Careers vanish after subprime freefall

[HFWR]

My "house payment" is $863, including taxes and insurance.

 

[Razor]

Haha, thanks guys, this is great news! I've already made an appointment at the Mercedes dealership for Thursday. My wife will be overjoyed!

Seriously though, I don't think any of the expenses I listed are really exorbitant. How do people make it on less? What about single income families with kids in the picture? No wonder people have such a hard time getting out of debt and building up any kind of savings.

I had a $800/month house payment before I paid it off 10 years ago and my current expenses are less than $2000, probably closer to $1500. I manage to save at least $2000 a month, have no credit card debt and both cars are 5 years old and paid for. I sure wish I made $6 to $8k a month.

 

[JustCurious]

Seriously though, I don't think any of the expenses I listed are really exorbitant. How do people make it on less?

They spend less on big ticket items, and the biggest ticket item for most people (after taxes) is housing. For example, my mortgage payment, for a 15 year fixed income mortgage, is $920 per month, and I suspect my household income is at least as much as yours. So I spend $1,200 less per month than you just on my mortgage payment alone.

 

[kombat]

They spend less on big ticket items, and the biggest ticket item for most people (after taxes) is housing.

Agreed, but even if my house was paid for, and you eliminated that $2,100 from the budget, that would still leave $6,000/month in expenses.

I guess maybe it's related to geography? Our property taxes are pretty high, living in the city limits. Is $350/person/month for groceries too much? We try to eat pretty healthy, most of that cost is probably milk and meat. Veggies, pasta, and rice are cheap.

Our car is paid for, we simply redirect the old car payment into a special fund for vehicle repairs, or a down payment when it comes time to replace it. (I don't want to get too used to having that money back in our pockets, it would just make it painful when we had to buy a car again).

Insurance is mandatory, cars need gas to run, we have to pay for heat and electricity... what's "too much" in our budget?

 

[JustCurious]

I think you are right that some of it relates to geography. Let's take property taxes for example... I paid $1,300 last year, for the whole year. If you paid $4,800, then I save $3,500 on that item alone compared to you. (I live in Florida, and I benefit from a law called "Save our Homes which caps annual property tax increases on homesteads). For another example, all of my utilities combined (internet, cable, phone, electricity, water) add up to about $250 per month, and I saved another $3,000 per year compared to your budget.

 

[W2R]

Sorry for my ignorance, but is there an exchange rate issue here? I notice that Kombat lives in Canada.

I also notice that his $2100/mo mortgage payment does not include either taxes or insurance. Wow. My mortgage payment was less than half of that, including both, until I paid it off.

I suppose that if I felt the need for a bigger house, I would have started with my present house, paid it off, and then moved up while keeping my mortgage payments low. But then, I am probably older and closer to retirement than Kombat.

 

[kombat]

I also notice that his $2100/mo mortgage payment does not include either taxes or insurance. Wow. My mortgage payment was less than half of that, including both, until I paid it off.

I don't mind sharing the details, if anyone's interested (this is an anonymous forum, right? ).

We have a 30-year (28.5 years to go!) 5.35% (5 year fixed) mortgage for $360,000. Our monthly payments are around $2,100.

We live in Ottawa, Ontario, Canada, where property taxes for our lot are around $4,500/year. Even I know that's high, but what can you do.

My wife and I are 32 years old. The house is appraised at $400,000, and the outstanding mortgage is around $355,000.

 

[megacorp-firee]

Is it really so difficult to imagine? My wife and my monthly expenses are $8K/month.

Granted, the couple in the article are utterly oblivious to their own idiocy. They've made their bed and will lie in it.

But for middle-class DINKs, $8K-$10K/month isn't that hard.

$2,100 - Mortgage
$2,000 - Retirement savings
$400 - Property taxes
$700 - Groceries
$600 - Car payment, maintenance fund
$500 - Natural gas, electricity, water, phone, cable, internet
$1,000 - Discretionary spending ($500/each)
$300 - Insurance - car, home, life, disability (this is Canada, hence no medical insurance)
$400 - Gas for car, bus pass, house maintenance

That, in fact, is pretty much our exact budget. It's not as hard as you think. Keep in mind, that's all *after* tax money. Neither my wife nor I have 6-figure incomes.

