Trying to figure out how to SPEND money and going backwards?

I'm sorry if this is in the wrong category. Wasn't sure where to put it. It's sort of a relationship question with the wife not wanting to spend any money but knowing we need to. But it's probably more of a financial question, not relationship.

We're mid-50s and the only debt is our house. New grandparents (first-time). We pay for the house every 2 weeks, a bit more than the minimum and it should be paid off in 10 years or so (maybe less). We have about $225k equity in the home. We have a 401k through work. I'm still working and have been at the same employer for 22 years. I make about $100k/yr and my wife just quit her job as a lunch lady, making about $12k/yr.

We have two vehicles that need to be replaced. One worse than the other, but both are not doing good and not worth fixing (transmission on one, oil consumption on the other, 200k miles on each). We only have about $12k saved in the car replacement category.

We also would like to get a lake cabin, cabin in the woods, land with no cabin - something to go to get away and build into a vacation spot for us and our children/grandchildren in the future. We're in MN and looking for something in MN or WI no more than 4hrs away.

Trying to figure out how we can do this. We probably use YNAB more of an expense tracker than I'd like to admit, though we do have categories for savings (car, Christmas, non-monthly bills, similar). But when it comes to the common monthly spending categories, we probably just spend and then enter amounts in later w/o checking categories before spending. 

I've been thinking about a home-equity loan. Up to 80% of our home value. Use our car savings category to get one vehicle with some extra from the home equity loan to get about an $18k vehicle we can use to tow our boat. Then sell the current tow vehicle to make up as much of the amount borrowed to pay back right away and the rest within 6 months or so. Then also look for land/cabin, not being in a hurry and finding something as cheap but as many features as we think we'll really want/need.

I know - that last paragraph is anti-YNAB, sort of. I did have an initial call with a local financial planner. He suggested I gather all my financials and meet in person to discuss this. He's aware of YNAB and thinks it's great. My wife is not a detail person, doesn't want to talk about the finances part of this.

I haven't had a raise at work for the past 4-5 years, but my boss is making a case for me and hopefully will get something soon (he's requesting 10%). One of the main problems I see is our average monthly net income is only $549.28. I'm sure we can cut some other categories and raise this amount. I've been looking at rental cabins/land and also Air BnB for pricing, and would try to rent out whatever we would buy for land/cabin and use that to help pay for it. Even just land with a camper/trailer/tent on it in MN go for $50+ a night. Cabins are more.

Wondering if anyone has suggestions or thoughts about this.

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  • Hi,  BMW Fan !  I'm going to throw out some things to think about...if you care to come back with some more specifics, maybe I can help more.

    It sounds like you are thinking a lot about the numbers, but not about your and your wife's different emotional relationships with money.  You frame "having reliable vehicles" and "having a vacation getaway" equally as "needs".  Whether you think they are equal or not, that is what you are communicating in what you just wrote and probably what you communicate to your wife.  Based on that, I am picturing a marriage where you fit what I'd call a "reward-seeking spender" archetype, and your wife either a "reflexive saver"  or a "pain-avoidant saver" archetype.

    A reward-seeking spender sees something they want, and if it's at all possible they want to spend to get it.  They are opportunity-driven and tend not to plan very much.  This can backfire, but this personality type is comfortable just rolling with it when it does.  A pain-avoidant saver perceives infinite risk whenever any financial decision isn't adequately planned or knowable, and generally has a lower risk tolerance than most people.  They are always thinking: what if something goes wrong?  A reflexive saver saves to feel safe.  To them, it's not about if something goes wrong...saving is something they feel they can control in a stressful world.  By the time they start feeling stress, in their mind, something has already gone wrong, even if it hasn't yet.

    If she's a reflexive saver, she will avoid looking at any financial details, because thinking about them causes her stress.  In the reflexive saver's mind, stress about money and an actual money emergency are the same thing, so the reflexive saver will go to great lengths to resist learning the details.  Pain-avoidant savers are usually easier to bring around if you come at it from the angle of "if we are disciplined about this, we can avoid or mitigate most things that can go wrong".

