The best thing about being NOT broke.

Over the last seven days I’ve purchased seven round trip plane tickets, and I might be purchasing two more. Alaska Airlines has been running some crazy deals lately and we’ve been snatchin’ em up like a boss. It’s insane.

We knew when we moved to Seattle we’d be making trips back to San Diego pretty frequently. All three of Girl Ninja’s sisters live there. The oldest two are getting married and the youngest is graduating college. Between showers, graduations, and weddings, we knew we’d be dropping some serious coin on flights. We may be $1,500 poorer because of it, but are gaining “riches” in life experiences…right? That’s how I like to think of it at least.

And that my friends, is probably the best thing about being not broke. Having a little (or a lot) of cash in the bank can afford you some pretty awesome opportunities. It allows you the ability to take advantage of incredible deals when they pop up. It gives you stability in the event of an “Oh $#@!” emergency like a job loss or car crash. It gives you the freedom to experience things you may have otherwise missed out on like weddings and graduations.

There really is nothing else to be said. Financial freedom rocks my face off. Don’t be discouraged if you aren’t there yet. Stay the course. Work hard. Focus on the end goal. You didn’t get in debt overnight, and you probably wont get out if it overnight. Patience and perseverance is the name of this game.

Being not broke is awesome. I hope you are either right there with me, or plan to join me soon.

On a scale of broke to loaded where do you fall? Has your financial freedom allowed you to take advantage of any incredible deals or opportunities lately!?

p.s. I’ll be in Vegas all weekend so if you don’t hear from me on Monday I either struck it rich, or am dead.

How you doing? $63K in debt with a six figure income.

Last month I asked for PDITF readers to submit stories about how they’re doing. I was amazed by the feedback I received, overwhelmed even. Far more people expressed interest in contributing to the series than I anticipated. I couldn’t keep up with all the emails and submissions I was getting, so I avoided them instead  (Haha, like a true Ninja right?). I added the emails to my “To Do” list and haven’t paid much attention to them. I’m just now taking the time to look ’em over and get things worked out (sorry for the procrastination).

Today we are kicking the series off with  BR, a woman who doesn’t necessarily agree with her husband on how their six figure income should be allocated…

My name is BR, and I have been married to DH (dear husband) for about 18 months.

Together, DH and I make $100,500 before taxes. After taxes, 401(k) contributions, insurance and all that come out of our checks, we usually take home just over $62,000 a year. We both can get yearly bonuses (last year, I didn’t get one, but my husband got $8,000) and my husband gets a Christmas bonus at the end of each year, usually the amount of one paycheck, but again, this isn’t guaranteed, so I don’t count it as income.

Our debt:

  • Car loan- about $12,000
  • Truck loan- $16,000
  • My student loan- $8,900
  • Husband’s student loan- $26,700
  • Total debt: $63,600

When we got married, we had about $15,000 of credit card debt between the two of us. We set a goal to pay it off before our first anniversary, and actually did it two months ahead of schedule (thanks mostly to my husbands bonus)! We were both really relieved to be out from under that debt, but we completely disagreed on what to do next.

If I had my way, we would never go out to eat or buy anything that we don’t NEED until we have everything paid off. It would only take a year and a half, and then we would be free and clear! My husband feels like this is not reasonable, since all the debt is low-interest (what he calls ‘good debt’) and both our vehicles are worth more than what we owe on them. His bigger priority is saving for a house, since he feels that paying rent every month is throwing away money. He also thinks that going out to eat is fun and relaxing (I think he’s just trying to get out of doing the dishes :)) and he loves to go to the movies.

So, we compromised. We put $900 a month in our house fund, and then I pay whatever extra I can find in our budget on my student loan. We go out to eat once a week, and we each get $20 a week to spend on whatever we want. My $20 usually goes toward my student loan, but I also use it to thrift shop or get a haircut occasionally. While I would love to have my way, I am able to compromise with this, because our debt is no longer at a point where it keeps me up at night, like it did when we first got married. If push came to shove, we could sell our cars and reduce our debt to only student loans. Also, watching the balance on our savings account go up is super fun, and it is comforting to know that right now we could live for two months with what we have.

Really, we are not in a bad place at all. We spend much less than we earn, we save a decent amount, and we are working on paying off our debts. I get impatient, and really want to ‘punch debt in the face’, but at the end of the day I would rather have a peaceful marriage than no debt.

 

Ninja’s comment: If you want to submit your story for the “How you doing” series, shoot me an email.

The most comprehensive guide on “how to become debt free” ever written.