Note that that doesn't include a gardner or a housemaid, no country club dues or fancy sports cars, no boats or private planes. Note that there isn't even an item in there for clothing, dining out, gifts, hobbies, or vacations (that all comes out of our "discretionary" money). I don't have a cell phone, I won't even pay for "caller ID" on our landline. We don't get the movie channels. I take the bus to work and brownbag my lunch every single weekday. We actually live quite frugally.

If you live in a big metropolitan area with high property taxes and sales taxes, ...etc. then $6k a month is not hard to do. ... and that is not living high either. Not complaining, just explaining how the math comes out.
Clarification, I deducted the $2K retirement savings

 

[Sarah in SC]

My table saw will only do about 26"...

Definitely fun to man-handle sheets of plywood. Wouldn't want to make to many false moves on a $125 sheet of mahogany.

We just had a friend put down some beautiful teak and holly plywood on our kitchen counters and I told him that he'd better make damn sure he measured about a hundred times before he cut that expensive stuff!

 

[W2R]

I don't mind sharing the details, if anyone's interested (this is an anonymous forum, right? ).

We have a 30-year (28.5 years to go!) 5.35% (5 year fixed) mortgage for $360,000. Our monthly payments are around $2,100.

We live in Ottawa, Ontario, Canada, where property taxes for our lot are around $4,500/year. Even I know that's high, but what can you do.

My wife and I are 32 years old. The house is appraised at $400,000, and the outstanding mortgage is around $355,000.

I guess one big difference is that while I could (now) easily afford a $400,000 house, I really don't need one.

I would probably get lost in a house that large, all by myself!

Also, I happen to live in a low cost-of-living area. My property taxes for the entire year were $551 last year.

 

[kombat]

I guess one big difference is that while I could (now) easily afford a $400,000 house, I really don't need one.

Of course we don't need it either. My wife wanted a big kitchen, and as it turns out, the only houses with big kitchens happen to be big houses.

Ironically, I'm the one that ends up doing most of the cooking!

$551/year property taxes? Wow! I knew we were getting shafted, but I didn't think it was that bad.

 

[Milton]

Sorry for my ignorance, but is there an exchange rate issue here? I notice that Kombat lives in Canada.

There is no significant exchange rate factor (during the past couple of years, the loonie and greenback have, on average, been equal).

 

[tuixiu]

We're also a no kids couple. The biggest differences in our expenses would be the real-estate related that others have mentioned and the grocery bill.

Our groceries run about $400/month for two people. I do cook a lot and try to buy meat on sale to freeze but surely not a fanatic meal planner and coupon clipper. (Note that the beer fund comes out of entertainment budget )

We're also at under $100/month for gasoline, and maintenance on the townhome is cheap depending on how you rationalize $170/month HOA fees that cover the landscaping, roof, exterior, etc.

 

[A854321]

This couple was so clearly living beyond their means. You would have thought that being in the mortgage business, including sub-prime mortgages would have much more of a clue of what was going on in their local real estate market than the average joe.

Fact is they lived in a very overpriced home in a very overpriced real estate market, extended their credit with an HEL to buy more stuff (Corvette) and when faced with her lay-off, didn't make appropriate changes to live below their means.

I would have thought that the option of plundering their 401K to keep up their lifestyle would have brought some clarity to their situation.

I just don't feel one bit sorry for these people with their combined 6-figure incomes. What do they think teachers get paid in their area?

 

[W2R]

Of course we don't need it either. My wife wanted a big kitchen, and as it turns out, the only houses with big kitchens happen to be big houses.

Ironically, I'm the one that ends up doing most of the cooking!

$551/year property taxes? Wow! I knew we were getting shafted, but I didn't think it was that bad.

Your salary is probably proportionally higher, too.

I know what you mean about kitchens! It is easier to find nice amenities in a larger house.

