Reader Case: Lost in the Rat Race on My Way to FIRE

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Sometimes you get a reader case in your inbox that screams for help and comes with a twist, so obviously I had to pick it. Read on and you’ll see what I mean:


Hello! Let me start off by saying that I’m a huge fan of your blog and investing strategy. I discovered it in 2019 and I went through your free investment workshop. In 2020 (yes right when the markets tanked) I took the plunge and invested my savings into a well balanced portfolio of ETFs. As the market recovered I made quite a bit of money that year. But somewhere along the line I got lost in consumerism and the rat race. I kept getting more and more raises at work and instead of saving more, I bought more stuff. I got into debt. I bought a condo, got a car payment, and got some cats that are costing me a fortune in vet bills/pet sitting fees as I love to travel. I don’t know how I got so off track. I knew FIRE was what I wanted and then I got caught up in what everyone else around me was doing and trying to convince me to do too. So here I am, in a bad financial situation and starting from scratch. The worst is that I am stuck in a job that I absolutely hate and have no work life/balance. I work all the time and my relationships, physical and mental health are in a steady decline. Here are the numbers:

Gross annual income: $86,000 (I make more with premiums but they are hard to predict exact numbers, for example I actually made $93,000 last year).

Net income: $63,900

Monthly spending (varies greatly as I’ve gotten into quite the consumerist habit so I waste a lot on gadgets and gear. But aside from that here are the other expenses):

Food/toiletries/household: $600

Mortgage/property taxes: $937.24

Car insurance: $165.03

Strata fees: $322.37

Condo insurance: $52.61

Car payments: $440.40

Electricity: $40-130 (depending on time of year)

Internet: $70.48

Cell phone: $39.20

Coin laundry: $22

Spotify: $11.19

Gas (varies greatly): average $350

Going out: $150-200

Cats: $70 

Debt to parents: $1000 (see details below)

Debt:

Car loan: $26,500 (interest rate of 5.99%, monthly payment is $440.40)

Mortgage: $203,865.04 (interest rate of 2.69%, 4 years remaining on term, bought last year)

Debt to parents (helped me with downpayment): $13,288 (zero interest, I’ve been paying them $500 bi-weekly but this is flexible as they are not in a hurry for the money back. I want the debt off my shoulders though).

Assets:

– Currently in an underwater mortgage so I can’t count that (it’s worth less than what I paid for it. I got caught up in a bidding war which I am not proud of. It was a massive mistake.)

– I looked into selling my car and I should be able to get approximately what I still owe on it if I do. But I lose the money that I’ve already been putting in.

Investments/savings:

– I no longer have any investments unfortunately. I used it all for my down payment.

– $3900 in savings account in cash (I’m slowly building up an emergency fund).

Okay so, here’s what I would love an opinion on and help with. In what order would you advise I do the following in?

– Pay off my debts (and which ones first)

– Save up an emergency fund for 6-12 months of living expenses (I hate my job and want the option to quit if it becomes too much and go look for something better suited to me).

– Start investing in ETFs again (so I can head back towards FIRE, I want to retire ASAP or at least find a lower paying job I enjoy).

Also would you advise me to sell my condo at this point in time or when would you advise it? Should I sell my car and take the loss to get something cheaper and more affordable?

As you can see I’ve dug myself in quite the hole. I went from being frugal and smart with my money, renting, deciding to be pet free, and saving about 60-80% of my income. Life circumstances happened and I spent all my money, got myself into debt, and bought a condo with annoying strata fees. I feel so overwhelmed and don’t know how to get back to where I was (well on the way to FIRE). I would so appreciate some advice from you guys!

Thanks for reading and thank you so much for all that you do to help people achieve financial freedom 🙂 

Sincerely,

LostMyWay


Hoo boy. This story had quite the twist ending. How does someone go from being well on the way to FIRE to digging themselves into the hole in just a few short years? Lifestyle inflation and keeping up with the Jones. Which is why I keep stressing the importance of hanging around like-minded people who won’t derail you from the FIRE path. But during the pandemic, it was easier to get lost in consumerism to fill a void when we were all banned from hanging out with other people. And even sadder is that LostMyWay made a lot of money from buying into the market dip but squandered it all on this underwater condo. And now they hate their job and it’s destroying their health and relationships. Sigh. Real estate bites another one.

