07Apr

Poor is in the attitude

 

 

wanting less

This is from the archives,originally published June 2012 but this is almost exactly what we talked about in Sunday school yesterday, so I thought I would repost.

“Poor” is a matter of attitude, not bank account.

I know this series is about conquering debt on a low-income, but to do that requires a frugal lifestyle (or that you win the lottery, of course), and a frugal lifestyle usually requires that we change our way of thinking.

I read an article recently that saddened me.  It was about “impoverished” parenting and the author was lamenting the fact that her children weren’t able to eat much junk food because they were too poor.  They also couldn’t afford to buy organic products, or name brand clothes.  She went on and on about how “poor” they were because they could only do this and this, but weren’t able to do that.  By the end of the article, she had achieved her goal and I felt deeply sorry for her children.

I don’t feel sorry for them that they are deprived.  They aren’t.

There are countless people in this world who are starving.  No this isn’t a “there are people worse off than you” lecture, the point is that many of them are more content than we are!  Will you process that for a minute?  When I went to Haiti on a mission trip in 2003, I witnessed some of the deepest levels of poverty I have ever seen—people living in run-down straw shacks with dirt floors.  Babies with their bellies pooched out from malnutrition, and kids with orange hair because their starving bodies were trying desperately to save any nutrition possible.  Even in their deep need, the people I met were far happier and more content than the spoiled American society that we live in.

The children from that blog post are only deprived because their mother is teaching them that they are deprived.  They are being taught to allow money to control their happiness and to live in a constant state of perceived want.  Once that mindset starts, there can be no fulfillment, no matter how much money you have, no matter how many nice things you have, there will always be something out of reach that leaves you wanting, until you change your attitude.

We’re on a limited budget, and I’ve had people shake their heads at how we’re depriving our boys of ____ (insert junk food, eating out, fancy toys, expensive vacations, etc.).  We have a roof over our heads and God always provides our needs (and most reasonable wants!).  We have a $200/month grocery budget, which rarely includes junk food.  (that’s a good thing.  We don’t need junk food!)  My boys always wear used clothing and it’s rarely name brand (again, a good thing.  I don’t want them to learn that the label on their clothing determines their value).  Logan wears almost entirely hand-me-downs, except for a couple of new outfits throughout the year that he gets for his birthday or Christmas.  They have less toys than other children we know and the ones they have aren’t fancy.

But, let me make something very clear.  We are not poor and my children are not deprived.  I will not teach them that.

They use their imaginations.  They enjoy simple things.  They don’t require the newest fancy toys to have fun or be happy.  We choose this for them, for a variety of reasons.

As Christians, we’ve all heard this verse quoted, “I can do all things through Christ who gives me strength.”  Do you know what Paul said just before those inspiring words?

“I have learned in whatever state I am, to be content.  I know how to be abased, and I know how to abound.  Everywhere and in all things I have learned both to be full and to be hungry, both to abound and to suffer need.  I can do all things through Christ who strengthens me.”  (Phil 4:11-13)

Paul had learned the lesson that contentedness, happiness, fulfillment and joy are not found in things.  He had learned to be content despite his circumstances.  Why are we teaching our children the opposite?

It is our job as parents to teach our children how to be content, transcendent of circumstances and material possessions.

We are making the choice to teach our children this valuable life lesson.  Through simple living, we are teaching them to be content with what we have.  No, they don’t have name brand clothes, a lot of junk food, or fancy toys.  They don’t “get to” eat out a lot or go on expensive vacations.  But they are happy and enjoy the simple things in life.  They are content.

They are a lot richer than most of the children around us who have every possible want fulfilled.

27Sep

Budget: Why we no longer see a mortgage as “good debt.”

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On paper, a mortgage seems smart.  I mean, why pay rent when you could be paying for your own house instead?

Consider this:

You purchase a house for $65,000, at 5% interest rate and a 30 year loan.  At this rate, your payment would be approximately $348 +$70 (mandatory PMI unless you have 20% down) + $150 (taxes and insurance for escrow) = $558/month that you are paying.  You pay the minimum for 30 years and you have paid $65,000 for your house, plus $60,617 in interest.

Now, let’s say you double up your principle payments, for a total of $916/month ($348 + $348 + $70 + $150).  Now, you’ll “only” pay $17,000 extra in interest, and you can pay that loan off in around 10 years.  So, in 10 years, you bought a $65,000 house.

Let’s say you decide to rent instead, using that same amount.  Our rent is $425/month.  We’ll take our allotted $916/month, and pay $425 in rent, putting the other $491/month into savings for the 119 months it would take to pay off the mortgage.  We would save $58,429 toward a house.  Just going by these numbers, renting would put us a bit behind—we could get a $58,429 house instead of the $65,000 we got with our mortgage in that same amount of time. (I didn’t take into account the market gaining/falling during this time, or interest earned on money being saved).