    You said this is probably a financial, not a relationship, problem, but I disagree: you don't seem to have found a strategy for handling money that makes you feel fulfilled (what your archetype usually wants) and your wife feel safe (what her archetype usually wants).  You're trying to solve a relationship problem while ignoring the relationship.

    Here's what I'd do in your case (and I have been!  I'm a reward-seeking spender, and my husband oscillates between the two archetypes I suggested for your wife.):

    1. Don't do anything until you have gotten disciplined about your YNAB usage and forward-budgeting instead of backward-tracking.  You can't reasonably ask your wife to feel confident in these decisions when you are in fact winging it to some degree.  "Winging it" is only ever a positive thing to reward-seeking types, and it's usually not actually good for us even though we like it. :P

      For my relationship, I manage the money (via YNAB)--checking in on spending accounts about every other day and loans/investments at least monthly--but only go over it with my spouse 1-2x/month.  That's enough to let him feel comfortable that I have a handle on it and we tend to agree on things at the strategy level, but I have to be doing the work in between to make sure we are always on track, to the penny, and I can rattle off timelines for everything when asked.
    2. Be realistic about what is a need, vs. a want.  "Want" doesn't mean "not important", just that you are being realistic about what kinds of choices you are making.  When you put "vacation home" on the same plane as "reliable transportation", you wife will (understandably) lose confidence that you are managing things responsibly.  Heck, *I* lost some confidence in you when I read that.   Given what you shared about your finances, you certainly aren't broke, but you are at risk of over-extending yourself.  If you rush into two vehicle replacements and a vacation property, you will definitely be YNAB-broke and at risk of sliding into serious trouble if an unexpected health problem or other emergency hits.
    3. Understand your wife's perspective better, so you can make financial decisions that are rewarding, rather than terrifying, for her.  You think very differently.  For example:

      "Reward-seeking" types tend to pursue a process that seems interesting, and then make a go/no-go decision at the point of commitment, i.e. the point at which backing off has costs, or going forward has risks.  For example, the reward-seeking person doesn't see test-driving a car or looking at properties on Zillow as a big deal.  After all, the only thing it costs is time, and there's zero risk or cost in deciding not to buy what you saw.  You're just finding out what's out there.

      Pain-avoidant and reflexive types see those browsing activities as a commitment to spend, but for different reasons.  Reflexive types know that if they like something, they may not be able to trust themselves not to buy, even if doing so is unwise.  They see beginning the process in any way as starting some kind of momentum that may not stop.  Pain-avoidant types are trying to avoid disappointment.  If they see a really awesome car or property, or worse, their spouse falls in love with one, and then they can't buy it, it causes them a lot of pain.  In their mind, seeing the wonderful thing and not pulling the trigger on buying is the same as having it and losing it, or worse...taking away something their beloved loves.  Both have strong motivation to nip any browsing in the bud unless the plan to buy and pay is solid.

    4. To deal with just that one difference in perception, for example, I'd start taking problems and opportunities one at a time.  That will lower her stress and increase her confidence that real planning and prioritizing is going on.  It will also force you to put off your really want until actual needs have been addressed.

      Then, when I've selected my first thing to attack (getting one reliable car in the household), I'd reassure her that we're not going to even look at a vacation property or a second vehicle replacement until this one issue is sorted.  I'd stick to it.  Don't even talk about a vacation property.  Instead, decide what you want/need in that first vehicle.  Consider (for yourself, don't freak out your wife) that being more modest with the car means having more money left for other things.

      Then, after you are there, either commit to a one-car lifestyle or start figuring out the second reliable car.

      Reassess often, in case new priorities or opportunities come up that need attention.
    5. Either temporarily or long-term, consider scaling back your vacation home goal.  I'm also in the midwest and I know that the same property that I can rent for $1k/week sells for $250k or more.  I've gotten some great cabins off of VRBO or similar, and between all the parts of family I travel with, we do this for about 4 weeks/year at a cost of about $5k-$7k/year (with sometimes rather large groups).  That is *much* less than the cost of buying, and is easily scalable (go on 1-2 fewer vacations /year if money gets tight) so you are less likely to get over-extended.
    6. This may all change when you get disciplined with your budgeting if there's a lot of unnecessary spending for you to rein in.

