A couple I know recently welcomed their first child. The husband, an engineer by profession, was the sole breadwinner. He lost his job in this economic downturn and has been unemployed for the last few months. So? There are probably hundreds of thousands of people in a similar situation i.e., single income families, with a baby to boot, searching for light at the end of the tunnel. Yes but not many would have the small matter of a 350K+ mortgage and car payment on a shiny new Honda toy to take care of! I do not know about other debts they carry. The wife is in no position to work (with a baby to look after) and the husband is on the lookout for a job in his field, while taking heart from the fact that he has a job in customer service at the local supermarket (no offense to customer service people – I’m just highlighting the fact that he has taken a severe pay cut).

Forget about emergency funds; they may or may not have had one. They will ride it out and things may hopefully be rosy again. What irks me most is the fact that couples (single and dual income) stretch every dollar to lead a great life in the eyes of their neighbours. No, I’m not going to rant about people who keep up with the Smiths and Joneses. But, would it not be better to wait a couple of years before jumping into such expensive mortgage commitments? Would it hurt to drive a late model car for a few years and then go for a new one, once the wife gets to work again?

Obviously, it is easy for me to go on a spiel with the benefit of hindsight. The talk of emergency funds, living within your means, etc. seems to have spread like wild fire, thanks to the efforts of personal finance blogs and TV and radio shows. When the economy gets back up on its feet (yes, the stock market is running a 100-metre dash but the economy is picking up at a slower pace), however long that may take, people would do well to remember the lessons learned during the time of doldrums. As raging as the next bull market may get and as low as the unemployment rate may go, the basics still shouldn’t change. Building up an emergency fund, delaying gratification, staying out of credit card debt, making wise investment choices by keeping expenses low, etc. are time-tested methods. There is enough material available about these topics on the web that one can feed off for free!

Change is permanent but greed and gullibility seem to be constants too. I hope people don’t treat these experiences as some chapter from a school chemistry textbook that holds no value to the majority of the population in their post-school life. Will I be made to eat crow in a decade or so, when the economy is doing well and people are still living great lives by avoiding consumer debt, pursuing passion, etc.? I’d gladly do so but that’s going to happen only if people start to fear unnecessary debt (the nonmortgage, non-educational kind) and resist living to please the world!

Clark is a twenty-something Saskatchewan resident employed in the manufacturing sector. He repaid around $20,000 in student loans and has been working to build his investment portfolio as a DIY investor (not trader) while nurturing plans to retire early. He loves reading (and using the lessons learned) about personal finance, technology and minimalism, when the mood strikes – which happens everyday!

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Good word, Clark!


For someone is his 20s, you show amazing matury when it comes to money matters. I have no doubt you’ll be able to succeed in retiring early (I wish I had your mentality when I was in my 20s!).

From all the investing books that I have read that cover the history of the stock market for the past 200 years, one thing I’ve learned is that mistakes are repeated over and over again by different generations.

That’s why there will always be boom and bust cycles in the financial markets. In good times, people spend as if their income/house value/stock portfolio will rise indefinitely. It’s called the wealth effect. That’s why most people don’t have an adequate emergency fund.

Like you, I realized that happiness doesn’t come from owning the new gadgets, driving a luxury car, buying brand name clothing, keeping up with the neighbors, etc.

That’s why the pursuit of financial freedom is so important in my view. It’s not about attaining a social status (i.e. millionnaire club) or boost one’s ego. It’s about having more time, freedom and choices.

My dream has never been about become rich; it’s always been about achieving my dreams. I just use money as a tool, a means to an end.

The People may or may not change (it takes a tremendous amount of energy to change with effect), but one thing is for sure — the bankers and politicians (who caused the havoc) have not, and will not, change. Greed and power are their business, and they are not willing to give up either of those.

Any change by the public will, of course, be reflected in society as a whole. Thus, time will tell…

As quoted from TheMarketTicker: “…an “unexpected” recognition of the reality that what is being done today both is unsustainable and won’t work, but we will do nothing appropriate about any of it until we find ourselves well-off the cliff and furiously pedaling in the air like Wile-E-Coyote – and at that point it will be to late to avoid the ugly consequences.”

