History never looks like history when you are living through it.
~ John W. Gardner
When I began writing this blog just a bit over a month ago, it was my intention to keep my personal life out of it. But the more I write and read, the harder it is to separate my money story from my life story. Many of my thoughts on personal finance and balance in life are a direct result of my life experiences, so I thought it might be useful to sketch out a summary so that readers will know where I'm coming from and perhaps learn from my mistakes.
I assumed that no one would be remotely interested in my comparatively boring life. I don't do any of the really neat, adventurous stuff that I read about elsewhere like traveling the world or running a really interesting business, etc.. I'm just a mom and wife who goes to the grocery store every week, worries about her kids and happens to have a rather over-developed interest in economics, financial management, and investing. All of this comes from someone who used to look at the business majors in university with pity and disdain for their ignorant materialism. Boy was I wrong – about the business majors and so many other things. I will elaborate on these themes in future posts, but for now, here's the story of where I've been.
The First Decade
Chapter 1: The Best Laid Plans
When I was 18, I applied for my first credit card, and I was surprisingly pretty responsible with it. My plan was to get married when I was about 30 or so, if at all. If I decided to have children, they would be in daycare while I pursued my teaching career. I couldn't understand why any woman would be expected to give up her life's ambition to raise kids while her partner was out in the world pursuing his. The best laid plans . . .
Mr. Cents and I were married in August of 1992. He was 21 and I was 22. I had just finished my education degree (following a Bachelor of Arts in English) and he had finished a Bachelor of Arts in English. (He was previously a business major and I'm afraid I may have inadvertently steered him off course as he became really interested in what I was studying for my English degree.)
We moved about 3 hours away from our home town in hopes that I could find a teaching position there. We rented a tiny basement apartment, and – here's the kicker- neither one of us had a job yet. I can't imagine what we were thinking, but we did OK. Mr. Cents got a job with a retailer and I eventually got a full time job as a supply teacher. I was making more money at the time. I only mention that because it hasn't been that way since.
After about a year of teaching, I decided it wasn't for me and quit to pursue a degree in psychology. Up until that point, neither of us had any student loans, but I had to take one out in order to pursue my studies. By that time, Mr. Cents was making more money. But shortly thereafter, he lost his job. I can't remember being all that stressed out about that, although I think I would have serious coronary issues if it happened today. The oblivion of youth can be wonderful!
Mr. Cents wasn't unemployed for long, and he soon got a position with a fast-growing retailer. He was good at what he did and was quickly promoted. At this time, Mr. Cents was mostly in charge of our finances. I really didn't think that was my department. He was the one with the business background, right? During this period, we did accumulate some credit card debt on some purchases that just look really stupid in hindsight.
But it didn't take long for us to realize what the credit card companies were charging in interest, so we decided credit cards would be a tool for convenience from that point on. We paid down our credit card debt and became more careful with our money. Mr. Cents was good with numbers, but didn't have the time or patience to do the detailed work it took to keep on top of everything. Gradually, I learned more and took over most of the financial management, although all of our decisions were (and still are) made jointly.
Chapter 2: Children & Changes
About 2 years into our marriage, we decided it was time to start a family. Mr. Cents was doing well and I was within a year or so of finishing my Honours degree in psychology. We would have the baby. I would take a bit of time off, finish my Bachelor's degree and then move on to graduate school.
A couple of months into the pregnancy, I had a routine blood test done that showed an elevated amount of something or other. That could mean problems with the baby, so I had to go for an early ultrasound. The levels of something or other were elevated because I was carrying two babies. Oh.
Whew! The babies seemed healthy, so that was great, but it meant planning for 2 children instead of one, and it meant a riskier pregnancy as well. I was able to finish that year of school, although getting in and out of my small car to get there was a bit of a challenge in the third trimester.
My boys were born in June of 1995, one month prematurely. Nothing has been the same since. The boys required extra care as preemies. I was never really one of those women who went crazy whenever a baby entered the room. In fact, I don't think I had ever held a baby until I held my own. Yikes – did that ever change my life! I absolutely fell head over heels in love with those little ones and they became more important to me than I ever could have imagined.
Still, once September came, I returned to school part-time. Mr. Cents had a boss that allowed him to work from home one day a week so I could attend school. Then, he got a new boss. The one day a week deal was revoked. I had only my Honours thesis left to complete my degree, but we could not afford to put 2 kids in daycare even part time so that I could finish my degree. I never did. My formal education ended there. But what I have learned since then is not in any book or any course syllabus and I am more grateful for it than anything else.
