Purchasing a Vehicle with Cash

 My husband's new all electric  Leaf. 

My husband just replaced our van with a Leaf all electric car.   The vast majority of our driving is within a ten mile radius of our home, making the Leaf perfect for my husband's daily commute to work.  The fact that this car is electric makes it a little unusual, but what is also less than average is the fact that we bought it with cash. We like to plan ahead and hand over hard-earned dollars for all of our purchases - including transportation.  

BUT... WHAT IF THE UNEXPECTED HAPPENS?

Your budget is on target.  You are cruising along at warp speed.  You are meeting goals, paying cash for every transaction, debt is in your rearview mirror, and you can see the financial freedom finish line up ahead.  Suddenly, the unexpected happens.  Your vehicle begins making a sound akin to a set of Ginzu knives slicing through a row of metal trashcans.   You are pretty sure that your formerly reliable transportation is about to give up the ghost. Less than 24 hours later you get the prognosis from your mechanic.  Humpty Dumpty cannot be put back together again.   

                                        PLAN AHEAD TO REPLACE THAT VEHICLE!

In the Ware household, as soon as we purchase a car, we begin saving to replace it.  We never purchase brand new cars.  It just doesn't make sense.  Transportation is not an investment.  It is depreciating from the moment you drive it off the showroom floor.  When we first married, our goal was what we called the 4/40 vehicle:  4 years old and 40,000 miles on the odometer.  However, in nearly 30 years the price of cars has escalated to the extent that our new norm is generally 6-7 years old and 70,000 miles.  We purchase with cash and keep vehicles for an average of 10 years.  When the cost of mechanical repairs begins to outstrip the value of the car, we replace it.  We try to estimate the life of our current model and then save accordingly.  For instance, if we expect our current automobile to last for 10 years, we decide how much we are willing to spend to replace it, and then divide that amount by the number of months until our expected purchase date.  If we are willing to spend $15,000 on a car and we have 10 years to save that amount, then we must set aside $125 for the next 120 months in a "car replacement fund." 

 So, let's see how that concept fits in with today's story, the one in which your ailing transmission just moved your vehicle replacement plan to the forefront of your budget. 

                                  WHAT TO DO IF YOU NEED TO AMEND A GOAL:   

- First, do not panic!  Share a car with your spouse, take the city bus, or get lifts from friends, neighbors, or coworkers for a week or two as you narrow down your options. 

- If you have two cars, you could opt to do nothing and survive with one vehicle for a period of time.  We did this when I quit work to stay at home with our firstborn.  We sold our extra car and lived with one car for several years.  

- If this is not an option, then you must find a car that fits within your car replacement fund. If you don't have a fund, then you must devise some ways to throw as much money as you can at that goal in a short period of time. 

                                   STRATEGIES FOR SAVING MONEY FAST!

1)  Cut or reduce the amount allocated to other budget items.  Eat beans and rice.  Your foot should not hit the pavement outside of  restaurants, video rental kiosks, clothing shops, or even thrift stores. Don't leave the house unless you really need to go somewhere.  You'd be surprised how much you can save in 30 days.  A "no spend" month, garners cash in a hurry. 

2)  Sell possessions.  What do you own, that others need or want?  Antiques or collectibles?  Gently worn, name brand, children's clothing goes for a good price.  Baby accessories, if they still conform to current safety standards, are a sure winner in the resale market.  Craigslist or Facebook both offer free venues for offering your items to the public. 

3)  Work overtime.  If you can't do this, get creative.  Cut lawns.  Deliver firewood.  Walk dogs.  Clean homes.  Cook for senior citizens.  Think of anything you can do for someone that they would prefer to not do themselves.  Then, offer them your services.  

                                                       PURCHASE WITH CASH!

No matter when your mechanical marvel bites the dust, shop for a new ride using only the money you have available.  No car loans.  Repeat after me!  No car loans!   A lot more than your pride is at stake if you give into the temptation to spend money you don't have, going into debt for the next seven years for an item that depreciates in value every day that you drive it.  For the next 72 to 84 months, you will send the bank money at regular intervals, praying to God that the car will not die or be damaged beyond the its value before you get done paying off that loan.   If this happens, you are upside down on the loan.  The bank will sell the car, leaving you responsible for the difference between the sale price and the amount still owed on the loan.   Inevitably you will take out another car loan, tacking on the amount still due on the first car loan.  Yes, you will be making payments on car #2, while also paying for car #1.  The only problem is that car #1 is no longer in your possession. You are paying for something that you can no longer drive or enjoy. 

