“I Know I Should Be Thrifty, But…”

Ways to rein in spending without undue pain.

Posted Jun 15, 2020

 Jernej Furman/Flickr, CC 2.0
Source: Jernej Furman/Flickr, CC 2.0

The loss of jobs and the precariousness of remaining jobs caused by the COVID economic shutdown is forcing people to spend less. That can be hard. Here is a composite question and my response:

Dear Dr. Marty,

My dream was always to own my own home and finally, three years ago, I managed (barely) to qualify for a loan on a modest house in a lovely area. Now, the COVID economic collapse has forced my employer to lay off people and to cut back others’ hours. I feel lucky to be in the latter category: I’m now being paid only 4/5 time. To be honest, I was expecting worse. I’m not a bad performer but I’m in human resources, a cost center. The company is focusing its resources on profit centers: sales, marketing, and business development.

I’ve gotten my bank to give me forbearance on my mortgage and student loan, but that won’t last forever. And student loans are virtually the only loan that can't get discharged in bankruptcy. Plus, my child is starting college (San Francisco State) in the fall. I’m glad I convinced him to attend a state university rather than the private college that was recruiting him, but even state universities are expensive.

I've even cut back on the small stuff. For example, for the first time, I've switched to a much cheaper hairstylist.

Despite doing all that, I’ve had to miss my most recent car payment—I bought a new Audi two years ago, my first brand-new car ever.

In short, I’m scared.  

My response:

I can’t imagine how scary it must be to fear losing your car and especially your home, which you’ve long dreamt of owning, plus fearing you won't be able to pay for your child’s college education. That may be especially true because some experts are predicting that the shutdown will cause millions of Americans to lose their jobs permanently.

I also understand how tempting it must have been to buy that house even though you knew that left you no cushion for unexpected events such as the COVID shutdown.

I don’t know the details of your situation, let alone what you most value, so the best I feel I can do is ask questions for your consideration:

  • Might it be wise to replace that house “in a lovely area” for one that's more modest yet safe? Often, there’s a large difference in the price. And because many experts are predicting that a recovery may take quite a while, perhaps it’s time to sell and take the appreciation you probably made over the past three years and rent, at least until the economy starts to turn around.
  • Similarly, if you’re making car payments on an expensive car like an Audi, with it being two years old, it probably still has a lot of resale value. If you traded it for a 10-year-old Toyota or Subaru, you’d get a lot of cash and a car that’s reliable and requires less maintenance than an Audi. Should you consider that?
  • I’d guess your child is excited about going off for the “college experience.” But in light of the COVID shutdown, might it be reasonable to ask your child to spend the first two years at a community college while living at home? That would likely save you tens of thousands of dollars. To boot, teaching quality is often better in the community colleges, because faculty is hired based on teaching, not research. And community colleges offer enough extracurriculars to give your child plenty to choose from. And while university dorm living sounds appealing, too often, cramming, three-to-a-room, all those young adults who are away from parents’ watchful eye for the first time can be a hothouse for behaviors you might not be thrilled with. Plus, after two years at a community college, your child may be able to transfer to a university whose brand-name opens more career doors than does San Francisco State.
  • You mentioned that, for the first time, you switched from an expensive hairstylist. Do you have other high-cost expenditures that might be reconsidered, for example, gym membership, frequent eating-out/taking-out, brand-name clothing purchases? Are you resisting the ease of online shopping except for necessities?

I wish I didn’t have to ask such Grinchy questions, but considering them might enable you to retain your lifestyle's most important parts even if the COVID shutdown's economic impacts are long-lasting.

I read this aloud on YouTube.