One of the things Wanderer and I like to say whenever we get into a jam (which happens frequently when you travel as much we do) is “doesn’t matter what happened in the past. What do we do now?” This prevents you from spiralling into the “if only”, “what if” “this is your fault” scenarios and wasting time being stuck in the past.

Yes, LostMyWay screwed up. But from all the reader cases we’ve done in the past, there is always a way back. And when unexpected situations like this hit—housing crash, a job loss, health crisis, a stressful job—are exactly when you find out the real power of financial independence. It’s not about travelling the world or retiring early. It’s about having choices.

In order to get back on track to FIRE and having options again, LostMyWay will have to get their sh*t together and figure out how to dig themselves out of this mess.

Let’s start by Mathing That Shit Up!

Summary

Income (after tax)$63,900/year
Total expenses (including debt repayment)$4410.52/month or $52,926.24/year
Debt$26,500 (car) + $203,865.04 (mortgage) + $13,288 (Bank of Mom and Dad” down payment loan) = $243,653.04
Investible Assets:$3900 (cash)

So, given LMW’s single person’s current yearly spending of $52,926.24 and after tax income of $63,900, they’ll be able to save $10,973.76. Now, it might seem like we’re ignoring the debt, but in our base analysis, the debt payments are included in their monthly spending (don’t worry, we’ll do something more clever with this in a bit).

This means their FI number is $52,926.24 x 25 = $1,323,156.

 If they were to continue spending this way, their time to FI would be:

YearBalanceContributionsROI (6%)Total
1$3,900$10,974$234.00$15,107.76
2$15,107.76$10,974$1,564.89$27,646.41
3$27,646.41$10,974$2,317.21$40,937.38
4$40,937.38$10,974$3,114.67$55,025.81
5$55,025.81$10,974$3,959.97$69,959.54
6$69,959.54$10,974$4,856.00$85,789.30
7$85,789.30$10,974$5,805.78$102,568.85
8$102,568.85$10,974$6,812.56$120,355.16
9$120,355.16$10,974$7,879.74$139,208.66
10$139,208.66$10,974$9,010.95$159,193.36
11$159,193.36$10,974$10,210.03$180,377.15
12$180,377.15$10,974$11,481.05$202,831.96
13$202,831.96$10,974$12,828.34$226,634.07
14$226,634.07$10,974$14,256.47$251,864.30
15$251,864.30$10,974$15,770.28$278,608.34
16$278,608.34$10,974$17,374.93$306,957.03
17$306,957.03$10,974$19,075.85$337,006.63
18$337,006.63$10,974$20,878.82$368,859.22
19$368,859.22$10,974$22,789.98$402,622.96
20$402,622.96$10,974$24,815.80$438,412.52
21$438,412.52$10,974$26,963.18$476,349.46
22$476,349.46$10,974$29,239.39$516,562.61
23$516,562.61$10,974$31,652.18$559,188.55
24$559,188.55$10,974$34,209.74$604,372.05
25$604,372.05$10,974$36,920.75$652,266.56
26$652,266.56$10,974$39,794.42$703,034.74
27$703,034.74$10,974$42,840.51$756,849.01
28$756,849.01$10,974$46,069.37$813,892.14
29$813,892.14$10,974$49,491.95$874,357.85
30$874,357.85$10,974$53,119.90$938,451.51
31$938,451.51$10,974$56,965.52$1,006,390.78
32$1,006,390.78$10,974$61,041.87$1,078,406.41
33$1,078,406.41$10,974$65,362.81$1,143,769.22
34$1,143,769.22$10,974$69,284.58$1,213,053.80
35$1,213,053.80$10,974$73,441.65$1,286,495.46
36$1,286,495.46$10,974$77,848.15$1,364,343.61

36 years.


Yikes! Given how much they hate their job and how it’s affecting their health, I’m not sure they’d make it that far.

This is especially depressing, given that they were originally saving 60-80% of their income, which would have put them in a good position to become FI in just 5-11 years. Now they’ve extended that timeline by more than 3x!

Killing the Debt

That being said, when you dive into the numbers you see quite a few loan payments in the monthly expenses, specifically $1000 is going toward the Bank of Mom and Dad for their down payment loan, and $440.40 is their car payment. Let’s pay these off and see how that helps the situation.