There is hope!  This bump in the road does not have to drive you off track.  First, plan ahead.  Next, keep your current automobile maintained.  Finally, set aside money each year for both car repair bills and car replacement. 

Until next time, 

Do all for the glory of God, 

Hope

I Took Out A Loan From a Payday Lender!

                                              

                                                     
I just heard a collective gasp from all of my readers.  However, once upon a time, Larry and I took out a loan from a payday company.  It was really quite unintentional.  We were buying new windows for our first home.  I had received a small inheritance, which would cover the cost.  The salesman offered us "180 days same as cash" financing.  We explained that we paid cash for home improvements - in fact we paid cash for everything.  The salesman actually had no problem with our decision, even smiling and nodding approvingly.

We Listen to Bad Advice

Then the next day, we mentioned our plan to some family members.  Immediately, they responded with a deluge of objections.  "You are being so foolish.  Think about the opportunity you are missing!  Current interest is 5 percent!  You will lose several hundred dollars by taking that money out of your account!  The window company  is charging you zero percent to borrow that money!  There is no downside!  There is no risk involved!"

The next day we took their advice.  Yep!  We called the rep back and told him that we were accepting the financing offer.  He was speechless.  Were we the same couple that he had spoken to 24 hours ago?  We had seemed so financially solvent, so secure in our plan, so fiscally conservative.  He asked our reasoning.  When we explained our skewed thought process to him, he spent a good amount of time trying to talk us out of it.  He warned, "This is with a high risk lender.  If you default, the interest rate is 24%.  Are you absolutely certain that you want to do this?"  We were sure.  I think he almost shed a tear or two as we signed the papers.

What's so bad about these loans?  

Let's pause here for an educational moment.  When friends, family members, or salespeople use the words "opportunity", "interest", and "money" all in the same breath, don't hesitate for even one second.  Run the other way!

"Same as cash" pitches are routinely hawked by a variety of retail establishments.  But, the actual offer is not really coming from your local furniture store or car dealership.  The loan is being underwritten by a third party company.  Yep.  "same as cash" is just a fancy way of saying LOAN.  Lenders are not philanthropists.  They are in the business of using money to make money.

Over 75 percent of these short-term loans are not repaid in full by the end of the grace period.  Sadly, most people don't realize the penalty for even one late payment.  If you don't pay back every cent you owe, the lender backdates the entire amount of interest to the FIRST day of the loan.  In other words, you then owe upwards of 24, 30, or 38 percent interest on the ENTIRE amount and it will be charged from Day 1 of the loan.  No exceptions.  No mercy.  It's all spelled out in the fine print of that two or three page contract.  Whew! 

I gasped when the loan payment booklet arrived in the mail.  It was from one of the best known payday lenders in the area.  Reality slowly dawned on me.  Somehow I had thought that the loan would be through a reputable banking institution.  I made the obligatory payments for two months and then I just could not take it any longer.  Earned interest was just not worth the angst that I felt every time I saw that payment booklet.  We had worked very hard to pay the house off in five years.  I could hardly believe that we had let ourselves be talked into a loan from payday company - even at zero percent interest for six months!

We Escape from the Trap!

I marched into that payday lending institution and told them I was prepared to pay off the entire amount remaining on the loan.  The eyes of the lady behind the counter widened in disbelief.  "But you have four more months on the loan.  Why would you want to pay the entire amount?"  She leaned forward slightly, lowered her voice, smiled, and almost conspiratorially whispered,  "Are you absolutely certain that you have the money available to do this?"

I stared into her eyes, and replied with an ardor generally reserved for repenting at a revival service, "Yes!  I just can't take being in debt one more single minute.  We've been debt free for many years, including our home."  Thrusting the precious final payment across her desk like it was infused with a deadly virus, I nearly shouted, "Here!  Take my check!"

