I’m hearing a change from young people lately, and by young, I mean anyone under 45. Some are hanging onto homes by their fingernails and prayer. Others are clawing their way up out of the dark pit of credit card debt. And all are disturbed and downright furious to see how our government spends wantonly and keeps asking for the debt ceiling to rise.
Rick and I have been through this grinding mill. When I graduated from college, I received a dozen “congratulations” letters with credit cards inside. Oh, goody!! Credit cards mean independence. Right? I managed to keep my spending in the realm of “I can pay it off at the end of the month”. After Rick and I married and bought our first house, we needed lots of things to fix the place up; new stove (to replace the ancient gas range), new refrigerator (to replace the “ice box”), washer and dryer because it took too much time to go to the laundromat with a heap of dirty clothes and a sack of quarters. Rick needed tools to work on the house; a disk sander, saws, plumbing tools. We had seven credit cards maxed out before we realized the mess we had created. Paying minimum payments doesn’t get you anywhere. Thankfully, his parents took pity on us and loaned us enough money to get out of debt. We cut up our credit cards, except for American Express which we had to pay off in 30 days, and paid Mom and Dad back over a period of months.
We also learned the hard way not to buy a house we couldn’t afford. After fixing up our fixer-upper, we stretched ourselves to buy a nice place in a nice neighborhood in Southern California. Then we found another house, bigger, with better schools and parks (we had three children by then). So we signed the papers before the other house sold. It was a hot market, right? We ended up paying two mortgages and sweating bullets. By the grace of God (before we even knew Him), the first place finally sold and cleared escrow before we had to declare bankruptcy. Hence, a few years ago, when we decided to move again, we sold our house and took our time looking for a place we liked and could afford.
After almost drowning ourselves in debt several times, we came up with “rules” regarding our finances:
Rule One: Everything we have comes from the Lord. Be thankful and give the first 10% to Him.
Rule Two: Pay your taxes on time and without (too much) grumbling. The Israelites coming out of Egypt did it grudgingly, and never made it to the Promised Land.
Rule Three: Do not spend more than you make. Before buying, ask yourself: Is this a “need” or a “want”? I “fasted” for 30 days on spending several times and was shocked to see how much I spent on “wants”. It was all little stuff (pack of gum, magazine, renting a movie, cup of Starbucks coffee), but it added up to a lot.
Rule Four: When buying a house, don’t listen to what the realtor or bank says you can afford. Go with 20% down, no more than 40% of the breadwinner’s salary for the mortgage/insurance/property taxes, and plan on paying off the house as fast as possible! Put extra money into “principle” each month, even if only a few dollars. When we added up what we’d be paying for our home if we took the full thirty years, it was appalling!
Rule Five: Have a “rainy day” fund (six months of living expenses). You can be sure hard times will come to everyone.
Rule Six: Save and make plans for retirement and infirmity. Do not count on Social Security! We obtained “long-term home care” insurance before age 50 when it was relatively “cheap”. The last thing we want to do is become a financial burden to our children.
Rule Seven: Have an R&R fund. Travel doesn’t necessarily mean overseas or across the country. It can be in your own backyard. I’ve been a tourist in my home town.
Rule Eight: Each family member should have a little personal spending money, even if only a few bucks. Each will find out whether they’re squirrels who tuck their pennies away or a boa that eats everything in one gulp and then waits around for 30 days to catch the next meal.
We didn’t start following these rules until we’d been married for seventeen years and were sick and tired of living on the edge financially. It took time and hard knocks to change our thinking, but small changes over time make a big difference.
Sometimes you have to tackle debt like the mouse that ate the elephant – one small bite at a time.