Now, to answer one of their questions: Which loan to pay off first?

The answer is simple: The car loan. It’s the loan with the highest interest rate, so mathematically we have to direct our firehose to that one first. This also means halting payments to their parents for a while. Is this a crappy thing to do? Obviously, but our reader’s drowning right now. The time to be nice is long gone.

By prioritizing the car loan with the highest interest rate, if they stopped paying their parents now, they’d be able to put an extra $12,000/year towards killing the car loan. Which means they’d be able to put $10,974 + $12,000 = $22,974 extra cash towards killing their car loan per year. At a current balance of $26,500, this loan should be gone in a little over a year.

Then and only then should they pay back their parents’ interest free loan, which would take $13, 288 / $22,974 = 0.57 years or about 7 months.

OK so that would take about 1.6 years to kill off their non-mortgage debt. What does that do to their numbers?

With the loans gone, their loan payments drop off their expenses. So that means, their base monthly expense is $4410.52 – $1000 (Bank of Mom and Dad) – $440.40 (car loan) = $2970.12/month or $35,641.44/year.

The lowered expenses mean that their savings rate would increase to $63,900 – $35,641.44 = $28,258.56 per year. It also means their FI number will be reduced to $35,641.44 x 25 = $891,036. How long would this take?

YearBalanceContributionsROI (6%)Total
1$3,900$28,259$234.00$32,392.56
2$32,392.56$28,259$3,639.07$64,290.19
3$64,290.19$28,259$5,552.92$98,101.67
4$98,101.67$28,259$7,581.61$133,941.85
5$133,941.85$28,259$9,732.02$171,932.43
6$171,932.43$28,259$12,011.46$212,202.45
7$212,202.45$28,259$14,427.66$254,888.67
8$254,888.67$28,259$16,988.83$300,136.06
9$300,136.06$28,259$19,703.68$348,098.30
10$348,098.30$28,259$22,581.41$398,938.27
11$398,938.27$28,259$25,631.81$452,828.64
12$452,828.64$28,259$28,865.23$509,952.44
13$509,952.44$28,259$32,292.66$570,503.66
14$570,503.66$28,259$35,925.73$634,687.95
15$634,687.95$28,259$39,776.79$702,723.30
16$702,723.30$28,259$43,858.91$774,840.77
17$774,840.77$28,259$48,185.96$851,285.29
18$851,285.29$28,259$52,772.63$932,316.48

Around 17.5 years.

So that means that paying off the debt brings their FI date down from 36 years to 17.5 + 1.6 = 19.

Better, but still not great. Let’s see what else we can do.

Selling the car

Given that the car is costing them a ridiculous $440 (loan) + $350 (gas) + $165.03 (insurance) = $955.03/month, this is a good place to find some savings.

Selling the car frees up $955.03 a month which they can redirect towards paying back their parents. At the current loan balance of $13,288 and with monthly payments of $1000 + $955.03 = $1955.03, that loan gets killed off in $13,288 / $1955.03 = 6.8 months.

Of course, they’d have to add back expenses for public transportation. Let’s say $150 for a monthly transit pass.

So now, 7 months after selling the car, all non-mortgage debt would be gone, and their monthly expenses would be $4410.52 – $955.03 (car) – $1000 (parental loan) + $150 (transit pass) = $2605.49 per month, or $31,265.88 a year.

Their new savings rate would be $63,900 – $31,265.88 = $32,634.12, and their new FI target would be $31,265.88 x 25 = $781,647. How long would it take for them to get there?

YearBalanceContributionsROI (6%)Total
1$3,900.00$32,634.12$234.00$36,768.12
2$36,768.12$32,634.12$4,164.13$73,566.37
3$73,566.37$32,634.12$6,372.03$112,572.52
4$112,572.52$32,634.12$8,712.40$153,919.04
5$153,919.04$32,634.12$11,193.19$197,746.35
6$197,746.35$32,634.12$13,822.83$244,203.30
7$244,203.30$32,634.12$16,610.25$293,447.67
8$293,447.67$32,634.12$19,564.91$345,646.69
9$345,646.69$32,634.12$22,696.85$400,977.66
10$400,977.66$32,634.12$26,016.71$459,628.49
11$459,628.49$32,634.12$29,535.76$521,798.37
12$521,798.37$32,634.12$33,265.95$587,698.43
13$587,698.43$32,634.12$37,219.95$657,552.51
14$657,552.51$32,634.12$41,411.20$731,597.83
15$731,597.83$32,634.12$45,853.92$810,085.86

Around 14.5 years. Add back in the 7 months it took to kill the parental loan, and we’re looking at 15 years. Still not the original 5-11 years to FI they had before but better than 19 years from before.

