We decided that we would use our tax return to help pay off one of Phil's smaller loans. I was so excited. Making payments is nice, but paying off a loan in full just feels so good. We got our return, calculated the total payoff amount (principal plus accrued interest) and sent in the payment (around $5000). I checked it everyday until it processed and showed a zero balance. It felt like such a victory, not only did it bring our total loan balance below $100,000, I was also so proud of us for using our return to help pay off the debt instead of blowing it on something else.
Then, a couple days later Phil was looking at some stuff for school and said, "I don't think our total loan amount is right." What?! Both of us keep track of and talk about our money, but I spend the most time on our budget and paying bills. I had been tracking these loans regularly since we were married so I didn't know what he was talking about. He then explained that he had also taken out a loan directly from his school, it isn't a federal loan like all of the others so it doesn't show up on the website that I usually look at. It was for $16,000.
Phil wasn't trying to hide this from me, he just hadn't thought to specifically show it to me and I didn't know to look for it. I almost cried. We had just paid off that small loan, and even though $5000 seems like nothing compared to $100,000, it felt like a lot. It felt like progress. Now we had even more debt, A LOT more debt.
This experience helped me learn a few things. First, make sure both spouses can see everything that has to do with money. Phil had been seeing that number in his statements from the school, but just didn't really think about it until he got his final loan total now that he is in his last semester. But, if he had just forwarded on those statements to me, it wouldn't have felt like such a blow when I found out later on.
Second, debt stinks. Ok, so I already knew that. But do you see the numbers I am throwing around here?! I am talking about tens of thousands of dollars! You could buy a house, in cash, with the amount of debt we have (depending on where you live of course). That is a lot of money. And the sad thing is, we are actually on the low end of the student loan debt spectrum (or at least in the middle somewhere). We have a lot of friends who will have four or five hundred thousand dollars in debt when they finish school. $500,000!!!
Just don't do it. Go to community college. Or a trade school. Work your way through, even if it takes a little longer. Don't get loans. Just don't.
Tuesday, April 29, 2014
Thursday, April 24, 2014
More on credit cards
So talking about credit cards...might as well dig in a bit. I'm not an expert, but I have learned a few things that I think are really important. First of all, how often do we hear the words "credit score"? Like every single day, right? Society seems to think that having a credit score is one of the single most important things an adult can have, or maybe even that it makes you an adult. Lets blow away the smoke shall we?
First of all, nobody needs a credit score. Ever.
You often see or hear commercials that say things like "low credit score? no credit score? no problem!" Its important to clarify here that a LOW credit score and NO credit score are NOT the same thing. Car dealers and pay day loan sharks and such want you to think they are, but they are not.
A credit score keeps track of your ability to borrow money. Thats it. So if you have a high credit score it means you are good at borrowing money. If you have a low credit score it means you bad at borrowing money (make late payments, default on loans, etc). If you have NO credit score, it means you don't borrow money. I have already established that borrowing money is not the way to go, so not having a credit score is actually a good thing! Really! It means that you pay for things with money you actually have.
But you are all thinking, wait! What if I want to buy a car?! What if I want to buy a house?! I need a credit score. No. You don't. Unless, you want to borrow money in order to buy that car or house (although houses are a little different and I will address that below). See, that's the problem most everyone in this country is facing. We are told we need to borrow money so that we can get a credit score so that we can borrow more money so we can buy things we can't afford. (No, we can't afford them. Remember, if we could afford them, we wouldn't need to borrow money in the first place).
So, what is the solution? Well, if you never get a credit card and never take out a loan you will never have a credit score. Which means you wont be able to buy a car you can't afford, so you will either have to save up until you can pay cash for that really nice dream car, or you will have to buy an old beater until you can get something better. As for a house, well it would still be best to save up and pay cash for a house too. Phil and I hope to be able to do that one day. But, if that isn't realistic you do have another option. Thanks to Dave Ramsey (of course) I now know how to get a mortgage without a credit score. It's called manual underwriting. It's what people used to do before credit scores became the norm. Yes, you still have to have a good down payment, a job, and proof that you have been in good standing with your bills (such as rent, electric, water, etc), but hopefully that would be the case anyway. My understanding is that not all lenders know how to do this anymore, so you may have to look around a bit, but now you don't have to go take out some loan just so you can get a loan...understand?
