Home Economics No. 46: A family in the Chicago suburbs earning $475k with $110k in debt

I’ve got to be honest: I’m nervous to share this edition of Home Economics. I think it could make some people mad. Readers typically have strong feelings about high earners.

One thing that I find interesting after years of working on Money Diaries, CNBC Make It’s Millennial Money, and now Home Economics—plus just generally following any and all kinds of salary/money transparency type stories—is that commenters tend to be judgmental of anyone with credit card debt, but they get downright angry when they feel like high earners are making bad money decisions.

And I guess I get it? If you’re struggling to make ends meet on $70,000 a year, and you see a family earning more than six times that also struggling to pay their bills, it probably doesn’t feel great. But also, why do we assume there’s a correlation between earning a big salary and being good with money? 

In the case of today’s Home Ec, the family hasn’t always earned such a big income. The husband went from making $70,000 for most of his career to getting a huge bump to $300,000 in 2018. With the raise came a move from a low-cost-of-living area to a ritzy Chicago suburb.

“We’ve been stuck on the hedonic treadmill,” today’s writer told me. If you look through their expenses, you’ll see they aren’t spending outrageous amounts on travel or luxury cars. And yet, they find themselves regularly relying on credit cards to pay their biggest expenses with the plan to pay them off once the annual bonus clears. But during that window, they get hit with high credit card interest charges. As a result, they have little to show in terms of retirement or college savings. 

So why even share this entry if we think it’s going to make people mad? I often worry that many of the Home Ecs we share are from people who really have their financial shit together. My two recent favorites were the single mom in Idaho, who has a lot in savings but still spends money on Botox, and the nonprofit exec in Maryland, who loves to buy nice clothes but also donates $7,000 a year to charities. Their stories are admirable and aspirational, but is it how most people live? 

At The Purse, we want to share all these stories, even the messier ones, because we think they are worth telling. Even if it makes readers a little crabby. And it’s never a bad idea to consider why a certain Home Economics pisses you off, and what that says about your own money feelings.

I hope it will also encourage more women with less-than-perfect finances to share their Home Economics. We’re always looking to tell diverse stories with a wide range of incomes and locations. You can fill out the form here.

While this entry is open to everyone, I’m limiting comments to paid Purse subscribers. If you do comment, please be kind! It’s a real person who wrote this, and she was very generous to share so openly with us.

Age: 46
Location: Suburban Chicago
Relationship status: Married
Age of partner: 45

About me: I’m a stay-at-home mom of three (two teenagers and a second grader) in the Chicago area. Our oldest child will start college this fall, and we are in the somewhat common position of not having much saved for college, not qualifying for financial aid, and feeling stressed. I also still have student loans from a master’s degree in library science from 20 years ago.

Income:

1. Your job title/salary: Stay-at-home mom, $0
2. Partner’s job title/salary: Wealth strategist, $300,000 base salary plus $175,000 annual bonus. This year, his bonus is going to be about $57,000 in stock options that vest over three years, and the rest will be cash. He’s receiving an additional $21,000 in stock options as well this year. The bonus is paid out mid-February. 
3. Your monthly take-home pay (paycheck amount after taxes and other deductions): $0
4. Partner’s monthly take-home pay (paycheck amount after taxes and other deductions): $13,750
5. Total monthly income: $13,750. We don’t consider the bonus to be part of our monthly income. We typically just use it to pay for big-ticket expenses (like summer camp for the kids) and pay off debt (we have about $30,000 in credit card debt right now).

Account balances:

6. Checking account balance: $5,294
7. Savings account balance: $500
8. High-yield savings account balance: $0
9. Monthly contribution to savings account: varies
10. Retirement account(s) balance: 
    • My husband’s 401(k): $182,103
    • IRA:  $18,580
11. Monthly contribution to retirement accounts: $1,000. My husband’s employer offers a dollar-for-dollar match up to 5% of eligible pay after one year of employment, and annual company contribution of 2% of eligible pay, which doubles to 3% after 10 years of employment. He only just started the job last year.
12. Cash management account balance: $4,838
13. Monthly contribution to investment accounts: $3,000. We just started this in January.
14. 529 account balance: $0
15. Monthly contribution to 529 account: $0
16. Emergency fund balance: Our cash management account functions as our emergency fund.
17. Goals-oriented savings accounts: $0
18. Equity/long-term cash incentive plan: $65,000. This is the stock option portion of my husband’s annual bonus. He just started the job last year, so it doesn’t reflect this year’s bonus. It’s a little confusing, but it’s actually a separate amount that he’ll be given over the next three years because he started a new job, and they’re basically paying him for stock options he had at the last job. His stock options for his annual bonus are separate, and he’ll get $78,000 this year.

