How did we get into this position?
It’s the question you think of as you lay in bed after you have the conversation with your significant other. That sickening feeling you get about the payments you cannot meet or the bills coming up that you cannot cover. You may have a rental property that suddenly needs a new oven, or your car breaks down unexpectedly. It always happens “when you least expect it” and when you can “least afford it”.
Growing up, both of us came from middle class families. We never went without. A lot of that came from hard working parents coupled with the soaring popularity of credit cards in the early 90’s. Even though we didn’t go without, one thing was missing – and is still missing from schools today… Education about finances!
If you were to put a label on us it would be the high school sweethearts. We have been together for a loooong time! It was inevitable that we would one day we would buy a house together. It was April 2012 and we decided it was time to buy a house, cos you know, renting is “dead money” anyway, right? Not always, but that’s a topic for a future post.
We didn’t put much thought into the purchase of our first home, or much savings for that matter. The realtor showed us through a few houses of our little town in outback Australia and we found our perfect little family home. Family? Oh, I forgot to mention we had a baby boy just over one year old by this time. Anyway, we went down to our local bank and talked to them about our options. The scary thing is, we had options! Even with minimal savings (I’m talking less than 5% here), the bank was still willing to talk with us about a home loan. We thought “How lucky are we?! They are doing us a solid by letting us buy a house. Way better than renting!”… Little did we know that (like most banks) they knew we were the perfect candidates to talk into getting into more debt than we could handle in a loan style that we didn’t fully understand.
We were offered a Line of Credit (LOC) type of home loan. “Oh, it will be great guys. Pay down the interest quicker and put all your money into the one account – doesn’t it sound fantastic?” I mean, who doesn’t like the sound of paying down their biggest debt in life so much quicker? It marked the beginning of the end for our finances and would be the starting point for what we struggled with for the next 10 years.
Don’t get me wrong, a Line of Credit loan works well for some, but it can be a horrible fit for others. The main struggle for us is that is does not separate your spending’s from your savings as it’s all in the one account. For the longest time we didn’t even realize how poorly we were managing our money.
Between buying a house, having a car loan and the use of personal loans here and there for different reasons, we thought these were all the things that adults just had. It’s ok if I am drowning in debt, because that’s just what adults do.
We were navigating being owners of a new home and becoming new parents and all the expenses that they both bring. Savings were always a “nice to have” and never a “need to have”. Like so many, as soon as we came into some money, we had already spent it in our mind. “Ohhhhh we get a bonus this month, well let’s plan a trip.”, or, “Ohhhh we got a raise this month, well let’s go shopping for some new furniture!”. It’s human nature and we were certainly caught up in the old trend of, “You earn more, you spend more.” This is also known as lifestyle inflation.
Fast forward a few years to 2017. This was a year that had the most amount of changes for us as a family. We started the year in a new country, which opened up the doors for new debt. We moved overseas with money in the bank (not from savings, but from our long service leave payout from our previous employer), however that didn’t last long… Before we knew it we were hemorrhaging money towards a new house, a new car, furniture and all the other things that come along with moving. What let us down, was not having a plan.
So, there we were - moving money spent, mortgage number two and vehicle payments to be made. Oh, and another thing I haven’t mentioned, we were also planning our wedding… From abroad… That we would have to travel back for… This was another expense that required us to – you guessed it – borrow more money. This time through a family member.
The catalyst for us to get our finances under control was when a family emergency caused us to travel back home in May of 2019 for a few weeks. Forty plus hours in and out of airports with not one, but two kids now. Canada to Australia for four people on last minute flights. You do the math for the cost.
It was a no-brainer; we were going no matter what. However, it was yet another thing we could not afford and another thing that we needed to borrow cash for. So, we borrowed again. From a different family member!
Something had to change. We couldn’t keep living like this. It was time for us to take control.
Blake & Allanah
FIRE with a Family