However, those numbers don’t take into account these factors:

1. Equity adds up very slowly.  We bought our house in 2007 for $67,500.  We’ve paid a little extra here and there, plus an additional $25/month, paying a total of $35,641 toward our home (payments + PMI + taxes + insurance).  We still owe $58,000+ on our mortgage.  So basically, we’ve paid $35,641+ for about $7,000 in equity.  And, in this down market that’s nothing because even priced at $65,000, our house isn’t attracting any buyers.  So, after paying our realtor and everything else, we’re probably going to end up in the hole, having to PAY, if we can sell it at all (we’ve had it on the market for (3) 6 month terms with very little interest).

During these 5 years if we had been renting instead of paying a mortgage, we would have saved over $10,000. (And that doesn’t take into account the cost of repairs that we wouldn’t have had to pay for, or the additional mortgage payments past the time we left, which already adds another $1,000 onto that, or the amount we stand to lose when we sell).

2. If you own your home, you are responsible for all repairs.  In addition to your monthly mortgage, you are constantly paying for repairs.  (Just before we moved, we had to spend $200 to fix the freezer and AC).  No, renting isn’t all flowers and rainbows, but if you have a good landlord who will fix things in a reasonable fashion, you have peace of mind about this.

3.  No freedom.  We have a one-year lease on our rental property.  We have to stay here for a year, but after that it’s month-to-month. If we need to move, we can move.  It’s that simple.

Many of you know that we recently moved;  we’ve been out of our house for 2 months, but we still have to pay our $569.02 mortgage until it’s paid off or sold.  We are financially tied to that property, and it has been a huge headache.

A lot of the problems we’ve experienced are exacerbated by the fact that we needed to move/sell after only 5 years, and that it’s a down market.  But this has opened our eyes to the idea that for us, there is no good debt.

30Aug

Budget Series: Is Frugality Worth it?

Get out of Debt on a low income

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I receive lots of questions and comments about whether or not our frugal lifestyle is worth it. My  answer is yes!

  1. It allows me to be a stay-at-home, homeschooling mom. Yes, I could get a job, and we could have more stuff. But, that’s not what’s important to us. I know many people think we’re depriving our children, some of them have been so bold as to tell me so. But, I can assure you my children don’t feel deprived and they are not.  Third world children are deprived. Motherless and fatherless children are deprived. My boys with a safe and secure home, all the clothing and food they need, lots of love, and lots of toys and videos and books?  They are not deprived.
  2. We want to teach our children to be content. We want our children to know that happiness is not dependent upon having the latest greatest toys. Yes, we could tell them that, all day long while providing them with the latest greatest toys, but I think it loses effectiveness. So, we live a simpler lifestyle, within our means. That is what we want to model for our children.
  3. Freedom. I enjoy having a budget that allows me to know where our finances stand. We look forward to the day that we will be out of debt, and not have God’s money mortgaged. We look forward to when our money will be ours to do with what we need to do, and what God calls us to do, rather than using it to pay interest on debt.  Debt is an obligation, and by the grace of God, we want to be able to pay all of our debts. Debt that is not repaid is stealing. Plain and simple.

With that said, here are a couple of things that are not worth it to us:

  1. We won’t stop tithing. I read a comment on another blog the other day that said basically, “If you’re trying to get out of debt, why would you still tithe?  Why not use that money to get out of debt?”  Being debt free isn’t worth giving up something that we feel called by God to do.  Furthermore, God’s word promises blessing in return for tithing (Malachi 3:10-11).  God has shown us time and again how He is faithful to provide, and how the tithes and offerings we give to Him will come back to us when we need it.  Tithing is NOT wasted money.
  2. We won’t work extra jobs. One of the things Dave Ramsey recommends (at least on the page I read a while back) was to get extra jobs, as many as necessary, even if you’re working all the time, in order to pay off debt faster.  Time is where we draw the line.  Because, we are not promised tomorrow.  If our world ended today, or tragedy struck our family, we could live with knowing that we didn’t have the best material possessions.  However, we could not live with the regret from spending these days and years with our children working all the time. In fact, time is one of the key reasons we embrace this frugal lifestyle. These days are precious and we will never get them back!

 

This is my list.  What about yours?  Is frugality worth it?  To what extent?  Join the conversation below.

09Aug

Our Snowball Plan (Out of Debt in 6 Years)

Get out of Debt on a low income

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On his site, Dave Ramsey talks a lot about using a snowball plan to get out of debt.  I’m not a huge Dave Ramsey fan, but there are some things about his recommendations that I can appreciate, and this is one of them.  Basically, you start off, chipping away at your smallest debt.  When that’s paid off, you take that payment and apply toward your next smallest debt.  You just keep combining all the payments, plus any extra, until everything is paid off and you’re out of debt.  In case  you’re still doubtful, I thought I would share the boring details of our plan, just so you can get an idea of how that might work.

