A Story About Paying Off Debt and the Obstacles Along the Way


When Is Renting The Better Choice?

I counted it up today and realized that in the span of our 20-year relationship, Fortysomething and I have moved no fewer than 10 times. It's as if we can't get enough of the stress. Every single time we decide to do it, we tell each other it'll be no big deal. Every single time, I drop a couch on my foot, lose the hardware to a bedframe or table, and yell at Fortysomething in a parking lot, usually all within the first hour. Every single time, it ends with me swearing that we're never moving again. 

What did we do last week? 

We moved. Again. Big #10.

View from the new front porch
Moving happened not because we really wanted to, but because we were desperate to get out of our previous apartment. Our original plan had been to stay there until we were ready to buy a house and make that one last big move. Sure, the place was dim and ugly with circa-1985 kitchen cabinets that clung to the wall with a few rusty screws. Yeah, pot smoke would waft in through the vents from the adjacent apartment and turn our bathroom into a veritable hotbox every weekend. But it was affordable and ideally located, and we wanted to make it work. 

Then, last fall, new neighbors moved in below us and made our dilapidated but cozy abode almost unlivable. Our evening hours turned into a predictable cacophony of music, yelling, and door-slamming. To get some shuteye, I'd have to take a sleeping pill and blast white noise through my headphones. We had some hope when our apartment manager listened sympathetically to our complaints and directed us to call the cops so that he could start the eviction process. We did, but the only result was that the noise got worse and the people downstairs became more belligerent. We decided we needed to break our lease and go.

We started looking around and quickly received a reality check. At the moment, the local house-buying landscape is sparse, cutthroat, and expensive (the average price of a single-family home exceeds $400K!) and getting more so with every passing month. Every halfway decent listing on Zillow receives multiple offers, often sight unseen. It's common for listings to be posted and taken down within the span of a few hours.  We know from friends who have taken the buying plunge that even the "average-priced" homes are far from being turnkey. Many of them need substantial work in the form of new siding, new roof, new air conditioning system, and/or mold removal. In other markets, those issues would bring down the cost. Not here. 

The idea of taking on more debt to the tune of hundreds of thousands of dollars, competing with multiple other bidders on what would likely be multiple offers, and then, upon finally having the winning bid, shelling out even more cash for repairs and updates on a potential money pit sounded less and less appealing the more we considered it.

Combine that with the fact that a) we still have consumer debt and b) our down payment would be meager, and all signs seemed to point to Now Is Not The Time To Buy.

While we were debating home purchase pros and cons, we happened to take a tour of a rental duplex down the street. It became available just as we were tearing our hair out over the neighbor situation. The rent seemed borderline astronomical, but it had almost everything we wanted, including a big kitchen with lots of cabinet and counter space, an abundance of natural light (an absolute must for me), lovely views, and a centralized location. 

And here we are! It's a warm, bright space, and it already feels like home (even though we still have boxes and boxes to unpack).

Renting again wasn't in our plans, but we do acknowledge the benefits. If something breaks, on-site maintenance will be here within hours to repair it. We don't have to fix the roof, clean the gutters, or paint the siding. We can spend our weekends on our hobbies instead of our house projects. And this place is more turnkey than any home we could ever hope to buy here.

That said, in the interest of full disclosure, I'd be lying if I said I'm not a tiny bit disappointed that we're not purchasing. I grew up at a time when it seemed as though buying a home was the thing every adult naturally did as soon as they had a steady paycheck. There's a part of me that is still vehemently attached to that ideal and expectation, even though I know it's unrealistic for many Gen Xers, Millenials, and beyond. 

Will we ever purchase our own place? Honestly, I hope so. I really do. We love it here, and we're compelled to put down roots. But the steep up-front costs and almost certain inflation are always going to be enormous challenges for us. Only time will tell, but for now, renting is clearly the right choice for us.

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Here's What Our Financial Recalibration Looks Like

One thing we've realized over the past 10 months is that budgets and debt repayment plans require periodic recalibration. Emergencies happen. Cars break down. Jobs come and go. Living situations change. Financial situations fluctuate, meaning that the achievement of our long-term goals depends in part on our ability to adapt and be flexible.

When we started this process in April of 2017, we were working with the following constraints:
  • One of us had a somewhat unpredictable contract job
  • One of us had a regular but low-paying job
  • We were repaying three credit cards, two student loans, and a car loan
At that time, we were able to allocate a total of $1600/month to our debts and had calculated a Debt Freedom Date of March of 2022.

By last September, our situation had changed:
So we decided to ramp up our debt allocation to $2200/month, giving us a modified Debt Freedom Date of November 2020.

Now our plan and budget are changing again, and for several reasons:

  • We paid off Credit Card #2, which leaves us with one more credit card and two student loans
  • We broke our lease (via our tax refund) so that we can move from our raucous, sleep-inhibiting apartment building into a quieter but more expensive duplex 
  • My new job pays more...
  • ...but my health insurance is more expensive...
  • ...and we're putting slightly more money into both retirement and an HSA

So what does all of this mean in terms of actual numbers? 

Here's our totally transparent breakdown of the old budget versus the new one:

In sum: rent and health insurance are going up. We'll be contributing slightly more to long-term savings. Our debt repayment allocation is going down. 

Sidenote: We are well aware that the rental is expensive, though for our ridiculously-priced city and given its ideal location (right by a trail and within walking distance of school and work), it's considered reasonable. I'll write another post in a few days that explains our decision to keep renting instead of taking the leap into buying.