What about the Mortgage?

But wait. There’s still the issue of the mortgage!

LMW is in quite a pickle with their condo purchase, because the market has dropped and they’re now underwater. That means they can’t sell without writing a check for the difference, so they’re effectively trapped in that condo for the foreseeable future.

However, one small saving grace of this reader case is that even though they blew up their finances with a condo, the price of that condo wasn’t too bad. Plus, they got in at a low 2.69% interest rate. If that mortgage balance were in the $500k+ range, they’d be screwed, but at $203k, maybe there’s still hope.

Specifically, what happens if we throw our money towards paying the mortgage off faster?

One thing that we need to consider is that even after the mortgage is paid off, they’ll still have to pay condos fees, insurance, property taxes, and utilities forever. This is a type of “forever rent” that you pay even if your property is paid off. So no, don’t listen to people who say once you pay off your house, you’re rent free. Ownership costs are forever.

First, we have to reverse engineer this mortgage. This is a little tricky since they lumped mortgage and property taxes together to give $937.24/month. Putting it into a mortgage calculator and assuming a standard 25-year amortization gave us a monthly payment of about $937, which doesn’t make sense since this amount is supposed to include mortgage and property taxes. It’s possible they meant this as only the mortgage amount, and it’s also possible that the loan has a longer amortization period. We’re going to take an educated guess and LMW can redo the numbers later on.

Using this mortgage calculator, if we put in the balance of $203,865 and an interest rate of 2.69%, and set the amortization to 30 years instead of 25, the monthly payment gets calculated as $824. If this is how their mortgage is structured, that means that their mortgage costs $824 a month, and their property taxes are $937.24 – $824 = $113.24. Again, this is only an estimate and LMW can easily redo the numbers themselves using the same calculator.

OK so let’s see how paying off the mortgage affects their FIRE journey.

Most mortgages have limits on how much you can put into your mortgage, but generally a standard fixed rate mortgage allows you to double your monthly payment without incurring penalties or fees. Check your mortgage documents to see exactly what’s allowed.

If LMW were to double the mortgage payments to $824 x 2 = $1648 per month, that would massively shorten the amount of time to pay off the loan, and save a ton of interest as well.

Source: https://www.cchwebsites.com/content/calculators/CAMortgagePayoff.html

On the chart generated by this handy-dandy mortgage calculator , the light blue line represents the original loan schedule. The yellow line is our new mortgage with the doubled-up payments, and we can see that the mortgage gets killed off in 13 years, so less than half the original time. We can also see that the interest paid over the course of the loan (represented by the dark blue and green lines) would be way less, about $55k. That’s got to have a positive effect on LMW’s FIRE journey!

In the previous section, we calculated that after selling the car and paying back their parents, their monthly expenses would be $2605.49 per month. If we double up our mortgage payments, that expense rises to $2605.49 + $824 = $3429.49 per month, or $41,153.88 per year. That means their savings rate would be $63,900 – $41,153.88 = $22,746.12 per year.

After year 13, however, the mortgage disappears. The other costs like insurance, property taxes, maintenance, etc. don’t, but we no longer have to pay the $1648 per month that we were handing over to the bank. That means their expenses go down to $3429.49 – $1648 = $1781.49 per month, or $21,377.88 per year.

Their savings rate would massively increase, becoming $63,900 – $21,377.88 = $42,522.12 per year. Their FI target would also change to $21,377.88 x 25 = $534,447. How does all this affect their time to FI?

