Debt: The "easy" way?
Our Financial Peace University Leadership kit just arrived. When I went to answer the door to get it from the UPS man, guess what was stuck in our door? A bright neon green paper advertising the services of a local realtor who was lauding all the benefits of making a house payment and "owning" a home (Um, excuse me, doesn't the bank actually own it?) as opposed to renting.
Thanks but no thanks, I'll stick with financial freedom, save my money to pay cash for a home, and let the bank own other people's homes. If I'm going to own a home, I want to really own it.*
Speaking of FPU, if you didn't guess, Jesse and I are gearing up to host our first 13-week class. It's something he's been wanting to do for awhile and I am excited to finally see it happening and to be able to help one of my husband's dreams come true. There's such fulfillment in that as a wife!
*This was in no way meant to be offensive to those who have debt. I understand that most people do and it's not because they are trying to be financially unwise. It's often because most people don't know anything better. Debt is just the way we live our lives and pay our bills. We know of so many families who are strugging along barely making it or where the wife has to work because there is no way they can afford to live on one income. Most of the time, it is completely due to debt - school loans, car payments, house payments, credit card payments, you name it. This is one reason Jesse and I are so thrilled to be hosting these classes. We've personally experienced the freedom which comes from living within your means by stretching what you have, downsizing, thinking outside the box, sticking to a budget, being creative, and doing without. It's not always easy, but the benefits are long-lasting and we don't in anyway regret our decision to avoid debt. We are so grateful to the wise training and examples of our parents in this regard and we want to pass along what we've learned so that others can also experience financial peace and freedom.
Thanks but no thanks, I'll stick with financial freedom, save my money to pay cash for a home, and let the bank own other people's homes. If I'm going to own a home, I want to really own it.*
Speaking of FPU, if you didn't guess, Jesse and I are gearing up to host our first 13-week class. It's something he's been wanting to do for awhile and I am excited to finally see it happening and to be able to help one of my husband's dreams come true. There's such fulfillment in that as a wife!
*This was in no way meant to be offensive to those who have debt. I understand that most people do and it's not because they are trying to be financially unwise. It's often because most people don't know anything better. Debt is just the way we live our lives and pay our bills. We know of so many families who are strugging along barely making it or where the wife has to work because there is no way they can afford to live on one income. Most of the time, it is completely due to debt - school loans, car payments, house payments, credit card payments, you name it. This is one reason Jesse and I are so thrilled to be hosting these classes. We've personally experienced the freedom which comes from living within your means by stretching what you have, downsizing, thinking outside the box, sticking to a budget, being creative, and doing without. It's not always easy, but the benefits are long-lasting and we don't in anyway regret our decision to avoid debt. We are so grateful to the wise training and examples of our parents in this regard and we want to pass along what we've learned so that others can also experience financial peace and freedom.
posted by Crystal Paine at 2:31 PM
20 Comments:
Crystal,
I didn't take offense to this post really, even though we do have a bank owned home- well partially at least. We feel that this way, even though we must pay a hefty amount in interest, that we are building equity which we will get out of it when we move. Since we bought a forclosed home which we've inexpensively remodeled, (Lord-willing) we will get all that and more back to put towards our next home. Again, Lord-willing. In other words, by living in this home even though we don't officially own it, we have the potential to get all those payments we made back and more. An option that renting doesn't offer us. At least this is how my husband explained it to me...
I've always thought of renting as such a waste of resources, maybe because I've rented before. But you're right, it's probably because that's all I've ever been taught. I'm very interested in you and your hubby's view on this. It's always good to get a new(and sometimes, better) perspective on things.
Crystal,
I think you will really enjoy the teachings of Dave Ramsey. My husband and I have been working on his Total Money Makeover and we have learned so much.
Samantha: I know some people look at us and think we are wasting a lot of money by renting. It's something we've thought a lot about and here is our conclusion: Right now, we are financially "ahead" and we want to stay that way.
