Any luxuries/ wants while in debt?

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The Dark Knight
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Any luxuries/ wants while in debt?

Post by The Dark Knight » Wed Jul 11, 2012 1:08 pm

I am paying off about 60k worth of student loans right now. There are many people out there (including some on this board) with similar or higher levels of debt that puts their net worth in negative territory.

For those of you in similar straits, how do you reconcile your debts with purchasing the occasional luxury/ want? Just don't do it? Use only "unexpected" money like bonuses, gifts, etc?

Or have you resigned yourself to living as frugal as possible until the loans are paid off?

Khanmots
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Re: Any luxuries/ wants while in debt?

Post by Khanmots » Wed Jul 11, 2012 1:17 pm

Like dieting a budget only works as well as you follow it.

Will allowing yourself the occasional indulgence make you more likely to stick with it? Or will it entice you to up the frequency and/or expense of those indulgences until they're not so occasional? It's all about knowing yourself.

Personally I can find enjoyment in watching debt go down or savings go up; might be part of why I'm naturally frugal.

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SSSS
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Re: Any luxuries/ wants while in debt?

Post by SSSS » Wed Jul 11, 2012 1:18 pm

The Dark Knight wrote:Use only "unexpected" money like bonuses, gifts, etc?
That one doesn't make sense to me. Money is fungible; once you have it it no longer matters where it came from.

I don't think there's a simple answer to your question. Try to limit discretionary spending as much as possible, but if you get to a point where you feel you'll jump off a bridge if you don't go see a movie, go see the movie.

NMK1
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Re: Any luxuries/ wants while in debt?

Post by NMK1 » Wed Jul 11, 2012 1:48 pm

Personally, I had over $30k in student loans last year that I have been paying off like a mad man and said I would not buy anything I didn't need until they are paid off. They will be paid off in October at the latest and I couldn't be happier. I looked at how much interest I would pay over the life of the loan and got sick. With the money I save on interest I may treat myself to something nice (Looking at an iPad) when I pay them off.

What kind of luxury are you talking about? $100 OR $1000? If it's $1000 that goes a long way towards a loan.

bungalow10
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Re: Any luxuries/ wants while in debt?

Post by bungalow10 » Wed Jul 11, 2012 1:59 pm

We paid off $110k of mostly real estate debt in 24 months (housing bubble, values have since recovered completely which made it all the more rewarding). Our net worth was never negative, but when my husband lost his job we realized our level of payments put us very close to the edge with just the one income.

We set mid-term goals and allowed ourselves splurges in the middle. We did have an aggressive schedule, which was re-written a couple times (mostly to be more aggressive, as our confidence and income grew). We made some splurges along the way, one was $3000 piece of camping equipment about 2/3 through, but we thought hard about it and considered it was a frugal alternative to other types of vacations, one we would use for at least 6-7 years. This was also a few months after my husband was reemployed, so we were feeling a little relief.

I would do it again in a heartbeat. It was difficult though, especially since we have two kids, but they also provided a lot of motivation.
An elephant for a dime is only a good deal if you need an elephant and have a dime.

scone
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Re: Any luxuries/ wants while in debt?

Post by scone » Wed Jul 11, 2012 4:56 pm

I do have little comforts-- good food, good coffee, decent wine. My car has a decent stereo system and air conditioning. Things like that. I think feeling "comfortable" rather than "luxurious" probably helped me stay the course. However, now that our debts are all paid, and we are getting older, I find I don't "want" as much as I used to. I could deal with far less stuff, especially if I didn't have to clean it. :happy
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jmg229
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Re: Any luxuries/ wants while in debt?

Post by jmg229 » Wed Jul 11, 2012 6:58 pm

For me, I think it is all about having a budget you can stick to. When me and my wife got engaged, I brought along almost $35,000 in student loans, causing us to have a pretty negative net worth. When we set out initial budget together, we talked about how quickly we wanted those loans paid off and budgeted for that. We decided we could handle them for 5 years for a variety of reasons related to where we saw ourselves in 3, 5, 10, etc. years. We then set the rest of our budget accordingly. We could have probably paid them off in 3 if we cut out all travel and ate ramen and water all day, but we enjoy traveling and good beer and good food, so we made those priorities in the budget as well. 2 years later we have just gotten back from an amazing international trip, we eat good healthy meals (almost) every night and we have a positive net worth and a very positive outlook on our finances, all while being graduate students/teachers (i.e. not anywhere near high income).

I think you need to just decide how long you are okay living with the loans and set the rest of your budget accordingly. If you don't like what you are left with, you need to consider the trade offs. Ultimately, it's your money either way.

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market timer
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Re: Any luxuries/ wants while in debt?

Post by market timer » Wed Jul 11, 2012 7:03 pm

I focus more on what is my interest rate than the level of my debt / net worth. Interest rate doesn't just mean highest interest rate on loans, but also things like whether I'm maxing out my retirement accounts. If I couldn't max out my 401K on my budget, I'd cut out some luxuries.

azanon
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Re: Any luxuries/ wants while in debt?

Post by azanon » Wed Jul 11, 2012 8:30 pm

The Dark Knight wrote:I am paying off about 60k worth of student loans right now. There are many people out there (including some on this board) with similar or higher levels of debt that puts their net worth in negative territory.

For those of you in similar straits, how do you reconcile your debts with purchasing the occasional luxury/ want? Just don't do it? Use only "unexpected" money like bonuses, gifts, etc?

Or have you resigned yourself to living as frugal as possible until the loans are paid off?
You're being way too strict. Plenty of people have debt, a home mortgage being highly common. I owe quite a bit on my house, but I have retirement savings, and I save consistently. Waiting until your debt free before you throw yourself trinkets is like a crash diet.

