Reply to Shocked: Our bare-bones monthly cost of living is 5K after taxes! What's yours?

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[quote=Anonymous][quote=Anonymous][quote]Well, that depends on how you look at it. True, we could legally pay less on a monthly basis. But, we are obligated to the total debt, not just the monthly payment. That we could get away with paying less on a monthly basis without being thrown in jail (or whatever) doesn't change the fact that we still owe the total. Plus, every month that large amount sits there, it gains compound interest and makes it harder and harder to pay back and we end up paying more and more to borrow the principal. [b]So, I don't consider it truly optional to not pay as much as we can.[/b] Just because the bank won't repossess or throw us in jail because we paid only the minimum doesn't mean the consequences aren't very, very serious and very immediate. Every month when I see that interest statement [b]it becomes clear that paying the minimum is not a choice. [/b]It's just a question of choosing which terrible consequence you face. [/quote]

I hear what you're saying, and as I said, I agree with your strategy.  But sorry, significantly prepaying an obligation simply isn't a part of a bare-bones budget assessment.  I get that you don't like to see the interest payment, and that since you have the means to avoid it, you do.  But it certainly is a choice.  The alternative is very unpalatable, but you have no legal or moral obligation to prepay the debt.  Extremelyadvantageous =/= necessity.  Under this theory, I (or anyone) could claim that my bare-bones budget absolutely requires that I pay an extra $5000/month on my mortgage, and save another $3000 each month because it's advantagous to do so.  If I posted that, you'd all think that was a silly argument.  How is this any different?  [/quote]

Sorry, but I disagree. In our situation, every dollar we pay is lost forever and then some. We lose $15k on that property every year because we can't rent for what we owe on a monthly basis. We will never get that money back and we have to cover it out of pocket every month. The true monthly cost of that place is what we lose every year renting it plus some monthly contribution to the negative equity (which absolutely *must* be paid before we can get to the point that we can stop losing money on the interest/taxes/principal/insurance/condo fees). I pay as much as we can to get us to zero on the negative equity as soon as we can so we can stop losing $15,000 a year. At our "best rate" we will pay another 45k before we will have the privilege of selling at a 35% loss. What I pay "in advance" is not optional or simply advantageous. I am accounting for the real economic cost of the property and you are not.  [/quote]

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