If we were to go into debt and buy a home, not only would we have numerous additional expenses just in the upkeep of the home, but it would very likely take us at least 7-8 years bare minimum to pay it off (that is paying much more than just the monthly payment so that we can pay it off as quickly as possible). The whole time we would be behind playing "catchup." In 7-8 years, we would own our home. However, that's all we would own. By that time, we probably be needing a larger home since we would have purchased more of a starter home to begin with and we could very likely have five or six children in 7-8 years and be bursting at the seams in a starter home. But, we would have just paid off our home so if we were to sell it, it may have appreciated a little bit, but not enough for us to afford to pay cash for a larger home. So, we would either have to stay crammed in that smaller home for at least a few more years while we saved up more money, or we could begin the debt cycle again. This time we'd have more of a down payment, obviously, but we'd still be behind. And what if something came up in the meantime? What if my husband lost his job? With renting, we can always just pay for the rest of our lease and leave. We can always downsize if we needed to. But if you "own" a home it can be much more difficult to deal with if you can't afford your payments.
On the flipside, where we are renting right now can very adequately meet our needs for another five years. At that time, we should have enough saved up to pay cash for a starter home. And then we could start saving up for something larger so that, as our family expands, in a few more years we could sell that home combine that money with the extra money we've saved, and pay cash for a larger home.
One of our biggest reasons for not going into debt is that we just do not have a peace about it. We don't think that all debt is always wrong for everyone, we just feel that it should be avoided much more than it is and that it would be wrong for us to go into debt right now. We feel as if it is presuming upon the future, not trusting in the Lord. And since we do not have a peace about it, we know that were we to run ahead with it and take out a loan on a home, we would more than likely be met with all kinds of financial pressure and trouble.
One thing I did want to mention is that taking out a loan on a home might not always be the unwise thing to do. For instance, we are able to save as much as we are spending on rent. If all you can afford is rent, house payments for a first home might be a better option. I would always strongly advise you carefully and prayerfully consider your options though, especially if you are thinking on taking out a loan.
We're like Samantha in purchasing a home(yes, with a bank lien but our name is on the deed and the interest and taxes and major renovations are deductible on our taxes along with profit with a move and new purchase). After renting the first two years of marriage with little left for saving for a purchase that kept increasing in cost with each passing month and our savings thus dwindling as consideration for a downpayment or option for full payment, our options were that we were investing money and energy for the profit of someone else when we could put about the same rent payment into a mortgage payment. A $35,900 home sold for $95,000 a few years later with the profit applicable toward the purchase of the next property. My parents had a similar experience, a purchase nearer $10,000 that sold for MUCH more.
With that said, it could be better for some to rent than purchase. It depends on where God leads individuals and where He has them as His workmanship with the understanding that we don't all have the same experiences with His perfect timing for us as individuals...not with salvation and not with anything else. The experience of my parents was that once they had one rental to their liking, the landlord came along and needed it for family use. Or the job required a move and starting from square one with another. Or expectations weren't realized and moving was necessary. Or family circumstances presented that necessitated moving.
The FPU kit sounds worthy of knowing even for those that have "been there and walked differently" though prayerfully.
I love Dave Ramsey. I try to listen to his radio show a couple of times a week at least.
My husband and I do have debt. We "own" a home and we have a fairly small student loan. God-willing we will be free of the loan in the next three years (or sooner), and the house... well, we consider a mortgage to be acceptable debt (and I know that some people don't; I understand and am not offended) -- provided that we are living within our means and keep up an emergency fund equal to at least 6 months' living expenses. We made this promise to ourselves when we first got married, and we intend to keep it up.
I would love to be free of the mortgage and actually own the home. But until that time, we would be making monthly payments to *someone* either way: the bank or the landlord. I guess we'd just rather be paying the bank. ;)
I used to work for a bank, and it's simply amazing how easily they will lend people money. It's *so* important to be wise when buying a home. Adjustable rate mortgages, interest only loans, and the HORRIBLE 80/20 loans are pushing up foreclosure rates to an all-time high. The simple truth is that if you can't afford a 20% down payment, you probably can't afford the home. And even then you should think about it carefully.