If the student loan is federal, low interest rate, (and naturally tax deductible) I wouldn't get in too big a hurry. The 15 year payment plan is just fine, AFAIK. Just make sure you contribute to your retirement vehicles, maxing them if possible.

stan1
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Re: Any luxuries/ wants while in debt?

Post by stan1 » Wed Jul 11, 2012 9:00 pm

It's all about balance and priorities. You don't need to live the life of a monk to be a Boglehead, or feel guilty if you spend money on yourself.

Physical fitness, eating healthy, good health, relationships with family and friends, and happiness are not luxuries.
If its a luxury car -- consider delayed gratification -- "i don'r need it now, and I'll enjoy it more later anyways."

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JupiterJones
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Re: Any luxuries/ wants while in debt?

Post by JupiterJones » Wed Jul 11, 2012 10:45 pm

I'd look at it this way: Let's imagine that student loans didn't exist. In order for you to get the education you wanted, you would have to wait and save up the money first. The less you saved, the longer it would take before you had enough to go, and therefore the longer until you graduated.

What would you spend your money on then? Would you, while saving desperately in order to attend college, still go out to the occasional movie? Restaurant dinner? Would you buy a fancy car? A new suit?

Because that's basically what's going on. The availability of student loans has flip-flopped the order. You're going to college first and "saving up the money" afterwards. And you're paying the price in interest for the ability to flip-flop it that way.

But the things you would "let yourself" spend money on in the first scenario are, IMO, roughly the same things you should let yourself spend money on now.

JJ
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Anon1234
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Re: Any luxuries/ wants while in debt?

Post by Anon1234 » Wed Jul 11, 2012 11:12 pm

We have big student loan debt too. But the government says student loan payments can be scaled down if you don't have income (get laid off). So thank you, fellow tax paying citizens, for subsidizing my car and vacation.

Mudpuppy
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Re: Any luxuries/ wants while in debt?

Post by Mudpuppy » Thu Jul 12, 2012 12:56 am

I have never been a fan of extremes. While I know there are personality types who are drawn to extremes, it is not my thing. I prefer the balanced approach. Since my student loan interest rate is 2.375% and my mortgage rate is 3.625%, I do not feel a pressing need to sacrifice everything (e.g. live like a starving student) to pay them off "now, now, now", even though I know some on this board advocate that approach. But neither do I go out and splurge on wants on a daily basis. I just try to follow a moderate, balanced path that allows for the occasional indulgence while still remaining on track to pay off the debt.

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CaliJim
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Re: Any luxuries/ wants while in debt?

Post by CaliJim » Thu Jul 12, 2012 1:02 am

In retirement I find I want less stuff and more good experiences. If you do splurge - splurge on things that build good memories.
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Toons
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Re: Any luxuries/ wants while in debt?

Post by Toons » Thu Jul 12, 2012 7:57 am

CaliJim wrote:In retirement I find I want less stuff and more good experiences. If you do splurge - splurge on things that build good memories.
+1 :happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

mlipps
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Re: Any luxuries/ wants while in debt?

Post by mlipps » Thu Jul 12, 2012 8:11 am

The Dark Knight wrote:I am paying off about 60k worth of student loans right now. There are many people out there (including some on this board) with similar or higher levels of debt that puts their net worth in negative territory.

For those of you in similar straits, how do you reconcile your debts with purchasing the occasional luxury/ want? Just don't do it? Use only "unexpected" money like bonuses, gifts, etc?

Or have you resigned yourself to living as frugal as possible until the loans are paid off?
Personally, I have about $30k in debt. We could probably pay this off in 1-2 years if we lived super frugally. We are stretching to about 3.5 to budget for:

$200/month in "Entertainment" such as dinners out, movies, etc.
$150/month in "Shopping" which includes necessary clothing/furniture purchases as well as wants
and $100/month for our Corgi :) (Includes our apartment's monthly pet fee)

I think it's worth it; the things we're doing are not extravagant but give us what I see as a sort of "minimum level" of happiness/enjoyment out of life.

We're also planning a wedding for next fall on a budget, and have decided to try to pay for the honeymoon completely w/"Fat Wallet" style income: Checking/Credit Card sign up bonuses, Frequent Flyer Miles, and Credit Card reward points, as well as a small amount of money I make monthly for filling out random surveys online etc.

I think, as others have said, it's a personal choice, but since you were asking what we do personally...there you go!

af895
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Re: Any luxuries/ wants while in debt?

Post by af895 » Thu Jul 12, 2012 3:32 pm

The Dark Knight wrote:I am paying off about 60k worth of student loans right now. There are many people out there (including some on this board) with similar or higher levels of debt that puts their net worth in negative territory.

For those of you in similar straits, how do you reconcile your debts with purchasing the occasional luxury/ want? Just don't do it? Use only "unexpected" money like bonuses, gifts, etc?

Or have you resigned yourself to living as frugal as possible until the loans are paid off?
Interesting topic. Your questions are equally applicable to those with no debt "on paper" but concentrating on retirement saving: there's a feeling of having a debt to our future selves.

I'm pretty frugal but my luxury item is, generally, food. Food affects everything - how you feel physically, your ability to perform mentally, and even your emotional state.

I used to dine out once a week ($35+ dinner, not a $5 sandwich) but have cut that to about once a month.

When I get the urge to dine out, I'll hit the grocery store for a large, gourmet frozen pizza at $7.

Running the numbers:
$7 frozen pizza / 2 = $3.5 per meal vs. $35 dinner out.

I could buy TEN of the deluxe frozen pizzas for the cost of ONE dinner out. (if you don't like pizza, insert "steak" or "salmon"... it's still way cheaper to buy it and cook it than dine out)

TL;DR: I haven't given up my preferred luxury item but I've changed the terms on which I enjoy it.

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