Friday, November 19, 2010

Still Waiting for the Disposable Income

Earlier this week, we paid off a loan. It was the smallest of our many loans for house improvements, but according to schedule we would have paid it off in August 2011. Paying off a loan almost a year early should feel really good, right? You would think so, but that doesn't seem to be the case.

I'm starting to get frustrated at our lack of disposable income, which is a bad thing because the situation isn't going to change any time soon, for 2 reasons. Number one, I will keep working part-time until Eleanor is in school—or until any other kids we have are in school. So my income is not going to increase in the new few years, and we will continue to have childcare costs.

The second reason is that we owe a lot of money. Between education loans, mortgage, and all of the money we borrowed to fix up the house in the past 4 years, I feel like our debt-to-income ratio is quite unfavorable. The amount of money we put towards debt, every month, is quite substantial.

On the other hand, I know that part of the reason our disposable income is nonexistent is because of our personalities. Keith and I are both savers. We are saving a good chunk of money for retirement, a piddly chunk of money for Eleanor's college, and we are also putting extra money towards our loans, in order to get rid of them more quickly. These are all good things, but they still make me feel poor when I can't afford a coffee at Starbucks more than once a month.

Finally, I know a big part of why I'm so worried about our finances is because we are naturally at the lowest income level for our adult lives (see reasons mentioned above, mainly: young children). This predictable state of tight budgeting just happens to hit at a time when economy's around the world are, like us, somewhat strapped for cash. And I think this is the part that really freaks me out. Right now, we don't have a lot of cushion. If something terrible were to happen, we don't have much to fall back on. And something terrible, in terms of job loss, is happening to people all over the country—and they are finding it nearly impossible to find a new job. What then?!?

So here I am. We're continuing with our debt snowball repayment plan. Or I guess a modified plan, because we're not sticking with the smallest loan first strategy. We chose the order of payment based more so on interest rates (getting rid of the highest ones first) and threw in a few smaller loans along the way at certain times, just for the sense of satisfaction. The important part is that we are committed to continuing our same debt payment amount per month, whether it's going to 5 loans or one remaining loan, until everything* is paid off.

I feel good about that choice. I yearn for the days when we're not so encumbered by debt, and our choices won't be so heavily influenced by the ultimate question, "Can we afford it?" And to have everything paid off by 2013—no more car loans, education loans, or home equity loan by the time Eleanor is 5—would be pretty amazing.

Except that, today, that still feels too far off. Debt accumulates in the blink of an eye, and takes sooooo long to pay off! It feels like we're making sacrifices on a daily basis, but the debt glacier doesn't ever move. Even paying off the one loan isn't enough to convince me that this is actually feasible. That it will all be worth it, and one day we will be (nearly) debt free. I guess I'm really afraid that we'll spend all of this time watching our budget, having no disposable income, and then something else will come up and the situation will never change. I know, I know .... if we've already paid old loans off by the time something new comes up, we technically will be better off. But I can assure you, it won't feel that way.

Am I making any sense, or just sounding whiny? A part of me realizes that we're doing fine, and we are lucky that we're both employed and able to pay our debts and living expenses at all. But the majority of me seems to believe that everyone else has more money than us, lives better, and drinks Starbucks all the time.

*Except our primary home mortgage loan. Because that doesn't count, right?

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