She had me sign a paper and I was officially set free from the the demons of debt.  I did not see, but rather felt, her bewildered gaze as I left.  I don't think that I represented the reactions of her average customer.  Over 15 years later I still feel a twinge when I pass that establishment.

Tips for Avoiding These Loans:

My story had a happy ending.  But, most don't.  Here are some tips for avoiding the "same as cash" trap:

1.  Don't shop for furniture or a car unless you have either cash in hand or nerves of steel.

 I mentioned in  Part 5 of my Debt Free Living series that Larry and I went to open houses for 20 months before we bought our second home.  We were in the midst of saving 40 percent of our yearly income in order to pay cash for a home.  We knew beyond a shadow of a doubt that we were not purchasing a home until we had cash in our hot little hands.  It is interesting to add that an extremely frustrated realtor at an open house tried very, very hard to induce us to change our minds.  Temptation passed and we remained strong and resolute.  So, if you even have a shred of doubt that you will stay true to your debt free pledge, then stay out of the stores until you are prepared to purchase.

2.  Ask for a cash discount. 

After narrowing down your choices, ask the salesperson (with whom you have hopefully developed a friendly rapport) if they offer a discount for paying with cash.  Many places of business offer between a 5 and 10 percent discount for paying upfront.  I hardly need mention that this discount is either equal to or greater than the supposed amount of interest that I was gaining by taking out our Same as Cash loan when we bought our new windows.

3.  Live with a written list of short, medium, and long-term goals.

Most purchases are not emergencies.  They can be planned and saved for in advance.  I know from experience that if you live below the national median income, this step is absolutely, positively critical to your financial success.  Avoid debt like a stranglehold from the depths of perdition!  It will most assuredly effectively and abruptly narrow your options.  Soon the only door that will appear to be open is the one that leads to the trap of living from one paycheck to the next.  Resolving to live within your means, paying with cash, having a budget, leaving yourself margin each month, and planning for future goals will broaden your choices in unbelievable ways! 

4.  If you don't have the money, then stop what you are doing and pray!

 I mean this sincerely.  I am not just saying it.  My boys would tell you that when they were growing up, there were many, many times that they wanted or needed something and it simply wasn't in our budget.  I would always smile and reply, "Well, let's pray that in."  We went to God, prayed, and waited.  Delayed gratification was their well-known companion.  But, what joy when we found what they wanted or needed at a price that we could afford and they knew that God had heard and answered! 

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Do all to the glory of God, 

Hope

Debt-Free Living - Part 5 - Cash is King! - Buying House #2

Today we ascend to the summit of our series.  

We purchase a new house with cash!

In case you missed the first four parts of my Living Debt Free series, you'll find:

Part 1 - The Early Years - here. 
Part 2 - Mistakes We Made - here.  
Part 3 - Paying Off Our First Home in FIVE Years - here. 
Part 4 - Gazelle Intensity: Saving for Home #2 - here.


In January of 2009, we began our grand journey to save $30,000 in 24 months in order to pay cash for our next home.  This mammoth task had to be accomplished while raising 4 boys on $40,000 a year.  We would need to live on 52% of our income, while tithing 10% and saving 38%!  Our nest egg grew as we bid adieu to every single superfluous item in our budget.  We trimmed, and then trimmed again.  Every single month I produced a spread sheet showing our rate of savings.

Open Houses:  "Hits" and "Misses":  

We went to open houses every Sunday afternoon.  Some of you might find this a foolhardy idea.  Why torment yourself with homes that you have no way of purchasing right now?  However, we viewed these open houses as a way to keep our "eyes on the prize".  They fueled our fire for continuing to save.  We used them to establish a realistic idea of what we could expect to find in our price range.  We parked and walked around various neighborhoods that we found interesting.  You can find out a lot about a neighborhood just by walking around and talking to the folks you meet.  We used our experiences to create a list of 24 items that we wanted in a new home.  We prayed over our list and thanked God for preparing the perfect house for us at the perfect time.

At the end of 2009, we found that we had exceeded our goal, banking nearly $17,000 in one year!  We had saved over 40% of our yearly income!  We decided that we could buy as early as August of 2010 if the perfect house came across our path. 

