My life with debt has seen its ups and downs.  When I got out of college, one of my first big purchases was a used car.  It cost me $6,000, for which I took out my first auto-loan.  Of course, with little expenses and a full time job, I was able to repay the loan in six months. 

From there, it was just playing with investing and saving money.  Sure, I had a credit card, but I never carried a balance.  If you were to ask me then, “What is a Good Credit Score?” I could assure you I had one.

I then got married and assumed some debt on the honeymoon—which I promptly paid off.  She had some college debt, but that was paid off before the arrival of our first child.

We were the typical couple—we’d put Christmas on credit and then pay for it in January.  We knew we should have some money saved, and we did buy some of it in cash, but we usually bought more than we had cash.

Over the next few years, we had auto loans, and actually took out a 401k loan once, before, in 2005, we decided to get out of debt after reading Dave Ramsey’s Total Money Makeover.  We cut back on our expenses, even cancelled the cable modem for Internet for a little bit, and worked on getting out of debt. 

We stayed out of debt until the Summer of 2010, when I needed to sell my house to come back to my hometown to work.  We put the loss from the sale (we’d only been there 1.5 years) on a card with 0% and went about paying that off.  And we would have, too, if it hadn’t been for the fact that the house we were renting was not going to be available for another year.

So, that means that we had to move again!

When you factor in a surprise visit to the ER, Christmas around the corner, and moving expenses, you find that you don’t have the money to pay off your original debt.

To make matters worse, it seems that the company that I work for always seems to let people go around the holidays—probably something about the fourth quarter.  Hearing the possibility that I might not have a job, I started wondering about how I would get buy if I still gave a lot of gifts at Christmas?

It’s never a good strategy to be in debt, but Christmas time is the worst time.  You’re not giving of yourself when you do it, you’re giving someone else’s money/gift and you’re enslaving yourself to that other person to pay it back.  And because you don’t know the future, that extra $100 or $1,000 that might seem so needful to make your kids smile mean that you have a hard time putting food on the table if the economy catches up with your job—which it could do.

While you’re thinking about money, gifts and debt this season, check out CashMoneyLife.  There are good articles over there, and you can learn a lot, but most of all, get out of debt.  It’s a burden no one should have to bear!

You know what really gets me going—the political theater that’s going on in Washington right now.  For weeks I’ve been mulling over this thing, and I’ve come to a few conclusions.

1. There is a Good Argument for Raising the Ceiling

I disagree with doing such, but there is a good reason for raising the ceiling: It’s to pay for things that the government, by law, has enacted and agreed to pay for.  There was a debate on whether to spend money on X, and at the time no one cared whether we actually had money for X, they agreed to pay for it anyway.

I mean, the U.S. Senate has not passed a budget since 2008, and Minority Leader (former Speaker) Nancy Pelosi came into government claiming that they were going to make sure that everything that they passed was paid for, but we’ve seen how well that worked out!

So, I can understand where people have gotten themselves into obligations as a matter of law, and so the Republicans coming back at a later date and refusing to fund what was passed—regardless of whether they voted for it—seems like sour grapes.

2. When is a Limit a Limit?

You can’t have a limit if it really isn’t a limit.  You and I have limits on our credit cards and mortgages, and we can ask for the limit to be raised, but we are at the mercy of the bank.  In America, the people are the bank, and it’s our money that they’re asking for more of—and not the money that we have now, the money that we and our children’s children will make!

That’s right, government revenue is our money.  Our government, last time I checked, was of the people, by the people and for the people.  Our government exists because of consent of the governed, and no matter what Washington wants to say about money belonging to the government, that idea is contrary and foreign to our countries founders.

At some point, to have a limit, you have to say “this far and no farther.”  But just like a child that learns that no doesn’t really mean no if he begs hard enough or shows the puppy dog eyes, our government doesn’t get the hint that there’s a limit and that it cannot and should not be extended indefinitely.

3. The Theater

Does anyone really believe that the Republicans aren’t going to vote to extend the limit?  I mean, I don’t even know if they really believed in Cut, Cap and Balance since all the talk I heard of was what they were going to do when that failed.

If you’re going to be negotiating from a position of strength, it’s best not to telegraph exactly what you’ll do should the other person decide that he really doesn’t want what you have to offer.

I mean, the President believes that he has the Republicans in a corner:  that either the McConnell plan will be passed, or the so called Gang of Six will come up with something, or they’ll pass a stop gap.  I don’t believe that the President believes that Speaker Boehner will really let the limit hold—or he’s sure that he can blame anything that has to be done on Boehner.

