Saving The Maximum vs. Happiness
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Hi,
I was inspired to post on this subject because of a comment Jacob left on my introduction post: viewtopic.php?t=238
He said that I can't afford to work part time when our 1st baby is born in 6 months because of how much we still owe on my husband's law school loans.
For two years, my main goal has been getting those loans paid down. I've stayed in a job I don't like and we've put all our extra money towards the loans.
My husband and I have always agreed I would only work part time when we had kids. I got pregnant sooner than expected (we thought it would take awhile for several reasons) and although the debt remains, I still plan to go part time at any cost, even if we had to defer the loans as much as that would pain me.
This issue is my line between frugality and happiness. I know I would be miserable working and having a baby. Other areas of frugality don't bother me. I don't consider it a sacrifice to live in a small house or not dine out or not buy new clothes. But working at a job that makes me unhappy and sending my kid to daycare? Unacceptable. Let the interest on the loans grow.
(Side note - it's not as if the husband will be making 45K/year forever. His position was meant to be only for a couple years and he's currently looking for a job that pays more of a standard lawyer's salary, then we can get back to paying off the debt, so this is some comfort to me.)
How about you? Ever opted for happiness over the most financially responsible choice?
K
http://www.frugalveganmom.wordpress.com
I was inspired to post on this subject because of a comment Jacob left on my introduction post: viewtopic.php?t=238
He said that I can't afford to work part time when our 1st baby is born in 6 months because of how much we still owe on my husband's law school loans.
For two years, my main goal has been getting those loans paid down. I've stayed in a job I don't like and we've put all our extra money towards the loans.
My husband and I have always agreed I would only work part time when we had kids. I got pregnant sooner than expected (we thought it would take awhile for several reasons) and although the debt remains, I still plan to go part time at any cost, even if we had to defer the loans as much as that would pain me.
This issue is my line between frugality and happiness. I know I would be miserable working and having a baby. Other areas of frugality don't bother me. I don't consider it a sacrifice to live in a small house or not dine out or not buy new clothes. But working at a job that makes me unhappy and sending my kid to daycare? Unacceptable. Let the interest on the loans grow.
(Side note - it's not as if the husband will be making 45K/year forever. His position was meant to be only for a couple years and he's currently looking for a job that pays more of a standard lawyer's salary, then we can get back to paying off the debt, so this is some comfort to me.)
How about you? Ever opted for happiness over the most financially responsible choice?
K
http://www.frugalveganmom.wordpress.com
I had commented in your post "Trying to be more frugal in Minneapolis".
In this post I would say that "in my opinion only" it is extremely difficult, not to mention stressful, for a woman with a young or infant child to work, while leaving the child in a paid daycare. Not knowing your full situation, this may or may not be something you could do. Financially, let's say daycare costs $175.00 a week. You recover some of it maybe in income tax credits. I would measure everything: Your salary, your daycare costs, your recovery of that, your absence from your child, sicknesses, bad weather, your own cost of employment, stress on the family, and add it up to see where you stand.
(Again please review my post to you as stated above).
Best Wishes
In this post I would say that "in my opinion only" it is extremely difficult, not to mention stressful, for a woman with a young or infant child to work, while leaving the child in a paid daycare. Not knowing your full situation, this may or may not be something you could do. Financially, let's say daycare costs $175.00 a week. You recover some of it maybe in income tax credits. I would measure everything: Your salary, your daycare costs, your recovery of that, your absence from your child, sicknesses, bad weather, your own cost of employment, stress on the family, and add it up to see where you stand.
(Again please review my post to you as stated above).
Best Wishes
We made a similar choice when our 2nd child was born this June. My wife stayed home full-time and our savings rate plummeted from about 33% to low teens. It is discouraging to see our savings not grow like it had been, but we know it will be temporary. She plans on returning to work when both kids are in school.
Some things are more important than money, hang in there.
Some things are more important than money, hang in there.
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I think it's essential to not have two full-time working parents, especially in the early years of a child's life, so I totally agree with your decision. My advice is to take a chapter out of Jacob's book and be creative and open-minded about further cost of living reductions--e.g. rent out the house and live in an RV, grow your own food, hunt your own food, turn your hobby into a business, etc.
It's struck me that providing day care for other people's children might be a good synergistic way to boost your income without necessarily adding to your time "burden" in taking care of your baby. I might be totally off about this--perhaps he/she is too young to share your attention like that.