We found a realtor in May of 2010.  We told him that we intended to purchase a home with cash.  He listened intently, but he also asked questions about our income and saw us toting around all those boys.  I was fairly certain that he thought we were "pulling his leg" with our proclamations of paying cash.  As a city employee, Larry is restricted to living no more than 25 miles from the city hall. We grabbed a map and used a compass to make a circle around the city.  All towns within the circle met our criteria.    I wanted a 3 bedroom house, in a small town, on a acre lot, no more than ten miles from Peoria.  The realtor showed us exactly what we asked him to show us.  No homes above our price range and only in areas in which we were interested.  It was a little discouraging.  It seems that everyone wants an acre lot less than 10 miles from the city, and owners charge some hefty prices for these amenities.

In July, Larry was praying about our new home and he felt the Lord impress on him that we would buy a home in north Peoria.  When he shared this with me I replied, "But I don't want to live in the city!"  It seems that God had other ideas.  One Sunday, just as we were seriously contemplating putting our house hunting on hold, Larry saw a listing for an open house in north Peoria.  Although the price had been reduced, it was still significantly above our price range.  Reluctantly, I gave into Larry's pleas and agreed to go look at it.  

As we walked through the house, we mentally reviewed our checklist.  It met nearly all of our criteria.   It was a three bedroom, two bath, all brick ranch with hardwood floors, and a walk-out basement.  The neighborhood was lovely and was just a 10 minute walk from a biking/hiking trail which traversed the city for miles and miles.  We decided to make an offer.  However, we told the realtor that it was a "1 bid deal".  We weren't going to entertain any counter offers.  It was "take it or leave it."  Our offer was 30% below the original asking price for the house.  I was pretty certain that the owner wouldn't agree to our terms.

Our Offer Accepted!

Just 24 hours later our realtor called to say that our offer had been accepted.  After picking my jaw up off of the floor I blurted out, "You're kidding!!!"  The realtor assured me that he was not joking.
As we neared the closing date, our realtor called to ask, "The closing for the new house will take place next Friday.  The sale of your old home will not be completed by then.  So, will you be taking out a bridge loan?"  "No," I calmly replied.  "We will just take the entire amount out of savings."  There was dead silence on the other end of the line.  He then hesitantly replied, "Okay, I'll tell them that you'll be ready for the closing next week."

The following Friday was August 26, 2010.  We arrived at the meeting with a cashier's check for the entire amount.  There is no way that I can adequately describe to you the feeling of absolute triumph that I felt in handing over that check!  Our realtor's eyes met mine.  He grinned warmly and quipped, "Cash is king!"

I want to thank you, my reader, for coming along on this journey down memory lane with me.  It has been a real joy to recount for you the amazing blessings that God has bestowed on our family.   I want to leave you with encouragement to reflect upon your own life's journey.  Remember, write, and relate your own stories of God's amazing grace. 

1 Samuel 7:12 says, "Then Samuel took a stone and set it up between Mizpah and Shen and called its name Ebenezer; for he said, “Till now the Lord has helped us.” Samuel set up a series of stones to remember God's goodness and faithfulness.  They remind us of the importance of telling these stories and passing down them down to future generations.  When you do so, you are not only building the faith of your children, but also that of your grandchildren and great-grandchildren.  These tremendous stories of God's provision will become the cornerstones upon which the faith of future generations of your family will be built!

Remember, do all to the glory of God,

Hope

Debt Free Living - Part 4 - Gazelle Intensity: Saving for Home #2!

Welcome to Part 4 of my series on Debt Free living.  

In case you missed them, you'll find the first three parts of the series here, here , and here.

In this week's edition I'll give you some specific tips on how we saved money for our great big, nearly impossible goal.

When we left our story last week, our money-savvy ways had become a lifestyle.  Our home was paid for.  Our brood of children was growing.  I might add, we were getting very creative at figuring out how to continue stacking them in one bedroom.  We sort of reached maximum capacity when our 4th son would simply not fit into that 11 X 11 foot bedroom.  We broke the bedroom impasse by installing our oldest son into the basement, effectively making our family room into a bedroom. 

