Oh goodness. Last night's FPU class was a swift kick in the rear! The 90-minute video that we opened with was eye-opening and got me all fired up and MAD. Some of my notes:
- The total American consumer debit is more than $2.7
Trillion, with a T! Back at the turn of the century, debt carried a lot of stigma - it was a big no no.
- Debt has been marketed to us in so many forms and so aggressively since the 1960's that to even imagine living without it requires a complete paradigm shift. Debt is not a privilege - it is a
product.
- "Cash Advance" companies specifically target the poor. They are greedy rip-offs that aren't needed and benefit no one but the owners of these companies.
- The lottery is a tax on the poor and on people who can't do MATH.
- Staying away from car payments by driving reliable USED cars is what the typical millionaire does. This is HOW they become millionaires! (If you invest the average car payment of $464 a month into a 12% account from age 30 to age 70, it will turn into $5.5 million!) The most expensive way to finance a vehicle is to lease one, or "fleece" one as Dave Ramsey said...a car loses 70% of its value in the first four years - it is the largest purchase most consumers make that goes down in value.
- If you pick a 15 year, fixed-rate home loan (that is not more than 1/4th your take home pay), you will save $143,000 over the life of the loan for a $250,000 home.
- The MYTH is that you will NEED a credit card to rent a car or make a purchase online. The TRUTH is that a DEBIT card will do all of that - find the rental car agency that will work with your debit cards' Visa or Mastercard logo. They exist!
- When you use plastic instead of cash, you spend 12-18% more because spending cash HURTS. (So what if you get 1% cash back?)
- Debt
consolidation is a CON. It typically saves little or NO interest because you will throw your low interest loans into the deal. You cannot borrow your way out of debt. Smaller payments = more time in debt!
- The myth: debt is a tool and should be used to create prosperity. The fact is that the borrower is slave to the lender.
- More young adults filed for BANKRUPTCY this year than GRADUATED from high school!
So, what are the STEPS out of DEBT?
1. Quit borrowing more money.
2. You must save money. (Starting with baby step 1 - emergency savings of $1000)
3. Prayer really works.
4. Sell something. (We sold video games so far. Next: books, clothes, misc).
5. Take a part-time job or overtime (temporarily).
Baby Step 2 - Pay off all debt using the
Debt Snowball:
This is how it works: First, you list all your debts in order from the smallest balance to the largest. Don't be concerned with interest rates unless two debts have a similar payoff balance.
As you start eliminating debts, you'll start to build some serious momentum. These quick "wins" will keep you motivated to stay on track. You pay the minimum on all your debts except for the smallest one - you attack that one with gazelle intensity! Every extra dime you have goes to attacking that debt - until it is GONE.
THEN, you attack the next debt. Every time you pay off a debt, you add its old minimum payment to your next debt payments. So, the snowball rolls over and picks up more
SNOW. Make sense?
Matt and I have a mountain to climb. From consumer loans to old business debt to consumer debt. We feel ready to climb though - and rolling the snowball from the top down
works.
This was the last note I wrote before I left class:
debt has only become accepted as normal in America over the last 20 years. To eliminate debt, you must remember that it’s 20% head knowledge and 80% behavior. You always spend more with plastic. Cash hurts! Commit to never using credit cards again—the first and most important step to dumping debt. Matt and I thanked the guy leading our class, and we cut up our credit card. OUCH! But, I felt at peace - we have our emergency savings (thanks to our tax return) and we have a budget that works. And - our goals in sight.
In closing, a question: What would you do with the money that you currently put towards a car or credit card payment? Your house payment? I think I would put it towards vacations, mission trips, and saving up for things we need. And give big!
Matt is turning 35 this weekend! We are celebrating with some friends over for the big day Sunday - I'm excited to bake something :) It is our first birthday together - not long distance. I am so excited to pamper him all weekend.
Matt has the most wonderful joy. He has a tender heart, an amazing intelligence, and is a best friend to many. He loves Jesus, techy things, his family, Ireland, breakfast cereal, and mentoring young men. He can quote movie lines like no one's business, and succeeds in making my sides ache from laughing almost daily. 
I love you, sweets. I admire how much you have lived these past 35 years and I am honored to spend the rest of my life with you! Let's always be crazy goofballs together ;)
