Disaster Planning and Debt...

[OkieGirl]

I feel like I've been having this conversation with a lot of people lately and wondered if you've run into the same?

Thinking through how to prepare for any disaster I don't know that budgeting was part of that disaster plan till a few years ago. We made a lot of stupid financial decisions in our youth (divorce, bankruptcy, buying whatever our little hearts desired, etc...) that left debt we had been slow to pay off. We've also had some 'seasons' of health issues that led to unexpected debt. Before the 'pandemic' I had decided to stop being stupid and dig in and pay all of that burden off (there are a ton of approaches out there and I can elaborate on what route we are taking if that's interesting). I knew it would take years; we are a few years in and have cut it in half.

Fast forward to 2022 and I'm watching the gas prices spike and hearing that variable interest rates (credit cards and LOC's) are rising I am thankful that we are a few years into battling that monster. We are still actively working on paying off what's left and free up those dollars in the budget. Times are tough and getting tougher, if you aren't living debt free already...make a list and go after the smallest item first. It feels good to pay stuff off and it feels even better to not owe anyone anything. Just my two cents, but this is truly a disaster plan I needed to get my head around.

 

[Leadeye]

In inflationary times financial sucess is found at the extremes, either no debt or tons of it, but in money generating things. There's always demand during inflation, because everybody knows the price will just be higher in the future.

 

[actaeon277]

Too many people don't understand what a burden debt is.
I let my debt get out of control, then buckled down and paid it off.

Now... the credit card is only for buying online, and only for stuff I can pay off at the end of the month.

 

[tim87tr]

Congratulations on your debt snowball and overall outlook on finances. Very few people like to discuss it (I do) and even less will address it. Yes this is a great time to reduce and eliminate debt. It's something I addressed over a decade ago and it'll change your life immensely. Less money will seem like so much more without debt. One will go from "what payments can I afford" to "do I have enought money to buy this".

Once you get in that groove, what you own is more appreciated and enjoyed, with less desire to acquire "things". Smaller and simple intimate items like gardening, landscape plants, personal bird sanctuarys, hobbies, visititing family/ friends and a simple screened in porch will be more meaningful as there will be less big items to worry about, without the burden on one's shoulders. Hard to describe until you experience it.

One recent thought I had about the smallest item paid off first that you mentioned, is that in current times if you can pay off the home first, it may be wiser. Just a thought as I did the debt snowball, small to large. Items that are essential to ones livlihood, like the home, utilities and food, may rank higher at this point moving towards some serious upcoming monetary problems in our Country. If I were to have a loan at this point, it'd be on a vehicle that I could more readily give up to a repo. Good luck, you're on a great pathway to success.

 

[2in1evtime]

I retired in late 2016, we had all debt paid off which wasn't a lot mainly our house. All of our vehicles were paid for, we do use our credit cards for purchases but pay them off every month. I advise everyone to become debt free, if i had realized and knew what i know now i would have been debt free in my 30's. We are not ones that have to go on fancy vacations or anything like that, we have our hobbies and the like to enjoy life.

 

[Mij]

A small trick we used a few decades ago, if your CC, auto loans, or other’s interest rates are higher than your mortgage interest rates, a Heloc to combine them and pay them off at a lower monthly total out of pocket cost. Then if that money was already in your budget, add that amount to your mortgage payment to pay down your mortgage principal. By law any extra you pay over minimum mortgage payment must be applied to the principal loan amount. This assumes you have the equity available to do this.

 

[woowoo2]

I would never transfer unsecured debt (credit cards) to secured debt (my home).

But that's just me.

 

[Mij]

Yes, to each his own. I would never consider the difference, to me a debt is a debt. They’re all secured….by my name.

 

[firecadet613]

The Dave Ramsey method works. We don't go to the extreme with it but it has done well for us and put us well ahead of our financial goals.

 

[tim87tr]

The Dave Ramsey method works. We don't go to the extreme with it but it has done well for us and put us well ahead of our financial goals.

That's what I used and think the OP is using. I think the last couple years has pointed me in different big picture directions. That's the point I wanted to try and describe to the OP. From a grounded non-crisis basis and outlook, anything of real livlihood value to you and a family in the future, particularly this decade, would be best to own. No one knows how things will adjust moving forward and there's plenty of threads on that.

IMO It'd be very wise to allocate any debt to non viable items for one's livlihood. Examples would be toys like boats, extra cars, UTVs, even credit cards at a last resort. I'd rather own a home and some freezers full of your local butchers whole hog and beef, frozen fruits and vegetables, and big pantry of dry foods. The survival and disaster forum on the board is the real deal now.

Obviously no debt would be best but a monetary change and hopefully temporary fallout could happen quite quickly. It's not something I would have ever thought before. My approach was the question "what do I most need now for the next decade?" No one knows what will happen to your Roth IRAs or tax deferred accounts. Might be worth using "SOME" of those monies for the livlihood items discussed. Things like a generator you'd never would have thought of before.

While on vacation or just driving around, I see many "alternative" living arrangements. Homes and cars are budget killers! People are fixing up old and small, but nice quaint homes, living in "barndeminiums", and even travel trailers on a small plot of land. I'd want to do anything before dealing with the loss of a home. Great time to think outside the box. The HGTV big home and mortage is no longer the American dream we've been sold. Why? Because the fiat currency system is debt based instrument dependant on the stability of the Fed Gov and Central Banks (cartels) manipulating the currency. This isn't the first nor the last time they've screwed it up.

 

[Mij]

There has never in recorded history been a government or state that has ever lasted with fiat currency as a base currency. This is the first time in history that all of the world’s governments all exist on some kind of fiat system.

Real value lies in things with intrinsic value, land, pm’s, guns and ammo. Live stock, Ect. Ect.

