I now understand paycheck to paycheck

[creditcardfree]

Not to change this to college debt, but I do have to boast that so far our daughter, second semester freshman year, has zero student loans. Yes, scholarships helped, but we paid for the housing and a little tuition out of pocket. Our goal is to get as close as we can to debt free for college. We have a plan. I see the worse case scenario as needing to borrow for a full year (two semesters) of tuition and housing.

Yes, college is expensive, but there is a whole group of people who don't even see a possible way to pay for it and then don't even try to save anything! We'll just borrow it. Ugh. Something saved is going to help at least cover books, or spending money while in college.

[disneysteve]

Not to change this to college debt, but I do have to boast that so far our daughter, second semester freshman year, has zero student loans. Yes, scholarships helped

And our daughter is 2nd semester sophomore year with zero loans. And yes, scholarships helped. She/we will need to borrow starting 3rd year as the well will run dry but I'm figuring a maximum of about 40K assuming she finishes in 4 years. If I change jobs in the near future (see my blog) it may be less as we'll be able to pay more out of pocket.

[corn18]

I have the option this year to fully fund my DD college fund (she starts this fall) or fund it up to a certain amount and take out loans for the rest. I can afford to fully fund, but would rather put the delta ($30k) into my retirement. Then I should be able to cash flow the last two years of college.

[LivingAlmostLarge]

Maybe but people on here are very prudent financially. I am also sure that all of you paying for college CCF, DS, Tom could easily talk to or know friends who are paying outrageous amounts for college and encouraging their kids to take out loans who aren't looking at owing $$$$ after graduation. I would bet even people you would consider "sensible" are going into debt themselves or cosigning for their kids because they feel they owe it to them.

Or how about remortgaging/refinancing the house to pay for college? Or borrowing from 401k/IRA for college for their kids? to go to dream schools? I just ask because I know we say it's credit card debt, overspending, but I can hear people talk about college and cringe and know it's due to paying $50k/year for private elite school that isn't affordable.

[Jovanny]

So how do you manage paying 38% of the DTI?

[Nutria]

So how do you manage paying 38% of the DTI?

My mortgage isn't that high.

[FLA]

I wish I had done what you did, disneysteve, have them be hands on right in it. I taught it theoretically, partly because I did not want them running to my ex saying mom makes x or mom spent y or guess how much mom has saved for retirement, a totally valid concern with my ex. So they got savings accts, an allowance that involved paying themselves and charity first, and an explanation of why retirement savings should start with your first paycheck. Save the money by skipping Starbucks and put it towards a car, etc. I didn't feel like they particularly listened to me but over time, they both became very frugal and made responsible decisions with their money.

The amt of clothes DD can wrangle with $75 is quite impressive. DS took a year off after HS (my parental nightmare), instead of loafing, he does double shifts as a waiter at our most upscale retirement community. He told me he's participating in his 401k, totally saved next year's tuition since he decided to take a year off it's his responsibility (his words, not mine), and after having a clunker of a car, did research and found a good used Civic. He has matured into an entirely different person and so far, that person is fiscally responsible.

[GoodSteward]

I have never understood why banks use gross to figure that percentage as well. Gross?! You mean they think it is ok to include taxes, insurance, 401k payments as being "available" to use for debt repayment?! They need to look at what I'm currently netting, and then figure the DTI from that. That would make a BIG difference on what they approve.

As for us, when we bought we were approved for around 100k, but we opted for a 73k house instead. turned out to be a great move. We were given a second lot of land due to property line issues nobody knew about. When the land was given, we learned about a 14x20 stick built storage building (made to match the house built on blocks) being on our property by a neighbor who went into foreclosure. That bank gave us the building. We moved it to the other side of our concrete parking pad, finished the inside, and now it is our office and hobby room (paid for). I gained equity just by being there lol.

As for my kids future. I am taking my 9 and 10-year-old to the bank next week to open a savings that each will run a checkbook balance for. they can use my debit card to buy, and I'll transfer money out once or twice a month. My kids will know how to save, track spending, and budget before they leave my house.