First of all, nobody needs a credit score. Ever.
You often see or hear commercials that say things like "low credit score? no credit score? no problem!" Its important to clarify here that a LOW credit score and NO credit score are NOT the same thing. Car dealers and pay day loan sharks and such want you to think they are, but they are not.
A credit score keeps track of your ability to borrow money. Thats it. So if you have a high credit score it means you are good at borrowing money. If you have a low credit score it means you bad at borrowing money (make late payments, default on loans, etc). If you have NO credit score, it means you don't borrow money. I have already established that borrowing money is not the way to go, so not having a credit score is actually a good thing! Really! It means that you pay for things with money you actually have.
But you are all thinking, wait! What if I want to buy a car?! What if I want to buy a house?! I need a credit score. No. You don't. Unless, you want to borrow money in order to buy that car or house (although houses are a little different and I will address that below). See, that's the problem most everyone in this country is facing. We are told we need to borrow money so that we can get a credit score so that we can borrow more money so we can buy things we can't afford. (No, we can't afford them. Remember, if we could afford them, we wouldn't need to borrow money in the first place).
So, what is the solution? Well, if you never get a credit card and never take out a loan you will never have a credit score. Which means you wont be able to buy a car you can't afford, so you will either have to save up until you can pay cash for that really nice dream car, or you will have to buy an old beater until you can get something better. As for a house, well it would still be best to save up and pay cash for a house too. Phil and I hope to be able to do that one day. But, if that isn't realistic you do have another option. Thanks to Dave Ramsey (of course) I now know how to get a mortgage without a credit score. It's called manual underwriting. It's what people used to do before credit scores became the norm. Yes, you still have to have a good down payment, a job, and proof that you have been in good standing with your bills (such as rent, electric, water, etc), but hopefully that would be the case anyway. My understanding is that not all lenders know how to do this anymore, so you may have to look around a bit, but now you don't have to go take out some loan just so you can get a loan...understand?
Isn't it freeing knowing that you don't need a credit score? It sure is for me.
Monday, April 21, 2014
The credit card
Like so many, Phil and I have had our share of credit cards. I got my first card when I was 18 and getting ready to go to college. It was a Capital One card with something like a $300 credit limit. My mom, who like the majority of us believed the myth that we all need a credit card to build our credit, allowed me to apply for it. Don't get me wrong, my mom did nothing wrong here, she didn't know any better and neither did I. We have all been ingrained with the idea that we need a credit score to do anything; it's only recently that my mom and I both have learned that that is not true. My mom did have the wisdom, however, to teach me to use my credit card carefully. I used it only a couple times a month to buy gas and groceries and then always paid it off in full.
Later, when Phil and I got married, we opened a joint checking and savings account with Wells Fargo, and each got a credit card through them. Looking back now, I don't even remember asking for a credit card, it seems like it was just part of the package and we signed away. I don't blame Wells Fargo either, their bankers are just doing their job. And most of them probably believe you need a credit score too.
We never considered not using our cards, at least not at first. We continued to use them as I always had, buying the things we needed anyway and then paying them off in full every month. We never carried a balance, and we had the "benefit" of getting 1% cash back on all our purchases. That is not a lot, but, we told ourselves, if we were buying it anyway why not make a little money while doing it?
You are probably wondering why, if we always paid off our cards and received cash back, is it a big deal? Why close them? Well, that was our feeling too, for a long time. Actually, until about a month ago. We have known for a while that once Phil graduated we would get super intense and pay off all our debt as fast as possible, and the closer it gets to that time the more excited I am to get going on it (we can't start yet because we don't have an income and need to save everything we can for moving expenses once he starts a new job). We really want to be debt free, and even though we have never carried a balance on our cards, we came to a realization that to keep using them was kind of counter to our goals. When you use a credit card, you are borrowing money. It doesn't matter if you pay it off right away, you are still borrowing it. And we are done borrowing money. No more. Ever. I don't want to worry about the "what ifs" any more. When you pay for things with money that you actually have, you never have to worry. You never have to worry about paying it back, or interest rates, or missing a bill, or not having enough, because YOU HAVE ENOUGH!
So, we cut up our cards (two Wells Fargo cards and a Target card, I had closed my Capital One card previously) and even though we still have our student loans to pay off, I feel even closer to our goal.