Mr. Cents was doing well and making more money, but he was also away from home from about 6 A.M. until 6 P.M. each day. Eventually, more travel was involved as well. Mrs. “get married at 30 and put the kids in daycare” was a full time stay-at-home mom at 26!
We still lived in a basement apartment, albeit a larger one, but we had one bedroom, which just barely fit our bed and 2 cribs. I'll spare you the details of the joys and difficulties involved with raising spirited children 2 at a time. Suffice it to say that I was one busy, exhausted, joyful, and grateful person.
Chapter 3: A House, Another Child, and More Changes
By the end of 1996 we were able to save up enough to afford a small house. The boys were very active, but their health problems were becoming increasingly difficult to handle on my own. One of my boys was born without a fibula (that's the small bone in your lower leg), a rare condition called fibular hemimelia. He is otherwise fine, but the affected leg is shorter, and this necessitated several leg lengthening procedures and other orthopedic surgeries. My other son was severely asthmatic when he was little, and both boys suffered from chronic ear infections. In addition, both suffered from a lot of allergies to everything from medications, to peanuts, to regular environmental things like ragweed and grass. During the first few years of their lives, I became a regular at doctor's offices and emergency rooms.
Despite how it sounds, the boys were generally very active, healthy and otherwise normal kids. I only mention these issues because they played a large role in my decision to remain a full time mom. My husband's job was increasingly demanding and I wanted and needed to be there for my boys.
Even being there full time was eventually not enough, as my parents and sister were using up their vacation days to travel to our house and help me out with one medical issue after another. Mr. Cents' new boss threatened to fire him if he left early one more time to take one of our kids to the emergency room. (We had only one car at the time). This was in spite of the fact that he continued to put up some of the best numbers in the company.
Near the end of 1997 we decided to move back to our home town where help was readily available, but Mr. Cents had to return to working the retail store end of the business at a reduced salary. (He had previously been a buyer.) Once we moved, the kids' medical problems gradually improved. They had a couple of surgeries to have tubes put in their ears and then had their adenoids taken out. They eventually outgrew a lot of the allergy stuff too, at least to some extent. During this period, we managed to focus on and pay off my student loans. Our debt consisted of the mortgage and a single car payment.
In January of 1999, we welcomed our 3rd son. I guess you can probably see by now that I never did pursue my super career. By the time I turned 30, I was firmly entrenched as CCO (Chief Care Officer) and CFO (Chief Financial Officer) of our household and I was so busy that I couldn't imagine how we would manage if I attempted to go back to school or find work. I did briefly work as a private tutor, but I gave it up because it meant being away from home during the evenings, when my boys were home from school and needed my help with their own homework.
Mr. Cents was still working in a retail store, although he did not like it as much as he had liked his job as a buyer for the same company. An executive change with the company made it clear that he would need to find another job. His was our only income, so we had to be careful about choosing a new position. Having moved from a larger city to a smaller one meant that our options were more limited.
Mr. Cents had filled out an online questionnaire for a sales position on a lark, as we were getting desperate. He eventually ended up taking that job, even though it was in a field in which he had virtually no experience: sales for construction-related materials. He began his new job in March of 2001, just a few months before 9-11 caused a major economic and political upheaval.
I almost forgot. When Mr. Cents left the retailer, he had some stock options to dispose of and didn't have the time to follow the market. That's how I got involved with trading, finance and economics. I've been studying it ever since. Before that, I didn't even know what stocks, the S&P 500, or any of those other mysterious things in the business section were.
The Second Decade
Chapter 4: New Job, New Life
In spite of the tumult of September 11th, we were able to sleep at night because Mr. Cents' base salary was guaranteed for 3 years. After that, he could take the salary as a draw, but it would have to be backed up by sales. Mr. Cents quickly became a top performer and was able to earn some nice commission on top of his salary. In addition, I worked as a self-employed assistant to him, helping him run his business and keeping track of our more complicated financial and tax situation. (Those of you who are self-employed or in commission sales will know what I'm talking about.)
Our family was quickly outgrowing our home. We lived in a 70 year old home with very small rooms and almost zero energy efficiency, but plenty of character. In the end, the space constraints outweighed the character and we started to look at building our dream home.