You certainly make some valid points. I am definitely impressed with your train of thought and the way that you are mapping out a strategy for being able to retire soon. As a financial literacy educator, I find that a most important tool that young people need is to learn how to manage their personal finances early. Learning the basics of goals setting, determining the difference between needs versus wants and balancing a check book/finances are just some of the key foundations to start the plan. In addition to writing about your goals, have you ever considered using some of your free time to speak with other young people to inspire them to learn how to better manage their personal finances? I bet you would be great at it.

I agree with Scott. I’m really starting to get the sensation that I’m living in the Twilight Zone with all of this talk of recovery and the stock market roaring. The “solutions” that brought us back from the brink are same sorts of things that caused the problems in the first place. We bought some time to fix this, but I fear we are wasting it. You simply cannot cure a debt crisis with more debt.

For regular folks, it seems the best course of action is the same as it always has been. Stick to the basics as outlined by Lillie. Set goals, budget, spend less than you earn, etc.

I think we need to strike a healthy balance between caution and risk. The couple you describe in this post may not be very financially exposed if the husband keeps his regular income. It even sounds like this couple is pretty resourceful as the husband takes a much lower paying job rather than collecting unemployment benefits and waiting for a higher paying job in his field. Many an engineer would have too much pride to do take such a job for which he is totally overqualified. I think this couple should be commended for taking this route. I wish them all the best!

In all honesty, this is the best blog that I’ve read in a long, long time.

You have reinforced the idea that being frugal and prudent never goes out of style.

Thanks Clark!

The couple described should be an example of How to Live your Life. It is the North American way to live for the here and now. Why not live beyond your means today and enjoy your life, because tomorrow you might get hit by a bus. If you save and save and wait for delayed gratification imagine all the opportunities you might have missed. What is your downside risk? If things do go wrong you can live off the state and just start over.

Nice post Clark.

Good examples – I like that.

And definitely think people shouldn’t live so large if they don’t make enough.

When I was growing up my parents would call it “Keeping up with the Jones'”, which I believe I asked, “Who the heck are the Jones’?”, and the questions is still valid today. Good post, but I have one small bone to pick, debt of all kinds is to be avoided (please don’t call it “good debt”, there is no such thing, however I do realize sometimes debt needs to happen but only in exceptional situations).


On a side note, there are homes worth 350K in Saskatchewan? Yikes!


While I agree all debt sucks (and therefore could be considered bad), you run into life situations that force you to make a choice. Those choices will give you good or bad debt.

Say you run your own business and you had saved up $30,000 to invest into your business … but the day before you pull the trigger, your car breaks down and needs a new engine. You realize the car is 15 years old, so you decide to get a car loan at 3% and buy a new car.

On the flip side you could’ve taken your $30,000 and bought the car, then got a $30,000 loan (putting your car up for collateral) at 3% and invested in your business.

Both scenarios appear to net out the same. You have a new car and a chunk of cash in your business. However, in one scenario the goverment is going to give you 1/3 of your interest paid back to you.

A completely different situation would be all the investors that took out huge loans once the stock market crashed and put it into all of these companies that had their stock sink for no reason other than fear. If you had’ve borrowed $50,000 last January and invested in the stocks that FT had picked in his contest, you would have had $60,000 in December. Your interest paid would be approx $1500 and you’d still get 1/3 of that interest back! That would’ve been a good debt too!

Clark has some great points, but to the author of MDJ, you really need some quality control on your guest posts.

Without any more context, there’s no logical leap between the case-study he outlines, and the “shame on everyone for having expensive things they may or may not be able to afford” follow-up.

Clark mentions the size of the mortgage (which is huge for Saskatchewan, and teensy for Vancouver, where I live), and the fact that there are car payments.

He admits he has no idea whether this couple has any other debt, or whether they have an emergency fund.

I’d say if I stopped working because we had a child, and my engineer husband found himself suddenly out of work, we’re in a similar situation, and we’d be just fine.

This couple could, like us, have no other debt (again, Clark has no idea) and an emergency fund that will cover expenses, including their mortgage for at least 6 months – longer if they’re bringing in extra money like the husband is with his interim job.

They could, like the author of another PF blog (Trent at The Simple Dollar) have the cash for their “shiny Honda toy” in an interest-bearing account, which is drawn upon monthly for the car payments financed at 0% or close to it, so their car isn’t costing them anything extra.