Total in checking, savings, and investment accounts: $276,315

Housing:

19. Size of your home: We live in a 3,000-square-feet, five-bedroom, four-bath home.
20. Mortgage: $1,850
21. Current home value: $750,000
22. Current mortgage balance: $417,113
23. Year you bought your home: 2018
24. Price you paid for your home: $615,000
25. Mortgage interest rate: 2.50%. Our monthly mortgage payment was about $2,200, with a 4.5% APR, until 2021, when we refinanced.
26. How much was your down payment? $123,000 plus closing costs
27. How long did it take you to save for the down payment? We weren’t first-time home owners when we bought this home—we owned three homes before this one. We bought our first home in Houston in 2008 for $215,000 and only lived in it for eight months! We bought our second home in a Cleveland suburb for $150,000 in 2011 and also only lived in it for eight months. We purchased our third home in 2013 and lived there until 2018. That house cost us $235,000. We saved for a year and half to buy that home and only put 3% down. We sold it for $268,000 and had about $185,000 left on the mortgage. We used some of the equity as the down payment for our current home.
28. Did you have any family help buying your home? We’ve had some help with the purchase for three of our four homes. My mother-in-law gifted us the 20% down payments for our first two homes. For our third home, we managed to make a very low down payment and didn’t need family support. My dad died in 2017, and he left me about $350,000, and we used some money from that account toward the down payment on our current home.
29. Property taxes: $18,500 annually
30. Home insurance: $4,728 annually
31. Electricity: $217
32. Water: ~$1,100 a year for water, trash, and recycling, paid quarterly
33. Natural gas: $225
34. Cell phone: $280 for two adults and two teens 
35. Internet: $91
36. Housekeeper: $276
37. Gardener: $250 for monthly landscaping between April and November

Transportation:

38. Monthly car payment: $1,100 for two leases (one SUV and one minivan) with three-year terms. Both began last July.
39. Car insurance payment: $439 for two adults and one teenager
40. Gas: ~$150
41. Car maintenance: Included with our leases
42. Parking: ~$200 annually for occasional trips into Chicago
43. Monthly public transportation: $75. Comes out of husband’s paycheck pre-tax.
44. Rideshares (Uber, taxi, etc.): ~$500 annually

Children:

45. Number of children and their ages: We have three kids, ages 8, 14, and 17.
46. Day care: N/A
47. Nanny: N/A
48. After school: N/A
49. School tuition: N/A
50. Babysitter: $10 an hour for sibling babysitters for our youngest, roughly 12 hours a month
51. Extracurricular activities: $3,000 per year for club volleyball for our middle daughter
52. Summer camp: $7,000 for day camp for our youngest
53. Other: $2,444 per child for the two teens to go on a choir trip to Disney World

Debts:

54. Student loan total balance: $80,000. Ugh, I wish I had used some of my inheritance to pay these down. I originally went to grad school at a large public university to study human computer interaction. The program had been billed as UX design for English majors, but after I enrolled in the program, the career counselor convinced me I’d be better off going into library sciences. I was never really passionate about being a librarian, and ultimately, I feel like I spent a lot of money on a degree for a job that doesn’t pay great and I never loved. I did work as a librarian for a while, but we were always moving for my husband’s job, and it made it difficult to find work. These loans have been in forbearance in the past, and interest compounded when I didn’t pay them, so the balance is higher now that it was when I finished my degree.
    
    My husband’s parents paid for his undergrad and law school degrees.
55. Student loan monthly payment: $380
56. Personal loan total balance: N/A
57. Credit card balance: $30,000 spread over four cards, with an average interest rate of 25%. We did balance transfers to two credit cards with a 0% interest rate, but unfortunately the locked-in rate expired this fall. We just added another $6,500 to this debt for day camp.
    
