Our Little House
President Bush is on TV right now giving a press conference about the rising gas prices. He keeps mentioning the sub-prime lending crisis, the foreclosures, rising food prices and other economic hard times that America is experiencing.
I personally love all the financial discussions going on right now. In fact, by the time I was about to graduate college, I realized too late how much I loved my Finance classes. I already was getting two degrees and certainly wasn't going to extend my stay in college, but the numbers were still magical to me. The day I learned about mutual funds and their growth potential, I went home and signed up for one. I didn't have much money, but thought I could invest $50 a month. When I finally cashed it in, I had $2000 from money that I never missed. I'm still committed to saving little by little to achieve goals.
In our own home, we are experiencing our own sort of financial balancing. This past year has been astronomical in expenses for us. G bought my engagement ring, we paid for our wedding, the flights for G's family from Puerto Rico to SC, and as soon as we returned from our honeymoon we bought a house. We paid for deposits and many things along the way in thousands of dollar chunks sometimes, but as it happens with weddings, the costs overflow the budget. When we finally counted it all up after the dust settled, we had a lot more debt than we had expected. That's when we had to sit down and make a plan. And thank God we did, because I'm happy to report that this month we have finally paid off the last credit card bill. It took a lot of talking, some sacrifice and continuous balancing of what we need now and what we can wait on.
When I hear about the country in financial crisis partly because of high gas prices, I can't help but think how spoiled we all are as a nation. High gas prices are nothing new to Europe and other parts of the world. That is why when you go to other countries, you see much smaller cars and better public transportation. (They also don't drive to the mailbox, but that's another point altogether.) We really do take our right to consume very seriously here and it gets us into trouble as a country and in our own personal finances.
One main reason is that debt is socially acceptable to us. Did you know that in France when you go to purchase a home having credit is looked at suspiciously? In America, if you don't have credit you can't even buy a home. Credit and debt are shameful, except here where it is so common that we take it for granted and assume that it is just the American Way. Although I have gotten out of debt several times in my life, I still include myself in the spoiled American category. It is me (and G) getting out of debt here after all. I believe there has to be a shift in perspective that has to occur to keep you from getting in debt at all. It's an actual realization that you can't afford something, and that is not something that we are accustomed to hearing, even from ourselves.
I want to tell you some of the specific things we did to get out of debt so quickly. This is part of the sacrifice that we were willing to do because it is so important to us.
1- No Cable TV. We have rabbit ears and they look strange on top of our 20" TV, but believe me you can still watch too much TV with only 3 channels.
2- One Car. In January we decided to sell G's Acura MDX. We had a loan on it and the gas mileage was terrible. This was one of the biggest sacrifices because we are left with my Honda CRV that currently has 209,000 miles. Most wouldn't have made this decision I know, but it was the right one for us. Being a one car family has been awkward at times, but overall hasn't been a problem at all. Part of this plan is saving for a new car to pay cash. I've never done this before and it feels very extreme, but why not? Go look at how much you pay in interest on your loan every month and you'll see why we want to do this. It may take all year. If we end up getting a hybrid like we want to get, we may have to finance part of it.
3- A Bucket of Money for Everything. We have our budget broken down into everything that we buy. Ok, that sounds restrictive, but we each have our own allowance that we can use or save for whatever we want. I just bought us new Pacific Coast Feather Co. down pillows like they had at the Marriot on our recent trip to Park City, Utah. Divine! We have a travel budget and do our best to stick with how much we save and not go over. This helps us not to get in a credit backlog after trips. Don't forget a bucket for saving. We have several buckets, retirement, car, emergency fund, and smaller ones for things we want.
4- Imagination. Learning to look around your town or your home for free things to do boosts your creativity. We go to a free putt putt course in our town, play Dominoes, basketball, go rollerblading, free night at the museum, go to doggy parks, and make an event out of Lost on Thursday nights.
5- Evaluate all monthly charges. I'm talking about gym memberships, phone, cable, internet, netflix, car payments, mortgages, cell phones, etc. Be realistic about what you use, don't duplicate, refinance now if you need to do so-you can even refinance your car.
6- We bought a house that would give us a comfortable monthly payment and NOT what the bank told us we could afford. Be careful to include all the expenses like homeowner's insurance, taxes, homeowners association when you figure what price range you are in. Also, the upfront expenses to care for your home can be high and unexpected. I mean, who enjoys buying mulch?
7- Home Cooking. We rarely eat out. I love to cook and Gustavo loves to eat so no trouble here for us.
I heard on the radio that the price of gas has now gotten so high that it is actually making people change their behavior. Apparently before the breaking point, we just keep doing to same old thing and then one day we decide enough is enough. The high gas prices are a catalyst that are making people buy smaller cars, drive less, rethink many lifestyle decisions that affect the bottom line. Although I don't wish for these high prices, I think the change that we are seeing brought about can be a positive if it changes us personally and in our country for the better. Choosing to consume less can give us more peace and contentment in our lives.
In our own personal financial correction, we have learned so much about self-control, the joy of delayed gratification and how we really can live with just one car. I'd love to hear about how your life has changed in a positive way because of getting out of debt or the high gas prices.