It all started with an extra $50 a month, that we had from switching car insurance providers.  At that time, we also had $3,500 in our savings account that we’d put away from our income tax return, with the intention of applying it toward one of our debts.

Our Debts:

Student Loan #1, $8,000
Student Loan #2, $11,000
Mortgage, $59,000
Total Debt:  (approximately) $78,000

I was lying in bed one night, and it occurred to me that with the $3,500 we had put away for debt reduction, plus our regular payment ($100/month), and the extra payment ($50/month), we could finish off that debt with our tax return in Spring of 2013!  That was a very liberating thought to say the least, and it’s what inspired me to crunch the numbers to get a little more money freed up for debt reduction, and make the following plan.  In addition to the $190/month, we usually get around $5,000 in a tax refund (yes, we are those people who claim 0 dependents through the year, and basically “use our tax refund as a savings account” to get a large lump sum back.  It may not be advisable, but it works for us).  So, we can set aside $3,500-$4,000 from that to use for the purpose of debt reduction.

Student Loan #1: $8,000
May 2012: paid a lump sum of $3,500.  This not only reduced our principle, but because the interest accrues daily on the balance, it saves us $30/month in interest, so instead of $55 of our monthly payment going straight to interest, now only $25 of our monthly payment goes toward interest.  So, while we added $190/month to the payment through budget-crunching, we also added an extra $30/month toward principle through the savings in interest. New Balance: $4,500

June  2012-Feb 2013:  Pay $190+$100/month, with at least $260 coming straight off the principle (this number will slowly increase as the balance decreases). Projected Balance: $2,160
March 2013:  Pay $2,160 from our tax return to pay off this debt.

Student Loan #2, $11,000

March 2013:  Pay $1,800 from tax return.  New Balance: 9,200
March 2013-Feb 2014:  Pay $192 (reg. payment) + $290 (snowball payment from paid off Student Loan #1).  I’m not 100% sure about the monthly interest payment on this loan, but my calculations assume that $100 from the regular payment will be applied toward the principal, making the total monthly amount $390).  Projected Balance: $4,520
Feb 2014: Pay $4,000 from tax return.  Projected Balance: $520
March 2014: Pay $450 (since more will go toward principle) Projected Balance: $70
April 2014: Pay off Student Loan #2!

Mortgage: $58,000
(Approximate amount applied toward principle from monthly payments from June 2012-April 2014, $2,300.  Projected Balance: $55,700)

April 2014-Feb 2015: Pay $360 (monthly payment, not including taxes, interest, etc.)+$482 (snowball amount from previous loan payments).  I used the amortization schedule to estimate that $115 of my monthly payment will go toward principle, resulting in a total of $597/month going straight toward the principle. Projected Balance $49,133

Feb 2015: Pay $4,000 lump sum from tax return. Projected Balance $45,133
March 2015-Feb 2016: Pay $360 (monthly payment, not including taxes, interest, etc.)+ $70 (from PMI)+$482 (snowball amount from previous loan payments).  At this point, the PMI that we’ve been paying for $70/month will drop off, resulting in an additional $70/month to pay toward principle.  In addition to that, since the balance will be reduced, more of our regular monthly payment will go toward principle as well, approximately $164/month.  So, the monthly amount applied toward principle will be approximately $716). Projected Balance: $36,541
Feb 2016: pay $4,000 Projected Balance: $32,541

March 2016-Feb 2017:  Pay $360 (monthly payment, not including taxes, interest, etc.+ $70 (from PMI)+$482 (snowball amount from previous loan payments).  At this point, the amount from each regular payment going toward principle should increase to $217/month, resulting in a total of $769/month going straight toward the loan amount. Projected Balance: $23,313

Feb 2017:  Pay $4,000 Projected Balance $19,313

March 2017-Feb 2018: Pay $360 (monthly payment, not including taxes, interest, etc.+ $70 (from PMI)+$482 (snowball amount from previous loan payments).  At this point, $275/month of my regular payment should go toward principle, resulting in a total of $827/month going straight toward the loan amount.  Projected Balance: 9,389
Feb 2018: Pay $4,000 from tax return.  Projected Balance $5,389

March 2018-August 2018: Pay $360 (monthly payment, not including taxes, interest, etc.+ $70 (from PMI)+$482 (snowball amount from previous loan payments).  At this point, $330/month of my regular payment should go toward principle, resulting in a total of $882/month going straight toward the loan amount.

September 2018:  Pay off Final amount on mortgage to be debt free!!!!!!!!!!!!!!!!!!