You are probably wondering why, if we always paid off our cards and received cash back, is it a big deal? Why close them? Well, that was our feeling too, for a long time. Actually, until about a month ago. We have known for a while that once Phil graduated we would get super intense and pay off all our debt as fast as possible, and the closer it gets to that time the more excited I am to get going on it (we can't start yet because we don't have an income and need to save everything we can for moving expenses once he starts a new job). We really want to be debt free, and even though we have never carried a balance on our cards, we came to a realization that to keep using them was kind of counter to our goals. When you use a credit card, you are borrowing money. It doesn't matter if you pay it off right away, you are still borrowing it. And we are done borrowing money. No more. Ever. I don't want to worry about the "what ifs" any more. When you pay for things with money that you actually have, you never have to worry. You never have to worry about paying it back, or interest rates, or missing a bill, or not having enough, because YOU HAVE ENOUGH!
So, we cut up our cards (two Wells Fargo cards and a Target card, I had closed my Capital One card previously) and even though we still have our student loans to pay off, I feel even closer to our goal.
Wednesday, April 9, 2014
Becoming free
If you couldn't tell already, I love Dave Ramsey. I listen to his podcast nearly everyday, and I always feel more motivated to pay off our debt and be smarter with money. Almost every day on the show he features a "Debt Free Scream" which is when someone, usually a couple, comes on the show and tells Dave how and why they paid off well of their debt and then they countdown and scream "we're debt free!!!!" It's awesome and so inspiring.
One day a couple came on the show to do their scream and Dave started asking them what made them decide to do it. The wife started talking about how she had bought a new car, a really nice new car, and how even though they were paying off their other debt, she was hanging on to that car. She said that she realized after a while that she didn't like what that car said about her. It wasn't really the car itself, it was that she was keeping it because it made her feel good, it was a status symbol and she realized she bought it so that she could look good to others, not because she really needed it. She had made that car more important that anything else in her life. She realized that she didn't like how that idea reflected on her and she decided to sell the car and help her family get out of debt once and for all.
Of course we need things, and its even ok to just have some things that we like and want. But the point that really stuck with me was that it can be so easy to put our things before God. Suddenly a car or a house or some nice clothes or whatever become more important than Him. I think sometimes Christians feel like being rich is bad because then if means you are prideful. But, I don't think being rich is bad at all, its just how you feel about and what you do with those riches that makes the difference.
"Lay not up for yourselves treasures upon earth, where moth and rust doth corrupt, and where thieves break through and steal: But lay up for yourselves treasures in heaven, where neither moth nor rust doth corrupt, and where thieves do not break through nor steal: For where your treasure is, there will your heart be also." (Matthew 6:19-21)
Part of the reason getting out of debt is so important to me is because I don't want to be a slave to money. Some might argue that getting an education is an acceptable reason to go into debt, but even if it is, debt is debt and I just don't want it in my life anymore. When you have debt it can prevent you from doing all the things you would like to to do, including lots of good things like donating to charities, developing skills and talents, and improving your family situation and lifestyle. Money is a tool, you just have to learn how to use it properly.
One day a couple came on the show to do their scream and Dave started asking them what made them decide to do it. The wife started talking about how she had bought a new car, a really nice new car, and how even though they were paying off their other debt, she was hanging on to that car. She said that she realized after a while that she didn't like what that car said about her. It wasn't really the car itself, it was that she was keeping it because it made her feel good, it was a status symbol and she realized she bought it so that she could look good to others, not because she really needed it. She had made that car more important that anything else in her life. She realized that she didn't like how that idea reflected on her and she decided to sell the car and help her family get out of debt once and for all.
Of course we need things, and its even ok to just have some things that we like and want. But the point that really stuck with me was that it can be so easy to put our things before God. Suddenly a car or a house or some nice clothes or whatever become more important than Him. I think sometimes Christians feel like being rich is bad because then if means you are prideful. But, I don't think being rich is bad at all, its just how you feel about and what you do with those riches that makes the difference.