Perhaps it’s the latter—for it’s obvious that the government takes more money in than is necessary to pay for the debt.  It’s Obama that writes the checks, and he could adjust for the money he has.  And yet he could take the tact that, should the ceiling not be raised, that he won’t send out the Social Security checks and blame the Republicans.

When it’s his responsibility to pay the bills in the first place.

What Will the Republicans Do?

By the time you read this, I would not be surprised if there’s a deal in place to raise the ceiling, or at least a tentative agreement—even though Boehner stated that they are on two different pages as far as where they want the country to go.

• The Republicans should stick to their guns, and let the ceiling hold.  They are there to do a job, and that’s to stop the growth of government. 
• They should make sure that everyone understands that it’s the job of the President to make sure the law’s carried out, and that means prioritizing spending.  This might mean stopping military action in Libya, Iraq, Afghanistan, etc.  Perhaps this is a good thing.
• If they really believe in Cut, Cap and Balance, then they should hold firm on that line and not accept any alternatives.  I’d love to see Harry Reid’s face when they’re made to bring that bill up again in the Senate and pass it or else look like they’re the ones that have help up the ceiling increase.

But, like I said, I’m pretty confident there will be a deal, and that we will cave.  Who knows, I could be wrong?

Rachel sent me this e-mail some time ago:

I was looking online today at Amazon for a book and I noticed under the "promotions" box that Amazon now offers the Bill Me Later option for your purchases (which I think gives you 90 days to pay it back but I’m not sure; I’ll have to look at it some more).  The reason this caught my eye is because just Wednesday I saw the same thing on the Macmall website when I was ordering the new computer for the church.  I can’t believe that in this period of financial crisis and credit meltdown, companies are still trying to entice people to do the Bill Me Later option.  Anyway, I thought it would interest you since you’ve been doing so many posts on credit and its problems lately.

And she’s right.  One of the biggest problems that we as a society are facing is the fact that we are addicted to having what we want right now, without paying attention to the fact that tomorrow is not certain.

Anyone who actually pays attention to the news and to what’s happened in just the recent past will realize that there is too much going on in the world today to believe that tomorrow is predictable.

That is why you shouldn’t spend tomorrow today, but should rather save and spend only what you have.

Bill Me Later sounds like a great feature, but it is still credit, it is still a debt that you will have to pay—whether or not you have a job when the bill comes due.

What would consumers do if they could arbitrarily print money or raise their credit limit every time they got out of debt?  Well, you don’t have to wonder at this hypothetical—the U.S. government is showing you in real-time.

Vox Day addresses two of the main arguments for raising the ceiling:

1. Not raising the debt ceiling will threaten creditor confidence in the value of U.S. treasuries and they may reduce the amount of U.S. debt they are willing to buy.
2. The debt ceiling should be raised one last time to extract spending concessions from the Democrats.

He blows both of these arguments out of the water in a recent article.  Well worth the read.

Many of us don’t prepare for emergencies.  We live with the notion that what is now is what will be—if not better.  This is something I touched on yesterday on the subject of Joblessness, but it pertains to financial planning as well.

While some people may have money saved for retirement (and fewer that have actually saved enough!), the numbers are staggering when it comes to being prepared for family or job emergencies.

In Fact, It’s Worse Than That

Up until this last recession, most people were living in the negative.  Between a house that they couldn’t afford and credit card bills up to their eyeballs, people planned that things would never change—and were startled when they did.

When I got a new job a year back and moved locations, the new job allowed us to buy more of a house.  Little did I know that I’d be unemployed again in a few months for much less than the new salary.  Fortunately, the severance package from my previous employer and the sale of the house allowed me some cushion between jobs, but I am doing extra work at my new job to try to maintain our standard of living.

And What About the Other Emergencies?

There are more emergencies than job loss that have to be accounted for.  Furnaces fail, floods happen, and we need to realize that life does not promise that everything will continue to get better.

We need to have extra funds and supplies—especially for those that live in areas that could go out of power in the winter or have worse things happen.

We should plan for the worst, rather than plan for the best.  If we plan for the worst but expect the best, we will be more at peace and be able to weather more storms than if we plan for the best and have all the stress when the best doesn’t happen—which is more often than not.

What are you wasting your money on?

That really is the biggest question that you have to answer when it comes to saving money and creating a budget.  You see, we all waste money—we impulse buy things that we see, we buy things at full price instead of waiting for a sale, and we buy things that we could make cheaper than pay for them.