The fact that children don't stay little for very long had a lot to do with our next decision.  Larry was starting to frequently repeat the phrase, "Every time I turn around in this house, I bump into somebody."  This was actually pretty literal, given the fact that the main floor of the house was just over 850 square feet.  The basement did add some living space, but we were cramming six people into a very modest sized home.

It was also, unfortunately, a very nice home in a quickly deteriorating neighborhood.  Rental property was becoming common.  Foreclosure was equally ubiquitous.  Drug-infested homes now dotted the neighborhood like a slowly growing blight.  In the past year, four homes within a block of our home were broken into - twice by armed robbery.  The fact that my husband worked in the evidence room at the police department compounded his angst.  He was well aware of how close the violence was getting to us.  The lynch-pin in the situation was when drug sellers ran through our front yard at 3:30 in the afternoon.  My children had just come inside from playing in the yard.  We were done!  Nothing gets a parent's attention like their children being in danger!   Talk about a catalyst for saving and moving!

Dave Ramsey Challenges Us To Pay Cash!

It was right about that time that I stumbled onto the idea of paying cash for our next home, almost by accident.  Honestly, it had not even occurred to me until I read my first Dave Ramsey book.  I had devoured dozens of books on finances, living on a budget, and saving money.  I had heard of Dave Ramsey and thought, "Well, I can't imagine that he'll say anything that I haven't read before."  But, it was one of the few books in the finance section at the library that I hadn't already checked out.  So, I sat down to read The Total Money Makeover.

In the book Dave talks about tackling goals with gazelle intensity.  He derives his concept from Proverbs 6: 4-5, "Deliver yourself like a gazelle from the hands of the hunter."  Apparently gazelles are experts at dodging in order to avoid capture by predators.  Dave asks the reader to adopt this strategy for getting out of debt.  Do whatever you have to do to get away from debt.  When you are tempted to spend money you don't have, channel your inner gazelle and run like crazy in the other direction.  The really creative, visual side of me enjoyed his word picture. 

I thought, "I'll bet I could adopt this strategy for saving for a  new house."  It was January of 2008.  I finally stopped viewing our savings as "one, big, green pile of cash."  I gave each dollar a job to do.  We found out the worth of our current home and then assumed that we could sell it for at least 90% of that price.  But, even after adding in a percentage of our savings to the total amount available for a new home, I realized that I would need to employ some black belt savings strategies to be able to purchase a home in a better neighborhood by our goal date, which was just 24 months away.

$30,000 In 24 Months!

We were approximately $30,000 short of the amount we needed in order to pay cash for a home in the price range we wanted.  My husband made $40,000 a year and we had four sons.  In order to make this happen we would need to save 35% of his income each year for the next two years!  That was double our rate of savings of the previous year! 

I was a woman on a mission.  I grabbed that great big, audacious goal with my teeth and wouldn't let go - like a dog hanging onto a bone!  I was on fire!  "Nickels and Dimes" became our daily mantra.  Although our monthly savings rate was already fairly high, each category was pretty tight.    There wasn't a lot of "fluff" to cut.  We didn't have cable, satellite TV, a dishwasher, or a cell phone (and still don't!) Our only option was to closely examine every single line item in order to carve out small amounts of additional savings.  For the next two years, if we couldn't eat it or wear it, we didn't buy it!  If we didn't already own it, we didn't need it!

Our Strategy:

Our strategy included a multi-pronged approach.  We started by cutting all unnecessary contracts.  The newspaper and internet were the first casualties.  The library had internet.  Books and movies were borrowed.   We read day old newspapers that Larry brought home from work.  We slashed our gas budget nearly in half.  We made lists of destinations, combined trips, and filled the gas tank of each of our two vehicles just once every thirty days.  Larry rode his bicycle three miles to and from work several days a week. Signs beckoning us to garage sales, went unheeded.  I used cloth diapers and line dried all laundry outside until the temperatures dropped so low that my fingers hurt.   I remember vividly bringing in laundry, dried into shapes resembling stiff boards.   I sliced the food budget to the bone, went to the grocery store just twice a month, planned meals, bulk cooked, and baked all of our bread from scratch.   