The Federal Reserve is neither, it’s not federal and it’s not a reserve. The Federal Reserve Note is a measure of debt not a measure of wealth, for each dollar in your pocket you owe the FR about 6 cents by my calculations.

The FR owns the largest chunk of physical gold in the U.S. The U.S. has the second.

Sorry if this is off topic don’t mean for it to be. Thought it may be germane to the subject at hand.

 

[tsm]

If you have a certain amount of extra cash available each month you can put toward existing debt, the most efficient way to become debt free is to pay off your highest interest debt first, then next highest interest, and so forth until you’re free and clear.

 

[OkieGirl]

@tim87tr, I agree with the premise.

We've decided that it's 'crunch time' and we want our 'get out of the city' hidey hole to be 100% paid for as well as everything that goes into it and makes it comfortable for our family. That made us shift some of our debt snowball a slightly different direction but in the end we arrive at the same place. We are also focused on what interest rates will climb faster than others, again - this is slightly off from the Ramsey perspective but with rates expected to jump there are some CC still left on the list that will change dramatically and others that will be a slower climb as the prime rate changes in the next few months. All of them need to be paid off but there are some that will cause us a lot of discomfort and others that will just be annoying. We've made room in the budget for $5 a gallon gas but it's time to stop half@$$ing it and really dig back in...(sigh).

 

[spencer rifle]

We've been debt-free for a while now, which allows $ toward the 3 Bs and PMs. We are in professions that don't pay much, so we got there by tightening the spending end. No cable, streaming services, lattes, sodas, restaurant visits, new cars, tattoos, highly processed foods, new clothes (only rarely), factory ammo or new furniture, but lots of gardening, home canning, self-repairs (I "make" more $ working on my own cars than actually going to work), cars selected for efficiency, use it up, wear it out (we never make any $ on garage sales, since once we get done with something no one else wants it), and only charging what we will be able to pay that month (we only have 2 cards). Got the well-stocked emergency fund and the retirement investments (Social Security - yeah, right). Recently added solar grid tie-in. He who allows us to live this way has a plan that it is part of. He will let us know how we will serve eventually.

"Just as the rich rule the poor, so the borrower is servant to the lender."

 

[bwframe]

No tatoos. That's just crazy...


.

 

[churchmouse]

I feel like I've been having this conversation with a lot of people lately and wondered if you've run into the same?

Thinking through how to prepare for any disaster I don't know that budgeting was part of that disaster plan till a few years ago. We made a lot of stupid financial decisions in our youth (divorce, bankruptcy, buying whatever our little hearts desired, etc...) that left debt we had been slow to pay off. We've also had some 'seasons' of health issues that led to unexpected debt. Before the 'pandemic' I had decided to stop being stupid and dig in and pay all of that burden off (there are a ton of approaches out there and I can elaborate on what route we are taking if that's interesting). I knew it would take years; we are a few years in and have cut it in half.

Fast forward to 2022 and I'm watching the gas prices spike and hearing that variable interest rates (credit cards and LOC's) are rising I am thankful that we are a few years into battling that monster. We are still actively working on paying off what's left and free up those dollars in the budget. Times are tough and getting tougher, if you aren't living debt free already...make a list and go after the smallest item first. It feels good to pay stuff off and it feels even better to not owe anyone anything. Just my two cents, but this is truly a disaster plan I needed to get my head around.

Just before we retired, I worked towards paying off everything possible.
No vehicle payments in years.
Credit cards are all zero balance but used to operate through the month. Totals are paid off before the interest hits.
We are down to the houses. We still owe on both but there is equity there. Due to some decisions made some time back based on medical issues is why we have not paid them off. How life can twist and turn.

 

[Steve]

I have managed to become 90% debt free, Still owe on the house, but slowing getting the principal down. But getting here was not easy. No new cars (or payments that come with them), no $50 or more dinners out, no impulse buys at the store, no expensive watches or jewelry, no fancy vacations, minimal cable and cell phone plans, combining errands so that I conserve gas, buying foods in bulk if possible, using coupons religiously and putting the savings in a jar (you would be amazed at what that adds up to in a month) and applying it to a bill, and so many other financial shortcuts.

I know it may sound like a Spartan way to live, but once you adapt to it, it is really quite pleasant and can be a lot of fun. And when you see to financial progress you are making, you will get even more enthused about it. Trust me, there is nothing like getting a utility bill that says "no payment due" because you have paid it 6 months or a year in advance.

 

[churchmouse]

No tatoos. That's just crazy...


.

In truth CKW and I both have some relatives that spend a crap load on body art and other idiocy and yet never have enough to cover the essentials. They both have kids and play them with the sympathy card as often as possible. We used to get sucked into their along with other family as to giving them money bailing them out.

Not long ago it became apparent we were being used to support a life style they could not sustain. Always had beer. New tennis shoes. Latest cell phones and play station bull and both sporting some serious art so we stopped. We are now no longer allowed to see their kids. Funny how people use kids as tools.

Live in your means.

 

[jake blue]

In truth CKW and I both have some relatives that spend a crap load on body art and other idiocy and yet never have enough to cover the essentials. They both have kids and play them with the sympathy card as often as possible. We used to get sucked into their along with other family as to giving them money bailing them out.

Not long ago it became apparent we were being used to support a life style they could not sustain. Always had beer. New tennis shoes. Latest cell phones and play station bull and both sporting some serious art so we stopped. We are now no longer allowed to see their kids. Funny how people use kids as tools.

Live in your means.

Wait, are we related to the same family?!? LOL

 

[churchmouse]

Wait, are we related to the same family?!? LOL

I believe every family has a few of these in its group.
We were talking about those beautiful kids just yesterday. It makes us very sad that a parent can weaponize a child for their personal gain.