Family and Finances: Episode 5, Part 1

And today we're going to talk about a painful topic in our lives, at least it started out that way, really, really painful, and that is the topic of debt. And our hope is to give the encouragement, the motivation, and the practical advice so that people can eliminate debt and to be free, even though right now they may feel like it is impossible. So we're going to talk about credit card debt, car, automobile debt, mortgages, and student loan debt, all in today's episode. And I think you would probably agree that we were the poster children of what not to do when it comes to debt. We were completely clueless. Yep. We had no advice. We had no real... We didn't seek advice. Yeah, and we really didn't have any training in that. We started out with student loan debt and just got worse from there. Thankfully, it wasn't much, and I wanted to eliminate it as quickly as I could, but we'll get into that. Well, in regard to the student loan debt, yeah, we did get rid of that one, but I had a bad attitude towards debt in that I liked it. And so I thought it was an opportunity for leverage and to multiply our resources. I was a risk taker, and it didn't bother me to open up a new credit card account or store account or to go down and buy a car on credit. I thought credit was great. And of course, you were fearing credit, and you were fearing this, and we just continued to pile it up. Well, and early on, we had both incomes, so it didn't seem to bother me looking back. But once children came and I wanted to be home, it was a real problem. Yeah. We built a budget, even though we didn't really have a budget, but we were thinking we would

have dual income for all that time. And so our expenses were based on two incomes, and then when we decided children were coming, we were only going to go down to one income. It didn't work very well. No, it didn't. So we had lots of problems. Let's talk a little bit about each one of these debts, Ann, and give people specific advice, maybe some stories. And let's start with credit cards. We started out with one credit card, and I think at one point in our life, we were carrying 10 credit cards. No. I don't remember that. 10? Let's just say 10 consumer accounts. Wow. That's credit cards and store accounts. Okay. You know, we would go in and open those store accounts, 90 days, same as cash. And if you didn't pay at the end of 90 days, they just made it a minimum payment. And we were saying, okay, well, we can make that $20 payment. And the next thing you know, we've got debt all over town. And we were, you know, we just did it the wrong way. We sure did if we had 10. I don't remember 10. That's too long ago. I can't remember that. Well, today we do it totally differently. We had to come up with a method to pay those off and agree together that we would do it a way that brought sanity into our budget.

So let's talk about the best ways to pay off credit card debt. Well, there's a couple methods that we try to encourage people to follow. You've got to get on a plan and have a disciplined way to pay this off. So the avalanche method is where you attack the highest interest bearing debt first. And that way you save money overall, you're paying the less interest in the long run. The other method is the snowball, the debt snowball, where you pay the smallest debt off first. So you get the psychological advantage or motivation to keep going. And I would say there's a third method. Some call it the debt snowflake, where you just pay a little down on your debt whenever you get around to it. Which I don't think, I would choose one of the first two. Well, the first one is the one I like. If you list all of your credit cards and the amount of interest you're paying on each one, and you eliminate that first, you get the most benefit of that. So if you've got a credit card and you're paying 14% or 15% interest, or you're paying late fees regularly, and you get rid of that, even though it may be your biggest balance, you're going to get a huge load off your shoulders. Well, and it's also important. that as a couple, you come to an agreement that you're not going to add to the debt. You're just gonna stop using your credit cards. You're gonna make sacrifices, and you're gonna commit to being self-controlled. Well, you remind me of the turning point for us when we realized we can't do this anymore. And we actually went to an all-cash budget, and we just stopped using them. And we began to pay them off so we could get them closed.

And then we agreed we would use only one credit card. And that way, we would be able to pay it off every month, and we'd never have a balance again. And we haven't had a credit card balance, meaning carried forward any of the debt beyond 30 days for how many years now? I don't know, it's been a while. So we went from being the poster child for being bad with credit cards to them actually becoming advantageous to us because we collect our airline miles, we don't pay late fees, and we just manage it really, really well. In fact, I think if you can't pay it off at the end of the month, you should stop using it for a long time until you regain self-control. Right. And it's just really a matter of sacrifice. You know, you stop shopping. It's so easy to use our credit cards today. You know, somebody recommended don't have your credit card linked to your Amazon account, where you have to manually put it in with each purchase. Anywhere you shop and you've got your card linked, take it off so you don't just mindlessly push the buy now button. Yeah, with just a click of a button, you can go into further debt. Right.

Now there are people who really struggle with debt, and it's just a huge sort of burden to them. They haven't been able to get out. They haven't been able to be successful. And we recommend they contact Christian Credit Counselors because they can create a debt management plan that is tailored for that particular family to help them overcome their lack of progress. Well, and one thing we haven't, that you didn't address is medical debt. A lot of people don't realize that a lot of hospitals and physicians are willing to work with you. As long as you're straightforward and tell them you want to pay, you just can't pay what they want right now. And I read a statistic recently that the average family files for bankruptcy because they're $300 to $500 a month short in their budget to make ends meet. If you think about how much interest we're paying on debt, if you could just eliminate all the interest in your budget, then you could close that gap. But if you think about bankruptcy, it truly reminds us of Proverbs 22, 7, that the borrower does become a slave to the lender. And we felt that. Back in those days, we were getting collection calls. We were making some late payments. I was juggling, just trying to make it all work.

And so we felt the reality that we were slaves to these lenders. No, and it took us a while to realize how we could cut back. You know, we had a lot of wealthy friends and we were just keeping up with, thought we were keeping up with them, going out to dinner with them, shopping where they shopped. And we realized, whoa, we cannot continue to do this. Yeah, we didn't realize that they were paying cash for their trip and we were putting it on the credit card. And so we were going further behind and it wasn't a problem for them. So getting rid of the credit card debt is a big boost to your budget because you just get so much freedom by not carrying that around with you month after month.