Welcome to Money Talks, a series in which we interview people about their relationships with money, their relationships with each other, and how those relationships inform one another.
Running Balance is a newsletter about a family of four living at 200 percent of the poverty line. Mrs. Running Balance is bringing in the family income, Mr. Running Balance is a stay-at-home dad, and they have a 3-year-old and an 18-month-old. The Running Balances recently declared bankruptcy and are sharing their income and expenses online so people can understand what it’s really like to raise two children in Houston on $47,000 a year.
The following remarks have been lightly condensed and edited for clarity.
Mr. RB: It’s been this kind of weird learning curve, especially since having kids. When you’re two single people living around 200 percent of the poverty line, you can be as flexible as you need to be. Once you have kids, you can’t put off something for them. You become so much more acutely aware of where your finances are falling short.
Mrs. RB: In 2014, when I was 28 years old, I moved back to my hometown and accepted a receptionist position making $33,000 a year. I was single, and I was like, “I think I can make that work on my own!” Then I called my now-husband, who was my former high school boyfriend (we dated for, like, a week in high school), and he was living with his parents while freelancing and going to school, and then we just kind of moved in together, and then we just kind of got married, and then we just kind of had kids, and there was no real point where we got financially prepared to have kids. It was just like, oh, this is happening.
Mr. RB: We’re in a major metro area, so rent is very expensive, especially if you need to find room for kids. We’re living in an 800-square-foot apartment with a 3-year-old and an 18-month-old. [Editor’s note: Rent for this apartment is $1,050 a month.] Until very recently, most of the rest of our money went toward credit cards.
Mrs. RB: When our bankruptcy attorney pulled my credit report, it came out to about $53,000 in debt; $9,000 is from a joint card I had with my mother that I didn’t know about, so that isn’t technically ours, but the rest is for sure.
Mr. RB: Having kids turned out to be a lot more expensive than we thought it would be. Literally the process of all those appointments. During the pregnancies for both of our children, Mrs. RB was still hourly, so anything you’re missing for a doctor’s appointment is actual hours off, and both times she had to go on bed rest for high-risk pregnancies. That’s a huge part of our debt.
Mrs. RB: My husband and I came up with an estimate of about $7,000, which includes $5,000 in lost wages, combined over the two pregnancies. We were so lucky, too, compared to a lot of people. I didn’t get maternity leave, but I got short-term disability, so I was really lucky that I was able to get 80 percent of my pay while I was on bed rest and for 10 weeks after both of my C-sections. But taking a 20 percent pay cut on back-to-back years was a real hit financially.
We started putting things on the cards in emergencies — there were times when we would go out to eat where we probably shouldn’t have because we couldn’t afford it, but more often we would spend all the money we had and then we’d need to get diapers or formula or groceries, and it would go on the credit card, and the next month the credit card minimum would be higher, so we’d pay the minimum and would have less money for groceries and diapers and formula. So it kind of got to be this vicious cycle.
Mr. RB: We started considering bankruptcy when we began thinking about moving states, from Texas to Washington, and were looking at, “Okay, if we want to move into a job search and possibly have to go off any kind of savings and start really trying to save money, how much would we need to save?” We are lucky to have the opportunity to stay with a family member when we get there, so we won’t have to immediately save a first-last-deposit situation, but we started looking at it and said, “Oh, we’ll never be able to save enough money to last even a few weeks, not with the amount of debt payments we’re making.” Even if we don’t have to pay rent for a month, there was just going to be no way.
I looked at Mrs. Running Balance one day and said, “We don’t have debtor’s prison. We could just not pay this.” She was like, “But then how would we get a house?”
Mrs. RB: I’m a really big rule follower, so I was kind of screaming internally when he said that. But then we came to the realization that if we ever wanted a house, we have no money, so we’d have to save money — and we can’t save money the way we’re doing now. So if a bankruptcy is going to be on my credit report for seven years, we weren’t going to be able to buy a house in that amount of time anyway if we didn’t declare bankruptcy.
Since that was really the only reason holding me back — also the rule-following, and the stigma of it, that was something to get over — we just realized that, in our case, maybe it did make sense to clear it out and start over.
We reached out to a bankruptcy lawyer and did a consultation, and she had us write down all of our debts and all of our assets, and then she said, “This is a pretty clear-cut Chapter 7 case, and you’ll be able to walk away from it. You’ll be able to keep your car if you keep making your payments, and you won’t have to give up your clothes or your children’s toys because there are exemptions for all of that.” So we went ahead and went forward with that, and although we’re still in the process of finalizing it, it’s been such a huge relief. Like, the mental stress of it, I can’t even describe to you.
Mr. RB: When I was 21, I was living check-to-check and I took out a payday loan under the advice of a neighbor. Then I was under the same payday loan for a year and a half, because if you’re somebody who’s taking out a payday loan, you’re never going to make up that initial shortfall to pay back the loan and the interest and also not need money for rent and food and living.
The credit cards — I kind of realized that it was like a payday loan in slow motion. You were never going to make up the shortfall without a significant positive financial change.