Here's what all of this means for the big-picture debt repayment plan:

This new plan is only a couple of months off from the old one in terms of the projected payoff date.

Of course I'm hoping that we'll be able to pay it all off sooner than that, and I think we will, especially if we receive work bonuses. But regardless, this new plan seems reasonable to me because it reflects goals and values that have become increasingly important to us over the past year:
  • Even though it's expensive, we love our community, and we're willing to pay the price to live here.
  • Our home is our haven. We value a quiet place where we can truly relax.
  • We want to become more dedicated to saving for the future.
  • We're determined to pay off this debt.
No doubt all of this will change again at some point. It's probably inevitable - because life - and that's okay. We can be flexible. We can adjust. Our pace of debt reduction might fluctuate, but we're moving forward nonetheless.

What about you? Have you recalibrated your finances lately, and if so, what prompted you to do so?
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The Biggest Monster Debt Payment Yet

Yesterday was a big day in $76K Land, and here's why:

The above graph is a Personal Capital-generated visual of our credit card debt (y axis) versus time (x axis). Actually, it's incomplete: it shows our consumer debt load since November 2017. In reality, we started paying off the credit cards last April, back when the total balance was more like $23K.

Here's a more complete (though no less awkward) graph. This one starts in June 2017:

The arrows indicate where we just made a monster debt payment of $3000 (thanks to a big side hustle for which I finally received my check, and yes, we put every single dime of it towards debt), bringing our balance from $14,700 to $11,700! We've made some big payments before - when we paid off our car, for instance, and when we ditched Credit Card #1 - but this is the largest one to date.

Here's where our credit card balances stand now:

CC #2: $1,524
CC #3: $10,218

We should be able to pay off CC #2 within the next few weeks via our normal repayment schedule. As for CC#3, we're waiting on a tax refund that should dispatch a major chunk of it. The goal is to bring our total credit card balance to zero by the end of April. 

Sidenote: I feel compelled to point out that the first phase (i.e., nearly a year) of debt repayment was painfully slow and uneventful. The balance has decreased so incrementally that it's sometimes been hard to celebrate the small victories. Only after we assessed and stabilized our financial situation, established a workable budget, took advantage of some side hustle income, and built up some snowball-y momentum did we start seeing some real progress. It feels amazing.

With our student loans, we still have a long way to go... but the journey seems doable now.
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Anatomy of Our Current Housing Dilemma

If you're following us on Twitter, you know that we're currently dealing with loud, inconsiderate neighbors in the apartment below ours. They blare music at night, hold thunderous conversations, interrupt our sleep, and basically make our home feel like a place we want to avoid. Our lease ends in June, so we're looking at another five months of living on edge.

If you've ever gone through something similar, please accept my sympathies. Having your space besieged by noise, especially when you're thisclose to drifting into dreamland, is both physically and emotionally exhausting. 

I have little control over what my neighbors decide to do: we've talked to them, we've contacted management repeatedly, and we've filed a complaint with the police, so we've kind of exhausted our options. Thus, I'm trying to focus instead on what we can do and what our options are.

The first thing we're trying to figure out is whether we want to stick out our lease or break it early. 

If we stay, I will probably continue to have nightly heart palpitations as the music starts blasting through my floor just as I've closed my eyes (or - probably a better choice - I will force myself to take up yoga and meditation). Money-wise, though, it's a strong option, and lately I've been surprised at just how motivated I am by our financial goals. So sticking it out is certainly not out of the question.

If we break it early, we'll have to pay rent until the landlord finds a new tenant. We're fairly certain he'd be able to do so within a few months at most. Our apartment is in an excellent location, has some gorgeous views of the surrounding hills, and is reasonably priced (all huge reasons we decided to lease this abode in the first place, and all reasons we were hoping to stick around for several years). But we'd be on the hook for up to $7000 in rental payments, and that's... a lot of money.

Regardless, we know we'll be out of here by June, so the question at that point is whether we should rent elsewhere or purchase a house.

The argument for purchasing is that we're committed to living in this town: we're not going anywhere. It's likely that a mortgage would be equivalent to (or possibly even less than) what we'd be paying in rent. The problem is that the housing market here is limited, expensive, and exceedingly competitive. The average price of a single family home is around $400K, and many folks offer to pay in cash to sweeten their bids (that is so far outside the realm of my own experience and abilities that I can't really wrap my mind around it). Our credit scores are excellent, our income is solid, and we're eligible for a VA loan, but we don't have a lot of money for a down payment. If we do decide to buy, we're likely looking at months of searching, multiple offers, and multiple rejections.

The whole thing sounds like a complete circus, and not in a good way. Part of me is so annoyed with the current housing market that I don't want to deal with it at all.

If we opt to rent again, we'll definitely be looking at townhouses or single-family homes. No more shared walls on all sides for us. Rent for such properties is expensive, and for what we need, it's likely to exceed a mortgage payment. There's no doubt that rent would increase on a yearly basis. On the other hand, we won't have to deal with maintaining or fixing up a new home, and we can find something that comes with all necessary appliances. 

Sometimes I wish we weren't so invested in such an expensive community, but here we are. We love our town. These are the choices.

If you have advice for us, I'd love to hear from you. Have you ever been in a similar situation? What was your course of action?
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