elephant projects, home

Debt-free planning

I am working through Tsh Oxenrider's One Bite At A Time. Her book takes the seeming elephant-sized list of ideas and projects that can be part running a household and brakes them down into bite-sized projects you can read about and start to do in a few minutes. The posts in this series are the recording of my journey through her book and the recommended projects.

Tsh’s project summary is a bit different than one might expect. Rather than laying out steps and ideas to getting out of debt, she lays out reasons why being debt-free is such an appealing and attainable idea. The project is not “get debt-free”, rather “make a plan to be debt-free”.

As I read this chapter and thought about this project I have alternated between,

“Oh, we don’t have any outstanding debt, so this does not apply to us.”

and

“Oh, my goodness! Your kidding me, right?”

The main cause of my internal debate has been centered around what is considered debt.

Is debt just personal and auto loans, credit card balances, home equity loans, student loans or what might considered “small” loans or does it include the mortgage on your home? If you think of debt as the relatively smaller loans, compared with a home mortgage, then we live debt free. We have no student loans, car loans, personal loans, home equity loan, and carry no balance on our credit cards. Yeah, well then this project is easy enough — no debt, no need to make a plan to get debt free, on to the next!

But what if you do consider the mortgage on your home debt?

Are you kidding me!?! Just the idea of trying to get out of that debt is overwhelming to me. Overwhelming enough, that I just want to say, “Oh, that does not count. A home mortgage is expected. It is just a regular part of life.” But there is the sense that accepting that idea is like accepting the idea that debt is a normal part of life, it is something that is “normal”, even good. It may be the norm in our society, but I do not think that is is the best way to live. Is it easy? No. Are there sacrifices? Yes. Is it worth it? I think it would be!

So, back to the mortgage . . . if we consider mortgage as part of our debt, then making a plan to pay off our mortgage as soon as we can is something I should do. So off to the computer and good ole’ Excel to make a basic spreadsheet. Using what we currently owe on our home mortgage, our interest rate, and the small amount we are paying extra each month; I calculated (with some formula figuring help from my husband) when we will been done paying our mortgage. If we don’t change anything we will be debt free in about 18 years. Really?!? Oh, that seems so far away! Not to be discouraged . . . I am looking at the spreadsheet as a tool for me to use as we make additional payments for determining how that will affect our payoff. (Yah, for looking on the bright side!)

Back to Tsh’s comments about debt.

Another aspect to the debt idea is using credit cards to pay for your everyday purchases. As you talk with people who have worked there way out of debt or those who specialize in helping others develop a debt free plan, the use of credit cards is almost taboo. Though you may use your credit card for everyday purchases, paying the balance off completely when the statement is due can be a slippery slope for some. The benefit of cash back bonuses or the convenience of the card all make this practice very appealing. However, do you really pay the balance off? Do you really have the funds to pay for things when you are paying at the store?

This is a practice that I really am not sure what to think of. In Tsh’s opinion using credit cards, even when you pay them off every month, is just a stepping stone to being in debt. I struggle with this idea, understanding where the danger lies, yet not sure if I completely agree – largely because this is what we currently do in our home. I think the key to effectively using this practice is being ABLE to pay cash for what you are purchasing. Even if you use your credit card in the store, you should be able to go home and transfer the funds from your checking account to the credit card to pay for what you bought that day! If not, do not buy the item! If you are able to keep this mindset, being aware of your account balances, and paying off the card even weekly or daily, then using your credit card to benefit from some cash back or other bonus offered by the company seems to be an acceptable practice. (Acceptable does not even seem the right word, maybe non-foolish.)

In Summary

When I consider our financial status from a debt standpoint, we are fortunate to be in the position of having already payed off our outstanding debt apart from our mortgage. I say fortunately, and yet, we have worked very hard to be here. My husband and I have both have good minds for money management and we work hard everyday to keep what we spend under the level of the income coming into our home. We have oops!-ed along the way several times, and with some extra work and belt tightening we have recovered. God has meet every need (and quite a few wants). It seems just when we need a bit more, there has been an extra consulting job for my husband or more hours for me to put in at my “pay check job” or a need is provided through someone’s generosity.

Two resources we use in our financial journey is Crown Financial Ministries and Dave Ramsey’s Financial Peace University. I would say most of what it taught through these organizations is common sense and practical. Though, it seems as if we ought to naturally know what they are teaching, it helps tremendously for it to be laid out in a logic plan or sequence. We are continuing to read through Dave Ramsey’s Complete Guide to Money. I personally, too, like Gail Vaz-Oxlade. Her TV show ‘Til Debt Do Us Part is eye opening and entertaining to watch and her site has several good resources on it for getting on a budget and getting debt free.

All in all, the project is more about making steps to an end rather than reaching that end. It has been good to review the ideas, refocus some areas of our spending, and evaluate where we might financially be in the future.

So what about you? Are you working to pay off debt? Do you have a set plan for the payoff, or are you just going month by month, paying what you can, hoping some day it will be gone? If you have no debt, how is that impacting you and the way you live daily? Do you consider having a mortgage on your home as “being in debt” or is that term more for auto, personal or credit card loans? Finances can be a touchy topic, but I am curious to hear what you might be think about these ideas.

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