YearBalanceContributionsROI (6%)Total
1$3,900.00$22,746.12$234.00$26,880.12
2$26,880.12$22,746.12$2,977.57$52,603.81
3$52,603.81$22,746.12$4,521.00$79,870.93
4$79,870.93$22,746.12$6,157.02$108,774.07
5$108,774.07$22,746.12$7,891.21$139,411.41
6$139,411.41$22,746.12$9,729.45$171,886.98
7$171,886.98$22,746.12$11,677.99$206,311.08
8$206,311.08$22,746.12$13,743.43$242,800.63
9$242,800.63$22,746.12$15,932.81$281,479.56
10$281,479.56$22,746.12$18,253.54$322,479.22
11$322,479.22$22,746.12$20,713.52$365,938.86
12$365,938.86$22,746.12$23,321.10$412,006.08
13$412,006.08$22,746.12$26,085.13$460,837.33
14$460,837.33$42,522.12$30,201.57$533,561.02

14 years, which is the year right after they pay off their mortgage.

This answer represents the best we can do. The mortgage is basically the limiting factor that prevents LMW from getting to FI any faster, and they can’t get rid of the mortgage by selling because their condo is underwater.

Conclusion

If I were you LMW, I would sell the car first. It’s causing you to bleed way too much money every month. Yes, it’s going to be painful since you’ll will be forfeiting the money you lost on it, but better to rip off the band-aid than continue bleeding. That immediately kills your highest interest loan. The money saved can be redirected to pay off the loan to your parents.

Next comes the 6 months of living expenses. Put that money into a high interest savings account or money market fund earning 4%. Because you hate your job, it’s good to have this FU money set aside in case you need to quit or take a leave of absence to fix your health. You don’t have enough money to never work again but this gives you the ability to take some time off to recover. Never prioritize money over health. Once your health is gone, no amount of money can buy it back.

Then invest toward your FI goal. Once you reach it, throw every last dime you have at your mortgage until you kill it. This is only under the condition that your interest rate stays at the very low rate of 2.69%. If that changes in 4 years re-evaluate. At that point if it’s above 4%, you’ll need to stop investing and kill your mortgage as quickly as possible before you can invest again.

What do you think?

Being chained to an underwater mortgage while having a hateful, stressful job is a horrible combination. In this case, unfortunately, LMW screwed themselves over by saddling themselves with debt that forces them into that exact suituation. The only way LMW can hope to get out of it is to sell the car, pay off their non-mortgage debt, restart their investment journey, and in 14 years, hopefully be able to pay off their mortgage and reach FI. What do think LMW should do? What would you do in their situation?


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39 thoughts on “Reader Case: Lost in the Rat Race on My Way to FIRE”

  1. Another issue that needs immediate attention is the gas bill [“Gas (varies greatly): average $350”].

    What in the world?! $350 average?!

    1. Yeah, that gas bill. That’s like 3-4 tanks a month. If they are driving that much to get to work, they don’t live anywhere close to work. Taking public transit over that distance may add hours to their commute. But if it’s just leisure driving then rusts am easy expense to cut.

    2. A more aggressive plan: Withdraw 3900 in cash; pay off mom 1k; prepay 2.9k rent at mom’s (lease agrmt); file BK to wipe debts, lose assets; go travel for a year; start new job when you come back and stay at mom’s for a while. Yes, there might be job search implications when you come back but just explain to employer “you are wiser for it”. But shhhhh, don’t tell anyone I told you this…

    3. Assuming gas at $1.65/L and a typical fuel efficient car at around 8 L/100 km, we’re looking at a ballpark of 30,000 km a year. I agree that is a lot. Based on the affordable condo price, my guess is that home is a fair distance from work. Either way, that’s a lot of driving, which will have a negative implication for fuel costs, maintenance costs, vehicle depreciation, and – maybe most importantly – personal free time and mental health.

      Sometimes a commute like this is a worthwhile compromise based on an individual’s own priorities and situation. I don’t know if that’s the case here, but I suspect that it isn’t.

  2. Great ideas but LMW should look at why they lost their way and how to prevent having another relapse in a few years time

    1. Yes, I thought that, too. It’s good not to dwell too much on the past, but you have to understand why you made your mistakes, or you will make them again.

  3. Get another job, man. Ideally one close to where you live. Even if FI isn’t on the horizon anytime soon, hating your job isn’t something you should put up with. It’ll make you miserable.

      1. Hi! Do you see any issue with how the FI number is calculated, considering expenses do not remain constant for 25 yrs? It may be more conservative to add an avg % increase every year (perhaps based on avg inflation data) for the yearly expense and then multiply by 25.