"Lay not up for yourselves treasures upon earth, where moth and rust doth corrupt, and where thieves break through and steal: But lay up for yourselves treasures in heaven, where neither moth nor rust doth corrupt, and where thieves do not break through nor steal: For where your treasure is, there will your heart be also." (Matthew 6:19-21)
Part of the reason getting out of debt is so important to me is because I don't want to be a slave to money. Some might argue that getting an education is an acceptable reason to go into debt, but even if it is, debt is debt and I just don't want it in my life anymore. When you have debt it can prevent you from doing all the things you would like to to do, including lots of good things like donating to charities, developing skills and talents, and improving your family situation and lifestyle. Money is a tool, you just have to learn how to use it properly.
Tuesday, April 1, 2014
Living like no one else
My parents never have had a lot of money, so growing up I learned that I couldn't always have everything I wanted. In fact, I never had everything I wanted. But I always had everything I needed. My mom stayed home to raise my brothers and I and did a great job stretching every penny. She was crafty and made our Halloween costumes, birthday decorations, and yummy meals. My dad worked hard to provide for us each day at work, and then came home and worked some more to make our house and yard a home. I have never looked back and wished I had more toys or more clothes or that we travelled to more places. We were a happy family with what we had, even if it wasn't as much as the Joneses.
Now that I have a little family of my own, I have grown to appreciate my upbringing even more. I realize how valuable it was for me to live in a family who worked hard to make do with what we had, and never placed to much emphasis on money (or the fact that we didn't have much). I'm not saying my parents were perfect with money. Now that I'm older and can talk about money with them, I have learned that they didn't always make the best financial choices either. They racked up some credit cards and spent more on things here and there than they should have. But, they still taught my brothers and I to be careful and wise with the money that we earned.
Now, with over $100,000 in debt, my dream is to just have a home for my family like I had growing up. I don't need to be a millionaire. The future is unknown to us and there is no way to know now how much money we have in the future. That is not really important to me, and never has been. I just want enough to have the things we need. It can be hard sometimes to differentiate between want and need. I love to shop. I love to get new clothes and things for our house. I love to sew and buy patterns and fabric. I like to travel and see new places. But those things all cost money, and truthfully, as much as I want those things, I don't need them.
Some may wonder what the big deal is. Why not just live like everyone else? "Make your monthly payments on your loans, get a credit card and charge a trip to Disney on it, finance new furniture, and don't worry about buying new clothes, you deserve them!" Isn't that what we all hear all the time? Well the fact is, I just don't want to spend my life making payments. I don't want to worry about falling behind on a credit card and getting called by debt collectors. I want to own the things that I have in my house. And I don't want to feel guilty every time I put on that shirt that I really didn't have the money for. I don't want to live like everyone else. Its just not worth it. Our goal is to pay off our loans in 5 years, that may sound crazy, but I know that we can do it. Like Dave Ramsey always says, we will have to "live like no one else, so that later we can live like no one else." And we will.
Now that I have a little family of my own, I have grown to appreciate my upbringing even more. I realize how valuable it was for me to live in a family who worked hard to make do with what we had, and never placed to much emphasis on money (or the fact that we didn't have much). I'm not saying my parents were perfect with money. Now that I'm older and can talk about money with them, I have learned that they didn't always make the best financial choices either. They racked up some credit cards and spent more on things here and there than they should have. But, they still taught my brothers and I to be careful and wise with the money that we earned.
Now, with over $100,000 in debt, my dream is to just have a home for my family like I had growing up. I don't need to be a millionaire. The future is unknown to us and there is no way to know now how much money we have in the future. That is not really important to me, and never has been. I just want enough to have the things we need. It can be hard sometimes to differentiate between want and need. I love to shop. I love to get new clothes and things for our house. I love to sew and buy patterns and fabric. I like to travel and see new places. But those things all cost money, and truthfully, as much as I want those things, I don't need them.
Some may wonder what the big deal is. Why not just live like everyone else? "Make your monthly payments on your loans, get a credit card and charge a trip to Disney on it, finance new furniture, and don't worry about buying new clothes, you deserve them!" Isn't that what we all hear all the time? Well the fact is, I just don't want to spend my life making payments. I don't want to worry about falling behind on a credit card and getting called by debt collectors. I want to own the things that I have in my house. And I don't want to feel guilty every time I put on that shirt that I really didn't have the money for. I don't want to live like everyone else. Its just not worth it. Our goal is to pay off our loans in 5 years, that may sound crazy, but I know that we can do it. Like Dave Ramsey always says, we will have to "live like no one else, so that later we can live like no one else." And we will.
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