I would be remiss if I did not mention one more, really important thing that we did.  We spoke only words that were positive and "life-giving".  When tempted to spend money we smiled at each other and said, "Nickels and dimes!"  We invented a chant for counting down the months until "new house time".  We prayed regularly together as a family and thanked God for meeting our needs.  We prayed for the current owners of the home that God was preparing for us.  We prayed for the new owner-to-be of our current home.  My husband walked around our home and our block praying for a hedge of angelic protection.   Well, you get the idea.  Prayer was, and is, a huge part of our lives.

Next week we'll talk about the grand achievement of our goal. 

Here are today's "takeaways":

Although the goal of paying cash for a house wasn't unreachable, it was very difficult to achieve.  We started with a firm understanding of our financial condition.  We set a reasonable price range for the new home.  Then we constructed a very specific game plan.  We had benchmarks and a timeline in place for tracking our progress.  We were willing to hard work and embrace delayed gratification.  

Until next week,

Remember, do all to the Glory of God,

Hope

Debt Free Living - Part 3 - Paying Off Our First Home in FIVE Years

 

Welcome to Week 3 of my debt-free living series!

If you haven't read part 1 or part 2, you'll find:

Part 1 The early years:  here 
Part 2 Mistakes we Made:   here.  

What we needed to know:

Larry and I had been married for 3 years.  It was that magical time when most couples purchase their first home.  Being the facts, figures, and finance guru that I am, I decided that we needed to look at three basic pieces of information and then align them - sort of like a venn diagram.  

1)  Experts tell you that no more than 35 percent of your monthly income should be allocated for household expenses.  In addition to your mortgage payment, household expenses include: property taxes, utilities, home maintenance, and house insurance.  My eyes nearly popped out of my head when I realized how very, very little we really had to be able to make a mortgage payment and still remain fiscally solvent!  

2)  Remember that big, green pile of cash that I kept eyeing longingly?  We had to decide how much of that stash we were able to use as a down payment.  We looked at our hard-earned bounty, which by this point in the game was seeming smaller by the minute.  We still hadn't quite made the leap to giving every single dollar a job, but, we decided  using 75% of our cash was reasonable - leaving us with 3 months of expenses as an emergency fund. 

3)  We found out how much the bank would loan us.  Wow!  Now that was a lot  of money!  Apparently having a steady job and no debt made the bank think that we were made of ... well... money!  No matter what figure the bank gives you, be prepared to cut it.  Seriously!  There is no way you should ever borrow that much money!  

Pulling it all together:

Now came the tricky part, pulling all three pieces into perfect alignment.  We weighed our options carefully.  Paying 20% down would allow us to skip the mandatory PMI (Private Mortgage Insurance) that was inherent in loans involving more than 80% of the value of the home.  So, that magical 20% down payment became our goal.  In order to "right size" our mortgage to match our down payment, we needed to cut the total amount the bank was willing to loan us by 35%.  By looking at homes only in this price range, we could opt for a 15 year, instead of a 30 year mortgage.  Sighing, I wrote down a solitary figure on a scrap of paper. It represented our perfect purchase price.  I cried.  Seriously, I did cry!  We did the only thing we knew to do:  We began to pray.  This seemed like oddly familiar ground.  Remember, we "prayed in" the little white house just a few months into our marriage. 

While our decidedly tight financial circumstances could have been drastically depressing, we took an optimistic outlook and  began looking at homes.  One dismal home after another met our weary eyes.  Our price range meant either tiny, cramped, poorly built spaces or older homes in bad neighborhoods in need of a serious overhaul.  Reviewing our list of "wants", we mentally crossed off items.  Three bedrooms became two.  Two bathrooms became one.  Central air became window fans.  We were being forced to separate our "wants" from our "needs".  Meanwhile, we continued praying for God to prepare a home for us, at the right price, in a nice neighborhood.  

Let the bidding war begin!

 In September of 1992, we found ourselves in a 3-way bidding war for a home.  All three couples had put in a bid for the same house, for the same amount, and on the exact same day.  We won the war.  That 20% down payment made the difference.  They gave us the house because our financing looked more secure.  The other bidders had offered 10% and 5% down respectively.  Never in my life did I think that magic 20% number would have proven to be so critical to us getting the home that we wanted.  