Hello Crystal,
That is wonderful...by the way, my husband and I are taking the class now at our church (week 5). We really enjoy it and are learning so much about getting out of debt. We are in the process of debt snowballing..........my husband is planning on getting a second job and pay off our last 2 credit cards which we don't owe too much on and probably can be paid off by our selling our car. The only thing we will have to owe money on is our house, which we purchased 2 years ago. My husband and I are both in our mid thirties. We decided to use the money we had for a downpayment rather than buying the entire house with cash (which we didn't have). We were living in NYC at the time and were living in a neighborhood which was getting pretty bad. Rent there is ridiculous so we opted to move to Florida and found a decently priced house in a nice community. The only thing though it was only a 3 bedroom so since we also decided to see how God will bless us with more children, we may opt to sell it in the future or just add an addition to the house. Anyway The course is wonderful and has really opened my eyes as to how we can all do without credit cards. We are trying to speak to others about the course but the moment they hear it takes place at a church they shy away completely. How closed minded! Meanwhile they are in so much debt...... anyway God Bless you and best of luck! PS You aren't wasting your money renting as long as your rent is affordable. Unfortunately living where we were affordable meant $1900 a month in a cramped apt. You are doing what is right in God's eyes!
Crystal, we took FPU this time last year. We have been debt free except the house for almost 3 years and it is wonderful. I do have to say it would be better to be completely debt free, but that takes time and we are working on it. Baby step #3 comes first. It seems that everytime we get the EF built up something happens, we move cross country, the roof needs fixing, etc. But I know we will get there and we are handling these things that do come up, so much better than we ever could have if we had had consumer debt. Have fun with your class!
Jennifer
I understand your view on being debt free and I am in agreement with you that it's a wonderful thing, but I must say that since we bought our fixer upper 6 years ago, which by the way is our only debt, we've more than doubled our home's value and have more than 100 thousand dollars in equity accumulated. It's a real blessing to us.
PFG blogmatron: Wow where do you live that a house only costs $95,000! Hehe I guess I've lived in the city for too long. :-)
I've always been taught that owning is better than buying, but I understand your perspective, Crystal. One of the things I find frustrating about renting is that I don't want to put too much money/effort into this home because I know we won't get anything back for it.
I have been wanting to take an FPU class for a while! I have a question, Crystal, about credit cards. We don't have one and don't really want to get one, but we have several people tell us we need one in order to build our credit so (someday) we can get a mortgage. Do you have any insight to this?
Hi Crystal,
We also do not have peace about aquiring debt. Being in debt is bondage. We currently have a small mortgage payment which in our area, after taxes and insurance is still much less than we would pay for rent. Our goal is to pay this off as soon as possible and be debt free. There is tremendous freedom in owning a home out right, although I can see where it is very, very difficult for many to do this; esp. in high housing cost areas. We live in the midwest where home prices are MUCH more affordable.
Take Care,
Trixie
My husband bought our house for 69,000, 7 yrs ago. It is assessed for almost 200,000, now (and we haven't even fixed it up all the way, yet). I believe that the less debt the better, but I do think it is good to build credit. I never had any credit cards and when I went to buy a car, my parents had to co-sign because I had NO credit.Even my huge savings account didn't amount to a hill of beans in the eyes of the bank.
I think that debt is OK as long as you can afford your payments with ease. We can. I think renting and buying really depends on your situation and location.
I did know one church that preached that any debt was a sin. This led a lot of the members of the congregation to sell their homes and cars. This caused a lot of problems because a lot of these people lost everything, financially. When they came to their senses and realized that they didn't have their home and couldn't afford to ever buy another one, there was some pretty upset people. I think some Christian groups take it a little too far. Having debt that you can't afford and missing payments is wrong. I would call it stealing. If you can't fulfill your obligation to pay what you are supposed to, you have some issues. I have some relatives who make twice as much as my husband and they are living paycheck to paycheck because of their financial commitments. THAT is slavery.
I think there has to be a balance.