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A few notes: 

-Yes, I know that life happens, and things could come up to interfere with our plan, which is why I said in my first post that we hoped to be debt free in 6-7 years instead of just 6 years.  Also, I left us about a $1,000 cushion from our yearly tax return, along with the money we try to keep in savings ($1,000) for incidentals.  This plan also doesn’t account for any extra money that I earn through article publications, etc.  Or extra money that my husband earns through occasional overtime pay and/or side jobs.  I purposely didn’t include anything like that because it’s not constant, and because I wanted to allow for some “incidentals.” 

And, this plan is pretty much dead in the water anyway, since we moved and everything is on hold as we try to sell our house instead.  However, I wanted to share in hopes that, in all it’s boringness, it might inspire someone else to see the numbers.

I know that 6-7 years isn’t terribly exciting, in comparison to those who pay off $85,000 in 6 months.  But, for us to be able to do this, even on a shoestring budget, is a terribly exciting thing, and 6-7 years is so much better than the 20 years we’d be looking at otherwise.

26Jul

Budget Series: Squeezing out an extra $440/month!!!

Get out of Debt on a low income

 

Back in May, I shared our super tight budget. I was discouraged about debt, thinking we couldn’t possibly get out of debt sooner than the twenty-year plan we were on (student loans and mortgage). I had a revelation that led to crunching the numbers and “finding” an extra $190/month toward debt reduction. This was HUGE! With that plan, we were going to get out of debt, mortgage included, in around 7 years or so.

Sometimes life happens in the midst of our well-laid plans.

Our family is about to move across the state—tomorrow. In the midst of the stress, to-do list, and emotions, it is also wreaking havoc with our finances.

  1. We drained our savings account paying the deposit and first month rent for a house.
  2. We’re facing many extra expenses—deposits, U-Haul rental, travel expenses, etc. However, it has been awesome to see how God has provided in the midst of these potentially budget-breaking expenses.
  3. Until we sell our (old/current) home, we will be paying all of our regular monthly expenses, plus rent at our new home.

So, here is yet another version of our budget, in which we crunch the numbers to create $425/month to pay our rent, and $15/month for garbage pick-up (we usually pay this a year at a time with our tax return, which is why it wasn’t in our budget before).

Total Monthly Income (after tithes, offerings, and required payroll deductions): $2,068

Voluntary Payroll Deductions:
Dental Insurance: $38.30

Monthly Bills:
Mortgage: $569
Rent: $425
Trash Pick-up: $15

Auto Insurance: $118
Electric: $125*
Water: $30
Direct TV: $0*
House Phone: $0
Cellphones: $35
Student Loan #1: $100*
Student Loan #2: $192

Flexible Spending (Cash Envelopes):
Groceries/personal needs/cleaning supplies: $200
Gas: $100*
Misc. Repairs and Household needs: $40
Spending Money $80*

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Where the money is coming from:

Electric, $50
This is an estimate, but we will be on city electric, which is usually significantly less expensive than the rural electric cooperative we currently have.

House Phone, $15
We disconnected our landline.

Direct TV, $65
Several steps here. We cut off service to a second TV, saving $6/month. While doing that, I asked about other savings, and they offered me an $8/month credit for 6 months. I called back later and received $5/month credit for 6 months. I would encourage you to call periodically and see if there are any specials or savings available. These credits will save us a total of $78 over 6 months, and the phone calls took only a few minutes of my time.

However, my current Direct TV budget is $0. I recently discovered the option to suspend satellite service. Direct TV offers this for up to 6 months in a 12-month timeframe, and there is no charge. (They do require that you be up to date on your bill). We are under contract, so this is giving us a much needed financial break.

Giving, $55
Our family supports two overseas ministries—World Vision, and Christian Flights International (a local ministry with which I travelled to Haiti on a mission trip in college). Since we are in survival mode, we made the difficult decision to put this giving on hold temporarily until we sell our house.

Student Loan #1, $190
We squeezed out an extra $190/month to pay toward debt reduction, but now it will help us with monthly expenses. It’s not ideal, but it’s nice to have that money already freed up, and for now, we’ll pay the minimum on our loans.

Gas, $35
We’re going to have to limit driving more than ever, but we’ll make it work.

Spending, $25
I reduced our spending money to $80. Again, “spending money” for us includes everything from gifts, clothing, entertainment, eating out, and anything else that comes outside our other categories. It is not “splurge” money. In reality, we have little to no splurge money, but we’re okay with that, because what we do have is the means to pay our bills and support our family, and for that, we’re thankful.

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A few months ago, it seemed impossible to find extra money to put toward debt reduction (or anything else). Now we are somehow able to pay an additional $440/month! I have shared our budget cuts to encourage you that maybe, just maybe, there are some things that you could do as well, in order to pay down debt, or even just make ends meet.

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