Debt - The Money Next Door

Excerpted from
Green with Envy: A Whole New Way to Look at Financial (Un)Happiness
By Shira Boss

The next discovery came over lunch. We were chatting about banks, and Tina mentioned that they use a certain bank because their mortgage is through that bank. Mortgage?! Our envy of these neighbors had been touched off years before when we heard that they had paid cash for their apartment. Now I found out that was incorrect information? (Was it possible the rumor mill was . . . flawed?) This whole time they were making mortgage payments after all? Two sentences later she mentioned having to keep their checking account at this bank because by doing so they had gotten some of the interest knocked off their home equity line of credit. Home equity line of credit?! I was too stunned to admit to her that we had heard they hadn't carried a mortgage and had been envious.

Tapping a home equity line of credit, I marveled to myself. Even my husband and I, with one income and graduate school tuition, had not resorted to that. I left my husband a message on his cell phone: "I just had lunch with Tina. You're not going to believe this! See you tonight."

At night we continued speculating. What was really going on over there? Had their parents helped them get the apartment by paying cash, but then John and Tina had to pay them back? Or, worse, had they accepted the gift of an apartment, only then to turn around and take a mortgage on it for extra cash?

Shame on us for caring. Yes, I know. I know! At least I'm being honest (here). And I know we're not the only ones who have conversations like this. The point is that for anybody who has ever had even an itch of wanting what their friends or associates have, it is most useful first to understand what it is they do have. Or, as the case may be, what they do not have.

After I received a contract for this book I asked John and Tina if I could officially interview them about their personal financial life. Surprisingly, they agreed, and so I got to find out the real deal about next door.

Let's start where it all started for us: how they paid for their apartment. It was neither an Internet fortune nor purely a parental handout but, rather, something we never would have guessed: John paid for most of it himself, out of an inheritance he had received in college from his grandfather. John, son of the Marxist, was the one with the money? Of course we hadn't figured that one out. Neither have their close friends. "Our friends must wonder how we can afford to live here, knowing that I work at a nonprofit and Tina's not working," John said a little slyly. When money does come up in conversation with them, he said, "We don't tell the truth about it."

So John had some family money. (Even though the whole family looked very modest. His grandfather was a shopkeeper in Brooklyn who never spent a dime he didn't have to and quietly amassed a fortune through decades of making steady investments in the stock market.) John kept the nest egg in a brokerage account and only spent some of the income for travel. Having some financial security right out of school meant he could get a PhD and not have to chase a high-paying career.

When John and Tina decided to move from a rental into our building, their strategy was to convert the stocks to real estate by paying mostly cash for their apartment. That way they wouldn't have a mortgage and could live on a smaller income. Her parents did contribute, but not on the magnitude we had assumed. They gave them about 15 percent of the cost of the apartment. After they closed, John and Tina took out a mortgage for about 10 percent of the apartment's value in order to restore some of the nest egg and free up some cash.

The antiquing spree? Her parents "chipped in," as they put it, to pay for new furniture as a housewarming gift. Okay, that was nice of them. What about the kitchen and bathroom renovations? That was done economically, they insisted, with John's dad doing some of the installation, and the materials paid for out of a home equity line of credit. The home equity line of credit!

Through all of this questioning-a dream come true in terms of being able to get the facts for a change rather than speculating and surmising-there was one thing, personally, I was eager to hear about: the cleaning lady.

Tina: "Well, we both hate to clean."

John: "You hate to clean."

Tina (with an eye roll): "It wasn't getting cleaned."

So far, so normal. It sounded like they'd been having the same "Why isn't the house clean, and how are we going to get it clean?" talks on their side of the wall as we had on ours. But the money. If they somehow had been choking on their budget just as we had been, how did they justify paying for help?

When they first moved in-when Tina asked me for a cleaning lady recommendation-they were both working. With the apartment purchase, their monthly housing cost, including the minor mortgage and the maintenance payment, dropped to about half of what they had been paying in rent. They could, therefore, afford the services of a cleaning lady. "Financially we were doing great," Tina said. Then she added, "For a short time."