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| Wednesday, January 17, 2007 |
| 6 ways to be a grown-up about debt |
 This Money Magazine article: 6 ways to be a grown-up about debt profiles the Trejo family.
So it came as a shock to Jessica when Willy, who handled their finances, told her they couldn't afford the $500 party she was planning. Says Jessica: "I thought he was just being cheap."
In fact, he was being realistic.
Only three years earlier the couple had been nearly free of debt, but now they were drowning in it. In addition to the $76,000 they owed on their mortgage and the $30,000 in loans for their two cars, they owed $19,000 on eight maxed-out credit cards and another $9,000 in student and personal loans. The consumer debt is the real killer for this couple. Buying a home and having a baby can push you into debt if you let it. The decision to charge expensive furniture and vacations is something I assume they now regret (at least I hope they do). The $500 price tag for their sons first birthday party did seem high to me. I would assume hosting a party at home and baking a cake would cost a fraction of that amount. |
| posted by Boston Gal @ 1:43 PM *
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| 7 Comments: |
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I don't have kids, but I still cannot even fathom the idea of spending $500 on a child's first birthday. Can you even imagine how much they would spend on future birthdays?
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Children's birthday parties are the new competitive sport. In Connecticut they include going to the theater, an evening at gymboree, going to Chuckee Cheese, and a party at the zoo including lunch, activities and a nice donation to the zoo. These are all parties that I am aware of for pre-schoolers.
The next generation is going to have even more trouble with personal finance.
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Kid's birthday parties can be expensive even if you don't have all the bells and whistles. It really depends on how many people you invite and how large your family is. I do think $500 is expensive, but its not outrageous depending on where you live, whether you buy or cook the food, if you have party favors, and whether or not you invite adults. If you don't have kids, then it can be hard to fathom how much anything costs for kids. Its a different situation when you become the parent and are faced with the reality of how small things add up.
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As a Latina, I can tell you that, culturally, first birthday parties are often a big deal, with many adults (family and friends) invited in addition to kids.
After reading the article, what I don't get is why they took out such a large home equity loan. Now they put their home at risk rather than just their credit rating. Bad idea.
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My nephew's first birthday was a cultural event as well, but honestly, he liked smashing up the cake the best, and that's like a $2.00 box of cake mix.
Of course there will be adults at a 1-year olds party. Who is going to bring over the other 1-year old guests?
But $500, when put plainly like that, seems excessive. However, if it's a family picnic with extended family, I could see the food and drink tab go that high.
Even so, the wife comes off kind of wenchy and overspendy in that article.
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We always celebrate the bithday of our daughter and spend lot of money. We love our children and do not save on them. I also understand that every family needs a house, but you can get smaller equity loan. In any case, it is the business of this couple and their choice.
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Birthday parties are very common and, of course, expensive. I do not think that $500 is a great amount, but home loan is, perhaps, large enough.
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I don't have kids, but I still cannot even fathom the idea of spending $500 on a child's first birthday. Can you even imagine how much they would spend on future birthdays?