It's struck me that providing day care for other people's children might be a good synergistic way to boost your income without necessarily adding to your time "burden" in taking care of your baby. I might be totally off about this--perhaps he/she is too young to share your attention like that.
I think I am confirming other posts, but I don't think he is saying you have to work. Just recommending that you reduce your cost of living so that you can still tackle the debt. Not acknowledging the costs of your situation does not make it go away. While many things in life are much more important than money, financial aspects are handled easily by reducing what we think are needs. Most of what people are used to are wants, regardless if everyone appears to live with much more.
I pay for nearly everything in the relationship I have, and do not feel any hardship.
My happiness I feel is compromised when I work on-call shifts for a week and get 20 phone calls in the middle of the night.
I also struggle with the "there is no 2nd chance in life" vs. "saving for the future" - when to spend the money from those crazy 80 hour weeks. I guess my "bad" habits sort of bridge the gap.
My happiness I feel is compromised when I work on-call shifts for a week and get 20 phone calls in the middle of the night.
I also struggle with the "there is no 2nd chance in life" vs. "saving for the future" - when to spend the money from those crazy 80 hour weeks. I guess my "bad" habits sort of bridge the gap.
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I just wrote a post trying to explain the technicalities behind my thinking. Maybe it is better explained with an example.
Suppose A has $150,000 in assets and B has $150,000 in debt. Both draw 6%. Both earn $40,000. Then each year, A will have $49,000 to spend, while B will have $31,000 to spend. You could also have a person with a net worth of zero, C, who'd then have $40,000 to spend. This is not just one year, this is every year. If the debt has to be paid off as well, then B may be paying $1250 extra per month to get rid of it in 10 years. This will cut B's spending to $16000 per year. That's less than 1/3 of A. Huge difference!
Overall, A will have substantially more financial freedom than B. This will be even more apparent if interest rates are higher, earnings are lower, or asset/liabilities are higher.
The reason I said "can't afford it" is that interest coverage is currently under one---this means that not only is the hole getting deeper, it's digging itself via compound interest. You are betting on future (uncertain?) salary increases to get you out of it. That's more than what I could live with---but then again I am not you. Maybe a substantial salary increase is a close certainty.
Also, I obviously I don't know how close to the bone you are yet in terms of making those interest payments. As I understand, there's still some comfort to give up. Maybe there's lots of comfort "in reserve". It may ultimately come down to that---as someone mentioned, your ability to stay at home vs DH's material comforts.
The problem with student loans is that you can't easily default on them. Wages and tax refunds can be garnished by collectors without going to court. This makes student loans more dangerous than credit cards.
Suppose A has $150,000 in assets and B has $150,000 in debt. Both draw 6%. Both earn $40,000. Then each year, A will have $49,000 to spend, while B will have $31,000 to spend. You could also have a person with a net worth of zero, C, who'd then have $40,000 to spend. This is not just one year, this is every year. If the debt has to be paid off as well, then B may be paying $1250 extra per month to get rid of it in 10 years. This will cut B's spending to $16000 per year. That's less than 1/3 of A. Huge difference!
Overall, A will have substantially more financial freedom than B. This will be even more apparent if interest rates are higher, earnings are lower, or asset/liabilities are higher.
The reason I said "can't afford it" is that interest coverage is currently under one---this means that not only is the hole getting deeper, it's digging itself via compound interest. You are betting on future (uncertain?) salary increases to get you out of it. That's more than what I could live with---but then again I am not you. Maybe a substantial salary increase is a close certainty.
Also, I obviously I don't know how close to the bone you are yet in terms of making those interest payments. As I understand, there's still some comfort to give up. Maybe there's lots of comfort "in reserve". It may ultimately come down to that---as someone mentioned, your ability to stay at home vs DH's material comforts.
The problem with student loans is that you can't easily default on them. Wages and tax refunds can be garnished by collectors without going to court. This makes student loans more dangerous than credit cards.
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"Ever opted for happiness over the most financially responsible choice?"
My view is that the purpose of saving is to enhance happiness. Any money you save is ultimately going to be spent in any event. All you are doing when you save is moving a spending event into a later time of your life. It's a question of timing things so that the overall life enhancement obtained from that money is the greatest.
It's clear from what you say that you would get great life enhancement from staying home with your child and that you would subtract great life enhancement by not doing so. This is not a question of being "irresponsible." It is a question of maximizing life enhancement. You have a huge opportunity to do that by staying home with your child (this is an opportunity that may not come again -- you can never be sure what the future is going to bring). So, if I were in your shoes, I would take advantage of that opportunity.
