After suspending extra mortgage payments in March, this month I have resumed additional payments to keep moving toward my goal of being mortgage-free by Christmas of 2024. As the COVID-19 pandemic began to take hold in the United States, I suspended my extra payments because I wanted to raise cash, just in case. The pandemic is far from over, but I am comfortable enough with my financial circumstances to resume supplemental payments.
Aiding my decision is the fact that our expenditures have plummeted over the last two months. We have stopped eating out, stopped going to movies, shows, and sporting events, stopped trips to stores, and stopped home improvement projects. Some repairs and maintenance tasks that I normally would hire out, I’ve done myself. Our son suspended extra-curricular activities. We cancelled travel plans and obtained refunds. There are no summer camps for which to pay. I don’t see discretionary outflows rising much for the next few months. Accordingly, there is extra cash and little reason not to resume the assault on my mortgage.
Indeed, the pandemic motivates me more than ever to rid my family of the liability of not owning our shelter free and clear. With underemployment and unemployment numbers rivaling the Great Depression, millions of Americans are struggling to make rent or mortgage payments. They live under the daily stress of the imminent threat of being forced out of their dwellings. While low wage earners are disproportionately affected, many mid to high wage earners also are imperiled by the economic downturn, even though they have less of an excuse to be facing eviction or foreclosure. Unfortunately, myriad mid to high wage earners make good money, but they spend even better money. In other words, they are addicted to debt.
I conversed with someone the other day who was in the top five percent U.S. income bracket and had been for quite some time. He should have had no problem weathering this storm. However, he had been living beyond his means. The more he made, the more he borrowed, and the more he spent. He saved proportionally little. COVID-19 has ground his industry to almost a complete halt. His income has evaporated, and he is struggling to make payments on his expensive fleet of cars, his three homes, and his quarter million dollars in credit card balances. Paying for his spouse’s medical care also concerns him. What’s worse, he suspects the disruption in his industry accelerated trends that will result in a significant and lasting reduction in his income, even after the pandemic passes. He has two homes up for sale, but prospective buyers are scarce. He has enough cash on hand to last only three months. The noose of his debt sentence is tightening. The saddest part of his financial predicament is that it could have been avoided had he lived within his means.
Going into the pandemic, America’s consumer debt levels were at record highs. More than income problems, Americans have spending problems. No matter how much we make or how much we have, we always want more. The Great Recession ravaged the country but a decade ago. How quickly we have forgotten the brutal lessons of leading debt-fueled lives in misguided pursuits of happiness.
With Love,
P. Gustav Mueller, author of The Present
Relevant Links:
“Debt Sentence” chapter in The Present, by P. Gustav Mueller
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