It was a 2 bedroom, 1 bath bungalow with a walk-up attic, built in 1930. Over 60 years earlier a local contractor had built it for his daughter and son-in-law.  We were the second owners.  The house had "good bones", beautiful woodwork, hardwood floors under the aging carpet,  and lathe and plaster walls.  The price was just $1000 more than my "perfect purchase price"!  

The first year we lived there, we put on a new roof and updated the electrical systems.  Then for the next four consecutive years, we saved every extra penny we could, making the equivalent of double payments.  Every few months we wrote a second payment check and labelled it "Apply to principle only".  I double-checked each time, to be certain that the bank had, indeed, applied it to the principle and not the interest.  I quit my job at the end of November in 1996, as we welcomed our first child into our family.  Our income was cut by 40 percent!  Larry made the final house payment in February of 1998, just over five years after we took possession. 


Next week we'll talk more about "living lean".  Over the next thirteen years we welcomed three more sons into our family, while setting aside the equivalent of our mortgage payment every single month.  Our brand new, great big, nearly impossible goal became to purchase our next home with cash!  

Life Lessons:

Our season of house-hunting was difficult for us on many different levels.  We were not only praying for a home, we were also praying for a child.  We went through years of infertility.  I desperately wanted to be a mother and I wanted to stay at home with that baby.  Looking back, I realize that God's timing was perfect.  Had we bought a more expensive home, I would have been forced to choose between being at home with our children and going back to work to help finish paying for the house.  I never had to make that choice.   A year after our son's birth, we paid off the house. 

Looking for your first home is a LOT of fun!  You get to go to open houses on Sunday afternoons, look at how others have utilized their space, explore different decorating techniques, and try to envision your family in each home.  Unfortunately, when you are house hunting while living beneath the median US household income, your dreams come into conflict with your reality in very short order!  It's vitally important to place distance in your mind between what you want and what you can afford when searching through the current MLS listings.  In your price range, finding the right house may be a time-consuming process.  So, be prepared to take your time! 

I remember going to family potlucks as a child and eating until I felt that I would explode. Those last few bites of chocolate cake sat on my plate uneaten.  I was so full that I just could not bring myself to touch it.  Food tastes SO good at a summer picnic.  However, too much of a good thing quickly becomes a really bad, uncomfortable, painful situation when you take on more than you can chew.  I vividly remember overhearing the adults declare to one another, "Her eyes were too big for her stomach." 

That is the word picture I want you to remember when considering your next house.  When you are living lean, each and every calculation you use on your journey becomes all that more critical.  
 Right-size your home and your mortgage payment and you will not be living under duress.  But, when you overspend, the result is often uncomfortable and painful.  You just don't want to spend years of your life worrying about whether there will be enough money to make your payments. 

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,

Hope

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,

Hope

The Journey to Debt Free College

(This post was originally published in 2014. Since then, two of my sons have graduated from high school. I added a postscript at the end of this article, updating you on their lives, careers, and whether they were able to attend college debt free.) 



Our oldest is a senior and plans to attend college with no debt.  Here is what we have learned, thus far, in our journey to higher education.  As we get closer, I’ll have to report on our progress. 

1)  Be VERY clear with your student at an early age as to what, if any, help he/she can expect from you and your spouse.  Whether you plan to give them $2000 (or $200) upon graduation from high school, let them know well ahead of time.  If you expect them to foot the entire cost of a higher education, this is fine, as long as they know it well in advance.  It saves on unmet expectations or hurt feelings if you are very open from the beginning.  

 2)  Our community college will be a GREAT help in cutting costs for the first two years.  He has easily saved enough to fund this through a part-time summer job.  Additionally, he'll save money during the first two years of his college experience by living at home and continuing to work that part-time job.   Every penny counts toward the ultimate goal of transferring to a 4 year university.  

