Rethinking standard of living

October 28, 2008 | 49 comments

Though I read the Two-Income Trap a couple years ago, I find myself thinking about it frequently given the current conditions of the economy. Harvard Law professor Elizabeth Warren wrote it in 2000, but the topics she covers are very relevant to what’s going on now. Re-reading the book the other day, I found that it left me with a ton of thoughts about not only my own financial situation but some of the trends going on in the overall economy today. I was going to just mention the book in a book chat post, but thought I’d share a bit more at length since I find it so interesting and since this is a topic on many people’s minds right now.

We live in a treacherous financial climate

The materialism and overconsumption that plagues our culture is an interesting topic that other books have explored in depth (and that I’ll probably do another post about as well). But this book takes a much-needed look at the other side of the coin: the disturbing practices of the lending industry that became widespread after a change in laws in the late 70’s incentivized states to cooperate with banks to allow them to charge exorbitant interest rates and thus drastically increase their profits. Warren offers a good analogy when she writes:

My father used to talk about Herring Hardware, a farm supply store that my grandfather had run in rural Oklahoma beginning back in 1904. When the Dust Bowl hit in the 1930’s and families could no longer scratch a living out of their modest farms, many packed up and headed west…Some of those families never forgot the debts they left behind. Twenty years later, my grandfather would still get an occasional envelope with a few twenty-dollar bills…My father would lean back at the end of one of those stories and remark that these were “good people, good people who followed through on what they owed…Folks just aren’t like that anymore.”

But my father overlooks one very important fact: Borrowers aren’t the only ones who changed. Lenders changed too, and far more than the people to whom they were lending…When a borrower makes a partial payment, when he misses a bill, and when his credit ratings drop, he actually gets more offers for credit…He has joined the ranks of an elite group — The Lending Industry’s Most Profitable Customers.

Warren then goes on to recount a story of when she gave a presentation to Citibank where she pointed out that if they stopped lending to people in financial trouble, Citibank could cut their bankruptcy-related losses by 50%. The room got quiet and an executive said, “We appreciate your presentation. We really do. But we have no interest in cutting back our lending to these people. They are the ones who provide most of our profits.”

She goes on to make this analogy from her grandfather’s hardware store:

The strategy used by today’s lenders exactly reverses the approach bankers used a generation ago when their main goal was to be repaid on time…Herring Hardware may have collected most of its debts but its lending policies were radically different from those embraced by today’s major lenders. Unlike today’s megabanks, Herring Hardware stopped making loans when a family got in trouble. Grandfather Herring would never have dreamed of sending a flyer in the mail cheerfully suggesting, “Fred, you’re behind on your payments for the fertilizer. Can we lend you the money for a new cookstove?” Nor would the local bank have suggested a second mortgage to the family that had just missed a payment on its first mortgage.

What I took away from this part of the book was that, yes, people need to be responsible for their own financial decisions and be cautious not to get themselves into trouble. However, in this new lending climate our fallen natures are up against big banks who are throwing all their weight behind getting people into debt; the average person today has to be far more savvy and able to resist temptation than the average person 30+ years ago.

It’s time to rethink standard of living

Here is probably the biggest takeaway I got from the book: it’s time for us (“us” meaning “me”) to rethink standard of living. People didn’t used to have to be quite as cautious about getting overloaded on fixed expenses; for example, banks would probably only offer you a loan for a house if you could put 20% down and if the monthly payments would be no more than 50% of your monthly income. No so today. We are constantly tempted to live a little (or a lot) higher on the hog than we really should.

There are definitely people out there who use modern banks’ questionable lending practices to get the biggest McMansion on the block out of sheer greed, signing up for mortgages that are blatantly unreasonable given their incomes. However, I think there are plenty of others out there who get in over their heads mostly out of ignorance about what a reasonable mortgage should look like. My husband and I made that mistake once.

Until I read this book I didn’t know what the traditional ideas were about what percentage of your monthly income should go to mortgage, and back when I did the math on what the payments would be for our downtown condo it seemed reasonable enough. We’d be able to make the payments and the HOA fees with what seemed like plenty of money leftover each month. On paper, it worked out great. But life threw us some curve balls and we quickly realized that our mortgage payment was too high. Luckily it all worked out and we were able to sell the condo and do a major lifestyle downgrade, but it gave me a new sympathy for people who find themselves overextended. A lot of people end up in that position out of not having the benefit of traditional wisdom about what percentage of your income you should dedicate to your various expenses, and out of not understanding just how unrealistic society’s expectations have become about standard of living.