Mrs. RB: We just realized that we were never going to make enough money, unless — and this is literally how I paid off my student loans, my father died and I used his life insurance policy to pay off my loans. That’s kind of where I was with the credit cards, where I was, I don’t know, going to pay the minimums for another 20 years, until one of us got an inheritance and we could clear them out.
Mr. RB: I think the single biggest big-picture thing for us, having the two kids, is looking at a house before they’re out of elementary school. I grew up sharing a bedroom with my twin brother for most of my childhood, and being just on top of each other, there’s no space to do anything in a small apartment, and that was the biggest impetus for the bankruptcy. It was like, “Oh, we’re never going to get out from under this.” We were never going to be able to afford a house.
In researching bankruptcy, one of the No. 1 scare tactics is “no matter how far you are in debt, whatever you do, don’t declare bankruptcy because people won’t want to give you a home loan.” But if you’re so far in debt, it’s not like you’re on the precipice of homeownership. It’s not like, “Oh, if we could just make the payments for a couple more months, we’ll be in a four-bedroom.”
Mrs. RB: I grew up in apartments inside the city with a single mom, and we moved every year or every two years, and that’s something I don’t necessarily want my kids to have to do. It was fine, but to have a better sense of stability for them is something that’s important to us.
Mr. RB: As soon as we stopped paying the credit cards, we were all of a sudden saving money. The ever-increasing credit card debt we found ourselves in was kind of a budgeting boot camp, because we were like, “We have to stop putting money on these cards but we have to keep making the payments.” Now that we’re not making the payments, we have the same financial discipline, but the money is not just evaporating. We have a small savings account now — literally very small, hundreds of dollars, but it’s there.
Mrs. RB: Our biggest struggle is eating outside of the house, but other than that, we’ve cut our expenses pretty close to the bone.
Mr. RB: It was insane to find ourselves so far in debt, because we have none of the physical things that you’d associate with people winding up in debt. We don’t have a fancy car, we don’t have a lot of clothes — I think both of us have five outfits each — and our TV cost $108 from Walmart.
That said, the theme of the Running Balance blog seems to be “sometimes you have to get Chipotle.” Our family is struggling, but we just spent $23 on chips and salsa. We used to say that we would never eat out, but any time you say you’re never going to do something, you actually end up doing it more. Instead of having the planned release valve, you end up saying, “This just has to happen today.” Then, two days later, because it’s not on the schedule, you say, “Okay, more Chipotle!”
Mrs. RB: This is our first paycheck where we’re actually budgeting for eating out: $50 per paycheck, or $100 a month. Honestly, budgeting $100 a month toward eating out still feels a little outrageous to me, even though I know we’re spending that much even if we don’t budget. With two kids and a tiny apartment kitchen, to be able to get a meal outside of the house once a week is a reasonable goal.
Mr. RB: There’s nothing our kids hate more than seeing me on the other side of a baby gate with a bunch of hot pans going. Plus, when you’ve got two howling babies and your partner says, “Why don’t we get fast food, I had a terrible day,” the emotional stakes of going, “No, I don’t think that should happen; tell me more about how bad your day was, but no greasy nuggets for you,” are pretty high.
Mrs. RB: There’s a lot of talk in the news about people who receive government benefits and people who are in poverty, and it’s really hard to see those people as human sometimes. Part of starting the Running Balance newsletter, for me, was to put my voice out there. I’m a nice person, I work a good job, but we are also struggling. I wanted to shine a light on people who have the same kind of issues that we do.
This interview took place before the spread of Covid-19 changed many of our lives; I got back in touch with the Running Balances to learn how the coronavirus was affecting them financially, and here is Mrs. Running Balance’s response:
Mrs. RB: I’m so, so lucky that my job is letting me telecommute for the foreseeable future, so we aren’t worried about making rent or paying bills.
My bankruptcy lawyer finally got back to me after a period of no communication and gave me a case number, which means everything has been filed and I should get a court date in the mail by the end of this week. (Assuming courts stay open?) On top of the virus stuff, I’ve been getting about five or six calls a day from credit card companies, so that will be a huge weight off.
We dipped into savings to get more groceries the day before payday (last Friday) because our usual grocery store got cleaned out and I was admittedly spooked by it. We went to a different grocery chain near our house and stocked up on five gallons of milk (not as drastic as it sounds with two toddlers), eggs, diapers, potatoes, and some household essentials we were running low on. (A package of toilet paper, dish soap, laundry detergent, and tissues.)
We did break our one-streaming-service-at-a-time rule and signed up for a trial of Disney+ that we’re probably not going to cancel.
I’m expecting to spend more on charging the car this month since I’m not charging for free at work. I’m also expecting to have to pay overages for data for our home internet with all of the streaming we’ll be doing, not just kid shows but also virtual meetings that I’ll need to be in. But we have almost no other expenses since we can’t really leave the house.
We haven’t eaten out in a week and have no plans to going forward. It just feels like too big of a health risk.
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