  4. C O U N S E L I N G. Find a therapist or something and attack the root of the problem. There are reasons that LMW’s head came unscrewed and step #1 should be addressing those reasons. Some folks can let past mistakes roll right off their back, some need an evening on the sofa sobbing into a pint of Cherry Garcia and then come back strong the next morning, some could use professional help; there’s no shame in door number three. But tackle it head-on rather than treating it as just a series of dispassionate financial decisions!

  5. I think the main thing they need to focus on is getting a more satisfying/sustainable, higher paying job. It doesn’t sound like they are likely to make huge changes in lifestyle (I mean like selling car/condo and moving to a very LCOL area)
    Having a better paying job that FEELS better to them is going to be the biggest change they could make.
    Then at said better paying job, they should Math It Up and see what extra they can put in pretax accounts towards retirement after the numbers that were crunched above.

  6. I would say if you can move back with parents short term do it. Condo rents are sky high. Use the rent from your place to offset your costs and save for a few years. The condo will pay for itself and drive down your mortgage without paying a cent. You’ll be able to pay your car off and your parents and still have an income property.

    1. That’s what I was thinking – use the condo as an investment property and move back in with the parents. Pay down all debts aggressively. Get a side gig while your at it. 🙂

    2. Or, alternatively, if it’s a 2BR, get a roommate and rent out the 2nd bedroom. Not ideal, but it could really speed things up.

  7. I get that a blog post can not exceed a certain length, but I find this analysis a bit too simplistic in that it didn’t take into account the many variables that are in play. LMW doesn’t state their age, but I’m guessing that they are young. If that assumption is correct, a significant variable would be a future partner who could split costs and/or bring capital to the FIRE pot.

    LMW also doesn’t mention where they live. Where I live, no way no how could I find a place to live for $1260 a month! So rental availability and cost needs to be looked at as well. Yes they had an affordable rental before, but can they get it again? If not, maybe buying was not such a horrible idea.

    While the interest rate is decent right now, LMW needs to keep in mind that the renewal rate may, or may not, be this favourable. One option that should be considered is to hang on to the condo now with the idea of selling it in 3-4 years time before the rate resets. By then, the amount of principal paid off and/or property price increases may mean the condo is no longer underwater and selling might be a reasonable option.

    LMW doesn’t mention what kind of a condo they bought. If it’s a two bedroom, could they take on a room mate? I used to rent out my spare bedrooms to students. It gave me some extra cash flow in the fall/winter months when the heating and hydro bills were highest, but gave me the place to myself in the summers so I wouldn’t lose my mind. Also, if we didn’t get on, I just didn’t rent to them the following school year.

    Room mates may also solve the ‘who’s going to look after the cats’ problem when LMW travels. (I don’t see any money in the budget for travel, but okay…..) Other options are making an arrangement with a neighbour – I’ll look after your cats if you look after mine – which is what I do now. Previously I was signed up with Trusted Housesitters (I was the person who looked after other peoples pets in exchange for a free place to stay). For the pet owner it was a very economical way to have their pets cared for while they were away.

    My advice to LMW is to take a deep breath and calm down. LMW – you are not in a bad place. Yes, you have a cash flow problem at the moment, but that can be sorted out. Sell the car. Pay your parents back. For the time being, think of the condo as paying rent to the bank landlord (banklord??). Re-evaluate the condo ownership question annually and decide what to do based on any new information/data. Work on improving your marketable skills and getting yourself a less toxic job. Stop buying gadgets. Live your life.

    It will all work out in the end.

  8. First thing is to find a new job that you can tolerate. Get a raise.
    Then get rid of the car. Mortgage is okay for now. Just keep paying it down. The real estate market will come back. Don’t pay extra on the mortgage payment. 2.6% is an awesome deal. You’re getting free money from the bank at that rate.

  9. I just want to say to LMW to hang in there. There are lots of reasons we lose our way. I too was doing great on FIRE closer to meeting my goal then when shit was originally mathed up. I have now lost my way. But it’s hard when you are the only one in your family doing well. You feel horrible watching everyone else struggle and you just want to help. I also lost so many family members in 2020 and 2021 I just wanted to do everything I could for those who were still alive. In some cases, there are things I don’t regret like buying the $1,000 heart medicine my sister needs monthly until the doctor would finally give her something cheaper. There are things I probably should’ve found another way to address – like buying a condo for a family member so my great nieces wouldn’t grow up struggling with homelessness like I did.