And now, as promised, The most comprehensive guide on “how to become debt free” ever written…

Spend less than you make.

-The end.

Are you hardcore?

A week or two ago, I wrote an article titled “You’re not debt free if you have debt.” It was a relatively successful post, receiving just shy of 70 comments. I’ve been meaning to address one of the comments left in the article….

My Rebuttal:

Stu, you sir are a Dumb-Dumb head. I can’t really argue with your logic since I see no flaws, but I can call you all sorts of hurtful things, like booger face, so I feel better about myself.

Even though I pay my credit card off in full each month, it’s still a debt. We’ve talked about “good” debt, and “bad” debt, but we haven’t talked about how YOU specifically use (or avoid) debt in your life. So today, I thought we could do just that. I’ll go first 🙂

Credit Cards:

I, Ninja, will continue to use my credit card as long as I pay the balance in full each month. I’ve made a personal commitment that if I ever miss a payment (yes, even by one day) I will immediately pay my balance off, cancel my card, and switch to a debit only system. Credit cards, if used responsibly, are a great tool.

Vehicle:

As for a car, although I don’t plan on buying a brand-new car anytime soon (never say never right?), I would be open to the idea of taking out a loan if I did. The loan’s APR would have to be less than the interest I earn on my personal savings (basically looking for a 0% offer). If I either had to pay $20,000 up front for the car, or could pay $20,000 back over the course of five years, I’m taking the 0% loan every time. Remember, liquidity is king, especially when it doesn’t cost you anything.

Home:

Although I am no home owner yet (praise the Lord), I do plan to be one within the next few years. Girl Ninja and I are plugging and chugging away at our goal to save $100,000 before we buy a house. We don’t know if we’ll end up putting $10k down, or $80k, but we sure as heck like the flexibility a big cash pile affords us. Ultimately our down payment amount will depend on our income, purchase price of the house, and interest on the loan (none of which we can predict at this point). I can tell you this though, unlike some PF gurus, I am totally comfortable taking out a 30 year mortgage. I’m also open to the idea of paying it down much, much sooner than that. I don’t have a firm “Our mortgage will be no more than 30% of our net income” policy like you might. All I know is I do NOT want to be one of those home owners that ends up hating home-ownership because it becomes a financial burden.

And that pretty much sums up what debt I personally find tolerable. I’m not a fan of second mortgages. I would never borrow money to invest it elsewhere. I would never take out a loan to start a business. I would never finance a luxury item like a boat, motorcycle, or vacation. I will never take out another student loan again. And I will never co-sign a loan, or lend a substantial amount of money, to a friend as long as I live. Never. Ever. EVER.

How does debt fit in to your life currently (what types of debt do you have)? What types of debts do you plan to continually utilize (auto loans, responsible CC use, mortgage)? What types of debts have you sworn off for good? Anyone sworn everything off?

A new way to punch your debt in the face

As much as I like to pretend I know everything there is to know about personal finance, I don’t. Shocker, right? My man Baker over at Man vs Debt, however, has been dominating the PF blogosphere for about two years now. When it comes to debt this man means business. Literally. Today Baker is launching his newest brainchild: You vs Debt.

You’re probably thinking “What the heck is You vs Debt?”. Well, sir or madame, let me tell you. It’s a 6 week video-based course designed to change people’s relationship and emotions surrounding money and debt. This thing is no joke. It’s like college all over again with “classes” Monday through Friday. Each day you’ll watch a video lesson that will be accompanied by daily challenges and a worksheet that ties in to the overall theme of that day’s lesson. The worksheets, along with Saturday accountability surveys, will help keep you focused and on track.

But wait, there’s more (haha, I’ve always wanted to say that). Not only will you have access to video lessons, personal worksheets, surveys and other course content, but the true value of the You vs Debt program is the community that will be involved. There will be at least 100 people (if not more) taking the class with you. That means you’ll have access to hundreds of like-minded and equally motivated people in the online forums. Struggling with credit card debt? There will be a forum for it! Want to know how to get ahead? Share your story with the group and get encouraged!!!! The online community that comes with the You vs Debt package, in my opinion, is by far its strongest selling point.