Which brings me to the most interesting point:

Warren points out that, due to a lot of factors which she details in the book, the average family in the early 1970’s spent only slightly more than 50% of their income on fixed expenses: mortgage, childcare, insurance, car, debt payments, etc. She also makes a compelling case that when those fixed expenses take up too much more than 50% of a family’s monthly income, they’re in a very precarious position financially.

I remember when first did the worksheet in her budgeting book, All Your Worth, and added up our fixed expenses to see what percentage of our monthly income they took up. It wasn’t pretty:

Fixed Expenses = Mortgage payment + HOA fee + property taxes + basic phone + health insurance + car payment(s) + car insurance + gas + bare-bones basic food needs + other essential insurance + debt (e.g. student loan) payments

When I added all that up…let’s just say it was more than 50% of our monthly income.

Even though we’d done a big lifestyle downgrade and were living in a much more reasonable house, I still marveled at how difficult it would be to get all those figures to add up to a number that we could pay with just one of my husband’s two monthly paychecks. Granted, a lot of our fixed expenses are bigger than they would have been if we’d lived decades ago because of factors out of our control, like rising health insurance costs or gas prices; yet that doesn’t change the fact that when fixed expenses start creeping up past the 60% range, you’re overextended (we know a lot of bankruptcy lawyers, and they all emphasize this heavily). And the more overextended you are, the more likely it is that you’ll face major financial problems if even minor unexpected events arise.

Overall thoughts

So this is what’s been on my mind lately:

First of all, given the modern lending climate, I’ve realized that I have to be much more astute than I’d realized to avoid getting in over my head, and that this is something I need to emphasize with my children as they grow up as well.

Secondly, I think our family might need to re-think what a reasonable standard of living is for us. I can’t directly change the fact that our health insurance is extremely expensive, that our property taxes are too high or that gas and food prices are crazy these days. However, I can drastically re-set my expectations in terms of what sort of house we should be living in, what kind of car we can really afford to drive (shoot, for that matter, whether we can really afford two cars), what constitutes “basic food needs, ” etc. I could admit that for too long I’ve been categorizing all sorts of luxuries as “needs, ” not really putting much effort into drastic cutbacks on the grounds that I “need” all sorts of things that are really not necessary for survival (or even a modestly comfortable lifestyle) at all.

I’d had it in my head that if/when my husband’s salary increases we’d get a slightly bigger house since at that point we’d have four children, and we’d “need” a bigger house since ours is only three bedrooms and less than 2, 000 sq. ft; I figured we might get a minivan with less than 120, 000 miles on it (maybe even one that has a door handle that actually works!); I thought we’d get back to buying fancy cheeses and sushi at the grocery store every now and then. But now I see that, if and when his salary does increase, if we don’t increase our expenses by one penny we might get to the point that, as is, we are truly living within our means.

So those are my thoughts! This subject easily lends itself to a discussion of topics like sacrifice, gratitude and worldly detachment as well, but I’ll save that for another post. Sorry for the long post — as you can tell, I’ve been thinking about this subject a lot lately. Anyone else have any thoughts?

UPDATE: A while back Meredith at Like Merchant Ships posted an excellent, interesting video by Elizabeth Warren that tackles the question: “If American families are working so hard, why are we still in debt?” The ensuing discussion in her combox, as well as the discussion to the follow-up post, are great as well.


  1. Pufferfish Mommy

    I do not have any thoughts as far as “answers” or anything else remotely helpful, I’m afraid. But it has been a scary time financially for my family for the past few months. We’re down to just enough money to buy groceries and gas after the bills are paid, but nothing more. Needless to say, that will not work for long. Dh will either have to take a 2nd job or I will have to find something to do to bring in a little extra money. But, as a stay-at-home-homeschooling-mom, I’m wondering where I will find the time… or the ENERGY?

  2. Jess

    I am in the process of reworking our budget too. Suze Orman is now saying that you need at least 8 months of expenses worth of $$ in your immediate savings for emergencies, at that is something we need to work on.

    It is all so confusing, I see on the news one market analyst who predicts a dramatic upswing in Spring of 2009 and then I read other predictions that we are headed for a global depression. I guess the best thing to do is prepare with savings and by living conservatively. I do think we all would be collectively happier as a society if we could stop attaching emotion to material goods.

  3. LilyBug

    This was quite an interesting post. I think you’re right on many points. Out culture has encouraged over-consumption which has lead to a two-income trap in that many feel they cannot exist on one income. The forces that be, however, long ago took advantage of these feelings and have actually made it more difficult to exist on one income.

