House Debt

Regardless of who you are or where you are financially, I think Americans would benefit greatly from walking through Dave Ramsey's Baby Steps and being intentional about every single dollar, living a debt free life. Make an actual budget for every month before it begins, unique to that month, with a list of all of your expenses and where you're going to spend your money.

I feel like I need to stop and address the fact that we, by God's grace, did not start in debt as a couple. We didn't have a car loan or a student loan, and so in some ways I'm jealous of the people who get to do their "debt free screams" where they've paid off all this money and climbed this mountain hand in hand, though I know most people who are in debt would be jealous that we never were in debt. BUT we did have to make the choice (with every new life step), to not go into debt. To not get a car loan. To not get a student loan. And life happened along the way: burst pipes, car accidents, babies, job changes, and college, all paid with cash.

We CHOSE to always (through lows and highs of our income) live on less than we made and put money aside. That's a choice. It's not always easy, any change is hard, but in my experience, this change is worth it.

We didn't start off with money genius or intentionality. When Matt and I got married, like most well-loved couples, we were given some money. We used that money to buy a car with cash (whew, one good move, hail damage and all), and then we blew through the rest of it on meals out and I HAVE NO IDEA WHAT ELSE. Once the money was gone, we looked around, confused. Where did it go? What did we spend it on? And most of all, where do we go from here?

Matt had a job, and I had a job, but I was also in school, and every penny I earned was going straight to keeping my school bill current. Matt's job certainly paid for our expenses with some left over, but if we didn't want to live paycheck to paycheck, we needed to know what to do with any money we had left over. We wanted freedom from the chains of money, and eventually a house filled with babies, and a van to carry them around in. If these were our goals, what were the steps we should take to reach them? I see God's fingerprints all over our search. I wanted advice: craving someone else's experience to help us make good financial choices.

I blogged about it, a year into our marriage. It's there archived for the world to see: I essentially said, "We know nothing. How much should we save as a down payment on our future house?" and someone who I've known for my whole life, a few years ahead of me, took the time to respond and say, "20%. It's old fashioned and it's a lot, but do it." That was all it took for me. I'm goal oriented and focused when I get something in my mind, so even though I had no idea how much 20% would end up being, I could look at the prices of houses in our area and know that we needed AT LEAST $20,000.00 saved.

I am in no way making light of $20,000.00. $20,000.00 is huge, and it was even bigger then. Gigantic. A ton, but we had A GOAL: a step to take. So we started. God provided work and money. God gave us health. We took extra hours and side jobs, picking blueberries and delivering packages and babysitting and and and.

So, we saved up 20% and moved back to Virginia, entering into debt for the first time as a couple. But it didn't feel like debt. It was a house. And still, really, I think it's the best debt you can go into (because it has gone up in value since we bought it), but I wish we had waited, and I'll tell you why.

Now, three years into home ownership, as I mentioned in a previous post, we still owe $79,000.00 to the bank. AND WE HAVE PAID OVER $11,000.00 IN INTEREST TO THE BANK in those three years. Interest. Not principle. Not money towards the loan, just extra money for them to jingle in their pockets and buy big buildings and fancy cars with. $11,000.00 DOWN THE DRAIN. And if we follow their formula, we still have TWENTY SEVEN years left of payments to them. The math on that is absurd. Yes, I know the interest goes down as you go along, but $11,000.00 interest is ALREADY ABSURD, and they're going to get plenty more even if we throw every single extra dollar we get at this.

It's ridiculous. Americans BEG for debt. They want it SO BADLY. When you get approved for a loan, you feel like a million bucks, even though it's COSTING YOU MONEY. "Thank you soooooooooooo much for letting me pay you!!!! Thank you, thank you, thank you, big bank for giving me money that I have to return to you and also give you additional money as well. You're the best!"

Yikes, it works me up. What a crooked system, that we're all living in and supporting. What if, hear me now... What if we saved up our money and bought things? With money. With our money. What if as God handed us money, we were intentional with it? If we can save up (over) 20% in two years (for a cheap house, mind you, in a not fancy neighborhood), that means in less than 10 years, we could have saved up 100%. Would it have been annoying in the short term, to rent and wait, deferring that desire? Yes, I'm sure it would have been, but we are, God willing, going to teach our children, so that they can start early and not spend their lives throwing money into the abyss that is Loan Interest.

After we bought the house, I found Dave Ramsey's plan. I knew about his general "stay out of debt" mindset, but finding his steps for saving, has helped us tremendously.

If you're young, start the plan. Start the steps. If you're not young, start the plan. Start the steps.

I will list the steps below. You do not start on the second step until you have finished the first step etc.:

1. Save $1,000.00 as fast as you can. This is your tiny emergency fund, a buffer between you and life.
2. Pay off all of your non-mortgage debt. List your debts, smallest to largest and pay the minimum on everything except the smallest debt. Knock it out fast. After you knock the smallest out, you take that payment and throw it at the second debt and on and on until you're DEBT FREE except your home.
3. Save up 3-6 of expenses (not income) in case of an emergency.
4. Put 15% of your income into retirement. If you have a 401K match at work, start there. Then a Roth IRA for the rest of it.
5. Put money toward your children's college fund.
6. Pay off your house debt.
7. Live and give like no one else.

My point is not that you shouldn't own a house or a car or go on vacation; I just think that we as Americans are living blindly. Accepting the myth that debt is fine and normal and everyone does it, so that makes it ok.

I'm not doing it. We don't have a credit card. We only have house debt, which we are throwing every extra dollar God hands us at, and when that $79,000.00 is paid off, I'll be thrilled to owe no man anything, but to love him. (Romans 13:8)

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