Paying back all debts can mean different things. Does it mean not carrying any debt load, including a mortage, often portrayed as “good” debt? Or, does it mean only carrying a mortgage, and paying cash for everything else? Or, finally, is it about planning your debt load so that you only carry what you can pay back quickly if it’s needed?
For my husband and I, with our lack of financial knowledge at the beginning of our marriage, we fortunately did not take on a lot of debt. We did carry a debt load for a period of time because my husband wasn’t getting paid. We lived in a rented row home in Philadelphia, used public transportation, and turned the front yard into a vegetable garden. We didn’t know about price books or shopping for clitemothes at thrift shops. We did go out to dinner a lot with friends because we thought it was something we could do. We lived off my very small paycheck from a nonprofit, and did our best to catch up on our credit card debt and utility bills from time to time.
Looking back, I would definitely tell the younger versions of ourselves that yes, we did make some good choices, but we also made a number of bad choices. We had cheap rent, and we had a good size vegetable garden for 2 people. We had access to public transportation. We could have focused on free or cheaper ways of socializing. We could have also lived on a cash-based budget, rather than charging stuff to our credit cards when our checking account balance was low.
Now, we do carry a mortgage, a home equity loan, and a car loan. Again, we didn’t know what we were doing when we bought our home, but we ended up in a fixer-upper with enough room to accommodate a larger family of 7 over time, along with a manageable monthly mortgage payment. Our home equity loan is a combination of renovating our bathroom and putting up new walls in 2 bedrooms on the second floor of our home. I definitely think we could have done a better job of figuring out how to pay for these projects without adding to our debt load. The bathroom project did feel overwhelming with the amount of water damage from the previous owners we knew we would have to deal with.
One of our major goals this year is to knock off a significant portion of our home equity loan which is currently $8,000. I re-arranged our weekly budget amounts this week to come up with a $300 monthly payment on the home equity loan which will help us reduce it by $2,700. Depending on how the year goes with our appliances, we plan to take out an additional $1,000 at the end of the year and put it towards the home equity loan. Then, the following year, we’ll pay off the home equity loan in its entirety. At that point, we can work on paying off my husband’s car loan early.
Could we pay off the debt faster? Of course. There are items in our budget which could be reduced or go like cable and internet access. We could also put our kids into public school and save about $4,000 on Catholic school tuition. Everyone’s situation is different, and everyone’s choices are different. And, both spouses need to be in agreement on the choice or they will accomplish less than their goals.
Frugal Friday at Life as Mom
Thrifty Thursday at Coupon Teacher