Financing My Life Has Never Been a Good Idea

I have financed a lot in my almost 7 years as an adult (shit, I’m old!).

Between cars, clothes, furniture, food, and random crap no one has ever needed, I have basically paid interest on everything I possibly could.

And I’ve learned something from this…

It was never a good idea.

No seriously, NEVER.

While I don’t allow myself to regret past decisions (because I have no desire to butterfly-effect everything), I can definitely look back with a look of confusion on my face. Really, past Erin, why did you ever think you needed that? More than that, why did you think it was important enough to pay interest on it?

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Let’s start with possibly the dumbest thing I’ve ever financed — furniture. “Deserving” an upgrade, I put $3,500 worth of furniture on credit. Don’t worry though, I was totally going to use it for years to come…

Exactly 12 months later, I packed my entire life into my Ford Focus and moved from Cleveland, Ohio to Portland, Oregon. While the furniture didn’t come with me, the debt certainly did. Now, ironically enough, I live in an apartment without furniture. One, because I would rather spend my money on other things, and two, because I refuse to finance it ever again. #maturity

By the way, that Ford Focus was also financed and is currently upside down (as of 12/31/2013).

With any luck, by the time this post goes up, I will be carless — only owing the difference between the loan and the value of the vehicle.

Now, I don’t actually believe financing a vehicle is always stupid. People who qualify for super low interest rates will benefit from financing, provided they are making more investing their money than they are paying to finance. But our situation was stupid because (a) we didn’t put down any type of down payment and (b) we bought too new of a car while in debt (2012).

Unlike the majority of people, we actually financed the opening of a business. Seriously, there was no cash involved whatsoever — just credit cards with 20%+ interest rates. We shut the business down and didn’t get the resulting debt paid off until over a year later.

Other than that, I’ve financed countless other things, from dinners out to spray paint to decor. All of it unnecessary, all of it stupid.

For the love of god, learn from my stupidity.

Almost anything you’ll be tempted to go into debt for is ridiculously dumb. Provided you can pay your basic bills, the only thing you may ever have to go into debt for is college, the purchase of a home, maybe the purchase of a vehicle, and possibly a large medical expense. Nothing else is important enough to pay interest on. Trust me, I’ve done the legwork.

What is the dumbest thing you’ve ever financed? What do you consider to be permissible debt?

Should parents pay for their kids’ tuition?

The PF blogosphere is made up of all different types of people. I mean, we’re all total nerds, but we all have semi-unique backgrounds and experiences.

In regards to college, there are bloggers whose parents paid for their entire tuition and others whose parents just helped cover costs.

And then others, like myself, whose parents did not pay any of our tuition.

To get this out of the way first, I don’t believe parents should be obligated to pay for or even help with tuition. Would it be nice? Sure. But the majority of people enter college at the age of 18. This is adulthood. Therefore, your parents are no longer legally obligated to cover any of your expenses. More than that, I don’t think they are morally obligated.

While my parents didn’t pay for my tuition*, I didn’t take this to mean they loved me less or cared less about my future.

I am not mad at them for my student loan debt because it’s really not their problem.

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They chose not to contribute, maybe because of financial strains or maybe because of other priorities, but either way, I hold no resentment. I am glad to have this indebted experience. It brought me to where I am today.

Because of my personal experience, I often think about whether or not I will help my children out with tuition. I could either go the “I didn’t get help, they don’t need it” route, or the “I don’t want my kids to deal with crippling debt” route. I’ll probably end up somewhere in the middle.

I like the idea of helping my children out with tuition, provided they are excelling in school. I am also of the opinion every single undergrad student should work at least 20 hours a week**. College should not be a postponement of adulthood.

In my ideal situation, I suppose I would pay for any classes in which my children received an A or a B and expect them to cover entertainment and living expenses on their own. What I want to know is what YOU plan on doing with your kids.

Here’s what I’m wondering:

#1. Was your tuition completely or partially paid for by your parents?

#2. How much would you be willing to contribute to your children’s college education?

#3. Did your own experience of paying or not paying for your own tuition affect your decision to pay or not pay for your kids’ tuition?

I am very curious to see whether people are following in their parents’ footsteps or doing the opposite. Comment below!

*Credit where credit is due. My father gifted me 4 years of textbooks as my high school graduation gift and my mom paid for my cell phone and car insurance until the age of 19.

**With two exceptions — students who are on music or athletic scholarships, assuming they have practice during the hours they would be working.

Debtors Just Wanna Have Fun!

There is a school of thought that seems to think the indebted should suffer through a life of deprivation until they pay off every dime of their debt.

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I have a theory about the people who fall into this mindset:

Number 1: Either they’ve never been in debt or they weren’t in debt for more than 6 months to a year.

Number 2: They are masochistic and/or sadistic.

Being in debt is not a reason to be punished. Okay, so we made mistakes, who hasn’t? It doesn’t mean we have to deprive ourselves of any joy that happens to cost money until our debt is gone. Because guess what, guys? Many of life’s little joys DO cost money!

Sure you could resign yourself to a life of free fun, which would probably include walking around parks, checking out books from the library, and having sex. All these things are great and totally fun! But if you are anything like me, you also enjoy activities that aren’t free — travel, eating out, festivals, movies, whatever.

Here’s the deal: when you are in debt and you choose not to throw every extra dime at your debt load, you are accepting you may incur extra interest. This is a choice you are making. If you accept it, then it’s fine.

At the same time, you don’t want to spend so much you are unable to pay off your debt. Spending everything you make will keep you in debt until the end of time. If you don’t want that, you DO need to make debt payments, probably more than the minimum.