    If you think about it, ignoring all the status symbol garbage, parents are expected (not encouraged…expected) to save for their personal retirement, to save for their children’s college education, to save for health care costs. And these are just the essentials. Unless your spouse, on his own, makes close to or over 100k per year, it is near impossible to make due.

    I speak, personally, from this because my husband and I pride ourselves on not living with any debt. I actually thought that with the arrival of our new baby in December I’d be able to stay home, part-time, and we’d still be okay (meaning our bills would be paid). I’m perfectly prepared to sacrifice luxuries. However, what we found was that my dropping down to part-time would mean my husband picking up my health care costs as well as adding on another child to his health plan. We tried every trick imaginable, including selling a car, and were not able to make a go of it. We still end up short…too short to make for a happy and content father. So, I’m stuck for now. I’m hoping that, one day, health care costs will actually decrease so that more people will be enabled to get out of the two-income trap.

  4. cheyan

    I just looked at our budget right now – just things like loans and utilities and rent, not the cell phone bill or anything like that – and was honestly surprised at how far above 50% it was. Yuck.

  5. Katie

    This is a great post. I haven’t done the math yet, but I’m pretty sure I’m living beyond my means. And I’m not even married yet. I fell for the credit card offers and now I’m in more debt than I’d like to be. It’s a bad feeling when you’re just barely making enough money for your bills because so much of your money is going to credit card debt. I hope to be out of it early next year but we’ll see. Thanks for the insight! I’m going to figure out my budget based on this 50% thing and see how it works out!

  6. Veronica

    We are certainly in a “financially precarious position,” and some months just can’t cover all our bills, and we took out a mortgage that was over 30,000 less than our small, respectable bank would lend.

    I think, at least in our income bracket, one of the problems is that the temptation to buy more house than we could afford is not about greed; it’s about security. We live in a fairly seedy neighborhood. Most pizza places won’t deliver here, there are two clusters of registered sexual predators a few blocks from us, and I would never, never walk here at night. But moving to a “safe” neighborhood would cost far more than we could ever afford, either in the cost of the house or the cost of the commute. We won’t make that choice, but I can understand people who do.

  7. el-e-e

    We, too, are down to JUST enough each 2-week pay period to cover our mortgage (which is NOT big in comparison to many of our neighboring subdivisions), groceries, utilities, health insurance and the daycare bill. Forget savings – we do 401ks but that’s it. If we didn’t have to pay for daycare, we’d have a whole lot more cash each month. But if we didn’t pay for daycare (read: both have jobs), we wouldn’t be able to pay the mortgage, etc… downward spiral.

    I’m interested in the book; thanks for mentioning it (although I’m worried it will depress me further to pick it up).

  8. Jolyn

    This looks like a definite read to check out at the library. I was wondering — does the calculation for set expenses include income taxes and social security and medicare, yes? Because when I factor that in we are certainly above 50% — and that’s not factoring in 401k contributions.

    I knew we needed to downsize (I’m a military spouse / SAHM) on our next move, but this puts it into concrete numbers.

  9. Anonymous

    You might want to be really specific about why people in debt are so lucrative. It’s because they will have paid back what they borrowed plus tons and tons and tons of interest. Scrooge was like that. A five dollar debt will cost you for the rest of your life and you can pay twenty-five dollars without getting out of debt.

    Jane M

  10. Joy of Frugal Living

    Great post. I also read this several years ago but have been thinking about it again in our current environment. It’s a good read (though I’m not impressed with her proposed solutions). I think the best thing we can do is optimize our own situations, as you are talking about.

    We are blessed to have recently gotten out of debt, after a HUGE load of student loans (both did grad school), plus a car loan. It was a major effort, but so worth it. We are also blessed to be able to live on much less than our good income. But you never know what the future holds. I keep trying to find new ways to save money so we can keep our lifestyle under control and our savings increasing.

    Good luck!


  11. Kate

    We definitely spend more than 60% on fixed expenses – we’re trying to get on top of it, but it isn’t easy. And there really is a structural issue where the poorer you are, the more you pay…for just about everything. Think of the difference between grocery shopping with $100 in hand and grocery shopping with $30 in hand…with less money, you end up buying the smaller, more expensive (per quantity) packages of everything because you just can’t spend a quarter of your budget on the big box of powdered milk or whatever.

