Wednesday, June 28, 2017

Debt-Free Living Part 2 - Mistakes We Made

Welcome to Part 2 of my series on Debt-free Living.

If you missed Part 1 be sure to read this post, which describes the early years of our marriage.  This week I'll give you the inside scoop on our money mistakes.  Yep!  We made a few.  Knowing what we did wrong may help you avoid the same errors.  

By early 1989 we were happily ensconced in our 550 square foot, 1 bedroom, 1 bathroom, 1 closet house.  We were living within our means, writing down expenses, and saving money.  But every single month, we were making two major money mistakes which would hamper us for many, many years.

Our Mistakes Begin!

Even though we didn't start married life in a hole of debt, we did begin by basically clawing our way through one month, trying to survive to the next! Eating out quickly became a distant memory.  We drove by Starbucks just to smell the coffee and then went home and made our own.  Every paid subscription went the way of the dodo bird.  Attending plays, the symphony, or pretty much anything else that cost cash became a foreign concept.  We took lots of walks and discovered that when we saved all the coins we found on the street in a special jar, we could amass enough to buy ice cream as a special treat about twice a summer. Believe me when I tell you that I went to unbelievable lengths to save a buck. 

Mistake #1: We didn't give every dollar a job.

The error of our ways didn't have so much to do with how we spent money, but with how we viewed what was left over at the end of each month.  We had no written short, medium, and long-term goals.  We didn't give each dollar a job to do.  As we lived lean, nickels and dimes did begin to add up to dollars.  But, without any "labels" on that mound of cash it was all too easy to overspend when replacing a car or taking a vacation.  It appeared that the money was there to do these things.  In short, we were not being intentional with our money.  So, we spent part of that big pile of  money that should have been earmarked as a house down payment. 

You see, after we had lived in our little white house for about three years, I got the "house-buying bug."  I went to my first open house up the street from where we lived.  I was bitten and smitten.  It was old.  It was spacious.  It had character.  It had potential!  From that point on, I ate, slept, and dreamed of having our own home.  This was when I discovered that viewing our leftover money as "one, big pot of gold" was a problem!  That money was not separated into jars labelled: "car replacement", "emergency fund", "or "vacation"  In my mind our savings was now one, big, glorious, green pile of H.O.U.S.E!

Mistake #2: We didn't divide our"pie" into smaller slices.

Much later, I figured out that we had to divide the "pie" of our savings into an awful lot of slices.  Panic immediately threatened to ensue.  But, it's like climbing a mountain.  You do it one step at a time. 

Approach your "short, medium, long term goal list" like you would attack debt.  Dave Ramsey describes a debt snowball.  His formula is also effective when saving for future goals.  If you have a couple that are small and fairly easy to meet, save for them first.  Throw all the extra money that you can find each month at those goals.  When you meet the goals, it will give you momentum to reach toward the next ones on your list. 

Then, combine the money that you were throwing at the two smaller goals, and throw it at the next goal.  Pretty soon, in a systematic way, you will have saved for a number of future goals.  Retirement is a "low and slow" strategy.  Compound interest is your ally in this goal.  If you are fairly young, even a little money, over a long period of time, will allow you to retire with dignity.  Read my review on Retire Inspired , a fantastic resource on planning for retirement, no matter what your current age.

Here's what we learn from today's post:  

Whether you are gloriously upper-class, comfortably middle-class, or challengingly lower-class, each dollar you make needs to be given a job to do.  Pretend you cash your weekly paycheck and get a stack of $100 bills.  You could take out $200 and label it "food" or $100 and label it "gasoline".  That's giving each dollar a job to do!  My very, very favorite FREE money managing tool is Every Dollar, from Dave Ramsey.  There is a paid "plus" feature, which links directly to your bank accounts.  I use the free version and simply manually type in my expenses.  I can create a monthly budget, track each of our future goals, and see instantly how close we are to reaching them.  I can tell my husband in about 30 seconds exactly how much money we have saved toward a new car or new living room furniture.  I love it!   Every Dollar gives every single dollar a "job".  So, I will never again be in the position that I was in after 3 years of marriage, with a stash of cash, not knowing how much of it I could use as a down payment on a home.

Next week I'll tell you how we managed the house hunting and paying for our first home.  We  paid off our 15 year mortgage in 5 years!! 

Until then, if you have any questions or comments, I'd be happy to field them.

Remember, do all to the glory of God,


Thursday, June 22, 2017

Debt-Free Living part 1 - Our story - "The Early Years"

 Living Debt Free!

I've decided to start a blogging series on living debt free.  So many people believe that surviving without debt is a fairy tale.  Well, I've lived it for many years and, I will assure you that like most fairy tales, there is a happy ending.

I promise you, my reader, a couple of things as I begin.  I'll not lie to you.  It has been tough.  It has not all been fun.  It has at times been a chore.  But, it has been rewarding.  I have learned much of God's grace and provision.  I have a LOT of stories to tell.  I'll be including tips and techniques that will, hopefully, help you on your journey. 