There are usually other things that can be cut. What's often lacking is the will to identify the cuts. What this opportunity (that's how I see it) does for you is give you enhanced ability to identify spending cuts. You will be getting so much enjoyment from that baby that things that you felt you needed when you did not have that source of enjoyment won't seem like such a big deal under these new circumstances. I believe that the change will end up being a net plus.
Rob
My view is that the purpose of saving is to enhance happiness. Any money you save is ultimately going to be spent in any event. All you are doing when you save is moving a spending event into a later time of your life. It's a question of timing things so that the overall life enhancement obtained from that money is the greatest.
It's clear from what you say that you would get great life enhancement from staying home with your child and that you would subtract great life enhancement by not doing so. This is not a question of being "irresponsible." It is a question of maximizing life enhancement. You have a huge opportunity to do that by staying home with your child (this is an opportunity that may not come again -- you can never be sure what the future is going to bring). So, if I were in your shoes, I would take advantage of that opportunity.
There are usually other things that can be cut. What's often lacking is the will to identify the cuts. What this opportunity (that's how I see it) does for you is give you enhanced ability to identify spending cuts. You will be getting so much enjoyment from that baby that things that you felt you needed when you did not have that source of enjoyment won't seem like such a big deal under these new circumstances. I believe that the change will end up being a net plus.
Rob
Perhaps some of the loans could be put into forbearance. For govt loans, my understanding is that you can get a hardship forbearance just by calling and telling them that you can't afford to pay right now. Don't do the online forms first, call them and see what they tell you. I did this at least 5 times, for 5 consecutive years. It didn't hurt my credit.
I was required to pay nothing, but I attempted to pay the interest off each month so that my debt level was stable. I didn't always succeed. By doing this you'll only be paying interest which maximizes your tax deduction for interest paid on student loans. Also, if you stay in forbearance the unpaid interest doesn't capitalize until you come out of forbearance (so no compounding-- you're not paying interest on interest). When I did eventually get a better paying job, I stayed in forbearance for another year until I had paid off all of the accumulated interest.
It was a long haul, but I've learned a lot from it-- the real price of debt, the importance of simple living, and the value of finding happiness in life beyond money. Paying off the debt actually feels really good when you get there too-- being optimistic, think of it as something you can look forward to.
I was required to pay nothing, but I attempted to pay the interest off each month so that my debt level was stable. I didn't always succeed. By doing this you'll only be paying interest which maximizes your tax deduction for interest paid on student loans. Also, if you stay in forbearance the unpaid interest doesn't capitalize until you come out of forbearance (so no compounding-- you're not paying interest on interest). When I did eventually get a better paying job, I stayed in forbearance for another year until I had paid off all of the accumulated interest.
It was a long haul, but I've learned a lot from it-- the real price of debt, the importance of simple living, and the value of finding happiness in life beyond money. Paying off the debt actually feels really good when you get there too-- being optimistic, think of it as something you can look forward to.
It does seem that if staying home part-time is going to increase your debt by resulting in increased interest accrual, that is a BIG sacrifice to be making for "happiness". And I am someone who is all for not having both parents out working full-time when kids are young.
I would say everyone is making some level of decision about maxing out savings vs. happiness. If you really really wanted to, you could probably save 100% of your income (or close to), squat out under a bridge, get all your food and clothing from dumpster diving, etc. Very few people would opt to do that (I think?). I think it is okay to spend/not save money now, even if it does mean you are delaying financial independence, but the question is how much money do you *really* need to be spending to be "happy"? For me, I think I would draw the line in your situation...I'm okay with having savings be flat for a short period of time, but having debt piling up would stress me out an awful lot more and so I would absolutely be looking for ways to further trim expenses or boost income.
I would say everyone is making some level of decision about maxing out savings vs. happiness. If you really really wanted to, you could probably save 100% of your income (or close to), squat out under a bridge, get all your food and clothing from dumpster diving, etc. Very few people would opt to do that (I think?). I think it is okay to spend/not save money now, even if it does mean you are delaying financial independence, but the question is how much money do you *really* need to be spending to be "happy"? For me, I think I would draw the line in your situation...I'm okay with having savings be flat for a short period of time, but having debt piling up would stress me out an awful lot more and so I would absolutely be looking for ways to further trim expenses or boost income.