    And then there’s bank policies…we’ve had overdraft problems in the past, and I’m amazed how every time my husband goes into the bank to discuss some issue we’re having with our bank account, the bank agent tries to convince him that what he needs is a line of credit, or a ‘special’ credit card. This last time, the bank made a mistake which almost cost us $400 in fees!! We had the time and the education to sift through the facts and make our case, but I hate to think how much more the banks make in fees off of people who do not have the education or the will to push through all the policies and fine print. I am so grateful we have never opened a credit card or line of credit, and the debts we have are to people and not to institutions!

  12. lizzykristine @ Uplifted Eyes

    I was fascinated by your review because my copy of this book just arrived from paperbackswap yesterday. I’ve been wanting to read it ever since watching an hour-long talk by Warren found at Like Merchant Ships months ago.

    I didn’t know that fixed expenses as only 50% of your income was the traditional goal, but my husband and I came to that same conclusion as a goal for ourselves. We’re not there yet, but we’re working that direction.

    For one thing, if something happened to my husband, I don’t have near the earning potential that he does. I don’t have a degree or job experience — I’d have to be a greeter at Walmart!! I’d be lucky to make, well, 50% of his income. We daren’t make commitments that are dependent on my husband’s level of income — especially now considering the economy and possible job loss.

    For us, working toward the 50% goal means no cell phones, driving 20 year old cars and eventually downgrading to one car, eventually buying a smallish (less than 1500 sq ft) old house in a not-so-good neighborhood and living in it all our lives, kids or no kids…

    But, come to think of it, that’s what my parents did, and I sure had a happy childhood. 🙂

  13. Jon

    I want to second what Lilybug said. From what I’ve seen only jobs in engineering or medicine pay enough promptly enough for one to have a decent shot at having a family, and even in medicine nursing is quite possibly inadequate. For everyone else, especially for those who work in retail, the question is how much can one cut before getting to a non-negotiable. Can one cut the TV? The internet? Move to a neighborhood in which drugs and guns are prevalent? There’s a lower bound on how much one can cut, and after that nearly the only solution is to add a second income.


  14. Kingdom Mama

    We’re in the “scary” state I guess. We really don’t feel that way though. I’m not willing to work outside the home….no matter what, and I feel that my husband works too hard to have to get a second job.

    We only drive one car (which is the only thing we owe on), we eat pretty basic foods, and we very rarely splurge on anything.

    We’re really content, and joke about how the world seems to be falling apart around us while we stay exactly the same. But, we don’t have any savings to speak of. So it really takes a lot of faith to stay out of the fear zone.

  15. Kimberly

    I think this is one of the cruxes of the matter….people want more than they can pay for. Doesn’t really matter how much money you make. I know people with million dollar houses who can’t afford their mortgages.

    I think it really does matter what decisions you make early on. The commenter who said she was single and in debt had the right idea, get a handle on it early.

    I live in an expensive area (D.C. suburbs), but things are doable if people are willing to make hard decisions. Veronica and her hubs live in an area they would rather not live in, but which they can afford, rather than having her out working and the kids in day care.

    Those decisions need to be thought out in advance, and then it makes sense when you have to live without certain things.

    Hard times can come, jobs can be lost, and that is a different story. But the decisions that come back to bit you are the ones you make with stars in your eyes.

    My story is similar to what the woman discusses in the book. My husband and I were both practicing attorneys when we got married and bought a house. (Just for the record, I was living in a 400 square foot apt at the time and couldn’t really afford much else…a lawyer’s salary doesn’t go very far here….) Anyway, the mortgage broker and RE agent were salivating at the thought of two lawyers’ salaries. And we were really pressured to buy more house. We had decided that we were only going to get what we could afford on his salary because we knew that I wanted to stay home when we had children. It was so hard to convince them of that. And it was a constant battle.


  16. Ginkgo100

    I think you would really be interested in the Dave Ramsey baby step plan. The basic ideas are old-fashioned ones: live on less than you make, pay off your debts, and save your money. He sets it up in a very orderly way that takes into account not just the straight numbers, but also human psychology — for example, he recommends you pay off your smallest debt first regardless of interest rate so you can get a quick dose of positive feedback, a quick “win.”

    We are following the Ramsey plan right now. We made a ton of mistakes, like buying two houses in a row with nothing down (at least we got fixed rate mortgages). Our taxes+mortgage payment is 50% of our take home pay, which is insane. We relied on a line of credit for an “emergency” fund instead of our own money.

    Now we’re committed to budgeting, paying off debts, and not EVER borrowing money again, except possibly if we buy another house (I see no reason that would happen). No car loans, no credit cards, pay cash for everything. It’s a radical idea, isn’t it?