At first, building a new home really seemed more like a pipe dream. But mortgage rates were really low and we wanted a home of our own where we got to choose everything rather than trying to fix up an older home. We had done enough sanding, painting and fixing up to last us for quite a while by that time.
Mr. Cents did well enough for us to take yet another huge gamble. Just a few months and piles of house plans and Excel spreadsheets later, we went ahead and had a nice, brand new home built. We moved in halfway through 2003, just as the housing market was really heating up. To say we stretched to afford the house would be an understatement.
If Mr. Cents continued to do as well as he had, we would be OK. I tried to structure the finances so that we would live on his base draw, and the extra commission would be for, well, extras. In reality, we experienced some lifestyle inflation as Mr. Cents did well for a few more years. We used the extra cash to finish the house nicely. We put in a driveway, landscaping, and finished the basement. We accomplished all of this without debt, but it meant putting very little into savings.
In the meantime, I was busy raising the boys and I was grateful to be able to run to school as needed and care for them when they were sick. I was also able to coordinate my son's care during his leg lengthening procedures and be with him for the duration of his recovery, physiotherapy appointments, etc.. Mr. Cents was very busy with work, so it was nice to have everything to do with home taken care of. I had also sold out of our mutual funds and taken control of our investing myself. I read, read, and read some more. (Tangent: Michael James recently wrote about mutual fund deferred sales charges and I had to laugh at Gene's joke in the comments section: Q. Why does it cost so much to get out of a DSC fund? A. Because it's worth it.) 😛
Chapter 5: Gathering Storm Clouds
Around 2005/2006, I began to get uneasy about our lifestyle inflation. We were not living with great excess, but if Mr. Cents had a rough year, we could be in trouble. We were no longer living on his draw of roughly $60000, but needed at least $80000 plus to maintain our mortgage and other commitments. We bought 2 new vehicles in 2006. We paid one off a year later. The other was financed for 2 years at 0% interest, so we just made the payments. I felt like we finally had our heads above water, but I was nervous about the economy.
Everyone seemed to be extremely over-leveraged, with new kitchens and home additions popping up everywhere. To some extent, we were part of that. But we did not take on debt to do the home improvements we chose. By the end of 2007, the only debt we had was our mortgage, but it was pretty large and our ability to make the payments could come into question if our income took a hit. Mr. Cents was still doing well, but he was selling a premium product, and we began to worry about how many sales he could make if companies needed to deleverage and cut costs.
Chapter 6: Thunder & Lightning, But No Permanent Damage
In 2008, Mr. Cents left the company he had been with for almost 8 years to join a local contractor, with a guaranteed salary for one year. Our timing was just about perfect. It was just about that time that the debt bubble burst and our income would likely have cratered – another bullet dodged. He received a fairly sizable deferred compensation package from his previous employer. We used approximately 40% of that to pay down the mortgage, and we placed the rest in an RRSP savings account to avoid the income tax hit.
By that time, I had reduced our stock weighting to nil, so our investments did not suffer in the carnage. I still have not re-entered the market, as our financial position became more precarious and I did not want the risk. During that time period, we aggressively paid down our mortgage instead. I don't want to make it sound like I am any kind of investing expert. I am more like an investing wimp. Although I avoided the subprime catastrophe, I was out of the market very early and did not benefit from the 2005-2007 market rise.
There was just one problem with our new life: Mr. Cents hated the new job. The workers were not competent and he felt uncomfortable selling for the contractor as a result. A year later, he took a sales position with a telecommunications company. He didn't care for that job either, for good reasons that I won't go into in the interest of brevity.
That pretty much brings us to the present. Mr. Cents started yet another new job at the end of November, 2009. He is back to selling in the construction industry for a larger local contractor. So far so good, but our current income based on his base salary (not including potential commissions) is about one third of what it was 3 years ago. I had increased our weekly mortgage payments for a year or two, but recently had the mortgage company reduce them again. We just can't afford the accelerated payments right now. I'll boost them again or make a lump sum prepayment if the commission starts rolling in.
On the plus side, the insane mortgage paydown vendetta I embarked on a couple of years ago has left us with a mortgage balance of just $34000. It was originally $202600. As recently as July of 2008, it was $145000. If things got really dicey, we could use some of our RRSP money to pay the thing off or make our payments.