I do not have any clients that have come to me early in their relationship (pre-marriage/common-law) seeking joint financial advice. I think that if more couples were able to be honest about this topic right from the beginning, serious problems could be avoided later. This is such a sensitive subject for most people and possibly embarrasing if they have very bad habits.

I would suggest that couples who are able to discuss financial habits and philosophies early in a relationship, probably either share similar attitudes or are willing to work together. I would also suggest that couples where one or both people are secretive about their money, spending and credit situations at the point in a relationship where they are getting more “serious” with each other, are in for a rude awakening when the truth eventually comes out (usually when they decide they want a loan or a mortgage and credit ratings come into play!).

It’s my hope that lots of teenagers are reading this blog because so many great topics about everyday money situations have been discussed. I particularly loved the discussion that put a dollar figure on the first year of a baby’s life! This would be very good birth control for teens who think having a baby would be “fun”.

I’m not sure how having a job for 2 years has anything to do with showing how well they plan (again, more context needed – has he been an engineer with other companies before this one? is he fresh out of university and this is his first “real” job? has he recently changed fields?) – again, this still remains a pretty useless post in terms of the calibre of content usually on this site, but I do appreciate the follow-up from the guest-poster!

Also living below you means should be a staple for MANY Americans right now. If I were the couple, I would without a doubt sell the car, and go for something cheaper, say at a government auction, or through Craigslist, the papers, etc. Cut all unnecessary expenses, the first being that shiny new Honda!

@ITS: The couple mentioned in the post live in Alberta but there are atleast a few houses that go for that price in the two big cities of Saskatchewan!

@Jen, @Bob: The house in question is in Alberta. Maybe, more facts may help – as I mentioned earlier, I don’t know every detail but I am aware that they put 5% down and borrowed a small amount of money from a mutual acquaintance to cover closing costs. The husband had held the job (in a big organization) he lost for over two years at that time. I believe that this shows their planning and savings scenario (it is not impossible that they put another 15% of their down payment into an emergency fund but unlikely I think). It is also entirely possible that they learned a lot after they bought the house and gave birth and tightened up within the next year (when he lost the job).

The post is not meant to show up the people in debt or show off my limited knowledge. It is a post inspired by a young couple’s story to provide some food for thought for people who are on the same track. I don’t know if the post came off as “attacking everyone with nice things” or arrogant (views will vary, of course). There are BMWs on the road and big houses in posh localities. Have I wondered if the owners are in debt? Sometimes! Do I lead my life begrudging every person who is rich (whether in debt or not)? No.

Incidentally, we chose to live in a decent but slightly less desirable neighbourhood in Toronto because we knew that keeping up with the Joneses would not be an issue and we could live our lives as we wished, surrounded by people who share our values of living within our means, spending on things that are meaningful and modeling good financial responsibility for our children. I think we enjoy a very high standard of living but it’s just not about the “stuff”. I don’t believe that “stuff” makes anyone a good citizen or neighbour. It’s the things we do that really make a difference both for ourselves and our communities. Interestingly, our neighbourhood is chock-a-block with artists, self-employed individuals, environmentalists and journalists. I’m encouraged to see that so many people who comment on MDJ share my views. Sorry if I sound “preachy”.

“Delaying gratification” is not a concept my generation (X/Y) seems to understand at all. People who pay off their debt, save, invest and plan will see a future with a great retirement and debt-free worry instead of still working at age 70 and owing $200k in mortgage and other debt.

An update: The husband has found a job as an engineer, albeit in a small company, and in a better situation than four months back.

@Joe: Well said! The freedom is what drives me! I know what I need and succeed in avoiding peer pressure most times!

@Scott: Great points!

@Lillee: I’ve been told that I think like an old man (wrt money and planning) by a few people and I have taken (and will take) them as compliments. I believe that I’m a better writer than speaker. Nonetheless, when I’ve seen friends in their early twenties follow the herd blindly and spiral into the abyss, I’ve (never given a lecture as such but) mentioned casually about the pitfalls of the path they are on; it didn’t work and they are continuing on their merry way. Maybe, a structured program would be better (schools, are you reading?)!

@ctreit: Swallowing pride is commendable indeed; not many would be up for it.

@die_broke: I’ve heard that example of “what if I die tomorrow?”. I don’t have statistics to back me up but only a small percentage of people die everyday and the percentage due to non-health reasons will be even smaller. I’ll gladly live a simple life and pursue my freedom unless someone is willing to give me the DATE. I’m not doing this to break convention but it is just what I Iike!

I’ll get to the rest of the comments later…..

These sort of smug “I’m more financially literate than my neighbour” type posts are a bit distasteful and, ultimately, don’t provide any new insights to the discussion. They really just repeat the same platitudes over and over. Especially when, as Jen points out, they are written without a full understanding of the situation. Why in the world would you say “Forget the emergency fund”? Whether they did or didn’t have one makes all the difference in the world.

I’ve always liked the style of this blog and the fact that neither the posts nor the comments tend to take a “Look at those fools — we know better approach” (a la Garth Turner’s obnoxious site). I hope it continues along that road.

Without any more context, there’s no logical leap between the case-study he outlines, and the “shame on everyone for having expensive things they may or may not be able to afford” follow-up.

Clark mentions the size of the mortgage (which is huge for Saskatchewan, and teensy for Vancouver, where I live), and the fact that there are car payments.

He admits he has no idea whether this couple has any other debt, or whether they have an emergency fund.

I’d say if I stopped working because we had a child, and my engineer husband found himself suddenly out of work, we’re in a similar situation, and we’d be just fine.

This couple could, like us, have no other debt (again, Clark has no idea) and an emergency fund that will cover expenses, including their mortgage for at least 6 months – longer if they’re bringing in extra money like the husband is with his interim job.

They could, like the author of another PF blog (Trent at The Simple Dollar) have the cash for their “shiny Honda toy” in an interest-bearing account, which is drawn upon monthly for the car payments financed at 0% or close to it, so their car isn’t costing them anything extra.

You’ve got half of the equation figured out, Clark, by knowing that you shouldn’t get yourself into debt by trying to have a house or car as fancy as your neighbour’s if you don’t have the same financial resources he or she does.

But the other part of financial, and life, maturity is learning to give people the benefit of doubt, and not assuming that everyone who has nice things is going into debt to do so.

While I agree all debt sucks (and therefore could be considered bad), you run into life situations that force you to make a choice. Those choices will give you good or bad debt.

Say you run your own business and you had saved up $30,000 to invest into your business … but the day before you pull the trigger, your car breaks down and needs a new engine. You realize the car is 15 years old, so you decide to get a car loan at 3% and buy a new car.

On the flip side you could’ve taken your $30,000 and bought the car, then got a $30,000 loan (putting your car up for collateral) at 3% and invested in your business.

Both scenarios appear to net out the same. You have a new car and a chunk of cash in your business. However, in one scenario the goverment is going to give you 1/3 of your interest paid back to you.

A completely different situation would be all the investors that took out huge loans once the stock market crashed and put it into all of these companies that had their stock sink for no reason other than fear. If you had’ve borrowed $50,000 last January and invested in the stocks that FT had picked in his contest, you would have had $60,000 in December. Your interest paid would be approx $1500 and you’d still get 1/3 of that interest back! That would’ve been a good debt too!

C8j

And definitely think people shouldn’t live so large if they don’t make enough.

You have reinforced the idea that being frugal and prudent never goes out of style.

Thanks Clark!