  17. mrsdarwin

    50 years ago there were no HOAs, and it didn’t take nearly as much money to get through college. Alas.

  18. Lerin

    Wow… this is a timely post for me and my family. I’m going to see if I can find the book at the library. I think it would help us.

  19. Shelly W

    Have any thoughts? Oh yeah.

    First, I have to thank God that He let me marry a man who had good financial sense. We never bought a house on two incomes because, like the attorney mentioned earlier, we knew that we wanted me to stay home with our kids. We have never lived beyond our means, and I totally give my husband credit for that (I, on the other hand, would have been sucked in by all the credit available and would have used every penny of it!).

    I find it interesting that nobody has mentioned tithing. From the first day we were married my husband said, “We are giving our first check to God, and then we’ll pay the bills.” I honestly believe that God honors our obedience in this area. It isn’t easy–it seems risky–but the benefits are so great.

    We are teaching our children some very basic principles early on. They get an allowance, and we expect them to tithe part of it, save part of it, and “spend the rest with joy and thanksgiving.” We have warned them over and over not to get into debt. Debt will squeeze every ounce of joy out of your life, and that’s certainly not what we want for our kids.

    Finally, I would have to say that personally, I have so much more respect for the person who lives in a smaller house that they can afford than anyone in a huge house that they can’t afford. It’s just not worth it.

  20. Jen S

    This has been on hubby's mind lately. Luckily, about 18 mos ago, while i was still making a ton of $$ we started paying off our debt & just finished putting out 6 month EF into the bank. Just in time for DH's income to (temporarily) drop from $5000 to $1000/mo. I am a SAHM now and we've rethought a lot of purchases & still haven't cut out ALL our luxuries but if this becomes longer than a month or two, we'll have to. I'll have to check this book out. Thanks!

  21. the mommie of mommie blogs

    great post and perfect timing. I am currently reworking our budget and may need to read this book. After paying off cc debt (new kitchen, new baby furniture, etc…) and student loans, we can breathe again. We still need to revaluate what we truly need vs. “nice to have’s”.

  22. Christine

    Great post and I’m going right to the library to get that book. We recently (August) became a one-income family. We cut our income by $20K and our monthly expenses by more than a third. By being creative and frugal we paid off all debt except our mortgage (which is comfortable on a home which, like yours, is less than 2000 sq ft, and we also have 4 children) and live without credit. It is the best thing we ever did and we are so much less stressed. Turning down luxuries (like every acquaintance’s kid’s birthday party and those Starbuck’s lattes) is much easier now and feels good. Most importantly we are teaching our kids the value of hard work, delayed gratification and meaningful family time rather than the keeping up with the Joneses materialist mentality.

    OK, off my soapbox now. 🙂

  23. habemuspapa

    I’ve been reading your blog for a while and just had to chime in on this one. This is sort of a tangent, but… One way to live with more for less is to choose unconventional, imaginative options. When we had our 4th child we had $3000 to spend on a vehicle that would hold us all. My husband ended up getting a used 15-year old limousine with 60,000 miles on it. It’s embarrassing to drive, but it’s clean, dependable, and comfortable, and we took on absolutely no debt to get it. I heard of a large family who a few years ago bought an old school for their home and paid $30,000 for it. They’ve had to do some work on it, but they’ve got plenty of room for their family and lots of stuff other people dream of – their own gym for example. And they paid less than they would have for a small 3-bedroom house.

    Love your blog. Keep it up!

  24. Sandy

    I have been interested in financial matters for some time. We learned the hard way several years ago after buying a home beyond our means, then furnishing and decorating the home with credit card purchases. We were self-employed and dh had some health problems and our income decreased dramatically and suddenly.

    The lessons we learned through that difficult time taught us how lean we could live and how many “necessities” we could do without. Just last month, we paid off a second mortgage we took out to pay off those credit cards. Yikes!

    The best thing we’ve done is move to a very modest home (1300 sq. feet plus half-finished basement with lots of storage and potential living space)in the country where we can burn wood for heat, have no water or sewer bill, etc. We live far below our current income and below most of our friends, but we are on our way to being completely debt-free (small mortgage and car payment on a fuel efficient car are our only debts).

    One thing that helps me is something I read somewhere and that is to “think like a 1950’s housewife” as far as standard of living. Many things we take for granted today were not needed at all then or were rare luxuries. Growing up, my family NEVER ate out. (Only exception was on vacation, which didn’t happen every year.) There were six of us and my dad grew a big garden and my mom canned the food. We never went hungry, but we didn’t have a lot of snacks around like most of my friends did.