[Nika]

It is really not your mortgage brokers responsibility to figure out what you can afford.

He/she won't know if you are planning kids in the future, what pre-school and camp you will choose for them, how much your tolls are, what your other priorities are.

You are the only one who can tell what is realistic for you, what you are willing to sacrifice and what is not getting cut.

I know a woman who eats 3 meals a day at work on weekdays, showers at work and has not bought a towel in 10 years. She could swing 50% DTI as she buys nothing. We could not.

Ratios are also different as you scale up. If you bring home 3K and your mortgage is 1.5 you are up a creek. If you bring home 15K and your mortgage is 7.5, you can eat on the remaining 7.5. There is a difference.

[Singuy]

I have been teaching my students that the banks is the single biggest scammer and will drag the majority of Americans into living paycheck to paycheck. See the trick is to figure out a number in which you can still "afford" and not default..but can't really afford to pay extra toward your principle..so that makes your interest payment to the banks a SURE THING!

Everyone wants to buy the best house they can afford..almost like wanting all the gizmos in a fully loaded car...except that a house is even MORE permanent(permanent psychologically...even though most Americans move every 7 years).

So when a mortgage broker tells you buying a 400k house is fine..you will most likely end up spending 415k because a house plays on your emotions. People start picturing how their kids will grow up in this and that room, how the dog will enjoy the back yard, and how beautiful their daughter will look coming down the spiraling staircase for prom.

[DaveInPgh]

We would have never been able to afford what the mortgage broker told us we could. Daycare alone would have sunk us.

[GoodSteward]

We would have never been able to afford what the mortgage broker told us we could. Daycare alone would have sunk us.

I used to cringe when I thought about our daycare for two kids being 630$ a month, which was more than our house payment at the time. But now, after hearing of day care for some places being 900-1000$ a month PER CHILD, I don't feel AS bad. Why would you live there?! Move!!

We opted for my wife to stay at home and raise our kids when the opportunity came up. Sure, we could progress faster to retirement and all that if she worked, but at what expense? You can most likely figure out how to pay something off, or save a little more if needed later in life to make up lost time, but you can't go back and make up for lost time with the family.

[Nika]

I used to cringe when I thought about our daycare for two kids being 630$ a month, which was more than our house payment at the time. But now, after hearing of day care for some places being 900-1000$ a month PER CHILD, I don't feel AS bad. Why would you live there?! Move!!

We opted for my wife to stay at home and raise our kids when the opportunity came up. Sure, we could progress faster to retirement and all that if she worked, but at what expense? You can most likely figure out how to pay something off, or save a little more if needed later in life to make up lost time, but you can't go back and make up for lost time with the family.

Daycare here is 2K+ per month for one child. Why would we live here? Why do you live where you do, instead of moving somewhere where daycare and housing is way cheaper, like, say, Viet Nam? Similar reasons.

[LivingAlmostLarge]

What Nika said about doing your own budget. I too can see how same incomes can vary what you can afford. $50k 1 income is very different from 2 incomes making $50k combined.

Anyway Goodstewart, perhaps people should move to a lower cost of living place, but then would it still be lower cost of living? Second, should we tell everyone living in a lower cost of living place to move to higher cost of living place if they making poverty level wages because the cost of living is so low? I say that because I think klrose has posted (i read her blog) making $35k combined annually and but they live somewhere cheap. The answer isn't to tell her to move, but to realize no matter where you live its how you live.

Nobody told friends of ours in a HCOLA to live there, but they like it. Probably with what they are making they shouldn't but they do. And my relatives in a LCOLA living super simply as substitute teachers but it's so cheap to live there they also make do. Both are difficult situations. Sweet spot is make lots of money and have choices.

[Nutria]

Anyway Goodstewart, perhaps people should move to a lower cost of living place, but then would it still be lower cost of living?

Ask the Oregonians who's rural towns are being overrun by rich Californians.

Second, should we tell everyone living in a lower cost of living place to move to higher cost of living place if they making poverty level wages because the cost of living is so low?

Even reading your explanation is puzzling.