There are a few ways to strike a good balance between financial responsibility and fun money:

1) Percentages. Assign percentages of your “disposable income” to debt and fun. Subtract your necessary expenses from your take home income and assign percentage values for the leftover cash. Like 75% to debt and 25% to fun. Or any other realistic percentage combination you come up with.

This is a great method for those with a variable income, because it is great motivation to hustle. The more you work, the more you play.

2) Numbers. Give yourself a flat number for fun and entertainment each month. If you happen to bring in more cash than usual, the surplus will go towards your debt.

This is a great method for those learning to operate within a budget. You have a finite amount of money, so you have to prioritize what is truly important to you in the fun department. And after a few months of spending all your fun money in the first five days, you’ll learn to ration your cash.

3) Financial sources. As a freelancer, sometimes I assign money to debt, savings, or fun based on where it is coming from. For example, I may throw all the money from a one-off gig towards my debt. Or I may assign cash from a certain client towards entertainment.

The same concept applies for windfalls. Maybe you throw your tax refund at debt but you use any gift money for entertainment.

Being in debt does not mean you have to deprive yourself of fun, even PAID fun. It is easy enough to say, “I’m putting all extra cash towards debt! Gazelle intensity! Rice and beans!”, but it isn’t sustainable for most people for a long period of time. Don’t neglect your debt OR your social life.

Do you think the indebted should be “allowed” to have fun? If not, how much debt have you paid off and how long did it take? Would you classify yourself as a masochist/sadist?

Living like a pauper, so I can be a Princess

I know that wanting material goods is frowned upon in this blogosphere of ours (MAG excluded, thankfully), but I’m not ashamed to admit that I really like nice things. I don’t think $350 for a great pair of leather boots is ridiculous and someday I’d love to own an Audi. #SorryNotSorry #WhatADoucheWhoUsesHashtagsInPosts?

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Unfortunately, I’ve had to scale back and say “no” to myself due to my slightly overwhelming debt load. As such, those gorgeous Frye boots I love so much are still with the great people of Zappos and I’m considering selling my Ford Focus to go carless, so an Audi isn’t super realistic right now. I don’t plan on putting these purchases off forever, but I’m trying to be nice to Future Erin until we’re out of debt. She deserves better than my impulsive self.

So here I am, typing this on my malfunctioning computer, sitting on a mattress on the floor with sheets but no comforter. I can see my kitchen and bathroom from here because I live in a 400 sq. ft. studio that I share with my husband. There is no dresser. There is no bed. There is no couch. My refrigerator is less than half my height. And obviously, decor is not a thing in this empty little space of mine. And you know what? That’s okay.

I am lucky enough that I don’t lack anything that I need. While I have a long list of wants that I can’t afford just yet, I’m not really deprived. My pauper lifestyle is just temporary and I fully intend on spending my late twenties building up enough cash in savings and investments to live more on the Princess end of the spectrum.

I’ve managed to live the last 24 years without getting a manicure or pedicure. I’ve dealt with white walls without artwork for my first 6 years of adulthood. I’ve suffered through $5 bottles of wine and lived to tell the tale. I suppose I’ll live right through the next few years of pauperhood just fine. It will be worth it eventually, or so I tell myself to get through it.

For now, I’ll just act like a Princess (minus the spending part) while living like a pauper. Eventually, my budget will catch up with my head. Eh, maybe not. My head is pretty big.

Are you living like a Princess or a pauper? What sacrifices are you making now for future rewards?

Debt Payoff Burnout

Being in debt repayment mode is pretty difficult, as anyone who has gone through it will tell you. Once you get over the initial shock of changing any bad money habits, and it can be invigorating and liberating to finally be spending less than you make each month. Throwing as much money possible at debts to get it paid off fast means a strict cut-back in spending in pretty much every area of your life.

this is your face on debt

this is your face on debt

If you have a big debt load, it takes more than a few months of mindful, restricted spending to pay the debt off. Somewhere between the 6th and 55th month of restricted spending, it all starts to feel a little bit boring– yes, you are making progress each month but with so much time left in repayment, it can feel like you will NEVER be done paying everything off, and feelings of depression from constant deprivation can start to set in.

The easiest way to combat payoff burnout is to change the way you feel about buying luxuries, like clothing, makeup, etc. Is a new shirt that you likely don’t need really worth the cost? Sometimes, within reason, it can be, but you can only wear so many items of clothing in a year, and no one is going to notice if you are wearing a new, barely different shade of lipstick. Once you go without and objects lose some of their importance in your life, you are less likely to feel super deprived after going long stretches without new luxuries.

Many debtors used to reward and pick themselves up by shopping. Using shopping as a way to feel good is not healthy mentally or financially. During the debt payoff phase when there isn’t any extra cash, it is important to find ways to make yourself happy and de-stress in healthy ways. Take up yoga or meditation, read a good book, exercise, or journal your thoughts and feelings. Not only will you save money, but the happiness you find will be deeper and more lasting than temporary shopping highs.

When I am starting to feel really burnt out and want to buy something, I put the item on hold or put it into my virtual shopping basket. Then I wait. I think about it for a day or two, and my urges have usually subsided enough by then so I can rethink the purchase objectively. Ask yourself “Do I really need this, or am I just feeling a bit financially deprived?” More often than not, it’s the latter and the need to purchase passes within a few days.

Visualize your end game, and use that vision for the future to motivate you when things are getting tough. Keep track of your progress through a debt spreadsheet, and celebrate all of the victories along the way.

How do you keep yourself motivated during debt payoff?