In 2006 the stock market was doing good, but I knew it was going to take a hit soon (I am not sure I knew how bad it was going to be, but I felt it was coming). I bought my home in 2004 for $140K and in 2006 it was valued at $260, but the thing was I knew my home wasn’t worth that much. I had this uneasy sense that I knew I needed to get a handle on my financial picture. Problem was I didn’t know what my financial state of affairs was but doing I knew I had to find out. So doing what a Business Administration major does best, I decided to make a balance sheet.
The bottom line wasn’t good, we were $174,524.41 in debt. The funny thing is before I calculated that all out I thought we were doing good. I really thought our loan debt wasn’t that bad. We had credit cards but they were all paid off. We only had (and still only have) three debts: Denise’s student loans, my loans, and the house loan. Still looking at the bottom line I knew that things had to change.
Looking at the debt I am not sure what I got for my money. At one time it seemed like I was doing well, but these days I kind of feel like I was sold a dream and all I have left for it is a two pieces of fancy looking paper and a money pit set on a mountain. Don’t get me wrong I am not saying that we didn’t learn a lot in college and it is nice to know that we have a fixed monthly living expenses (we were smart enough to go after a 30 yr. fixed). The thing is however I wonder if in the end it was really worth it. I find it ironic that the majority of the richest people in the world never finished college and the happiest people I know don’t own any land. Not to mention having so much debt really reduces your flexibility. We live in turbulent times and I worry that I am not as stable as I would like to be. Like most people I worry about my family and I want to make sure they are on a solid financial footing.
With the desire of having a more solid financial footing we worked on a ever evolving series of budgets. It took time but we now have a spreadsheet that allows us to track all of our expenses down to the last penney. If your interested in checking it out you can go HERE. Most people we know would be horrified to share all their expenses like we do, but Denise and I have no such pretenses. As you can see we are not poor and we are not rich. With an annual income at about $55,000 we are just slightly higher than the average US wage earner. The net worth is negative, but you have to realize I base this off the scenario of having to liquidate everything immediately. We first and foremost feel that we are very blessed and so aside from shelter and food, tithing and offerings are our first priority. In the spirit of weathering out that “rainy” day we also try to save at least 10-15% of our income a year for retirement purposes with an additional money allocated to long term savings. The goal with our budget is to anticipate any expense that may come our way. This is almost impossible, but we have found that if we pad some of the expense items and spread it out over the year we have been able to smooth out high and lows over the year.
In order to pay off our debt we have adopted a snowball method. We pay almost minimum payments on all of our debts except for one. Our main focus since 2006 has been Denise’s student loan and excitingly this looks like this is going to be the year we are going to pay it off! After we pay off this debt we will use all the money we had allocated to Denise’s loan to my loan, then to the 2nd, and finally the first. Unfortunately, my prediction is 2026 (seems so far away!) to pay off everything, but I figure having some date is better than no date. Plus, with a little bit of luck we might even be able to put some more money to pay down some of those loans. If you ever feel like donating to any of this your more than welcome to do so! [paypal-donation]
The main thing is we have a plan. It may not be the best plan, and it is certainly not the only plan, but at least it is a plan. What I love the most about our plan is that it gives us hope and a sense of continuity. Things may happen and they do, but slowly but surely we are mitigating those risks. For us this is a war and like Winston Churchill said, “he who fails to plan is planning to fail.”