3)  Fill out FAFSA in January.  Even if you need to estimate your income, fill out your initial papers on-line as close to January 1^st as you can.  This “holds” your place in line and puts your “file date” as the date you initiated the file for that year.  So, if you begin the paperwork on January 1^st, and you amend your income amount on March 1^st, your “file date” is still January 1^st.  Since some funds are given out on a “first come, first served basis”, you have obtained and maintained your “early file” place in line.  (NOTE - You can now fill out FAFSA as early at October 1st.  It will use your taxes of the previous year for calculation.  If your financial status has changed greatly, finish filling out FAFSA and then call the financial aid office at the colleges which your student is interested in attending.) 

 4)  Research EARLY!  Go to college fairs with your student as early at their freshman or sophomore year.  Reps love to see eager faces.  Find out EXACTLY what those colleges want to see on your student's transcript.  Most 2 year colleges sponsor a bi-annual “college fair” night.  If your child is interested in a Christian college, check http://myblueprintstory.com/ to find a free Christian college fair near you. 

 5)  Ask questions!!  Answers are free!  We discovered that a 4 year college, which is about 30 minutes from our home, has a GREAT working relationship with our community 2 year college.  There is a rep. dedicated to helping community college students transition to their university.  Additionally, most colleges spell out very specifically what financial incentives they will give transfer students with high GPAs. 

6)  Watch those ACT/SAT scores.  If your child is truly interested in attending a 4 year university as a freshman, it is TRUE that they will be offered a LOT more financial aid as at incoming freshman, than they will be as a transfer student.  So, talk to reps early and often.  Ask specific questions about their scholarship levels.  Sometimes the monetary difference between an ACT score of 25 and 27 can amount to several thousand dollars in honors scholarship money at that particular university.  If your student needs an ACT increase of 1-2 points, then have them take the test again.  They can take the ACT up to 12 times, although statistically scores don’t increase significantly after the third try.

7)  Visit universities.  We are just beginning this part.  This is the fun part.  They like you.  They want you.  They serve you a free lunch.  Seriously, don’t go over the summer.  Go when class is in session.  This way you can visit with students and ask about their experience.  You can see if traffic is crazy or if the class sizes seem abnormally large.  If your student is seriously interested, plan to visit more than once.  Any college should be open to hosting your student overnight and letting them audit classes the next day, which are associated with their chosen field of study.   Finally, bear in mind that this more money than buying a house folks!  Don’t be afraid to ask all of your questions, and have them answered adequately, before you make a commitment.  Be sure you understand ALL the costs before you "sign on the dotted line."  People who have never had to live on a limited income forget to add those "$50" parking passes, and "$100 one-time enrollment fees".  But, if you count nickels and dimes (like we do) then you want to know ALL the costs.  

8)  Apply for scholarships EARLY!  There are a lot of scholarship opportunities available for younger students.  Most involve writing essays.  So, be certain your student gets a GOOD background in what constitutes "good writing."  Even if your student does not win, an honorable mention in a nationwide contest looks REALLY good on their transcript. http://www.fastweb.com/ is the best place we have found to scout out REAL scholarships.  Yep, there are a lot of places on-line which will charge you money for research that you can do yourself.  You need to sign up for an account.  But, really, we have not received a lot of nuisance e-mails or phone calls from signing up with Fastweb’s free service.  To guard against this possibility, we DID set up a separate e-mail account dedicated to all college research. So, all the colleges have that one, special e-mail address.  You don't clutter up your own in-box then.  

9)  We put our son in charge of our family finances for six months when he was 15.  This was a HUGE help in him understanding money - how to save, spend, and manage it. 

What about you?  Are you on this journey?  Any additional tips you can share?  I’d love to hear from you.

Update: July 2019.  

Our oldest took as many classes as he could at our local two-year college, paying just a couple of thousand dollars out of pocket after scholarships.  He was offered a full-tuition scholarship at a 4 year Christian college to finish his undergraduate degree.  He worked full-time for 1 semester to earn money for room and board before transferring. He will graduate debt-free in May of 2020 with an undergrad in psychology. We have given him just $4000 toward his college education. 

Our 2nd son graduated from high school three years ago and chose to pursue his love of technology. He now has his dream job, working in IT for a Christian healthcare sharing company.)  

Remember, do all to the glory of God,

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Do all to the glory of God, 

Hope