I also live in a house that is mostly owned by the bank--we might own a closet by now. I would prefer to own it outright as soon as possible, but my husband's theory tends to be that it is okay to carry debt so long as our interest on the debt is less than the interest on our investments.
Our situation is a bit different because my father-in-law gave us the land for free, so the land was the equity we used to build the house. We don't look at it as an investment monetarily. Unless the Lord very clearly tells us otherwise, this will be our home for the rest of our lives, and will belong to our children and grandchildren after us. I have put down roots and my husband always had them, and if it were feasible then we would consider going into debt to buy more land around us that is being sold. It's not like owning something is secure in the US. Even if I owned my home outright I would have to pay rent in the form of property taxes.
We do have a life insurance policy that means if my husband were to die I would be able to pay off the mortgage.
I think that we all could agree that owning land is good, and we all could agree that being debt-free is good. The disagreement is on which is better.
I also think that credit cards can be used wisely--I may have mentioned this before. If one uses a credit card like a debit card, checks, or cash (not spending more than one have or more than is in one's budget) and the card has cash back, extended warrantees, protection from invalid charges and other perks, one can come out ahead. I am very happy with using a credit card this way, and we pay it off every month. Certainly some people might find it too tempting, especially if they were living with a very tight budget, but it works well for us (and I do not work).
Just my two cents (payable in three easy monthly payments!)
My husband and I really like Dave Ramsey too! I pray your class goes wonderful Crystal – how exciting for your husband to realize one of his dreams!
We have been living in military housing on various posts and forts nation wide for the past 6 years. We have been able to save a great deal of money by doing this and have now purchased our first home. We are not completely mortgage free, but will be moving again in 2 years to another duty station, plan to sell this home, and make a substantial profit (hopefully that’s the Lord’s will as we have tried to make wise decisions). We may live on a military base at our next assignment as well. Our goal is to pay cash for a home when my husband retires from military service.
Great comments here. Sounds like there are a lot of financially wise people!
Wow, Zan! That's an incredible appreciation. Sadly, we don't have that kind of appreciation anywhere in this state that I know of unless somehow your area goes from being dead to being a commercial hotzone. Otherwise, I think it's maybe like a few thousand dollars every few years.
Like I said earlier, I'm not against all debt, especially when you are talking about your first home. Sometimes, it might be the more financially wise thing to do - though I'd like to see more men thinking and preparing ahead of time for their future than just going out and getting a big loan for their first home without having saved up at least a sizable downpayment. I'm hoping we can equip our children with the skills and knowledge ahead of time so that by the time they are 25 or so, they are much farther along financially than we are.
Concerning credit cards, I'm not completely opposed to them in all circumstances, but if you don't view them like debit cards and cash, cut them up. We didn't have a credit card until about 2 years ago. The only reason we got one was in order to build up credit as we had none at that point and it was very hard to be able to rent without credit. We made a few larger purchases with it with the money already in the bank, paid them off at the end of the month and built up enough credit so that we now have good credit on our credit report instead of no credit. We've found that we much prefer cash and debit/checks second, so we've not used our credit card since then.
I was so disappointed when our local Christian station took Dave Ramsey off the air (and replaced him with reruns of "on the air pharmacists", of all things!).
Right now we are totally debt free (thanks to an inheritance from my gandparents) and it is so good to be FREE. Even though our only debt was our mortgage, and we could easily pay it every month, there is definately a difference in how our finances work now, for the better!
It is very difficult, though, to stay away from debt. Dave Ramsey is a voice in the wilderness. Everyone else says to "use debt"--or "use other people's money for your advantage". For my husband who is looking always to improve our situation, that idea is very tempting, especially when it's "Christian companies" who are advertising loans and mortgages. :(
On credit cards: we have not had one in almost 5 years of marriage, and neither of us has had one in our life.
Our credit score is "excellent" (because of our previous mortgage, however), but we have found that when people want a credit history, and we have nothing but the mortgage, it is not that hard to get them to look at our other regular bills--we save all our information from utility bills, etc. and hand them over. :)
Crystal,
I like what you said in your last comment. When I read this post the first time, one of my thoughts was how we hope to teach our children the importance of being debt-free. Something I wish I would have learned growing up. I hope my husband and I can teach them to begin to save for home-ownership beginning at a young age. This would be ideal.
