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Don’t Get Trapped By Fixed Expenses

June 6, 2011 · 137 comments

in Personal Finance

I graduated from college in 1991.  Unfortunately, the economy was not at it’s best and a lot of graduates did not have jobs.  As a matter of fact, I remember some kids wrote on their cap ‘Will work for food’ as a joke.

My husband and I got married right after graduation and we started working right as soon as we got back from our honeymoon.  He worked for a ‘Big 6’ accounting firm and I started my enthralling career in computer programming.  We made decent money, but we also had my student loans to deal with, two car payments, wedding debt, rent, and more.  After two years, we bought our first house for $95,000.

Looking back on that first home purchase, I am not sure I would have bought a house so soon.  What we did that I regret is we obtained a mortgage that required both of our salaries to pay.   Even though the economy was not at its best, we were young and foolish enough to think we would both be able to find work immediately if one of us were ever laid off.

We were lucky because even though layoffs were happening around us, neither one of us were ever affected.  However, that house payment added stress because we knew that if we were ever reduced to just one paycheck, we would not be able to cover our bills.

Shortly after purchasing our home, I was pregnant.  I was thrilled to be expecting, but crushed that we could not afford for me to stay home.  I hated that the decision to return to work was made for me because of our expenses.  Financially, I think that was a turning point for me because I felt like I didn’t have control over how I wanted to live my life.  I love control, so not having the choice to stay home really bothered me.

Fortunately, I was able to work out a deal where I just went in to the office three days a week.  However, once we could afford to live on just my husband’s paycheck, I quit.  My boss talked me into working part time and I was told I could work entirely from home.  I had just had my third child and decided to give it a try.  I did that for a year and was just exhausted, so I quit for real.

Since that day I fully stopped working in October of 1999, I vowed to not make any financial commitments that could not be paid with just one salary.  Over the years I have worked from home again on and off, but I never committed to a summer home, bigger mortgage or anything.  (We did move from that starter home, but the house we bought ten years ago was based solely on my husband’s income.)  I never, ever want to feel trapped again.  Now, we don’t save all the money I make now, as we do like to take vacations and such.  However, our fixed expenses never change regardless of our income.

The point I am trying to make is this:  even when times are good, spend like times are bad.  Circumstances can change in the blink of an eye, and if you can try and live off of  just one income, your life will be full of so many more choices.  I am not just talking in regards to staying home with children,  I am referring to life in general.  Would you rather have a secure retirement or an extra bedroom and larger dining room?  Many people move because housing deals are so good that they can’t turn down the ‘opportunity’.  However, buying anything in a recession may be like catching a falling knife.  No investment is certain, and do you really need that bigger house just because you can afford it at that moment?

Have you ever felt ‘trapped’ because of the amount of money committed to fixed expenses?

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{ 30 comments… read them below or add one }

Nicole June 6, 2011 at 8:02 am

I’ve worked very hard so as not to worry about money. We did worry about money in graduate school, but minimum expenses were pretty close to our incomes.

We definitely were lucky that when we bought the house, DH didn’t have a job yet. If we’d rented instead, though, I’m sure we’d have ended up with a smaller place.


Kris June 6, 2011 at 11:40 pm

Worrying about money is so stressful. I still do it occasionally, mostly when I lose sight of the ‘big picture’.


Moneycone June 6, 2011 at 8:04 am

“even when times are good, spend like times are bad. ” -Awesome advice Kris! I remember those days – late 1990s. Lots of startups, economy was booming, heck I couldn’t even get any apartments in Northern CA!

I remember my friend bought a super expensive Merc SUV (and he was single!). People spent money like there was no tomorrow.

I also had friends who were extremely cautious with their spending habits. Guess who weathered the crash?


Kris June 6, 2011 at 11:39 pm

Oh my, a Mercedes SUV for a single person? What a ridiculous move!

I remember when apartments were even hard to find here. Then ‘luxury’ apts were built with all kinds of amenities. Then the market fell apart, as vacancies in such apts went way up.