    My bit of advice is to spend each day thinking of one change you can make to get you back on track and try not to let it weigh you down mentally. You need to be able to think clearly. You made the decisions you did based on the person you are and the circumstances you were in at the time – and 2020 was a very hard time for some of us. I also agree to look for a new job. There are still many open positions. So, spend a couple days each week looking.

    Mathematically speaking, paying down highest interest first makes sense, but I would also keep building up the emergency savings. It seems like in situations like this – shit always goes south at the worst time. So, try to prepare for it so it doesn’t really knock you down.

  10. I love to see what you guys recommend! I don’t feel that I can have a low-stress lifestyle without a car, particularly where I live. So in this case, I would sell the car and buy a used one for cash for maybe 5-7k. Maybe ride public transit for a month or two to save up for that.

  11. Darn ! That mortgage is a veritable brick in the toilet !!

    …also double darn.. ‘wish there was more info on how upside-down she is on the mortgage, and also how far away parent live.

    Assuming not crazy upside-down AND good relations with parents AND parents live close by: My vote is to immediately accelerate payment to parents. Take the $3,900 in savings, round it up to $4,000 and hand off to parents as a sign if goodwill. Next, do everything humanly possible to hustle-up the mortgage deficiency so that she can actually sell it…put it up for sale as soon as within a couple thousand dollars. Simultaneously find a good home for the cats. Lastly, since she’s now in the good graces of parents on account of accelerated debt payment, look into moving in with them. Spend a couple years with mom/dad paying off remainder of debt and also building up $100K.

    When a person both hates their job and is also upside-down on their mortgage, it can sometimes require extreme drastic action in order to undo the damage…. I know… I’ve been exactly where you are, including the two cats !!

    1. I’m not sure I agree with all of this, but I do agree with finding a new home for the cats. LMW took on too much. As long as you find a good home for the cats, it’s fine. It’s better to admit you took on too much than to drown in stress. It shouldn’t be the first priority. I agree with others priority #1 needs to be finding another job, ideally closer to home that is less stressful and that pays more. Even if it pays the same, it’ll put more money in your pocket if it’s closer to home.

    1. Long term, it’s quite realistic. Here are the returns of the most expensive share class of Vanguard Balanced Index (60% total U.S. stock market and 40% U.S. investment grade bond market):

      1 Year: -4.59%
      3 Year: 7.71%
      5 Year: 6.60%
      10 Year: 7.44%
      15 Year: 7.15%
      20 Year: 7.69%
      Since Inception on 11/9/1992: 7.83%

      So all periods besides the recent 1 year period exceeded 6%.

      The future certainly isn’t guaranteed, but a 6% assumption is a little bit on the conservative side.

  12. This monthly housing payment is significantly lower than the national rent/mortgage payment averages (US & Canada) – how is the mortgage a brick in the toilet? LOL. Doesn’t everyone need a place to live? Not everyone likes having sex at their parents’ house when they’re out of high school…

  13. I will mirror some of the comments already mentioned here in that if LMW does not comprehend as to why they are “subjectively” emptying their closets to begin with, no amount of “objective” numbers is going to solve their conundrum. LMW needs to figure out that crucial piece of their puzzle first. Otherwise, the closet they just emptied out will be filled with even more proverbial junk the next time around as described in this scenario. Most times, I find the “math” is not the issue and the obvious solution lies in having the proper “mindset” as in reprogramming what has been ingrained in our DNA by societal norm and re-aligning those values and beliefs with the underlying fundamentals and principals of FIRE. This task in NEVER easy and quite challenging for most to say the least but I personally would rather walk alone than with a crowd going in the WRONG direction!

    I agree with the assessments…

    #1- the “lifestyle inflation” is a problem (ie. keeping up with the Jones’s)
    #2- a community of “like-minded” people is missing (ie. a good tomato mixed in with bad tomatoes analogy)
    #3 – the perpetuity of “unrecoverable costs” in home ownership (ie. your home will ALWAYS be a “liability” unless you either rent it out or sell it)

    ImmigrantOnFIRE

  14. In the late 50’s when the first credit card is issued, the old fashion “SLAVERY” system was transformed into the modern day “SLAVERY” machine.

    The average human brain simply cannot process the vicious cycle of credit and debt or simple put “USE FIRST AND PAY LATER” concept.

