Saturday, July 5, 2008

Debt: Nothing Good Ever Came of It

So lately, I've been coordinating the Financial Peace University course at my local church. We're in to week 7 now and it's been a lot of fun. So far, everyone who has attended regularly has really embraced it and everyone else seems to be working toward that goal of financial freedom.

For those of you who are unaware, Dave Ramsey is the man who started this whole ministry years ago and he currently is probably the most popular man when it comes to dealing with personal finance. What is it about him, though, that makes him unique and stand out differently from all the rest?

I believe it is his devotion to chopping up credit cards and telling people that the only way to truly win financially is to stay away from debt entirely. This means you don't finance cars, furniture, and pretty much anything else that doesn't have some kind of foundation. He does say that a mortgage for a home is OK, but only 15-year, fixed rate mortgage where the monthly payments are 25% of your take home pay. The only reason he allows for that is probably because real estate goes up in value. Everything else you can own doesn't.

Since first hearing about him and learning his teachings, I've found things have gotten better for both me and my wife. We still have a lot of debt to pay off, but we've paid off about 20,000 already. We own both of our cars now (really own them, not just drive them while a lender holds the title) and we have no credit cards. We are working on paying off the rest of our debt and getting our emergency fund fully funded (which will be 15-20K) and then we'll start saving for a house.

The truth is, you cannot win financially when you have to pay everyone else large portions of your income every month. All you end up becoming is a courier between your employer and the people you owe. Yes, the furniture you have is nice. But doesn't it feel a little less comfortable every time you sit in it? How about that car you drive? Are you worried about totaling it and having to still pay for it?

For me, I have a very cheap, ugly looking set of love seats in my apartment. And they are fairly comfortable, even though they are probably older than I am (I'm 26 years old). We have two cars that run well and are both payed off. I managed to pay off mine before I got married and my wife's has just recently been payed off. We decided that we would no longer have car payments for the rest of our lives. The more I think about it, the more I realize that car payments are just plain retarded. You know when your car is probably going to break down. You can see it years down the road. And not having the foresight to save up a few thousand dollars in that time to put down and pay for a new one is just plain foolish.

Yet most Americans do this all the time. They are shocked when their cars suddenly no longer work and cost more to fix than they are worth. And then they all go in to the dealership and buy a car that worth 10x that piece of junk they drove on the lot and the cycle starts again. Do yourself a favor and break that stupid cycle now.

I can tell you, driving my car has been much more enjoyable now that I have the car title with me rather than in some lender's file cabinet. I don't let dings or dents bother me too much anymore because I don't have to worry about it being repossessed if I hit hard times.

That's just one small example of financial peace and what it is all about. I have decided to buy a house with 100% cash and no mortgage. My wife agrees with me and while things don't look like we are going to be able to accomplish this anytime soon, I think we will succeed in the end. I would rather own everything I have and owe nothing to anyone on this world than own everything I want and owe everyone else all that I have.

Credit cards are probably the biggest scam ever perpetrated on humanity. They destroy lives, families, and finances more than the Federal government could ever do. And people cling to them like they are some kind of holy grail of finances. These are the same people who would scoff at me if I told them I had no credit cards. And these people are broke.

Sure they drive nice cars, wear nice clothes, and always seem to have it together. But they're broke. And they're stuck in denial about it. I'm broke as well. But at least I admit it.

And at least I have a plan to not remain so.