Sunday, November 7, 2010

Dealing with Changes in Finances

A Preface
I’ve spoken now and then on this blog about our finances (trying to sell an apartment on a down market, paying off our debt, our Lazarus at the Gate experience, our budget as a moral document, jubilee etc). I talk about finances because they define what social change and social responsibility means in the day-to-day living out of our ideals. And in turn, our ideals come to define our finances. In this post I'm going to give the story of our how we got to where we are now. I'll talk more about specific aspects of our finances in later posts.

Eug and I have both moved towards frugality over the course of our (almost 4 years of) marriage-- frugality as known by the world’s most wealthy, where frugalistas can still buy ice-cream and the occasional Big Gulp. It’s frugality with a purpose, Your Money or Your Life style. That is, by not spending money, we are given freedom-- freedom from the obligations that spending produces.

Debt- lots of it
Our first year of marriage, I took on $47 000 in student loan debt (don’t convert that into rands, it’s too depressing), and only began working about 9 months into grad school. We were also in a church where love was expressed by spending a lot of money on people-- money that we didn’t have. Eug also had some student loan debt. For over a year, our monthly costs exceeded Eug’s income, and we had about $5000 in credit card debt. And the $47 000 had grown to $53 000 after interest had been added.

In late 2007, as we learned to actually talk budget, things started to turn around. I got two part-time jobs during my last semester of grad school. Rather than letting those checks go into our checking account and stay there, as soon as they came in they went into debt repayment. The whole check. So it was like we didn’t have it. Once the massive student loan started decreasing, we gained momentum and felt like we could actually be free in our lifetime. I started reading personal finance blogs like Simple Dollar and Get Rich Slowly.

In early 2008, we joined a Lazarus at the Gate group-- “Live more simply to give more generously”. This group was totally transformational in helping us define ourselves as rich. In this group, for the first time, we created a budget and paid off our credit card debt. I felt really content with what we had, and our expenses actually decreased so that we were living within Eug’s net salary (around $46 000), and able to use my new state salary (around $40 000) and our tax refund to pay off more student loan debt. I’m not sure what exactly we sacrificed, three keys seemed to be a) staying in our $600/month apartment (which is extremely cheap for Boston) and b) Continuing life as a one-car family and c) decreasing our ‘pocket’ money allocation (I'll talk more about pocket money later).

We also barely turned on the heater and, as I hadn’t accumulated any leave, we didn’t travel to South Africa (or anywhere, really). We were also able to learn to give as much as we could. Looking back, 2008 was really the key year in our getting out of debt. By early 2009, we were non-mortgage debt free.

Changing Times
That freedom had a tremendous impact on the two years that have followed. We saved aggressively for about eight more months, and went car free for just under a year, so that Eug would be able to quit his job and start his own design business. Conferre has been developing as a business the past one year, and our savings have allowed us to survive these leaner times. I love that only one of us has an employer, and that Eug has the freedom to shape his own schedule. His self-employment means we don’t have to find daycare for Noah. I love being part of the Conferre journey, because it feels like we’re (Eug is) building something new and helpful and visionary [and location independent].

We stayed in our small apartment until Noah was about three months old. In September, we were lucky enough to move downstairs, where the rent is double but so is the space. I can’t help feeling that our experience paying off debt, and really talking through expenses, has helped prepare us for this stage in our lives, when it’s not just about us anymore. It’s no longer practical to save aggressively or freeze in the winter, it seems as though this is a stage when we try to support Noah’s growth as best we can. Our financial lives have shifted according to what we’re hoping for Noah's first year of life.

For a long time my goal was not to be ‘ruled’ by money- not make life decisions based on financial implications. Now, I think that in order not to think of money you have to think about money. We have to think about your relationship with the stuff, fight the impulse to always want more, and enjoy what we already have. Over the next few weeks I'll go into more detail on how we budget, save, and simplify.


leah said...

This is a neat thing to write about Jo - I'm looking forward to more posts on the subject! Also when I see in print how much you make and how little you pay for rent it gives me free reign to feel sorry for myself!

Concrete Gardener said...

Used to make (and used to pay for rent) is probably an important qualifier here-- but yes, I totally take your point-- I think talking numbers actually helps us break the power of comparison, because lots of times we're comparing different things (different types of financial stress, etc) and don't know it because we guard our numbers (for fear of looking rich or poor) so closely.