Husband of Everyday Tips June 6, 2011 at 11:28 am

The change to “spending like times are bad” was one of the best things we ever did. It’s not that money is never an issue, but it does not have nearly the impact on our life decisions as it once did.

Sometimes it’s hard to look at a project around the house that needs doing but we can’t afford right now. Even though we could get a loan to do the work, it feels better to either do it ourselves or wait until we can pay for it in cash.


Kris June 6, 2011 at 11:38 pm

Do the work ourselves??? 🙂


Husband of Everyday Tips June 8, 2011 at 8:31 am

I’ve painted a thing or two over the years! 🙂


krantcents June 6, 2011 at 12:23 pm

You can never make a mistake by being conservative! Part of the recent crisis was banks making mortgages without income verification. There were a lot of people who were caught up in the real estate bubble who thought they too would make a fortune. Greed is bad!


Kris June 6, 2011 at 11:37 pm

Krant- I remember a friend of mine thinking about buying a house with an interest only loan because houses in the area were appreciating over 20 percent per year. Many people felt this way, assuming the trend would always be up. However, we saw what happens when the market cannot sustain such increases. Even those that were not greedy made bad decisions based on past performance. It is all sad.


Money Reasons June 6, 2011 at 12:35 pm

Sounds like a wise way to go to me!

My wife was the one who very strongly did’t want to work once our kids was born, so we did rent for a little while until we had a decent downpayment (more than 20%).

We aren’t as wealthy as I would like to be, but were not doing too bad either.

I’m all for bigger and better vacations (as long as the vacation is a good value).


Kris June 6, 2011 at 11:16 pm

MR- you were smarter than we were. We only had 10 percent down for our first house and had to pay that ridiculous PMI insurance. I was so glad when we got rid of that.


MoneyIsTheRoot June 6, 2011 at 3:16 pm

This is a really good point…you can cut down on all of your variable expenses..but its that fixed expenses that really do us in. When you have a mortgage or a lease payment for a car, there isnt much you can do to change those payments.


Kris June 6, 2011 at 11:13 pm

Money- I have been doing all I can to get rid of fixed expenses. However, we still have to get rid of the mortgage and one car payment.


Car Negotiation Coach June 6, 2011 at 7:03 pm

Kris, I really like that motto: even when times are good, spend like times are bad. Being an entreprenuer, I always try to look at my savings as “can i survive a year off this without income?”. I’ve had to deal with that scenario in the past and I know that the good times come and go without much warning.


Kris June 6, 2011 at 11:04 pm

Thanks CNC. It is amazing how business and government can’t seem to see that the good times can’t last forever. Then when the economy turns, suddenly everyone is strapped for cash and making drastic cuts.


Yakezie June 7, 2011 at 12:06 am

$95,000 for a house, SO CHEAP! What is it worth now?

I like your thoughts of just affording something on one income. So smart!

How much do guys after 20 years at a Big 6 accounting firm make? A range would be great if possible.




Kris June 9, 2011 at 9:47 pm

I don’t know what the house is worth now since we moved out four years after we bought it. We did sell it for $126,000 though.

Regarding what someone makes being in a Big 6 (now Big 4) accounting firm after 20 years, I really don’t know. My husband changed jobs after my oldest son was born because he didn’t want to have to work all the hours ‘busy season’ requires and travel all the time (and miss seeing him grow up).


First Gen American June 7, 2011 at 6:29 am

There was a time after we moved my mom to the town we lived and my second child was on the way that I felt trapped into needing 2 incomes. I’ve worked hard for the last 3 years to do exactly as you said “spend like times are bad.” I’m back to the point where I think we could drop an income if needed.

I’d hate to have to work if I had some kind of family emergency and I didn’t have the choice to take the time I needed. I think not only would that be difficult, but I’d resent every waking minute I spent at work. Now I just try to make the best of every paycheck and every hour I spend working. It’s not all fun, but I don’t have to dwell on the negative stuff because if it were really that bad, I can quit. Great Advice Kris.


