MP Dunleavey

Uncommon Sense

Facing hard financial choices

Even your own well-oiled financial machine can start to break down. Here are the warning signs that caused me to pull over and make a sobering change.

By MP Dunleavey

There comes a time in life -- even in the life of a personal-finance writer -- when you are forced to deal with the fact that your finances aren't the well-oiled engine you thought they were.

There are loud clanking sounds, the motor keeps stalling and even though you just put more greenish stuff in the radiator, the gauge still says the car is overheating.

This also happened to our Subaru, but that's another story.

At a certain point this summer, my husband and I realized that there was an underlying malfunction in our financial lives, despite what we thought were our best efforts.

We had been trying to scrimp our way to financial sanity, and it wasn't working. Finally, we admitted to ourselves that putting our little family on a sustainable path meant making an extremely difficult choice.

Symptoms of a financial breakdown

I'm amazed at how long my husband and I put up with various red flags that our finances needed attention. Here are three big ones that just kept smacking us in the face, screaming "Wake up!":

You're doing everything right, yet things keep going wrong.

My husband paid off all his debt this year -- over $6,600. This freed up approximately $500 a month in credit card payments.

I finally set up a savings account for our long-term and emergency savings and set aside $260 per month (in addition to $300 in short-term savings and $200 per month toward retirement).

I calculated our monthly expenses again, and we were living closer to the 60% Solution -- at about 72%, which isn't bad.

Yet despite all this virtuous behavior (and extra cash), there always seemed to be more bills than money.

Embarrassing things happen and you don't know why.

Several times this year we got hit with overdraft fees because, apparently, the financial fog would roll in, and we saw more money in our checking account than was actually there!

Hello?!? We can't do math? Plan ahead? Communicate in grunts and sign language in order to convey who spent how much on what? And by the way, honey, No Use Please ATM Card, Yes, Thank You.

You keep vowing: Next month we'll get ahead!

If you do get on top of your finances the following month, then yes, the problem was temporary. Bully for you.

But if this is the refrain you keep whistling in the dark -- month after month -- get a clue.

It's the opposite of "If it ain't broke, don't fix it." Meaning: If something ain't fixed, THAT MEANS IT'S BROKE.

Hitting bottom

My cigar-chomping editor wanted to know if our financial retrenchment was prompted by the fact that we were now expectant parents. (Cigar-chomping editor's note: MP has since delivered a healthy baby boy, born Sept. 25.)

Not really. Although it's true that having a baby demands financial adjustments, our frustration grew out of our own inability to keep our money on an even keel.

That said: Knowing that this fall we'd have another mouth to feed and $225 extra dollars to shell out for insurance each month -- never mind diapers -- did light a fire under our duffs.

So here's what happened:

  1. I woke up one morning and I got fed up. Up to here, as they say. It wasn't anything specific. I just said/stormed to my husband: I CAN'T TAKE THIS ANYMORE.

  1. For some reason, one spouse always gets there first. So if it's not you, don't assume your mate is a big, cranky pain. She might be saving your financial life.

  1. I pointed out to my husband that we make a perfectly good income -- about $7,000 to $8,000 gross per month (it varies because we are both freelance). AND THE FACT THAT WE WERE STILL STRUGGLING WAS INSANE.

Arrival at an uncomfortable solution

I recalculated our monthly expenses yet again -- always a grounding, eye-opening exercise -- and realized that there were a few expenses that were higher than I'd thought. And there were several small-but-simple steps we could take to spend less.

But I was sick of small-but-simple steps. They weren't powerful enough to address the real, true underlying problem, which was:

We were trying to do too much, given the money we earn.

Our monthly expenses came to more like 84% of our gross, with about 6% going toward my remaining credit card debt and 10% going toward various savings buckets.

This is living proof, by the way, of the wisdom behind the 60% Solution. If you can keep your committed expenses down to 60% -- or 70% including fun money, or even 75% like Anna -- you don't end up sucking wind every month.

When your committed expenses creep up to the point that your short-term savings can't cover all the random expenses that seem to strike every month, you'll always have that can't-catch-up feeling about your money -- like those horrible dreams where you're trying to run, but never get anywhere.

Relinquishing the bright lights

So after four years of having both a cheap apartment in New York City and a cheap house upstate -- and rationalizing that we could afford both because two cheap things can't be expensive, right? -- we decided to give up the apartment and move upstate for a while.

This move would reduce our monthly income somewhat because my husband would have to change jobs -- we're anticipating a loss of about $1,000 to $1,500 -- but it would also cut our committed expenses from about $5,500 to $3,800, including upcoming baby costs.

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Alas, we are not happy with this solution. It's chock full of financial sanity. It will make our money lives easier. We're just not keen to relinquish the bright lights of the big city for the quiet starlight of upstate New York.

In fact, even as I type, I am looking around, hoping a more comfortable answer sails through the window, on a fluffy white cloud of hope.

(Pause while writer looks out window one last time.)

Actually, on the very day that I was writing this article, someone asked me if I was available for a long-term writing project. At first, the idea of making more money was instantly appealing.

It would mean that we could stay in the city.

But I work pretty hard already. And while we all like to believe that the perfect answer to all of life's problems is to Make More Money, that isn't always the case.

Sometimes the answer is to learn to live better on the money you have.

I'll always have the option of working my fingers to the bone. But a very good reason not to take on more work, even if it means more income, is about to enter our lives.

And perhaps, right now, that's more valuable.

Published Oct. 4, 2006

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