    Sorry such a long comment. I’m fascinated by this topic, too!


  25. Ouiz

    Thank you for this fantastic post!

    It’s so hard to live in this culture and avoid the temptation to want more just because others have it. I know I’m royally guilty of complaining about the size of my house (less than 1800 sq ft) for my family of 9.

    The recent financial situation was a huge wake up call for me. I went from whining and complaining to thanking God that we still have a roof over our heads. (I’m trying not to live in a state of complete panic.)

    Living a simpler lifestyle is shocking at first, but as we take baby steps in that direction, it’s becoming a bit more… fun, actually!

    I love what Shelly W had to say about tithing. It seems so “absurd,” when looking at it from a worldly perspective, but I can also testify that God has blessed the 90% we keep and made it do more than we could have ever done if we tried to keep all 100%.

  26. Michelle

    I am blessed to be in a situation where we are living at or below our means. One of the first decisions my husband and I made was to just live on his income so that we’d wouldn’t miss that money when we had kids. Which was something that has kept us at least even in any case. Like when we were first married and my husband got laid off and then hired on to a company that was just starting up. It was about 6 months or a year before we were getting paid regularly. So while we haven’t accumulated savings as of yet (that’s our next thing) we were able to support ourselves somehow through my much smaller income. When I quit my job to stay home with my son I found that money was never missed. Besides that a cost analysis I did with a friend (who does not think I’m doing what’s best for my children by staying home instead of working) showed that my salary would have gone almost entirely to childcare and gas.

    Some things that I have found that can help stretch a tight budget is to take what little savings you can on the little things because it adds up. Like I don’t have a land phone line, we use our cell phones that we would have to have anyway. I also found that things like taking the cheapest plan that meets your needs for things like cell phones, cable, etc can add up too. We haven’t bought a house yet because we want to get the best deal but also be able to pay off as much as we can up front.

    Before I got married I used to barely be able to pay my bills as well. Getting things where they are now has been hard and I don’t have the same things as most of my friends (mostly because I don’t need them) but it’s well worth it. It’s amazing what is a need and what is a want when you get down to it.

    Another insightful post. Thank you.

  27. aahcoffee

    Wow, great thoughts!!!! So much food for thought here. I need to find that book. 🙂

  28. Michelle

    I forgot to mention in my previous post that if you live in Colorado, Nebraska, New Mexico, South Dakota, or Wyoming there is a grocery buying program called Share. In colorado the web address is so I imagine if you take out the colorado and insert your own state you will find it in your state. It’s a great program. The goal of SHARE is to help families save about 50% on their groceries, while encouraging the building of relationships with their neighbors in the community. There are no qualifications…if you eat, you qualify. Anyway they get in different selections every month and you order it and pick it up. The small amount of profit they make goes to getting groceries for struggling and homeless families. So on top of getting food for really cheap, you’re actually helping families in need also. It’s run by Catholic Charities. My sister and brother’s families are both in desperate situations themselves so my husband and I have been ordering groceries for them from SHARE (we can get them more with what we can afford to give them through SHARE). It’s a monthly thing. I order food for my own family as well. Hope that helped someone.

  29. Michelle

    I should have tried the website thing before saying it. I now know that if you go to the colorado website, you actually pick your state on the host site list. Sorry.

  30. Marian

    Average American house size, 2004: 2,330 sq.ft.
    Average American house size, 1970:
    1,400 sq.ft.
    Rethinking seems most definitely in order.

    We don’t have that much wiggle room in the biggies: house (for 2 parents, 4 children and homeschool: 1700 sq ft- not all of it heated!- tiny yard, one bathroom, 109 years old and showing it) and cars (we do have 2 now, but never newer than 7-10 years old). I’m not necessarily claiming prudence or virtue there– we probably would have indulged in more if we could have! But I have noticed how much my idea of our standard of living has grown in the smaller things– what foods, clothes and activities we can afford, for example. Tired of scraping, we’ve spent more on THOSE things every time we’ve seen a little increase in income. It’s the same moral issue, though, and overindulgence in “small things” can quickly become big when the margin is so slim…

  31. Grammy

    This is a very much needed discussion. Having raised seven kids with very undependable income I know it takes ingenuity, extreme frugality, and much prayer. God loves and helps those who strive to do his will – they will get necessities provided but not their wants, they will be humbled, and they will end up thanking God for his goodness. DARE to follow Him!