    With the exception of mortgage, paying with “CASH” is the best PROTECTION for most of you. If you CANNOT pay with “CASH” don’t touch or consume it.

    The transformation of this young person into a “SLAVE” clearly demonstrated when he/she did not have the “CASH” for the down payment of the condo.

    PAY WITH CASH…

    1. You are soooo right. They’ve made slavery appealing. It’s so frustrating seeing so many people take the bait.

      I’m definitely not a Muslim, but I can see why that religion forbids the charging and paying of interest. Over 1,000 years ago, somebody else figured out what you just said and put it into a religion. Sadly, if you leave it up to individual will power, most people will keep taking the slavery bait.

  15. “ One thing that we need to consider is that even after the mortgage is paid off, they’ll still have to pay condos fees, insurance, property taxes, and utilities forever. This is a type of “forever rent” that you pay even if your property is paid off. So no, don’t listen to people who say once you pay off your house, you’re rent free”

    While there is “forever rent”, it is impossible to find someplace to rent for 3 times my current property tax & insurance bill at my location (I don’t account for utilities since I would have to pay utilities even if I rented). I was upside down for a few years, but you have to live *somewhere*…. So there might be some value in riding it out.

  16. It should be forbidden people in these financial conditions to finance a house. It’s the greatest mistake someone can make. Actually buying any house at any price in any circumstance is, it destroys wealth in the name of a stu-pid old falacy that ” oh you have to live somewhere”
    screw that! either you like it or not, your house is not yours and it will never be not in the US not in China govt will always own it and you!!!

    1. *fallacy.

      There’s truth to what you say, but as someone who has experienced rent shock the past few years, it’s not a cut and dried thing. The “you have to live somewhere” meme is definitely abused. But there is truth to it.

      My thoughts are to keep your total housing costs, whether renting or owning, to as low a percentage of your income as you can tolerate. It’s not always easy to do because there are a lot of moving parts. But most people need to be more conservative in how much they spend on housing, whether that be renting or owning.

      And tragically, yes, there really is no such thing as true home ownership. We rent our land from the government. A lot of people don’t want to face the ugliness of that.

  17. Keep the condo and car. The car especially because that gives you freedom on where to work and to travel. It’s newer so that’s a great thing. Used cars are not reliable and insanely priced right now. Public transportation is NOT reliable and there are safety issues and Ubers can be pricey. The condo is cheaper than renting and no putting up with out of control landlord issues such as raising rent or kicking you out by selling. You have fixed housing costs until loan resets and are stable and secure. You can tell your parents you are planning on selling condo and moving back in with them. Trust me they WILL forgive your loan when you put things in those terms. Lastly, get a job you love working with great people with maybe better pay and it will be amazing. You sound young and have plenty of time to grow wealth. Lastly, definitely KEEP your pets. You would be miserable without them. Best of luck. You can be frugal without destroying your quality of life which selling everything would equate to. I don’t understand the hurry to sit on the sidelines.

    1. “Used cars are not reliable”? I hate to break it to you, but your new car becomes used the second you drive it off the lot.

      Buy and drive what you want, but I have a 24 year old convertible that I’ve owned for 12 years which has never left me stranded despite some track use. My daily driver I bought at 3 years old and 26,000 km. Cost a third less than if I’d bought it new. 5 years later I’m still happy driving that car.

      1. The cost of used cars now vs new might deflate your argument. Used cars ARE “less” reliable and MOST are not protected by manufacturer warranty. Cars over 10 years old are generally not safe and past their useful life. In Fl the statute of repose on product liability claims is 12 years. I had a Range Rover for 12 years which I loved but traded for a Volvo XC 90 after it abruptly became unstable at highway speed on one occasion unknown as to why and stalled repeatedly in bumper to bumper traffic also unknown why. Also the seals were breaking down and leaking fluids. I am always stunned by frugal millionaires who play martyrs driving their old Camrys and the like. To each his/her/they own but a decision to choose to drive old vehicles impacts others. Newer vehicles are better with emissions so better for the environment and allows other drivers to roll down their windows without choking on the exhaust from an older vehicle that should be retired. We are fortunate to also have a TESLA which has 0 emissions and reliable without all the moving parts associated with a gas engine and fun to drive as well. Long and short is keep your newer car if you can handle the payment.

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