Finance

Our Personal Finance Journey Part I

I just dropped my 1st grade daughter off at her private, Christian school, and now I’m enjoying a relaxing cup of coffee as I type this. We are expecting our second child in two months, and I get the privilege of being a stay-at-home mom. I’m living my dream. And the best part? I’m not stressed about finances.

I could easily write off our current financial situation by saying, “we are blessed.” And, yes, we truly are blessed. But our current scenario did not happen randomly over night. We are blessed because of a seven-year process, seven years of life-changing habits, seven years of financial sacrifice and delayed gratification. Seven years of living below our means and working toward a common goal. We truly believe God has poured out his blessings upon our family because we have tried to be wise stewards of what he has given us.

But, it’s been a process. Sometimes a very hard process.

Everyone’s story is different, but I thought I’d go back and share our personal journey, if nothing more than as an encouragement to others who are ready to quit being normal. Our lifestyle is definitely in the minority, so as Dave Ramsey calls it, we are totally weird. But since America has a negative savings rate, we want to be anything but normal.

When Brent and I met almost 11 years ago, he had a decent job, but no savings. The one remarkable thing was that he had just paid off close to $18,000 on a credit card (hopefully those two trips to Europe were worth it)! He had a $393/month car payment on his Jeep Wrangler, but overall, his financial situation could have been much worse.

On the other hand, I was living on a low teacher’s salary and had about $2,000 in a savings account. I had a credit card I used every once in a while but I always tried to pay it off fairly quickly. My car (a little Saturn) was paid for and I had no other debt.

Brent and I have always inherently known that debt isn’t really a good thing, so I would not have classified us as big spenders when we got married. However, we bought into the idea that if we could “afford the payments” on something, that meant we could actually afford it. We didn’t mind using the credit card for things as long as we had a plan to pay it off quickly (about 3 months time was our max limit that we wanted to carry a balance).

I desperately wanted a car with power windows and locks, so I traded in my paid-off Saturn for a used Sebring, creating a car payment of only $250 a month. But I knew I could “afford” the monthly payment. When we got married, we wanted new furniture for our house so we started buying one set after the other. Because we believed we could “afford the payment” on our 2 years no-interest furniture, that meant we could actually afford the furniture. New furniture all for only a couple hundred bucks a month! What a deal! New carpet for the bedrooms? No problem. For a $100 a month payment, we could “afford” to do it.

Just look at this bachelor pad decor.

It needed a woman’s touch!

A lot of people think, “What’s the big deal? If you can write those checks every month and still be within your budget, doesn’t that mean you can actually afford those things?” That’s exactly what we thought. Instead, we were unknowingly typing up our income.

Although Brent and I weren’t spend crazy, we had no written budget. From the beginning, we had agreed to always communicate about money (the leading cause of divorce), but the extent of our communication was agreeing that we wanted our bills paid every month, and hopefully (fingers crossed!) no remaining balance on the credit card. We also consulted each other before spending any money for things other than necessities. I might go to the mall and find a dress I really liked, so I’d call him from the dressing room and tell him how much it was and ask him if we could afford to put it on the credit card with the hopes of paying it off very quickly. What I didn’t know was that Brent was trying to juggle an abstract budget in his brain. Almost always he would tell me that we could work it out. I had no clue the mental stress he was dealing with, and he didn’t want to tell me either because he didn’t want me to worry.

About a year into our marriage, we were encouraged by our small group leaders to take a Crown Financial course. So, we signed up for the one-day crash course version of the class.

Enter the beginning of our paradigm shift.

The focus of that Saturday was about getting out of debt.

What we started to understand was that affording payments is not the same thing as being able to afford what we were buying. Affording something meant paying for it outright so it immediately became ours. Otherwise, we were “slaves to the lender” (Proverbs 22:7). We might have brought our newly purchased product home, but we didn’t truly own it yet. The places we bought them from owned us until we could pay them back. The monthly bills became a ball and chain, not allowing us much freedom with our income.

If you added up our car payments, furniture, carpet, and miscellaneous credit card spending, we had about $1,200 of our paycheck each month heading out the door as soon as it came in! The light bulb went off and we realized that instead of paying other people that $1,200, we’d rather put it in our own pockets and do with it as we pleased. We wanted flexibility.

If we didn’t have debt, but we wanted a new (to us) car, we could simply pay that money to ourselves until we had the amount we wanted, and then pay cash! We would own the car as soon as we drove off the lot (not to mention you get a MUCH better deal when you pay cash and you don’t end up paying interest)! If we wanted new furniture, we could pay ourselves for a few months, and then purchase a set using cash. We would own it the day it was delivered! And the next month? We wouldn’t receive a bill. Instead, we would receive $1,200 that would go into our pockets instead of out the door. We could quickly save for the next thing on our list. What a freeing idea.

The thought of this freedom and flexibility set our brains on fire and we decided to throw every extra penny we could find at our debt (smallest to largest) to get to a point where we would be paying ourselves instead of other people. We cut back on our lifestyle and employed one of the greatest tactics to financial health: delayed gratification.

During the course of paying off our cars, furniture, and credit card, I changed schools and increased my salary by a bit. However, friendly pressure was put on me at my new school to obtain my Master’s degree so I could become an adjunct professor and offer my AP class as duel enrollment. With our new mentality, we had no choice but to cash-flow the classes I began taking. Thankfully, some of our smaller paid-off debts freed some money to do so.

My second year at the new school, we found out we were expecting our first child. This lit an even greater fire under our pants, and fortunately, we paid off every last penny we owed before she was born. Not having any debt is what gave me the option to stay home that first year with her. We owned our cars. We owned our furniture, we owned everything we brought home, which meant we didn’t need my salary to make those payments that are oh-so “affordable.” We had options.

That’s the funny thing about life. Things change. People lose jobs or receive pay-cuts. You enter a different season of your life where you need financial flexibility. Those once affordable payments are now restrictions on what you can do. Without debt, your money belongs to you, not a car dealership, a retail store, a credit card, or a bank.

But…, by completely cutting out my salary the first time I became a stay-at-home mom is where things got interesting. We experienced one of the hardest financial years of our marriage.

But that’s for Part II, right?

 

If you have monthly payments (car, retail stores, credit cards, bank loans, student loans, anything on a payment plan, etc.), my challenge to you is to add up all of the payments to see how much money could be going straight into your wallet instead of out the door each month. Multiply that number by 12 to see how much money you could be saving to purchase things in cash in only one year’s time. You might be surprised.

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