I recently read an article that says 80% of Americans are in debt, with an average of $62,000 per person. This made me take a step back and gasp. My entire life I have strived to be smart with money. Now don’t get confused. I’m not talking about the kind of smart where I can invest $100 and walk away with $100,000 a year later. I’m talking about being responsible with the income my wife and I make. That being said, we live in America; The land of easily acquiring a loan…? I think it’s something like that, right?
We live in a country where there is at least one bank on every corner. A country where you can walk into a car dealership and walk out with a new car for a *cough* small *cough* monthly payment. The federal government even recently raised the debt-to-income ratio to 50%, meaning you can now have debt payments that recquire 50% of your GROSS income. That is your income BEFORE taxes, medical, and the like, are taken out. This truly is the land of opporunity. And there is no opportunity like right now to sink lower and lower into the pits of debt… That’s a joke…
I was blessed to be raised in a family where I pretty much had whatever I needed, and was given a lot of what I wanted. I never had many needs in life. This was because my grandfather worked hard to become a successful surgeon, and my father inhertited the same work ethic. My father worked several jobs when I was young. He was active military, while working in the banking industry. He also had several side jobs, and worked as a reserve police officer on the weekends. I was blessed in that the same work ethic my grandfather and my father had translated into my own life. I have had some sort of job ever since I turned 13-years-old, from mowing yards to waiting tables. When I reached college I made the decision at the beginning of my sophomore year that I wanted to help my father pay for my education. I began working full time with the University Police Department. I worked the night shift, from 9pm to 7am, 4 nights a week. When I finished with my shift I went home, got a couple hours of sleep, then went to class full time. The perks were I received a full salary with benefits, and received a 20% reduction on my tuition, which helped my father. I maintained some form of full time work through college, and through my next three years of Graduate School in Colorado.
Up until graduate school I had no debt. I had to take out student loans to pay for graduate school, which was my first real experience with barrowing money. I did not like the taste one bit. When you owe someone something there is an associated stress that is very unpleasant. All through my life up to this point I had strived to do things the right way when it came to money. However, everyone I know is so quick to accumulate debt, because they say it’s “just part of life”, and it’s “just something we have to do”. I define debt as a means by which you can have the things you want, right now. There is no logical reason to accumulate debt. We accumulate debt out of our desire for more stuff.
I would like to say that debt as a result of medical bills, student loans, and the like, are different forms of debt. Some debt is unavoidable, and some debt is a necessary means in order to attain greater success. In those situations there are a lot of resources to assist in paying off those forms of debt quicker. And I would never be quick to judge someone for trying to better their life through education.
As for our family, my wife and I have one credit card that we only use when we know we have the funds to immediately pay it off. We set a strict budget that for the most part we adhere to, except for the occassional whim. It took a few years to get to this point in our lives. It’s not easy. In fact it can at times be difficult. Especially when you see friends buying the next greatest things, and living in the big houses that they fill with nice new stuff. Jealousy is real, and it is uncomfortable and imposing. Our method for budgeting is to budget based on our net pay, after everything is taken out. We are usually in the green every month. But there have been a few months in the past few years that we tripped into the red due to unavoidable expenses.
I am not saying this is the way everyone should do it. In fact, I know there are better ways to budget effectively. For the past seven years this has worked well for our family. The downside to a strict budget is that you are easily stressed when you near the end of it. We live on my single income, and it’s not a lot. We have been successful at living off my income, but it’s tight most months. Our goal has always been to never go into debt for the material things. So you can imagine the stress that sits heavily on my shoulders each month. I would lose sleep over our finances, and eventually we decided that enough was enough.
We knew that we needed to make a change. My new goal is to try eliminating the burden of finances and see if I would be less stressed, and more happy. This is coming to us in the form of selling our house, among other things. The typical housing-ratio portion of the debt-to-income ratio I mentioned earlier is 28%. This only includes your mortgage, escrow, and pmi if you have one. It does not include other bills and upkeep. I calculated the total amount of money we spend on our house each year, including maintenance, lawn, utilities, and everything else that comes with owning a home. We spend roughly 40% of our net income just on our home and the associated expenses. Freeing ourselves from this large financial burden and downsizing to a smaller, more financially appropriate housing option, is the best step we could take towards achieving our goals
People say money cannot buy happiness. But money does have the ability to eleviate the financial burdens in your life, which can in turn make you feel less stressed and more happy. So with specific regard, money can in fact assist in attaining a certain level of happiness and contentment. What would life be like if your mortgage was paid for a year? Every person I ask that question to usually uses the words “freeing” or “incredible.” It’s because financial stress is a very real problem in our society. Finances effect us personally, and it can effect our marriages and families in a very negative way. Can you think of a time when you may have undeservedly lashed out at a loved one because you were stressed about a financial issue? We let ourselves become too untwined in the message of the ‘American Dream’. As a result we seek the biggest and best, and in turn plummet into debt and bad temperament.
Do I really need the bigger house? Or those new hardwood floors and granite countertops? The majority of the world would laugh at those materialistic desires. So I will counter the debtful argument offered by the ‘American Dream’, and say I believe we would be more successful, and overwhelmingly more happy, if we maintained lifestyles that directly correlated to the income we receive, and found our worth in God rather than in material possessions. Getting a grasp our finances is one of the most important things we can do on our journey to bliss. I for one get excited just thinking about the possibility of financial freedom.
You may be wondering what our plan is when we sell our house… You will have to wait and read.