I guess I should post this here.
In posting this article to Facebook, I said that “o
Truuuuuuth. And being able to save up for it and drop cash on it is so much more rewarding of a feeling that using a credit card on it (which is debt no matter how you spin it). We plan on doing the same for our car :)
My issues with this debt deal
(taken from a long comment I put on a friend’s Facebook post)
Ooh! Ooh! Do I get to say my problems with it? I mean, it hasn’t actually passed through either house yet and as such isn’t a done deal, but I’ve still got complaints.
A.) We’ve still got MASSIVE deficit spending even with this deal. You can’t keep spending more than you make and expect to come out on top. Basic budget rule right there — don’t spend more than you make.
B.) Related to the first one, but still separate. While this deal *does* require a congressional vote on a balanced budget amendment,
nothing very little hinges on it (unlike in Boehner’s plan). In Boehner’s plan, the second debt limit increase hinged on the passage of that amendment. This deal has nothing something like that, and one can simply take it or leave it. With how terrified most democrats (and many republicans) are of actually having a balanced budget (“not our entitlement programs or defense!”), there’s no way little chance it’ll pass. EDIT: Lol, j/k. Apparently, something *does* hinge on the balanced budget amendment. The debt ceiling can be increased by $1.2 trillion regardless of passage of that amendment, but if the amendment *does* pass, it can go up to $1.5 trillion. The relevant parts were correct all snarky-style.
C.) It’s too small. This “cut x-amount *over ten years*” crap is just pointless. Firstly, the current congress has no control over the future congress without the passage of an amendment; laws are too easily changed and recommendations are too easily ignored. Secondly, our current debt is $14.3 trillion, and we think cutting less than $3 trillion in *projected* spending (not even real spending, but what we think we might spend) over a decade is going to work? No. It’s just way too small. It will never get the job done.
I don’t want a default, so part of me is happy that a deal has been struck (although there is now worry it won’t pass both houses as both parties have complaints about it), but another part of me thinks that a default is almost necessary, that we won’t come out of this idiotic mindset until we hit rock bottom. You hear that about drug addicts a lot. Well, I think we’re addicted to spending. Massive cuts are going to be necessary in order to get us out of debt, and that starts with NOT having any deficit spending. You can’t spend 175% of your annual income and get out of debt. That’s equivalent to a family making $60,000 a year and spending $105,000 a year. It just doesn’t make sense, and it just doesn’t work. The size of the cuts necessary will *suck* for everyone in the short term, but they’re necessary for the long term.
Baby Step 1: Complete!
Since a blog is kind of like a journal, and some of the advice I’ve heard about going through any big plan in life is to journal about it, I felt that this was something worth talking about.
Meghan (mickeygnome) and I are already working on getting our finances in order. We don’t want to be like our parents (and most of America, it seems), living on credit, paycheck-to-paycheck, worrying every time a relatively expensive emergency comes up. We want to be comfortable. Rich would be nice, but we’d be happy with stable. We always worried that we’d have to be doctors or lawyers or whatever in order to have that happen. Then I remembered this guy named Dave Ramsey that my grandma was always going on about, and then Meghan reminded me that we both watched a video in our Econ class in high school of Dave doing a live event. So, I started looking around online. I found this video by him about being able to pay straight cash for cars for life and still retiring rich.
I knew right away that the video was idealized, and the idea of a “good” mutual fund being 12% is a little insane in today’s economy (although I later found that 12% is the market’s lifetime average). Still, the idea of never having a car payment was radical to me, and I was hooked. I found that my aunt had his book, The Total Money Makeover. I read it, then I got Meghan to read it. We both talked about how it was filled with common sense advice that we’d heard before but hadn’t actually seen practiced in our lives (with the exception of my grandma — the woman is amazing). It’s filled with success stories of people that got themselves out of ridiculous amounts of debt and are now living wonderful lives just by following and sticking to his plan. Some of those stories are by people making $180k a year, but some are by people making $30k. We knew it could be done, so we made a decision then and there to get our lives straight financially.
From that point on, we started doing our finances together. We made a budget and started following Dave’s seven baby steps. Because of leftover student loan money, we basically already had the starter emergency fund (which is $500 instead of $1000 because make [waaaay] less than $20,000 a year). Since we didn’t need to worry about bills yet, we started pouring money into saving for the wedding.
Suddenly, we found out that (thanks to unforeseen circumstances), we needed to come up with about $800 within 3 or 4 months in order to pay for Meghan to be here at IU this semester. We took stock of everything we could do and decided to not spend a dime we didn’t absolutely have to. This means we lived on meal points: we ate nothing but dining hall food, we bought groceries from meal point places, we didn’t go out and spend money on anything but essentials like soap and haircuts (and barely even then). We managed to save up $800 in around two-and-a-half months, though looking back on it, it seems a whole lot faster than that. Life sucked for awhile, but it was totally worth it. We learned that we *could* do it, and we did. The problem came when we ran out of meal points with a month or so left in the semester (before Thanksgiving). My mom gave us like..$400. There was a parent loan with leftover money that, for some reason, came to me instead of her. She told me to send her back all but $400, and we used that as our “cushion” fund. We still had money coming in from jobs.
Total disclosure: we spent every bit of that $400 and our paychecks by the end of the semester. We couldn’t eat in the dining halls anymore, so we ate out for everything. We bought “groceries” in the form of microwavable meals and what have you. We splurged a few times. We basically went crazy from not being able to spend ANY money for so long. That’s what told us that Dave Ramsey was right in that we needed to include a “Blow Off” section in our budget. We couldn’t have done it when trying to save up for Meghan’s school, but we knew right away that, when we didn’t have to worry about that anymore, we’d need to make a more legitimate budget.
So, all of that for this: we got back on plan and finally finished off our $500 emergency fund last night. It feels fantastic! I was giddy. I still am. We managed to do that AND save up almost $1,400 for our wedding at the same time. Now we can start dumping almost ALL of our savings into wedding savings, and we’ll be able to build it that much faster. I’m so excited for it. We’re actually still going to save some for “just in case we need to help Dad.” There’s this whole thing about my grandma having cancer, then we found out that it’s worse than expected. Doctor told them today that, of the 19 nodes he took from her, 17 were cancerous. Wee! So, my dad’s real worried about being able to pay for a funeral and medical bills and whatnot, and none of his SEVEN SIBLINGS are offering to help pay AT ALL. One offered to pay for a wig if she ever needs one, but that’s it. Anyway, Meghan and I are going to save what we can to help Dad out when he needs it. Scary times, but…yeah.
Anyway, the next step is marriage. Then, we’re gonna focus hardcore on paying off our student loans smallest to largest. It’s gonna take awhile, but we’re gonna do it faster than a lot of people do it. We we we so excited. We so excited. Gazelle intensity for the win!