Thursday, June 12, 2008

Living Debt Free--Part 1

I've had some thoughts on finances swirling through my head that I wanted to share. However, I quickly realized that writing about them all at once would make for a very longwinded and boring post. So, I'm starting a series, called "Living Debt Free" which I will be continuing throughout the next week or two.

Living debt-free is definitely something my husband and I strive for. I was raised by parents who were very careful about the loans they took out, and King Jo was raised with the mindset that loans are as bad as the Anti-Christ (and I'm only half-joking). This definitely gave us an advantage as we were able to marry only owing a few thousand on my school loans and were able to quickly pay that off even with very low-paying jobs before getting pregnant a year later.

Though we recognize the great freedom in being debt-free we have also encountered the reality in life that sometimes unexpected expenses come up and staying out of debt when you're young can be difficult. This is why I think it is SO IMPORTANT to have at least a modest emergency fund in place. We were so busy trying to get loans taken care of our first year of marriage that we neglected saving for an emergency fund and so every car repair and unexpected bill that came along would hit us hard and set us back. God was amazingly faithful to provide, but it would have saved us a lot of heartache if we had been more diligent to set aside at least $1,000 for those burdens that come along. It's sad to say but when our bank made some mistakes involving about 40 dollars, we were overdrafted because our checking account was that tight! Now, we try to keep a couple of hundred dollars of float money in our checking account, which we don't spend, but we have it there in case of problems like that!

Though we didn't have an emergency fund for the first few years of our marriage, I am so glad we have at least $1,000 set aside for that now. I would like to be able to set aside even more in the future. But for now, I really want to encourage my blog readers to start small and build a emergency fund of $1,000 if you haven't already.

Who should have an emergency fund?
1. High school students (now is the time to be saving since you have few, if any, bills)
2. College students (Too many college students are tempted into easy credit card fixes when the car breaks down and they are living off of Ramen noodles without a dime to spare.)
3. Newlyweds (If I had to go back and do things over I would do everything I could to have an E. Fund in place before getting married. It would be a great thing to suggest when folks ask what you want for your shower or wedding.)
4. Singles, couples, families, retirees, the elderly, etc. Basically EVERYONE! We all get hit with unexpected things, whether medical or home or car or travel related and one of the keys to staying debt-free is to be prepared when things come up so that you are not forced into debt!

Where do I start?
1. If you are prone to spending everything you have, have your bank set up an automatic feature where they take x amount of dollars out of your checking each month and put it into a savings account.
2. If you make plenty of money to live off and then some, then there is no excuse for you to NOT have an E. fund. Budget your needs and get busy with saving and stop spending on stuff you don't need.
3. If you are barely scraping by, then you will need to assess if there is something you can cut back for awhile so you can pad your E. fund. No eating out until it's done? Challenge yourself to bike to work in the summer? Give up lattes? Do you have lots of junk sitting around that you could sell?
4. If you truly don't have an extra dollar to save, then it's time to figure out how to get more cash flow into your life. Do some evening babysitting, delivering papers, mow lawns, or bake and sell bread, but do find a way to make some money that you can SAVE, not spend.
5. Pray a lot. Most of us can save more than we do, but we aren't in the habit or we haven't learned personal discipline and hate denying ourselves the little luxuries we so enjoy. Praying about our financial needs and decisions helps keep us accountable before God and helps remind us to stay on track. When we acknowledge our need before Him, He is faithful to meet our needs and help us.

I really believe the first $1,000 is the hardest! It can be really hard to start saving if you aren't in the habit, but once you get the ball rolling, it becomes easier and easier! Of course the E. Fund needs to be continually maintained because as you dip into it for big needs, that money will need to be replaced. There is always the chance that an expense will come up that will totally level your E. fund and cause you to have to go in debt and for those instances, I haven't the answers, except to say that God is faithful and will provide for our needs when we look to Him. We do the best we can do to be wise and prepared but we ultimately have to trust Him for every area of our lives.

I have been blessed by the wisdom of Crown Ministries and Dave Ramsey regarding finances and setting up emergency funds. Check out their sites for more on this subject.

Do you have an emergency fund? If so, how has it helped you with pursuing a debt-free life?


Suzanne said...

We have also been blessed by Crown Ministries. Last year my husband lost his job. I am a SAHM. We did not want me to go back to work; we did not feel that God was leading us in that direction at all.

Luckily, we had an emergency fund and 3 months of savings in place. We got by for 7 months on that savings! We never touched the emergency fund! DH received a very small serverence and God greatly blessed us.

Since then, DH has started seminary despite a much lower-paying job. I am still a SAHM and soon to be homeschooling mom. We received so much criticism from "friends", our church at the time, etc, for not following the world's way of mom going back to work in this situation. I can say we have been *so blessed* by doing it God's way. It hasn't been easy, but it's deepened our faith so much.
Sorry I wrote a novel here! I'm enjoying your blog!

the momma said...

just yesterday, I ran into a friend who, after finding out we are expecting again, asked if this changed our house plans. (?)
See, we are living in a disgusting 975 sq ft house (currently 7 of us) under the conviction that we are not to be in debt, even for a house. Plans have been, ever since we downgraded (severely) to this place over 2 years ago that we would begin building when we have $100,000 saved up. (we still have very littel in the house fund)
For some reason this man (a good, god-honoring man, I might add) thought that surely NOW, we would just go ahead and take out a loan & build..... As I reflected on the conversation later, I thought - we are simply being obedient to what we believe the Lord has asked of US. Sure, I'd like to live in a nice house, with plenty of space for everyone & everything ~ but I'd rather be obedient!

and no - we don't have a big enough emergency fund set up ~ but we're working on it....

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