 

[Khan]

I pulled up the money charts from '07:

utilities: ..$3715.36
(cable cell electricity natural gas landline/dsl water/sewer/trash)

prop tax: ..$827.30

Ins: .......$1812.82
(car house ltc medical)

total: .....$6355.48

$529.62/mo
---------------------
total spending $23485.89
just under $2000/mo
(includes taxes but not car purchase)

with car purchase just under $3000/mo
(first car purchase since '89, and last one for as long as possible)

 

[Moemg]

$551/year property taxes? Wow! I knew we were getting shafted, but I didn't think it was that bad.

You are not getting shafted . Most people are paying a lot more property taxes than $551 . New Orleans just happens to have low taxes . Why ? I'm not sure .

 

[W2R]

I live alone, so theoretically my expenses should be half of Kombat's. As a percentage, here is a comparison:

$2,100 - Mortgage 38%, when I still had a mortgage
$2,000 - Retirement savings 161%
$400 - Property taxes 11%
$700 - Groceries 43%
$600 - Car payment, maintenance fund 1% (did not finance car, Toyota)
$500 - Natural gas, electricity, water, phone, cable, internet 19%
$1,000 - Discretionary spending ($500/each) [-]40%[/-] 15%
$300 - Insurance - car, home, life, disability (this is Canada, hence no medical insurance) 66%
$400 - Gas for car, bus pass, house maintenance 50%

So, per capita I spend more than you on retirement savings and insurance, the same as you on "gas for car + house maintenance", and less than you on the other items, notably property taxes, having a paid off low maintenance car, and lower utilities on my smaller house.

Really, I am also spending more than you on house maintenance because I only fill the gas tank every six weeks and these two are in a combined category.

My insurance didn't include medical insurance either, since that is deducted from my salary before I ever see it.

Edited to change my discretionary amount: I buy my food and gas out of this, so it is more like 15%.

 

[W2R]

You are not getting shafted . Most people are paying a lot more property taxes than $551 . New Orleans just happens to have low taxes . Why ? I'm not sure .

Don't worry, they get us in sales tax, which is 9.75% and on its way up. Property taxes were higher when I lived in Texas, but they have no income tax there. Why? I'm not sure.

 

[kombat]

Alright, in the interest of accuracy, I've dug up some hard numbers. I overestimated our mortgage slightly. Here's our exact monthly budget:

$4,200 My income (after tax)
$4,200 Wife's income (after tax)

$2000 Mortgage
$2000 Retirement savings
$1000 Spending money
$370 Property tax
$152 Electricity
$150 Natural Gas
$170 Cable, phone, long distance, Internet
$625 Car payment/maintenance/down payment savings
$700 Groceries
$15 Water/sewer
$175 Gas for the cars
$90 Bus pass
$125 Car insurance
$70 Home insurance
$200 Life/disability insurance
------------
$7,842/month

Again, I'd like to point out that that doesn't include clothing, gifts, vacations, home maintenance and repair, charity, furniture, hobbies, dining out, or many other things that have to be covered under the "Spending Money" item. I've tried to cut back this budget as best I can, we have compact florescent bulbs in the most-used rooms (not worth upgrading bulbs in the bedrooms rarely used), we close the vents in bedrooms we don't use, we have a digital programmable thermostat controlling our heat/air conditioning so we're not heating/cooling the house during the day while we're at work. My car is a '95 Honda Civic that spends most of its time parked (I take the bus to work), my wife's car is an '05 Mazda 3 (no bells and whistles) that was paid off 2 months ago. We have no other debt at all, other than the mortgage. I don't think we're living very extravagantly, yet we easily go through $8k/month.

I don't think it's hard to imagine a family (especially with children) spending $8k-10k month "keeping up with the Jones'" when we spend that much living (what I would consider) frugally.

