Comment by neogodless | Hacker News Reader

Comment by neogodless | Hacker News Reader

How does this math work?

They take home $8070 [0].

The mortgage might be $2130 (assuming $360k house, $300k initial mortgage @ 5%) [1].

Credit cards of $50k - if they put $1000 on it each month @ 12% that's 70 months to pay off [2].

For $51k of student loans, lets say they are paying $985/month (which would take 5 years [3].)

So far I've used up $4115 and have $3955 left. Let's assume they pay $2000 for childcare and $1000/month for groceries for a family of three. They'll also have utilities and insurance payments to make. These are all insane number in my opinion, and I was already generous with overpaying on the credit cards and rapidly paying towards the student loans. Now they've only got $955/month left (which some people are actually able to live on.) What did I miss from their budget and which of the numbers did I get wrong?

I'm not saying the article is wrong. I'm saying what was the point of their example household?

[0] https://smartasset.com/taxes/connecticut-paycheck-calculator...

[1] http://www.calcxml.com/do/mortgage-calculator?skn=292#calcou...

[2] https://www.bankrate.com/calculators/credit-cards/credit-car...

[3] https://www.bankrate.com/calculators/college-planning/loan-c...

The article could have maybe picked someone more sympathetic.

These folks are actually doing quite well. And their housing is quite affordable.

But, you know, they ran up a bunch of consumer debt, including $8k on a high-interest TJ Maxx card...

The story here is of a middle-class couple overspending on consumer goods.

You forgot to factor in UberEats, Disney trips, and other one off expenses that end up easily being $75+ a pop. Expenses that some people would budget for a week or two (or longer), people are easily spending on a single event. That hefty $4000 in your checking account quickly dwindles down to nothing because they spent $500 bucks over the weekend on multiple UberEats and a quick run to the mall.

I think this is the right response to the gp's budget item enumeration.

People don't naturally pay the minimum for each necessary bill and never buy anything else. They have a stream of money and tend to spend it on what they see their costs are now.

Some adults are cognizant of future planning and are detailed with their budgets (past, present, and future), but I suspect most are too tired from working + raising kids to spend the extra mental effort to budget carefully and stick to it.

> balance of approximately $7,500

> about 23 years to pay it off

i'm guessing that's much much higher than 12% interest, although we don't know what the minimum payment is.

i just looked at this site (TJMaxx isn't available in my country [thankfully?]) and it's nearly 30%:

https://www.supermoney.com/reviews/personal-credit-cards/tjx...

not sure if correct but i've never seen 12%, only mid 20s

> not sure if correct but i've never seen 12%, only mid 20s

I think there are three classes of interest rates: - teaser rates (very low, but only in the first x months, then they reset to a standard rate) - standard rate for decent credit - default-risk rate -- card holders are moved to this rate by a clause in their contract if they default on any credit obligation on their credit report or if they miss a certain number of payments on the "due by" date.

I'm using my own terminology; no idea what industry jargon is for these.

Off the top of my head:

* Medical Insurance * 401(k) Contributions * HSA/FSA Contributions * Commuting Expenses * Auto Loan * Gas * Auto Insurance * Property Taxes (unless you rolled that into the mortgage) * Home owners insurance

All of that will easily chew up that 955 left a month. And, that doesn't even take into consideration a date night or two a month, and general keep me out of a depressive state stuff.

I did mention insurances, but missing their auto loan was a big omission! I used the estimate on the linked page for mortgage, which includes property taxes and insurance.

So that leaves the optional retirement and healthcare savings, plus commuting/gas (which may have some overlap.) And again I was going really high on the debt payoff estimates, groceries, and hopefully child care (though I have seen even worse.)

But yes if have student loans, but then choose to take on a car loan and a mortgage payment that stretches you thin, you start to have to choose between savings, debt pay off and fun things including eating out and more expensive forms of entertainment.

The snapshot isn't the complete picture, but they definitely look like they are in a perfectly reasonably situation, and they could have those optional debts paid down relatively quickly, which would massively ease up their budget.

Two cars at $706 a month each.[0]

[0] https://www.nerdwallet.com/blog/loans/total-cost-owning-car/

Even if you buy your cars cash, unless you already have that much liquid sitting around you've gotta be saving hundreds every month to prep for the next car and for major repairs to the current car. You're either saving hundreds a month for future car expenses, already have a large savings (so, not these folks), or you're 100% for sure guaranteeing future debt.

[EDIT] which is to say that even without a car payment, you better be saving the equivalent of at least half a car payment a month, or you're probably falling behind.

Car payment, insurance, food, gas, tolls, oh and healthcare.

The mortgage would actually be closer to $1600 unless I'm missing something.

Taxes & insurance.

Reply on news.ycombinator.com