  32. Kylie w Warszawie

    Hubby and I just recently read an article in Reader’s Digest where a family limited themselves to $100 for essentials for a month. They kept the son’s preschool and mortgage and car payment and fresh milk and produce, but cut out everything else. At the end of the month they donated their savings from that month to a soup kitchen. You can find hit here:

    Anyway, hubby and I were both moved by this story and have decided that this is what we will do for lent this year. We’ll tweak it to our own necessities (we don’t have a mortgage, but we have two preschool bills…we have to have gasoline to get us to church, but perhaps we can take public transport or our own two feet other places). I will blog about it, but I was really touched by the idea that we DO live with too much. I lived in Ghana for two years and sometimes I wonder if I learned anything from that time.

  33. Katie

    Interesting post with a lot of good points.

    We’re in a tricky spot because our middle daughter has cerebral palsy and gets SSI. We can’t have more than 2K in assets (savings, property, etc) and if I work, any money I gross comes directly out of what she gets. So I figured up that I’d have to gross at least 1K a month working part-time to break even. Not worth it, frankly.

    We definitely lived outside our means in the past thanks to credit cards. We’re trying to live within our means now and working with a debt management group to get out of debt and stay out. Even with our very modest income (about 28K a year), if we didn’t have these debts, we’d be able to have a small savings and money left after necessities for a little bit of fun.

    I remember reading somewhere that in the 50’s people had twice as many kids in houses half the size as now. We have 3 kids in just over 1000sq feet. We’ve always lived in small houses (our last house was 800sq feet, only one kid then).

  34. Kacy

    Great Post, and I’ve loved reading the comments. I’m 23 and my husband and I are expecting our first child in December. We recently moved from Texas to New York City for graduate school, and we’ve been amazed at the huge price difference in simple basics such as food and housing. For example, our rent is the same as my sister’s mortgage payment on a 3 bedroom house in a nice neighborhood in Texas. We live in a modest two-bedroom apartment in a rough neighborhood. We are the only non-immigrant family living in our building, and we’ve seen the way these families make-do with even less than we have.

    Fortunately college loans are our only debt, and our baby qualifies for government health care here (We were paying fully out of pocket in TX) and my husband and I get free basic health insurance from the school. We have no car, no cable, no landline phone, and no credit cards. We mostly eat canned soups for meals since I’m too tired to cook. This also means we eat out a couple times a week, but we only eat half our meals and get the rest to-go for another meal. Once the baby is born, we will work opposite shifts to avoid childcare expenses. Even with these money saving techniques, it’s still hard to save. Right now i have to continue going to grad-school and working, but one day I want to stay home and raise our children.

    The so-called “housing bust” has actually made me very happy. Maybe we will be able to afford a house someday.

  35. Spring

    In some ways, I see this current economic downturn as a kind of correction. Not a market correction, but a values correction. We’d gone so far into materialism and excess that I’m almost relieved that we, as a country, are pulling back from that now (although it’s unfortunate that it is by necessity).

    I’m not sure things are “better” if my family and I have a new car and big house and colossal stress…I like my simple little house and paid-for cars. I will have better things when I can afford them and try to avoid unnecessary stress and debt in the meantime. This is my preference. Others may have different inclinations and I certainly wouldn’t want to offend anyone who is really struggling right now. I’ve been there too.

  36. Colored With Memories

    visiting from boomama’s.

    excellent thoughts to chew on.

    i think entitlement plays a big role…we all need to rethink what our rights are vs. what are just simply privileges.

  37. Tammy M.

    Great post.

  38. MemeGRL

    Thank you for this. Found my way here through BooMama and was happy to see some numerical backup for something I wrote on gut a few weeks ago. When we were trying to get our mortgage, we were biting our nails over the one we wanted to get. The bank told us we were “eligible” for one more than DOUBLE the one that already had us biting our nails. Where we got lucky was that we had an ethical banker, who knew us, our hopes, our plans, our budget, and quickly followed up by saying she would never, EVER give us a mortgage that big and looked as unhappy and baffled as I felt that her industry “standard” was so different from what common sense would say. And as things have unraveled in the larger economy, I’m just so sad for everyone who didn’t have our banker or someone like her.
    It’s still tight around here. We’re still feeling…extended, let’s say, to be in the school district we want, in a house we love. But this is something we banked for and planned on and have contingencies to take care of. But we both know we’re one round of layoffs from some hard decisions.
    Anyway, I appreciated your post–thanks!