You’ve got half of the equation figured out, Clark, by knowing that you shouldn’t get yourself into debt by trying to have a house or car as fancy as your neighbour’s if you don’t have the same financial resources he or she does.

But the other part of financial, and life, maturity is learning to give people the benefit of doubt, and not assuming that everyone who has nice things is going into debt to do so.

Yeah, I agree with Jen,

These sort of smug “I’m more financially literate than my neighbour” type posts are a bit distasteful and, ultimately, don’t provide any new insights to the discussion. They really just repeat the same platitudes over and over. Especially when, as Jen points out, they are written without a full understanding of the situation. Why in the world would you say “Forget the emergency fund”? Whether they did or didn’t have one makes all the difference in the world.

I’ve always liked the style of this blog and the fact that neither the posts nor the comments tend to take a “Look at those fools — we know better approach” (a la Garth Turner’s obnoxious site). I hope it continues along that road.

Thanks for the all the comments – both appreciation and critique!

An update: The husband has found a job as an engineer, albeit in a small company, and in a better situation than four months back.

@Joe: Well said! The freedom is what drives me! I know what I need and succeed in avoiding peer pressure most times!

@Scott: Great points!

@Lillee: I’ve been told that I think like an old man (wrt money and planning) by a few people and I have taken (and will take) them as compliments. I believe that I’m a better writer than speaker. Nonetheless, when I’ve seen friends in their early twenties follow the herd blindly and spiral into the abyss, I’ve (never given a lecture as such but) mentioned casually about the pitfalls of the path they are on; it didn’t work and they are continuing on their merry way. Maybe, a structured program would be better (schools, are you reading?)!

@ctreit: Swallowing pride is commendable indeed; not many would be up for it.

@die_broke: I’ve heard that example of “what if I die tomorrow?”. I don’t have statistics to back me up but only a small percentage of people die everyday and the percentage due to non-health reasons will be even smaller. I’ll gladly live a simple life and pursue my freedom unless someone is willing to give me the DATE. I’m not doing this to break convention but it is just what I Iike!

I’ll get to the rest of the comments later…..

Great post, Clark.
In Victoria, BC, I see this situation threaten to play itself out all the time – couples using both incomes to support their mortgage (except here it’s $500k). Wife has a baby and self-employed hubby gets hit by a downturn in his line of work and somehow SOMEHOW they don’t lose the house but boy, are things tight and grandparents are called.

“Delaying gratification” is not a concept my generation (X/Y) seems to understand at all. People who pay off their debt, save, invest and plan will see a future with a great retirement and debt-free worry instead of still working at age 70 and owing $200k in mortgage and other debt.

I’m a Financial Planner and although Clark made some pretty large assumptions about the couple’s financial situation, I can tell you that in my practice I run into many couples and young families in their 20s and 30s that are living with significant debt and are often reluctant to reveal it to me in our initial discussions. They have heard the messages about living within their means but the compulsion to have the “best stuff”, right away, is often too strong! In most cases, everything is fine, as long as they can maintain their income levels. I often find myself wondering what life lessons the children of these people are learning. Believe me when I say that kids are very good at picking up on the habits of their parents, and their expectations about their standard of living and what they need to have to be comfortable as they grow older will be very high.

Incidentally, we chose to live in a decent but slightly less desirable neighbourhood in Toronto because we knew that keeping up with the Joneses would not be an issue and we could live our lives as we wished, surrounded by people who share our values of living within our means, spending on things that are meaningful and modeling good financial responsibility for our children. I think we enjoy a very high standard of living but it’s just not about the “stuff”. I don’t believe that “stuff” makes anyone a good citizen or neighbour. It’s the things we do that really make a difference both for ourselves and our communities. Interestingly, our neighbourhood is chock-a-block with artists, self-employed individuals, environmentalists and journalists. I’m encouraged to see that so many people who comment on MDJ share my views. Sorry if I sound “preachy”.

@Big Cajun Man: Well, if one believes that education will be their road to a better life, then I’d say go for it. Of course, there is no guarantee and there are a number of factors involved but I don’t think I’ll pick on someone who gets an educational loan. Whether they use that money and their time in a useful way is another matter altogether!
As for the mortgage, if owning a home is a dream, then “To Each His Own” as long as they can afford it and don’t stretch themselves thin!

@ITS: The couple mentioned in the post live in Alberta but there are atleast a few houses that go for that price in the two big cities of Saskatchewan!