Kris June 9, 2011 at 9:43 pm

Thanks for the kind words First Gen. Having choices is one of the greatest things in life. It is awful to be forced into a position, especially like in a time of crisis like you mentioned.


Financial Success for Young Adults June 7, 2011 at 12:19 pm

Very wise words. I really wish I hadn’t racked up so much debt because now that I want to do more I am trapped by fixed expenses like you mentioned. However, I will be debt free in just 3 years (sooner if I use Christmas bonuses) and I am very excited for that day!


Kris June 9, 2011 at 9:34 pm

Debt free in just 3 years! That is fantastic and admirable. Be proud of that fact instead of lamenting your situation. You are doing great!


Financial Independence June 7, 2011 at 1:02 pm

Great post, thank you very much. For those who are earning their living the only way to achieve financial independence is to spend less than you earn and invest the rest.

The more you save the closer your goal is. There is no way around it.

The small thing – I just posted about it – the every item you buy today, you have to replace it sooner or later. For example a camcorder, laptop, etc…everything will cost you money of lifetime, just to maintain the same position.

Imho, this is the only way out.


Kris June 9, 2011 at 9:33 pm

If only most people in America spent less than they earned, then we wouldn’t be in the mess we are in. Oh, I wish the government would do the same thing.


Ken @ Spruce Up Your Finances June 8, 2011 at 12:26 am

Very true on the fixed expenses since this is something that you really cannot trim until the payments to these are over. It is to cut entertainment expense, lunch at work, etc but there is no way you can cut your student loans, mortgage payments, etc until you finish paying them off. Of course, you can refinance them and get a lower monthly payment but you are just extending the debt and not really cutting the expense.


Kris June 9, 2011 at 9:32 pm

Very true Ken. Plus, you can only refinance to a certain extent as interest rates will never go below zero! Best you can do is not have to worry about interest in the first place. I still have a ways to go, but I will celebrate like crazy when I don’t have any monthly payments outside of utilities!!


Crystal @ BFS June 8, 2011 at 10:21 am

Mr. BFS and I agreed in college (right after we got engaged in 2002) to always live on the lowest salary and save the largest since that made the most sense financially if one of us lost our job. Then life happened and we realized we would not be happy living on my $26,000 a year take-home pay, lol. We’d pretty much be able to pay our mortgage, utilities, and food…and that’s it. So we switched to living off of his salary ($36,000 a year take-home) and saving mine since 2006.

Now that I am technically making more than him if you combine blogging and my day job (I take home about $48,000 a year), we are still living off of his salary and saving both of mine. That way, when I quit my day job, our savings will stop increasing as quickly but that’s it. No huge lifestyle deflations needed, we’ll still be able to hit our original savings goals, and hopefully we’ll have a less stressful transition…we’ll see…


Kris June 9, 2011 at 9:28 pm

You guys are doing fantastic!! Is the 401k part of the saving, or are you saving all that cash on top of the 401k savings? Either way, kudos to you!


C.M.C. June 12, 2011 at 10:14 pm

I like this post. Unfortunately, I feel that my student loan is hanging over my head. I want to pay it off as fast as I possibly can, because I feel like it is preventing me from living the life I want to live.

I just became engaged a little over a week ago and we were initially thinking of a late Summer 2012 Wedding and now we’re thinking of pushing it back almost a whole year so that it doesn’t affect the speed at which I can pay off my loan. It’s frustrating, because I don’t necessarily want a 2.5 year engagement, but I also don’t want to be stupid. We’re not necessarily in a rush, but I feel like this stupid debt is putting off everything, including how fast we can save for a down payment on a house.

Looking back, I wish I had the brains to pay back my student loan much earlier and more aggressively, but I just wasn’t thinking. I thought my 20’s would last forever. Boy, was I wrong!


Kris June 15, 2011 at 12:01 am

I think I am going to write a post based on this comment, so I will without commentary until then… Thanks for sharing!


Glenda June 13, 2011 at 8:27 am

Getting trapped in fixed expenses it seemed a lifetime..nice post!


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