Lessons in Personal Finance, Psychology and Debt (with visualization).

in Project HOPE4 years ago (edited)

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The New House.

I wanted to post this visualization to show that bringing down spending after such momentum is possible, although painful to go through.

I can't speak for others, but my wife and I got caught up in a sort of 'spending feedback loop.' The more we spent, the easier it was to spend.

We bought a house in Dec 2016, but we didn’t stop there. We bought decorative pillows, new furniture, matching curtains, kitchen supplies, another TV, etc… all of which we already had, but we just wanted new stuff, so we bought new stuff. All of it was paid for with debt. And the more debt we had, the more debt we didn't mind having.

This was easy to do because the threshold for spending was already set high by purchasing a new house, and every item and upgrade could be justified by "adding value to our investment." Even though there was a growing amount of expenses that was unrelated to the function of the house.

The Problem.

We noticed the problem in Feb 2017, and the fights started a month later in March. There was a ton of blame. We accused each other of spending too much or making too little; and zero progress was made for 2 months as the debt racked up and investments were cashed in.

When the fights escalated to throwing dishes, plus yelling for hours (which gave the neighbors something to talk about, haha); things started to change a bit. Cleaning up a plate of eggs, potatoes, and ketchup that just exploded all over our kitchen in a fit of rage is a time-consuming ordeal, enough time, to talk.

The Spending Party was over.

We both recognized that the spending-party was over; a hard pill to swallow for both of us. And if we didn't do anything about it, there would be hell to pay, and by ‘hell’ I mean unsustainable debt. There was no wise old person to talk to about this. It was just us, because it wasn't a financial issue, it was an emotional one. We spent money because we liked spending money, it wasn't about the things we bought, which made it that much tougher.

This 'consumption hangover' created a persistent malaise in our relationship. We slowed down going out to eat, going on vacations, and buying random stuff on Amazon (yes, that was fun for us). Our fun-quota was coming up short, because spending money was our fun, and when we couldn't do that anymore, we didn't have fun together. Then we didn't even want to be in the same room together. We started to question whether we had anything in common at all. We even talked about divorce. It was awful!

More money and less stuff.

The one thing that we did have in common though, was the idea that our future looked much brighter with more money and less stuff. More fun at less expense. We played more video games together, went on more walks, did more of our home maintenance, learned how to cook and stayed off Amazon.

By Aug 2017 we started noticing improvements. By Jan 2018 the fiscal improvements were significant enough we splurged at Starbucks, 10 bucks; rather than dropping 80 bucks at Texas Roadhouse...progress. 😁 We then decided to do monthly brainstorm sessions about how we can save more.

Then the hammer came down in Jun 2018 when our HVAC system took a dump, and we had to shell out $8,300 to replace it. We made a lot of progress up to this point, so the abrupt increase in spending was a bit demoralizing, but we came too far to let this stop us.

  • In Dec 2018, we sold one car, and went to one car for two people, which saved us $74/month.
  • Jul 2019, we paid off our car, saving $425/month.
  • In Feb 2020, we cut $85/month in bills and started paying off the house debt.
  • In May, we cut an additional $16/month in bills.
  • In June, we cut our own hair and other random stuff that saved another $100/month.

Sitting down with our budget every month thinking of ways to save is actually fun for us now. Fun without spending, FINALLY!

In Conclusion.

In November 2016, right before we bought the house, our monthly expenses (6 month moving average) were $5,445.04. Today our monthly expenses are $3,621.11; a 33.5% decline.

The neighborhood we live in now (same city) is a lot better, the house is 50% larger and our happiness is priceless. All of this with 33.5% less cost. If you would have told me four years ago that this was even possible, I would have called you a damn liar! 😁

That said, this whole darn thing was emotionally taxing. I don't wish it on anyone. But there is a consolation to this, my wife and I have never been closer. We have the confidence to tackle problems faster and easier. We are more humble, and less cavalier. We have more in common. And most of all, our stress has dissipated, and our fun-quota has been filled.

Thanks for reading our story, and I hope it helps someone out there.

Stay frosty people.

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With a budget like that in Venezuela you would live like a king and I mean that literally, I understand the point but to have healthy finances it is necessary to have a budget organized by both.

That is a good point @trabajosdelsiglo.

I probably should have included more economic principles. For example, like debt, collaboration and efficiency of capital, to convey that whether we’re talking about a family unit or a national economy, compromising and putting money towards ‘value added’ projects can bring you more happiness at less cost.

Thank you for the comment. 😁

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