  39. needagoodnickname

    Jen, sorry if I missed it somewhere, but have you ever read Happy Are You Poor by Fr. Thomas Dubay? I would love to read your thoughts on it. It has made a lasting impact on me, maybe not as much yet as the author might have liked but it has influenced real decisions and not just ideals I like to think I hold.

  40. The Koala Bear Writer

    Very interesting post! You’ve hit a few things on the head (as usual). I keep saying that how much money you have depends not on how much you earn, but how much you spend. A friend of ours is single and makes twice what my husband does; he’s also still living with his mom, has no vehicle, and is flat broke. Many people have been surprised by our decision to drive only one car, and to have only me insured on the car (my hubby’s insurance was about three times what mine was, mostly just due to male statistics). We also spent one summer biking to work rather than driving. Right now, we live in a small town and can walk nearly everywhere we need to go. Things like that have enabled us to save a lot of money. We also borrow movies from the library rather than renting. I make a lot of our own food, rather than buying prepackaged. Choices like that save money, but take time to make into habit. 🙂

  41. SuburbanCorrespondent

    Good conclusions! And, up until last year, we lived in a 2000 square foot, 3-bedroom townhouse with 6 kids. Of course, it helped that it had 3 and a half baths. Why is it that kids all seem to need to poop at once?

    I digress. It was plenty of space. Well, enough space, anyway. We put 2 sets of bunkbeds in the master bedroom and turned it over to the kids, in order to make more efficient use of it. You may want to try the same thing.

  42. Anonymous

    If you know anyone who has a large amount of credit card debt, please encourage them to do a free consultation with a bankruptcy lawyer just to get the basic facts. It can really turn your life around to get a fresh start. I’ve seen it save people from suicide, and save marriages.

    – A bankruptcy lawyer

  43. Melissa

    Hi Jennifer! I just recently found your blog and love it—I always look forward to your insightful posts. I especially enjoyed this one; my husband and I have been big Dave Ramsey fans for the past few years and his book “Financial Peace” changed our entire perspective on money. We do his envelope system, paying cash for everything, after we pay bills online. It has changed us completely. When we had two incomes, we were in debt and spending like crazy. But since I quit working and we’ve followed his system, we have paid off debt and now actually save for retirement and have college funds for our kids—all on ONE income. The only debt we have now is our house. And when the cash is gone, it’s gone. His ideas of not using credit for anything and only paying for stuff with cash used to be “radical” in consumer-crazy America, but he’s become quite popular recently in light of the recent credit crisis. If anyone feels overwhelmed by their financial situation, please read his book—it WILL help and give you direction. Just thought I’d give him a little plug!

  44. Sarah

    Awesome post, I just found you today and totally plan to keep reading. One of the best pieces of advice my husband as I recieved when we were getting married was this: If you plan on staying home with your kids (which I did) then, starting now, only use your husband income when figuring out how much can afford on a mortgage and when paying your fixed expenses. If you start out that way you avoid the two-income trap from the start and don’t have to get yourself out. So that might be helpful to some who are just starting out. This also allowed us a chance to get a good savings stored up, and to put aside money for unexpected expenses, future cars, etc with my paycheck. When our son was born we felt absolutely no impact financially – except for the hospital bills!

  45. Multiple Mom T

    About a year ago I asked a real estate friend how much home the bank would allow us to have. I was SHOCKED. We wouldn’t have been able to pay for all the “fixed” items you listed. We bought our home 8 years ago when I was still working full time (before kids) but with only his salary in mind. We knew we wanted children. We knew we wanted me to stay home. We planned ahead. It worked for us.

  46. Gillian

    Spring, I love what you said. It’s interesting that people are being forced into living closer to the ideal.

    Now if only the value correction could improve pro-life issues!

    We are probably over extended by that 50% too, but I don’t consider us in any debt, and all we have is the car payment that would count as such. We are sensibly living in an apartment until we can properly afford a house. I’ve taken up meal planning in an effort to lower food costs. If I had my way I’d be going out to eat often and I was but this is fixing that. We haven’t eaten out for dinner in over a month (okay we did last night but we had coupons) Baby steps I guess. Might try the budget thing for lent, it’s a fantastic idea.

  47. Pam

    Thank you for this book recommendation!!! I just got it out of the library and devoured it. I love the framework and now will start dealing with our “wants” categories. I just wish they went a little further and talked about budgeting the wants. Any recommendations? Know any budget percentages that are useful? Thanks!

  48. Jennifer F.

    Pam – Elizabeth Warren did a follow-up book called All Your Worth that deals with the nuts and bolts of budgeting that you might like.


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