    We tend to fall into a cycle where we’ll have some very big expenses that we put on our credit cards, the debt will build up, and then we’ll pay them off once my husband’s bonus comes in. For example, a lot of this debt is leftover from the two bat mitzvahs we threw our daughters in the last few years. They weren’t even over-the-top events, but they did cost more than we had cash on hand to cover. 
    
    I don’t like letting the balance build up because we end up paying so much in interest charges. It’s a cycle we’re trying to break.
58. Credit card monthly minimum payment: $517
59. How much do you spend on your credit card(s) each month: We’re trying to use our debit card more in an effort to curb our credit card debt. Right now, we probably spend around $500 to $1,000 a month. But we also just put the summer camp expense on a credit card.

Food:

60. Groceries: $1,800. My husband wants me to cut this down to $1,000 a month, but I’m not sure how I would, as our kids eat a lot, especially because one is an athlete. I also pack a lunch for the youngest to take to school every day. I cook at home four to five nights a week, and I shop at Whole Foods, a local food co-op, and Costco for bulk snacks and other supplies.
61. Dining out: $2,000. We usually get takeout on Fridays and have lunch out as a family on Saturdays, and my husband and I do one date night a week. While my oldest has a job and earns some money to cover some of her expenses, we give both our teens money for them to eat out.

Socializing and Entertainment:

62. Subscriptions (streaming services, magazines, etc.): $500, which includes Substack and Patreon subscriptions, The New York Times, HBO, Netflix, Amazon Prime, and I think some others. It’s too much!
63. Memberships (museums, etc.): $0
64. Movies, concerts, other events: $20. Usually just one movie a month—I have a friend who likes to see movies!
65. Entertaining and socializing other: $0
66. Hobbies: $0
67. Travel: We don’t travel a lot. We go to Indianapolis every year for Thanksgiving to visit in-laws, and we have taken a couple of trips to the D.C. area to visit family on my side over winter break. Last October, we went to the D.C. area for a cousin’s wedding, and we spent about $3,500 on airfare for five, an Airbnb, a rental car, and meals out. We hope to travel more, because I know the kids love it, and we do, too.

Miscellaneous:

68. Clothing: ~$5,000 annually for the five of us
69. Home supplies: Included in groceries
70. Exercise: $0
71. Personal and self-care (haircuts, manicures, massages, etc.): $2,000 annually for haircuts for all, coloring for me five times per year, and pedicures about three times a year for three of us.
72. Pet expenses: $70 for cat food and cat litter
73. Pet insurance: $0
74. Donations: $0
75. Tithing: $0
76. Events (birthday parties, etc.): $1,500 for three birthday parties for the kids and $400 for two birthday dinners for the adults

Insurance:

77. Life insurance: $334 for a 10-year term policy for my husband. I think we have $4 million between this policy and one through his employer.
78. Health insurance: $1,000 for the five of us, including dental and eye. This comes out of my husband’s paycheck
79. FSA contribution: N/A
80. FSA balance: N/A
81. HSA contribution: $500 pre-tax
82. HSA balance: $800
83. Other insurance costs: N/A
    

Total monthly spending (includes annual expenses divided by 12 and rounded to the nearest dollar; includes monthly credit card minimum payment but not last year’s travel expenses): $14,788

Tell us more:

84. What are your top financial priorities?
    Paying for college, funding retirement, and eventually buying a home with more land for gardening.
    
85. How do you feel about your current financial situation?
    It feels like we have a great income but little to show for it. My husband will receive a $175,000 bonus this year—a mix of stock and cash—and it’s the biggest of his career. For the last six years, the bonus has been about $100,000 a year. We find ourselves paying for our property taxes, camps, vacation, and credit card bills with his bonus and never saving any of it. It has never felt like there’s enough left over.
    
86. How is your financial situation or approach different from 5/10/15 years ago?
    My husband hasn’t always earned such a big salary. From 2011 to 2017, we were living on $70,000 a year, while my husband worked as a lawyer for a small firm, and I stayed home with our small kids. In 2018, on sort of a whim, he applied for a job in Chicago that paid $350,000, and he got it. It was pretty thrilling at first to start earning that much money, but when we moved from Indianapolis to Chicago, everything was much more expensive. The lifestyle where we live now is very different, and I feel like we’ve gotten caught up in the hedonic treadmill. Despite the fact that my husband has a current income of $475,000 a year, we still feel a huge amount of financial insecurity. 
    