Let's start with some numbers:

30:  The number of years that Larry and I have been married - since 1988.  
24:  The number of years we lived UNDER the national median household income
22:  The number of years we have survived and thrived on 1 income
21:  The number of years we have been completely debt free INCLUDING our home
  4:  The number of sons we have taken along with us on our journey.

Our Beginnings:  

 In June of 1988, at the age of 23, I was a blushing bride.  I worked in Christian radio and Larry worked as a security guard.  We were young, in love, and flat broke.  We had no budget, no goals, and spent every cent of our wedding bounty in the first 2 months of our marriage.  We weren't going crazy.  We weren't out buying boats and BMWs.  We were just living like everyone else.  We went out to eat a couple of times a week, took a weekend trip or two, and bought cool new stuff for our apartment.  We didn't track out expenses.  We just assumed it would all work out.  But, by August, when I looked at our bank balance, I realized that it was NOT working out! 

Then God sent an amazing man into our lives.  I want to thank Larry Burkett and shake his hand when I get heaven.  About four months after we got married, the local Christian radio station I worked for began airing Money Matters, a program all about financial freedom. On this program Larry Burkett extolled the virtues of saving, spending, planning, and handling money God's way.  I came home and excitedly told my husband, “We’re going to live on a budget and pay cash for our next car.” He thought I was crazy! We both made $5 an hour!

 I got myself a cheap pad of paper and a pen and went to work.  I figured out how much money we made each week and where the money was going.  The first thing I told Larry was that we needed to move.  He stared at me incredulously, "What?  Where are we gong to find a place cheaper than this?"

I replied, "Well, I don't know.  All I know is that our lease us up in 2 months and we can no longer afford to live here."

I then asked him what he wanted in our next apartment.  He explained that what he really wanted was a HOME, not an apartment.  He no longer wanted to share some of his walls (and floor) with other folks.  So I set to praying for a small home for less rent than we were currently paying.

 The Little White House: 

A few weeks later, while on a walk we spotted the cutest little (and I mean 550 total square feet little) white house situated on a triple wide lot just two blocks from our apartment.

A white haired, spry gentleman walked by the house and saw us staring.  "You kids interested in renting the house?" he inquired.

"Well, that depends, how much do the owners want?"

"Two hundred dollars a month!" he declared.

Now the man was past 70 and a little hard of hearing.  So we assumed he was also a little addled.  They could not possibly want $90 LESS than our current rent!  We called the number listed on the tiny slip of paper on the home's front door.  It turns out that he wasn't quite as confused as we had thought.  They DID want only $200 a month!

It turns out that the home had been in the family since the 1920's.  The matron of the family very much wanted to keep the home and instructed her children that she would pay to have it completely renovated.  New paneling, new ceilings, new bathroom fixtures, new kitchen cabinets, new flooring, stripped woodwork, new vinyl siding, new roof.  After they got done, they could not find a renter.  I kid you not!  They tried $300 a month.  No takers.  They dropped it to $200 a month.  No takers. The owners were flabbergasted.  What was wrong with their house? 

 Nothing.  It was waiting for us. God sent us on a walk down that road on that night to find a little old man named Roy who encouraged us by saying, "You kids take the house.  You'll like it."  For those of you who wonder about these sorts of things (I always do),  No, Roy was not an angel.  He was a real person and his dear wife, Buella, and he became our good friends.

We lived in the little white house for the next four years and made many happy memories.  The owners never raised the rent.

So, what do we learn from this story?

1)  First, God always has a plan!  Never, never, never doubt that God is on your team and if you seek Him, you will find solutions.  We submitted our desires to Him and God came through in an amazing way! 

2)  Second, live on a written budget every single month.  That's how you figure out where your "black holes" are - those vortexes that suck in your money and you never see it come out again.  Eating out was a black hole for us.  We cut it in 1/4th and to this day we rarely go out to eat.  No more weekend trips either for a while.  Instead, we took long walks, held hands, and picnicked regularly.

3)  When you have believed God for provision, be prepared to believe Him some more!  When we found our dream rental house, our praying was not over.  The house did not come with a stove and refrigerator.  So, we set to prayin'.  We had exactly $150 for appliances.  Once again, God sent Larry to a garage sale for a 1960's stove and a 1950's refrigerator.  We left the stove with the house and the fridge was eventually given to some church folks.  That fridge was built like a tank and is probably still purring away in their garage!

4)  Practice contentment.  Nothing is perfect.  That house met our provisions.  The appliances worked.  The second hand drapes covered the windows.  On the other hand, I battled bugs in the summer.  In the winter you could see the lined curtains move when the wind blew.   The water line to the kitchen perpetually froze solid in the winter.  Larry crawled under house on a regular basis and thawed it with a blow dryer!  My point is:  I could have fussed and fumed about what I didn't like in my house, my furnishings, my possessions.  However, choosing to be grateful fills your heart with joy! 

Oh!  And for those who are wondering about how we did on paying cash for vehicles, we took a $1000 loan on the next car, paid it off in 6 months, and we have paid cash for every car since then.

Stay tuned for Part 2 of this series on Debt-free living.  If you have questions, I'd love answer them.

Remember, do all to the glory of God,