 

[Razor]

Alright, in the interest of accuracy, I've dug up some hard numbers. I overestimated our mortgage slightly. Here's our exact monthly budget:

$4,200 My income (after tax)
$4,200 Wife's income (after tax)

$2000 Mortgage
$2000 Retirement savings
$1000 Spending money
$370 Property tax
$152 Electricity
$150 Natural Gas
$170 Cable, phone, long distance, Internet
$625 Car payment/maintenance/down payment savings
$700 Groceries
$15 Water/sewer
$175 Gas for the cars
$90 Bus pass
$125 Car insurance
$70 Home insurance
$200 Life/disability insurance
------------
$7,842/month

Again, I'd like to point out that that doesn't include clothing, gifts, vacations, charity, furniture, hobbies, dining out, or many other things that have to be covered under the "Spending Money" item. I've tried to cut back this budget as best I can, we have compact florescent bulbs in the most-used rooms (not worth upgrading bulbs in the bedrooms rarely used), we close the vents in bedrooms we don't use, we have a digital programmable thermostat controlling our heat/air conditioning so we're not heating/cooling the house during the day while we're at work. My car is a '95 Honda Civic that spends most of its time parked (I take the bus to work), my wife's car is an '05 Mazda 3 (no bells and whistles) that was paid off 2 months ago. We have no other debt at all, other than the mortgage. I don't think we're living very extravagantly, yet we easily go through $8k/month.

I don't think it's hard to imagine a family (especially with children) spending $8k-10k month "keeping up with the Jones'" when we spend that much living (what I would consider) frugally.

Most people don't make that kind of money. Do you and your wife have good job security? What would happen if you were laid off for a period of time? Could you survive?

 

[kombat]

Do you and your wife have good job security? What would happen if you were laid off for a period of time? Could you survive?

Heh, you're preaching to the choir, my friend. My wife and I both graduated university in 1999. I went to work for Nortel and she went to work for JDS Uniphase. Guess how that worked out.

We're well aware of the fragile nature of working in high-tech, so we're prepared for layoffs. I'd still like to be even better prepared (ideally, I'd like to have a full 6 months of living expenses saved up), but I'm planning to use our "car payment" money to build up that fund, now that the car is paid off.

 

[brewer12345]

I don't think it's hard to imagine a family (especially with children) spending $8k-10k month "keeping up with the Jones'" when we spend that much living (what I would consider) frugally.

We go through roughly 8 to 10k a month with two adults and two small children. Most of our numbers are not that far from yours, although RE taxes are a good bit higher (pushing $600/month), water/sewer is higher (~$100/month), and transportation costs are higher (my long commute). We do not live extravagantly. Its just that we are in a high cost area and that is the way it is.

 

[soupcxan]

The guy in the Times article is clearly an idiot but I agree 100% with Kombat, my wife and I make $100k gross in a relatively low cost of living city in the US - it sounds like a lot of money - but when you break it down the money does not go as far as you would think. Here is what our budget looks like (this is for two working adults, no kids) - there are probably a few areas where we could trim it a little, but for the most part our entire take home pay is spoken for every month. With no pension and no 401k right now, 20% of savings for retirement is a minimum.

I do not think we live a particularly lavish lifestyle and we are lucky that both our cars are paid off (not true for many 20-somethings). I don't know how a family can make it on the median income of $48k/year (I could do it by myself as a single person renting a cheapo apartment, but not with a wife and child).

Monthly Net Pay $6,000

Monthly Expenses
Mortgage, taxes, insurance $2,000
Student loans $300
Groceries & household supplies $500
Gas $350
Meals out $150
Electricity & water & gas $300
Cell phones $100
Basic Cable TV & Internet $85
Entertainment & Movies $50
Personal care $30
Subtotal: $3,865

Annual Expenses
Savings (20% of net pay) $14,400
House maintenance $2,000
Travel $2,000
Gifts and charitable donations $1,500
HOA dues $1,000
Clothing $1,000
Car maintenance $1,000
Car insurance $900
Education (parking, books, fees) $500
Healthcare $500
Subtotal: $24,800

Total monthly expenses: $5,932

 

[tuixiu]

So I wonder what the article subjects' budgets would look like, given that you're starting out with:

$10000 mortgage & HELOC & insurance

What do they need to have $13-15k coming in the door every month to swim in place?