87. What are your money stressors?
    Paying for college and saving enough for retirement. Because of my husband’s salary, we don’t qualify for financial aid, so we’ll be paying full-price for our oldest to attend her first-choice college.
    
    We are trying to get into a better place financially and start saving more for retirement and keeping enough cash on hand to cover all our expenses. Once we pay off this round of debt, my husband’s bigger monthly income will allow us to stop using credit cards, and we’ll start putting more into retirement. My husband has a whole plan.
    
88. Do you expect to receive (or have you received) an inheritance from a family member?
    Yes, we expect to receive an inheritance of a home and a somewhat large amount of cash from my husband’s mom and stepfather. They are 75 and in decent health, so we can’t count on this being any time soon, and we wouldn’t want it to be soon.
    
    I received around $350,000 when my dad died in 2017. Honestly, we didn’t spend the money wisely. Part of it went to the down payment on our home. The rest of it went to paying a baby nurse/night nurse for the first six months of our third child’s life, furnishing the new house, and paying for day camp that first summer for the two older kids. I had severe postpartum depression after our third was born, and I think spending on these things was one of the ways I coped. I don't regret spending on the night nanny service, which probably cost something like $75,000 for those six months, but I do regret spending so much on furniture and other miscellaneous things.
    
    
89. Do you receive any financial support from your family?
    My husband’s mom pays $400 a month for a lease for our teen daughter’s car, but we don’t expect her to do that beyond the current term of the lease. This lease is in my MIL’s name.
    
90. Do you financially support any family members beyond yourself and your nuclear family?
    No. My parents had very little money when I was growing up, but they were more comfortable by the time they retired and passed away.
    
91. How do you and your partner split your finances? How did you decide to go that route?
    We share everything, which is especially important because I have no income of my own. We decided to share once we got married, when we were still making two incomes. It wasn’t always my plan to be a stay-at-home mom. But we moved around so much for my husband’s job, and it was always hard to find new librarian jobs. I just got more and more discouraged. Ultimately, it felt like the choice was made for me.
    
    I don’t know if I’ll ever go back to work full time. I would like to have some additional income to cover additional costs—like travel and owning some land so we can do more gardening—and contribute to household expenses.
    
    My husband and I have been together since we were 19, and while I think we have a strong marriage and that he would never leave me, there’s always a little fear about not having my own money.
92. What are you willing to sacrifice to meet financial goals?
    We don’t travel much, which I miss. I think we’re going to need to cut out much of our dining-out budget in order to pay for college in the fall.
    
93. What are you NOT willing to sacrifice to meet financial goals?
    We’re paying almost full price for our daughter to go to her first-choice college. (She did get a small merit-based scholarship.) I know how important it is for her to go to this school, and I’m willing to make other sacrifices in order to make sure she can attend.
    
94. Tell us about one financial accomplishment you're proud of.
    I love being able to support our kids in their extracurricular activities and summer camps. Growing up, summer camp was so important to me, and I know my kids have had a similar experience. It’s expensive but worth it.
    
95. What is one financial goal(s) you still want to achieve?
    We’d like to retire in about 20 years. We will be saving more and spending less on things like groceries and dining out.
    
96. What do you regret spending your money on the most?
    My graduate degree in library science. I don’t use it, and I shouldn’t have paid full price for it with student loans.
    
97. What is one thing you spend money on that makes your life better?
    Summer camp—both day camp and sleepaway camp. It’s been such an important way for our kids to unplug, find new interests, grow independent, and make new friends.
    
98. What is one thing you spend money on that drives you crazy?
    We spend so much money on dining out/food delivery and food in general with three kids. It feels like I’m always trying to save money here, but the kids are constantly hungry, and food is always running out, even though I cook dinner five nights per week!
    
99. Is there anything else you would like to add?
    We know that we’re lucky to have a high income, but both of us have money insecurities from experiences growing up. I grew up with parents who made under $50,000 in today’s dollars most years, and my husband grew up with much more but lost his father (the family’s primary earner) when he was 20.

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