Dining—The Curse of Eating Out

For my family, it’s dining out.  I can always find an excuse why we should just eat out instead of prepare something we have.  Don’t get me wrong, my wife is good at making nutritional meals!  It’s just that sometimes I have a craving for something different, and the kids will always want chicken nuggets.

We have an envelope system where we take actual cash and divide it up, but we always find ourselves reaching into different envelopes in order to pay for eating out.

Trimming Back

During this time of financial uncertainty, it’s best to be taking a hard look at where your money is going.  It’s wise to consider your spending, and make sure that it is not putting you at risk of going back into debt.

To that end, the easiest way (numbers wise) to get the numbers looking good is to trim the spending.  This means that you may have to tighten that belt or it may mean that you’ll look for more things on sale.

Whichever it is, you’d better start tracking your expenses—your true expenses—so that you know where to cut.

Cutting is Difficult at First

Cutting back is hard—especially if it is a large amount.  If you can find ways to make it easier, that’s good.  If you find that you’ve overspent your budget, then maybe you cannot live with as little as you gave yourself to spend.

You should give yourself a little time with the new budget—though you shouldn’t starve yourself!

Make sure that the cuts are practical, and that there’s a reason behind them.  Also, don’t forget to plan in some money to go to things that will help you relax (or look up and plan a lot of “free” or “cheap” ideas for dates).  You will need to keep your sanity if you’re truly going to make a difference in your bottom line.

This week I hope to introduce the 5 or so topics I will be covering, and next week will be the first week with the new topics going.

That being said…

The idea of Money Mondays is that on Monday I’ll be discussing financial wisdom that I’ve found as well as my thoughts about what is going on in the current economy.  It’ll be a mix of practical tips, things I’m doing as well as spotlights on some articles and what’s going on around us.

If you have any questions about how I handle things financially—other than what I make – Use the contact page or the comments below and I’ll try to answer!

This past week, I was in a conversation with a coworker about cars.  You see, ever since I decided to be done with debt and my wife and I decided to have our third child, we’ve only owned one car—a 1997 Dodge Grand Caravan SE.  It’s old, but it has low mileage for the age and it’s served us well.  Until I started to drive back and forth to work for my new job.

You see, vehicles of this era have problems with oxygen sensors.  I think that when I get the one that just blew out replaced, it’ll be the second or third one on this vehicle.

Why Don’t You Get a New Ride?

My coworker suggested that I just trade it in and purchase another vehicle.  He told me that I could get a good, reliable, 2-year-old van for $150 a month, if I got a loan.

And there was the rub.  You see, I prefer to save and pay.  I’ve been doing the saving part (of course, I would be further ahead had I not lost my job in May!), but I don’t have the money to buy anything reliable at the time.

My choice has been to decide not to go into debt for practical purposes.  I’m choosing the saving route because of the economy and because it makes more sense to “own” than it does to “borrow”—especially on items that depreciate in value as quickly as a vehicle does. However, a 2-year-old vehicle is wise, and that will be my goal.

How to Get Out of Debt and Stay Out

The thing is, if you’re going to make the decision to get out of debt, you have to have your reasons.  For me, I saw how I always was paying part of my paycheck towards interest.  For me, that interest was low because I performed some debt consolidation to cards with fixed rates or 0% rates back when that was possible.

But the trick was that the banks let you know that you could always get more money if you wanted it.  And they also know that even if you usually pay off the entire balance, if you get a balance they have a chance that you won’t.

So in order to avoid throwing your money at interest, you need to learn patience and deferral.  You need to master your money and not let it master you.

I saw this handy graphic the other day and just had to share.  You can click on the image on the right to see the original, full sized image.

The green represents income and the red represents debt.  Pardon the language in the 29 year old comment, but it’s very real.  The more income we have, the more debt we accrue because of the increased spending power.

The thing is, after we get into so much debt we find that we’re in a prison to debt—giving most of our earnings that are supposed to be working for us to someone else.

This nightmare has to end.

How much do you have saved up?  Me, I’m better than about 3 months—especially because we’ve seriously cut back on discretionary spending with my job loss.

According to Christian Personal Finance, the size of emergency funds is increasing:

I was just reading an article in Money magazine based off a poll asking their readers how much they had in emergency savings. It didn’t seem to be a very “scientific” poll, but I was very surprised by the results.

According to their survey, 37% of the responses indicated they had more than 6 months of expenses in an emergency fund! Another 19% had 3-6 months, 22% had less than 3 months, and another 22% had none.

So, how about you?  Do you have a lot saved? a little? none?