@Jen, @Bob: The house in question is in Alberta. Maybe, more facts may help – as I mentioned earlier, I don’t know every detail but I am aware that they put 5% down and borrowed a small amount of money from a mutual acquaintance to cover closing costs. The husband had held the job (in a big organization) he lost for over two years at that time. I believe that this shows their planning and savings scenario (it is not impossible that they put another 15% of their down payment into an emergency fund but unlikely I think). It is also entirely possible that they learned a lot after they bought the house and gave birth and tightened up within the next year (when he lost the job).

The post is not meant to show up the people in debt or show off my limited knowledge. It is a post inspired by a young couple’s story to provide some food for thought for people who are on the same track. I don’t know if the post came off as “attacking everyone with nice things” or arrogant (views will vary, of course). There are BMWs on the road and big houses in posh localities. Have I wondered if the owners are in debt? Sometimes! Do I lead my life begrudging every person who is rich (whether in debt or not)? No.

Great post, a message more Americans need to hear. I worry about the stock market doing a “hundred meter dash” right now, I’m half expecting a decent market correction within the next year.

Also living below you means should be a staple for MANY Americans right now. If I were the couple, I would without a doubt sell the car, and go for something cheaper, say at a government auction, or through Craigslist, the papers, etc. Cut all unnecessary expenses, the first being that shiny new Honda!

Great post. It amazes me how much people spend on appearances. I know of a guy who makes $250,000 and can’t pay for his only kid’s graduate school tuition. It might have something to do with his $800,000 house…..

Clark – the additional context makes all the difference in the world! Of course putting only 5% down on any mortgage isn’t a decision many people would consider particularly wise, and borrowing closing costs from friends also indicates they might be struggling.

I’m not sure how having a job for 2 years has anything to do with showing how well they plan (again, more context needed – has he been an engineer with other companies before this one? is he fresh out of university and this is his first “real” job? has he recently changed fields?) – again, this still remains a pretty useless post in terms of the calibre of content usually on this site, but I do appreciate the follow-up from the guest-poster!

@Jen: The husband’s not fresh from university, it is not his first real job and hasn’t changed fields. My reasoning is that if a couple know that they want to buy a house atleast two years down the road, they should start to save for a down payment (atleast 20%). If expenses don’t allow them to reach their savings goal in two years, then delay buying a house or go for a smaller house. You could argue that they were dutifully paying off their student loans (I don’t know if that is the case) and hence could not put 20% down. If true, then they could have waited for a few more years (delaying gratification?). Of course, if buying a house is a dream and a wild one at that, then good luck!

Jen in T.O. – do you see many couples coming in to get a reality check when they are early in their committed relationship (i.e. soon after living together or after they are engaged but before they get married)? Finding out that there are two clashing, or dysfunctional, financial management styles could be dangerous for a long term, successful relationship.

You are absolutely correct cannon_fodder. Different money styles can be one of the most difficult issues that couples deal with in a relationship and it is definitely important to identify the differences and find the similarities. In my practice I always ask each partner to complete a questionnaire separately and without consulting with the other person. It is not surprising that every couple has some differences in risk tolerance and money habits. Most are only slightly different but occasionally I come across people who are markedly different in their views about spending, saving, use of credit and risk tolerance. In those cases we have to get to the root of their philosophies (or habits) and find some sort of compromise between the two. This is invariably a serious source of stress in relationships.

I do not have any clients that have come to me early in their relationship (pre-marriage/common-law) seeking joint financial advice. I think that if more couples were able to be honest about this topic right from the beginning, serious problems could be avoided later. This is such a sensitive subject for most people and possibly embarrasing if they have very bad habits.

I would suggest that couples who are able to discuss financial habits and philosophies early in a relationship, probably either share similar attitudes or are willing to work together. I would also suggest that couples where one or both people are secretive about their money, spending and credit situations at the point in a relationship where they are getting more “serious” with each other, are in for a rude awakening when the truth eventually comes out (usually when they decide they want a loan or a mortgage and credit ratings come into play!).

It’s my hope that lots of teenagers are reading this blog because so many great topics about everyday money situations have been discussed. I particularly loved the discussion that put a dollar figure on the first year of a baby’s life! This would be very good birth control for teens who think having a baby would be “fun”.