    Finally, I don't know if it's just one of those miscommunications that happen in a text-only medium, but your post sounded like a man who "knows what's right" and wants confirmation that he is, and maybe help to convince his unreasonable wife.

    In other words: you seem to have started with the assumption that your strategy is valid, and hers is not.  You can think that way if you want, but it will put your relationship at risk.  If she's important to you, you'll attack this as a team and find a strategy that meets both of your needs.  It's not a question of right-vs-wrong.  It's a question of different priorities, strategies, and risk tolerances.

    Like 2
    • HedgeMage HedgeMage [Apologies for detracting from OP’s topic for a moment…] I’m intrigued by the financial archetypes you describe here. Are there resources you might be able to point me to that describe these? If not, you should consider writing/publishing them. I am a marriage and family  therapist, and having this resource would be helpful for my clients.

      • HedgeMage
      • Tomato_Thunder.11
      • 4 mths ago
      • Reported - view

      Sky Blue Tugboat  This is a model I've been working on for some financial literacy / personal finance workshops I expect to be teaching in a few months.  I've written up the whole thing as its own thread, so as not to derail this one.

  • Thanks for the response. It's quite comprehensive.
    I AM thinking about numbers, and wanting to crunch them in various ways to see if what we want to do is possible. If it turns out we have limits on what is possible, then that's OK. Right now we just don't know. I'm not sure I said a cabin or land is a need. It's a want, for sure. The vehicle is a need. It would cost to repair more than it's worth.

    Only the big purchases like this are the ones we have conflict about, which is probably normal. Our weekly budgeting in YNAB goes OK. I'm more of a "how much do you need in X category?" and we just go with that. There isn't much conflict on the day-to-day budgeting or spending. We spend half of our budgeting time categorizing what we already spent and the other half actually budgeting our income. I reconcile every month. We usually "budget" near one of my paydays (every 2 weeks). Every penny is accounted for.

    We have gotten 1-2 months budgeting into the future off and on, but that comes and goes as we live life. It would be great to get 6 months or a year into the future. That's a goal that I can certainly work towards.

    Your number 1 -- That's our M.O.  Not doing anything. We know the transmission has been going out for a while. We've been saving for a new vehicle. But that's as far as it gets. I'm not buying a vehicle, though looking at them online to see what would be suitable and how much they cost. But we never do anything about it - and I am smart enough to not go and just buy one.

    Your number 2 -- I don't think I put the vacation home in the same category (need) as a reliable vehicle that can pull the boat. I didn't mean it to come across that way. I used the word need as in "my wife might need indoor plumbing but I'm OK with an outhouse. So what do we agree on."  And also looking at this from an Air BnB or similar rental situation and how much more could we rent for with indoor plumbing vs. none (from a "help pay for it" angle). Not that we need a cabin. 

    Your number 3 -- You have described us pretty accurately, for the most part. 

    Your number 4 -- That seems pretty sensible.

    Your number 5 --  I come at that at a different viewpoint. Not better, just different. I'm looking at a week cabin rental (which can cost $1500-$4000/wk, depending) as an expense. Whether it's an actual cabin rental, an all-inclusive vacation in the Caribbean or something similar. However, I look at the land more as an investment. There is value with real property. Yes, there are certainly more expenses also, but in the end it should historically hold its value at least. My wife is more interested in rentals. There are pros/cons with each I suppose. I like the idea of tangible property. If we could get something that can be rented out 1 week per month at $100/night, it could help offset costs. Again, unknown because we haven't really talked about any of this in detail. We're also thinking about something our kids could use w/o spending a lot of money to go on a vacation. 

    Your number 6 -- We probably have some unnecessary spending going on. I'm going to look at our day-today type expenses (not monthly bills, mortgage, insurance, etc) and see what our averages are. Maybe we can come up with some compromises on cuts and save that for the big things. Our kids moved out in the past couple years and I'm not sure our spending has reflected that very much. I'm sure there are changes/reductions that can be made. YNAB says our age of money is 79  days. The toolkit says we have 63 days of buffering. 

    I don't know if my strategy is valid. I want to talk to her about it. And also get feedback from other YNAB'ers who may have thought about these questions before. 

