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.
I find the whole selling stuff on Ebay to add more internal clutter than I feel like it offers in financial return. I prefer giving stuff to Goodwill and I have held the occasional garage sale. There are only a few things that I regret letting go of. But for the most part getting rid of clutter and un-used stuff always ends up improving my chi.
Congrats on your accomplishments. I know how hard it can be to let go of stuff. Yay, you! :-)
Great topic! Over the past several years I have been transformed from a spender to someone who really enjoys saving money. Congratulations on making the hard choices and sacrifices to start your marriage off on the right financial footing.
Your house is cute!
LBR-I know what you mean about ebay. Again, it's paying to sell something and then the standing in the line at the post office. I've done it a few times, but it usually feels a let down compared to the money received.
When I moved to Texas I let go of 1/4 of my furniture and countless carloads. It has always been a dream of mine to "travel light". I guess it's the free spirit in me who wants to only have a carload full of stuff to escape. Well, we are beyond a carload now, but at least the makeup collection continues to dwindle. I'm down to a carload of makeup at least. :) Progress, not perfection...
Thank you!! Now we have lovely red geraniums in front of the house and it makes me feel like I'm in the south of France. :)
I think saving may be more addictive than spending. We have to be careful not to become Scrooges and count our gold coins every night. My favorite expression to hubby is "Do you know how much money I saved you!" Just not having my hair highlighted alone has added up to thousands in salon visits and hair maintenance products. So what if I like perfume because I'm so thrifty in the hair department.
Phew! Getting out of debt has been a challenge at times, but I think it has instilled values in our marriage from the start that will last us forever.
Thanks for your comment!
you are right about the differences in thinking in different countries. here, the norm is 50% down on a house, mortgage the other 50%. and even with that 50% down, the banks still want co-signers on the loan. financing on cars is a relatively new phenomena, most people either have company cars as a perk, or buy them outright, as we did. cars are generally smaller as gas is a small fortune (about 4x as much as in the u.s., the price on the board is the same amount more or less but here it's per liter, not gallon) and most families have only one car, but that is changing, unfortunately, as people here with money try to mimic the american way of life, which isn't really practical for the realities of this country.
real credit cards have just been introduced in the past two years, beforehand we used debitcards, which made spending more "real." and they are not handed out to everyone. those who are invited to have a card but have no history are given extremely small credit lines. but all is not rosy -- there is tremendous bank overdraft here that is being remedied as the banks are capping that as well. i see that there is much more awareness in this country of the cost of things and the value. our tax bills are huge as we all pay for socialized medicine among other priorities.
we all know what our currency is trading at against the dollar, because our economy is somewhat dependant -- but how many average americans not in finance know the status of the dollar -- or even care? (well, maybe now people care) i didn't when i lived in the u.s. it's not important when your currency is the world standard.
we chose to live in an urban center so that we wouldn't be so dependant on our car, both in terms of my daily needs and my husband's commute to work. the trade-off is more expensive housing, but with our crazy gas prices, it's worthwhile.
i definitely think more of the big picture here, and whether or not something is worth spending on, whether it's planning my errands for walking-distance downtown so as not to even start up the car, and really thinking about whether something is a need or a want...
Mdmom- Wow! I loved reading all the information in your comment.
I can't imagine anyone having to put 50% down on a house. We put 5% down and felt like it was a lot. There would definitely be fewer homeowners, although maybe there would be just fewer very expensive cars on the road. It seems that Americans choose to spend their money on cars and keep the homes highly mortgaged.
It's sad that the American way of life is pervading other countries. I hope everyone learns from our example with our individual debt and out lending crisis.
Oh, the high taxes of socialized medicine. I am not sure which is better, but between medical insurance and the cost of doctors, I think we all pay a pretty penny. I imagine socialized medicine does put a heavy burden on many during their healthy years though.
That's great that you can live close to things. If I were walking around here, people would think I was stranded and ask me if I needed help. Being with one car is a sacrifice here, so it's interesting to know that it's the norm or even a luxury in other places.
Knowledge of how other countries do things is so enlightening! I love to know how other people view their personal finances and manage daily lives. Thank you so much!
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