's so much like an addiction, because you don't realize how your spending habits creep up on you until you suddenly look back and say "how the hell did that happen?" If you think you're good with money, don't be so sure until some adversity hits you and you're suddenly faced with the prospect of altering those habits that have been etched into you like the way water carves stone. It's far, far harder than you might think. And I suppose that's why I'm writing this long-winded, angsty daylog: as a warning to anybody else who thinks they're on top of the world and can handle anything life throws at you.
Even with all I've written here, I'm still a stubborn jackass. We still have satellite television, two cars, and a cellphone. I still don't shop at Aldi, although I've been trying to go to Jewel-Osco more often since their prices are a bit lower. I still feel the urge to go on a spending jag now and then, even adding items to online shopping carts despite knowing there's no way to pay for it. Change is hard, and we are trying our damnedest to remake ourselves into people who are thriftier, more deliberate, and less materialistic (all things I thought I was until I had that plastic card with its enormous limit in my hands).
Some Tips to Help Avoid What I'm Going Through
Cut up every credit card you have. Do it now. If you're really squeamish, stick them in a drawer somewhere where you won't have immediate access to them.
Close the credit card accounts, if you've memorized your number and don't think you can trust yourself with online purchases. If you have a balance on any card, set up a debt reduction plan and stick with it. Obviously, everyone says to pay more than the minimum or it'll take forever to pay things off; however, it's often very beneficial to pay as much as possible toward your highest-interest card first while paying just slightly more than the minimum on the other cards.
Don't pay anything with plastic of any kind. Instead, withdraw spending cash when you are paid and use that. Humans have an aversion to handing over those physical bills and coins, as opposed to deducting some intangible number from another intangible number. If you make an online purchase, take the equivalent amount of that spending cash and deposit it back into the account first.
Balance your checkbooks with a pillow, e.g. pretend you have $500 less than you actually do. This is another psychological thing, as you'll strive to keep that recorded balance above zero subconsciously even if you know there's actually more in there. (My mother actually maintains a $2000 pillow! Shame I didn't inherit my money sense from her...)
If your living situation changes, act as though the change is permanent. If you are laid off, do not assume you'll find a new job right away. Bite the bullet and cancel luxuries to fit your new situation. The sooner you get rid of it (cable/broadband/mobile phone/etc.), the less you will get used to it and fall into the false sense of security that putting it on credit can give you.
And remember: there is no such thing as a small purchase. Ten $6 cappucinos bought over the course of two weeks may seem like nothing compared to one $60 DVD box set, but it's all the same to your wallet.
Heck yeah, this is preachy. I don't want others to fall into this trap, and I especially don't want folks to say "haw haw, that idiot, he got what he deserved for spending so much". Yes, we are entirely to blame for the situation we're in right now, but the point is that I was one of those people.
You are not as infallible as you might think.