  • I would start a "vacation land/cabin" savings category. I would not deplete your transportation category to fund it. And then, I'd start saving for a 20% down payment and see how that feels in the rest of your budget. It sounds like you can put at least $300/month in there already. And you will be motivated to trim the rest of your budget, when you can put the trimmage towards something exciting.  There is nothing like a really vivid goal to get me using YNAB in a proactive way.

    Then once you have enough saved for a down payment, by then you'll likely have a better handle on your cashflow and can step into planning in a sturdier way.

    If you are going to rent the cabin out, there will be lots of extra expenses. For instance I don't mind a not-great mattress but for a money-making situation, you need a good mattress. You need a coffee maker even if you don't drink coffee. You need nice fresh towels, not the old stained ones that get thrown in with the camping gear. Etc. etc. I would save for that too so that you aren't sidelined by cash flow issues before your venture really gets off the ground.

    If you have to buy another car I'd buy one that can tow, because why not if you know that's where your life is heading.

    Also you say you have a 401k but you don't say how much is in there. Have you done your retirement numbers and do you know that you are on track to retire comfortably and safely?

  • We've agreed to look at cheaper vehicles for the immediate need of replacing the one with the bad transmission so we can pull the boat. Not as expensive - up to about $6000. Enough to get by and continue saving for two better vehicles. That will take about half of what we have saved up for a vehicle.

    We talk about the land/cabin type at a later date. Maybe. 

    401k - probably not enough in it. Only about $400k in it right now with 10 or so more years of working left. Increasing the monthly investment on that will be needed. The house will be paid for by the time I retire. 

  • I think a big question is "what's sustainable?"

    My husband and I have a goal to buy a lakeside cabin in the future, too, and have thought about renting it regularly to defray costs. To get ready for it, we realized we needed to set aside what the monthly costs would be now as a way to save for a down payment and get ourselves accustomed to not having that money available in the future. The monthly costs we anticipate include mortgage, cleaning & upkeep (maybe a local caretaker?), utilities, travel to/from, furniture/household items wear-n-tear replacement, marketing the property, etc. It adds up quick! And that doesn't even include the initial up-front cost of prepping a cabin to be rentable in what is a pretty zany AirBnb market, as Ivory Storm suggested above. 

    When we looked at our budget, we're budgeting for True Expenses, have a handle on (most!) spending, and yet we're stilling WAMing a good amount every month. We've also not quite dialed in our retirement savings, which are primary for us, and want to be able to travel while we're saving for property, so that's important, too.

    After analyzing all that, we realized we're not quite there yet. We can't shoulder all of the anticipated monthly costs while keeping our budget aligned with our top priorities and having the quality of life we'd like. Our compromise is to save consistent amounts every month toward a future property and vacations and retirement while we work on lifestyle changes that will enable us to set more aside.

    I share all this to say I totally get where you're coming from! I want that, too! Perhaps dialing in your budget and pretending now that you have all the costs you'll have in that wish scenario will help you know if it's doable—or how to get to a spot where it can become doable. :)

    Like 1
      • MadDog
      • Navy_Blue_Pegasus.2
      • 4 mths ago
      • Reported - view

      Dela great feedback.  I think a lot of people consider the saving for the property and then the cost to maintain it once purchased as two very different activities from a budgeting perspective. In these types of scenarios where the purchased item will have ongoing maintenance costs, I think you should consider the budget on a continuum rather than separate activities.

      Saving for the purchase: What is the time frame? Is the purchase price fairly stable or subject to fluctuation? Are there associated fees or closing costs? Have the fees been factored in to your monthly savings? What happens if your plans change? 

      Purchase: Do you have an contingencies for the purchase? Are there other purchases required (furniture, home decor etc). Have you factored those into your plan? I think that this is a major place where people get into trouble because they only considered the primary purchase and not the other initial outlay costs.

      Maintenance: Will you convert your monthly savings into the budget for the maintenance cost? Or have you earmarked those savings for another major purchase? I think that this is a second spot where people get caught because they give the savings two jobs - another purchase and maintenance - but they don't realize it. Writing it out helps.

      Replacement costs - If the purchase is something that you expect to replace (car, boat, trailer), how and when will you fund the replacement? Is there money elsewhere in the budget? Have you considered whether or not it is necessary?

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