Budgeting: debt

Nothing fucks you over like debt.  Nothing.  Because you're not just paying back what you borrowed, you're paying that back plus interest.  

And interest rates...have to go up.  They must.  Because the federal government in all of its infinite wisdom turned on the fucking printing press, and put too many dollars out there to chase the same amount of goods there's always been.  Raising the interest rates removes some of those dollars from circulation, but...unless they really jack the rates up (hint: they might have to, even if they don't want to), prices won't go back down.  

So.  Debt.  Most Americans owe multiple types of debt: consumer debt (credit cards, cars, store credit, gambling), medical debt (insurance helps, but a vast majority of people don't have enough savings to cover deductibles and out-of-pocket costs), student debt, mortgage debt.  

The mortgage debt is the only really acceptable debt to be carrying.  The right kind of mortgage is fixed rate, and costs no more than a quarter of your monthly take-home pay.  Total.  Thirty years is okay, fifteen's better.  

Everything else...doesn't just add up, but multiplies.  It builds.  

Pay that shit off before you do any fun stuff.  You will not be able to afford to keep carrying it as the economy keeps getting ratfucked by politicians that have no concept of consequences.  

I do not have any debt.  I managed to get through college and grad school without accruing any student debt whatsoever,* and only carried a small credit card for a little while.  We owed on a car for a little while.  I do have experience with debt.  

What my experience taught me is that I don't like debt.  I don't like owing money, and paying back more than I borrowed in the first place.  In fact, I hated it.  I hated how it shrunk the cash available to use on other things I needed--not wanted, needed.  

And I don't think our consumer and/or medical debt ever exceeded about ten grand.  

The average American owes around twenty or thirty grand, spread mostly between student debt, car loans, and credit cards.  

Median income is only about forty grand per household, in this area.  

I used to listen to a lot of talk radio, back when I worked on campus--AM talk radio, not NPR.  It helped keep me sane in lefty-land, knowing that I was not alone in seeing that the emperor was naked.  And this was when we still had a little bit of debt--a grand or two left on a 10K car loan, and a couple hundred on one credit card, and a hair more on another.  And I hadn't changed the station after Rush Limbaugh's show went off, and...Dave Ramsey came on.  

I sat and listened for two hours, until the next show came on.  

It was a revelation.  I already knew how to budget, but I had not even considered what life would look like without payments.  

And I sat down and thought about it.  We had a house that we'd just bought, and our mortgage payment was a bit less than what we'd paid in rent, and having a little extra was...nice.  I looked at my budget, and considered what I'd have to plan with if we paid off that little bit of debt we still owed.  

Ramsey's plan is stupidly simple: pay it off.  Pay it all off.  

He lays out baby steps on how to tackle the utter mountain that most people have in front of them--starting with saving a basic emergency fund of a thousand dollars in the bank that is not touched for any reason other than a true emergency: your washing machine or dryer abruptly die, your transmission goes out and needs rebuilt, you have to go to the emergency room for something (even with insurance, those cost).  Then, look at your debts, and lay them out.  Which one's the smallest?  Don't look at the interest rates, or the minimum monthly payments, yet, just the individual debts.  Which one of these things has the smallest number of digits to the left of the decimal?  Which one's next?  And so on, until you've got the list arranged from smallest to largest.  The next step is that you pay the absolute minimum payment on all of the debts...except that smallest one.  You pay extra on that until you've paid it off.  Then roll that into paying off the next one.  

You don't get to eat out, or do fun stuff that costs money, or anything like that while you've got debt--you just pay it off.  Ramsey says that once it's paid off, you will feel like you'd lost a ton of pressure and dead weight off your back.  Like you can breathe again.

He's right.  

I am not kidding.  

My household does not have any debt.  We do have a credit card--one, singular, solitary.  Not multiple ones.  We pay it off every month.  

Dave Ramsey advocates that people never, ever have a credit card--however, he and a lot of his listeners/fans have been addicted to their credit cards as much as any alcoholic is their tipple.  They cannot have just one, because it snowballs.  

We've never been addicted to credit cards.  I do not advocate even "just one that we pay off every month" for anyone who has been addicted to consumer credit.  At all.  

However, for us, it has been an invaluable tool: our bank limits our debit card purchases to $500/day unless we call to make special arrangements.  I don't have an issue with this--it protects us from having someone steal our card/number and cleaning us out.  However, sometimes...making a larger purchase is a little harder than I'd like for it to be, because fewer places are taking even local checks.  

I managed to get through college, then grad school without borrowing money--and we paid cash for a second, accounting degree, for my other half.  We could not have done the latter without having been debt free. 

We have no payments where we're paying interest.  None.  We own our cars and our house outright. There's no car payment, no house payment.  

That money goes into savings.  We save up for things.  We saved for several years to put a new roof on the house--if we'd had payments on, say, a car or student loans, we could not have put the new roof on the house, year before last.  There's a couple of other repairs (nowhere near as major) that we're working on saving for.  We'd be a lot farther away from being able to do them if we owed money on credit cards, cars, or student debt. 

We would not be able to keep the kids in the school they go to, if we were paying interest because we had debt.  

Debt is bad, m'kay?  Get rid of it.  

If you don't make a real effort now, it's going to be a lot harder, later.  

*I managed to get my undergraduate degree paid for by a full Pell grant and Vocational Rehabilitation.  I got a graduate teaching assistant position that paid for my grad school tuition and a grant that paid my fees.  Without those...neither of my degrees would have been able to pay for themselves, and I'd have been screwed.  And a lot of people in college don't have any more of a chance of their degree paying for itself because they've been actively lied to all their lives, that "any degree will boost your income."