Crystal,
The only down side to living where we do is that normal middleclass people must commute long distances to their jobs if they want to live in a decent size house with a yard. My husband travels an hour and sometime hour and a half. Some people in our neighborhood drive almost 2 hours.
My husband thinks that it is completely worth it because he had enough of the city life when he was a kid and loves living in rural NH.
Right after he bought our house the prices soared. My sister and her husband bought a house up the road for the same price, too. It was amazing what happened with the housing market. Both of the houses needed a lot of work done on them. Unfortunately, there aren't those kind of deals anymore and my sister and her fiance probably won't have the opportunity to buy a starter home at all. It is really too bad. The prices are kind of ridiculous now. You can't find a shack below 100,000, now.
Dave Ramsey is the best for any financial freedom makeover. WE are currently on his program. However we didn't buy his kit or attended any classes. We borrowed the book (Total Money Makeover) from the library and I got my dh the audio version at an outlet Bible bookstore for $5.00. We have been gazelle intense for about a year and paid off about 11,000 dollars of HEL loan (DOUBLE YUCK!!). We have $9000 to go to pay then we are debt free except the house. The house is next to tackle but won't be gazelle intense over it.
The one small problem I have with renting (now I have never rented before because we were able to buy a house since my dad gives each of his children money down to get a house Thanks Dad!!) is your money is gone where with a bank loan your money is going towards a loan. Now I have friends who have apartments. Their payment is as much as my mortgage payments however my house is much much bigger than theirs. I am scratching my head over that one. We currently have 3 bathrooms but one of them is currently being remodeled, 3 bedrooms, 1 living room and a great room that consist of the 2nd living room, dining area and kitchen. Friends of mine only have about 2 bedrooms, 1 bathroom, tiny kitchen and very very small living room. Yet their payments are about the same as mine.
We have tax benefits of owning a home. Yes, the bank has the deed but our names are on them. They are the deed holder though. make sense??
In a sense, our house is our access. I just rather pay the bank than the landlord since the house will be totally ours someday (hopefully sooner than later). Little by little it is becoming ours each year. The plus side for us is that our house is worth much more than what we owe on it. That is a blessing only through God. We have more control over our home through a bank than we would have through a landlord.
I just feel much safer this way even though we are paying the bank. You are putting your money to work that way where a landlord just pockets the money and you never see it.
For us, if we were not able to keep up with the payments on the house we will sell it however the plus side is we will get more than what we owe and still buy another house that is cheaper. I am thankful that hasn't happened yet because our house is made up of our blood, sweat and tears. We built it ourselves with the exception of framing which we had a friend do it since he gave us a price we couldn't refuse.
Just my thoughts...I just wouldn't say that having a loan through the bank on a house is a bad thing. It depends on your perspective.
Holly (had to post as anon because I am having trouble with my passcode. I forgot it!!)
I know this is an older post, but one way to pay off a house if you are able to, is to buy houses that are not so nice, fix them up and then sell them, making 15k-30k on each at times sometimes and pay off your house over a short amount of years. My aunt has done this and paid off several houses in the end. I understand the fact of not going into debt, but sometimes it is not possible to rent if you have more than the "normal" amount of children also. My parents would search for weeks, sometimes months to find someone who would rent to someone who had 4 children in some areas. I remember when there was 6 of us, it was pretty much impossible when there was a shortage of rentals in the area. Also, you end up when you have more children and it is not your house, sometimes things are built to rental quality, which does not often stand up to children. We lived in a place where things were not built good. The towel rack was not put into studs and when it was bumped several times, it fell off pulled out drywall with it and it was "our fault". The cheap cabinets fronts would fall off at times etc.
Anyhow, just some ideas!
My sister bought a house for $42k about 4 years ago and sold it one year ago, for $70k in a place where the economy is supposed to be depressed.
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