I watched a YouTube video that I just can't get over. It was a couple who were more than a million dollars in debt and didn't seem to care. A MILLION is a lot, right?? But they were so chill about it. And of course, they don't recommend you do what they do, but in their situation, for them, it was the best thing, they say. It blows my mind, the excuses and justifications they came up with for what they did.
They had a mortgage over 500,000 (they needed to be in that neighborhood so they're daughter could go to a specific school and there was no way for them to rent in that neighborhood), student loans over 400,000 (they are both lawyers), a 15,000 loan on their 401K so they could have a down payment on their house (because the housing market is so ridiculous, of course, not because they weren't patient), over 20,000 in loans for house repairs (I honestly think the house was the worst decision they could have made), 14,000 for a car loan (because they live in the suburbs, so they needed two cars, they tried using only one but they work in opposite directions with different schedules and they really tried to keep the cost down on the car, but they wanted it to be an investment--they don't know that cars are literally never an investment--because they'll probably send this car with their daughter to college), and top of it all, in the last year, $15,000 of credit card debt crept up on them because they didn't adjust their lifestyle to all the payments they now have, the $20,000 pay cut the wife took (so she could be with a company she liked more) right after they replaced all the windows in their house, and the new baby which costs a lot in childcare.
Now if I sound like I'm judging, it's because I am. Not so much because of how much debt they have, but because of their outlook on the debt. They literally think it's no big deal and they also don't have any plans to pay off their house or their student loans anytime soon (which are what make their debt almost a million dollars to begin with). They also say that they "needed" it all. It drives me crazy, as if going into debt wasn't a choice for them, it was the only option? What a total joke.
I want to take them and shake them and say, "WHAT IN THE WORLD IS WRONG WITH YOU?" Do they honestly not understand the risk, much less the opportunity cost of all the payments they make? Between the two of them, they must be making a lot. Imagine if they had that income but they didn't have any payments. Imagine what they could do, what they could give, how much less stress their lives and marriage would have, if they had no payments.
It's really hard for me to see other people doing finance different than Ben and I, because it's worked so well for us. We found Dave Ramsey July of 2014. I was pregnant with Ashtyn, we were both in school, Ben was moving from an $18,000 a year job to a $40,000 a year job. We had no money, $5,000 in student loans, and weren't budgeting.
When we started budgeting, that was the best thing for our finances. We suddenly were in charge of where our money went, instead of hoping we'd have enough money to make it to the next paycheck. It got us on the same page in our marriage and eliminated the friction over finances.
We went through Dave Ramsey's first three baby steps really quickly. His steps are 1) Get $1,000 in the bank, 2) Pay off all debts except house (we didn't have a house at the time, we only had the $5,000 in student loans), and 3) Build up a three to six month emergency fund. We started in August and by the end of January, we had our debt paid off and our emergency fund in the bank. We started saving for a house, but it was slow going.
We really wanted to buy a house. I was finished with school, we had a baby, I was tired of being in Orem where I was without a car while Ben was at work all day and without family close enough to visit very often. Ben would get home from work or school and work on his business part time and I had a brand new baby. It was lonely, it was hard, it was tiring. But we also knew that the plan we were on was the right path and that it wasn't going to last forever (even if sometimes it felt like it would). So we waited to buy a house and we kept plugging away at our plan.
May of 2015, our landlord's daughter got married and they let us know we would need to move so their daughter could have the apartment. I actually had known we would be moving soon (I didn't know why, I'd just had the impression. This happens to me often. I have a hard time with change, so God helps me prepare for it.) and was really excited for the move. We talked about a lot of different options and looked at a lot of different apartments, but we ultimately decided to take the leap of taking Ben's business full time and move to Vernal where it was cheaper to rent and where we could live with Ben's sister while his business started bringing in more money (at the time his business brought in about $1500 a month).
If we hadn't been out of debt, if we hadn't had so much in savings, we never would've made the leap. It would have been too risky. When we moved, we literally didn't have any payments. We had to buy diapers and food and that was about it. We knew it was the perfect time to try something like this, because we didn't have a house payment because we had waited to buy a house even though we really hadn't wanted to wait.
Now Ben works for himself, which is the best thing ever. I get to stay home with my kids and work on my blog without any pressure to make money off it, both of which I'll forever be grateful for. And we're getting ready to buy our first house. We had a lot of options when we were looking because we've been so patient. We've waited and sacrificed to save for years. Ben's income is pretty high, we have over $100,000 to put as a down payment, and we decided to buy a house in Vernal (where the market is a lot cheaper but where we're still really happy). We are building a house that we know we'll love, in a location we love, and we also know that we'll be able to pay it off incredibly fast.
Our dream is having no payments, including a house payment, so that we can do incredible things with our money, like travel a lot and be outrageously generous.
It's hard, because of how many blessings we've seen following Dave Ramsey's plan, to see people we care about do things differently but I also see them be happy while making some decisions we wouldn't. I'm working on trying to see how their decision are best for their families and not see their decisions as bad decisions simply because it's different than what I would do. It helps to remember that while Ben and I wouldn't do it, the people we love make overall good financial decisions and are responsible with their money.
This video, though, is different to me because it's so extreme. And their view on money drives me crazy. Maybe I'm just crazy. Maybe a million dollars in debt will become the new normal and maybe they actually are happy, with no financial tensions affecting their lives and marriage. Maybe.
All I know is what I would do if I woke up in their shoes. First, I would sell the house and rent while I got out of the mess I'd made. I'd pay off the 401K loan immediately. I'd keep $1000 in the bank and then begin the debt snowball. I'd list my debts lowest to highest and begin throwing any equity in the house and any savings (I think they have a bunch of savings) and then pay it off as fast as possible. It would leave probably $500,000 in debt, but because of their savings and how high their incomes are, they could probably pay it off really fast if they got intense. It wouldn't be the most fun few years of their lives, but the payoff would be worth it. Then I'd pile up as much cash for a down payment as I could and then buy a house and pay it off as fast as I could. That's what I would do.
But I'm not them. I can't do that for them and I can't make them follow a plan like that. They obviously don't have the same views on money as I do right now. All I can do is follow my own financial plan in my life and not worry about theirs.
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