Ah, did a few of you cringe when you saw the words “selling point”? Ya didn’t think something this awesome would be free did ya? Baker has basically poured his whole life in to the development of this project…I mean really, he quit his job and has become a full-time PF blogger. He’s been working on this thing for quite some time and deserves to be compensated for all his sweat equity. The course will be $97 even. HOLY CRAP NINETY SEVEN DOLLARS?! Yeah it’s kinda pricey, but it’s also 40 very specific and detailed courses designed to transform the way you think about money. If you want all the juicy details you have to sign up for the course, but I’ve been given permission to share the themes of each week. They are:

Week 1: Free Your Mind

Week 2: Less Excuses, More Action

Week 3: Suck It Up and Budget

Week 4: Stop Buying “Crap”

Week 5: You Should Be Making More Money

Week 6: Making it Stick

Obviously you probably shouldn’t sign up for the You vs Debt program if you A) need to go in to debt to take the class, B) have no debt, C) don’t like being challenged, or D) hate having fun. If you didn’t meet any of those specifications you should probably give the course a looksy.

Lastly, in an effort to be fully transparent, if you click any of the You vs Debt links in this article and sign up for the course through that link, I will be paid a commission. Do you have to use the affiliate link to sign up for the class? Absolutely not, but why the heck wouldn’t you want to hook me up a little!?! Even though I get a commission for each member that signs up through these links, please know that I’m not just posting about the class so I get paid. I’ve been asked many times before to run affiliate links on my blog and every time I’ve declined, primarily because the product offered sucked.

You vs Debt is different though, it’s one of my friends offering an incredible program that will hopefully change a few lives. Girl Ninja and I went through a six-week Financial Planning course during our premarital counseling and it was honestly one of the best things we could have done together. This is definitely not your only way to punch debt in the face, but it sure as heck is a good one. Take a look around You vs Debt and see if it’s right for you, registration ends Thursday.

And now an awkward family photo…

You’re not debt free if you have debt

I was talking with a man yesterday who said, “I was raised with a strong German upbringing so I don’t mess around with debt and am proud to be debt free.” As we continued chatting about his finances he eventually told me he has both a mortgage payment and a car payment. Wait, hold the phone. Hate to break it to ya buddy, but you’re not debt free if you have a mortgage and a car payment. Have these types of loans really become such a standard in our culture that we forget they’re still debts?

I get it. Some people think certain debts are “good” and others are “bad”. This man has obviously decided for himself that mortgages and car loans can be classified as good debt, but last time I checked, my blogs name wasn’t Punch Bad Debt In The Face. No, it’s Punch Debt In The Face, because I believe “good” debt is a term we Americans use to feel better about ourselves and our financial situation (It’s like being called festively plump instead of fat). I don’t discriminate, I punch all debt in the face, regardless of how “good” it might be.

What I think this man, and many others, mean when they refer to things like mortgages and student loans as “good” debt is that these types of loans are not as bad as credit card balances or payday loans. How about we change your perspective though and admit that “good debt” is really just another way of saying “not-as-horrible-but-still-pretty-sucky debt” (has a nice ring to it doesn’t it).

Obviously this gentleman is comfortable maintaining a car payment and a mortgage as part of his personal finances, and to be perfectly honest, I have no authority to tell him to change his ideology (contrary to popular belief one can have debt and still be financially responsible), but I can definitely call him out when he tries to pretend that he is debt free. I am debt free sir, you are not.

Has our culture become so numb to consumerism that we think we can have a car loan and be debt-free at the same time? Do you believe in good debt? Why or why not? Should I have punched this man in the face for being so naive?

Liquidity is King

Dave Ramsey often repeats the popular phrase “Cash is king.” While I wont necessarily disagree with Dave, I’d be much more on-board if he said “Liquidity is King.” Two similar statements, but they mean a world of difference. Let’s look at an example…

Say Girl Ninja and I have been diligent little savers and we have $200,000 cash money sitting in our bank account. Then say we find a property that we want to buy valued at $180,000. Dave has always said he prefers people buy a house with cash (although he does tolerate 15 year fixed mortgages). Following Dave’s advice, you’d write a $180,000 check for the house and have $20,000 left in your bank account.

I don’t know about you, but there is no way in h-e-double-hockey-sticks I’d ever put 90% of my liquidity into an illiquid object like a house. That’s just as crazy as going to Vegas and putting $180,000 down on red. Don’t do it. EVER!

I will gladly pay a 4.25% fee (estimated mortgage interest) to keep the majority of my cash as, well, cash. It’s no different than when I had my student loan. At one point I had a $14,000 loan balance, but $16,000 in my savings account. I could have paid Sallie Mae off with the click of a few buttons. But I didn’t. What if I lost my job? What if my car was stolen? What if I had health issues? A paid off student loan isn’t going to put food on the table in the event I became unemployed. Money in the bank, however, allows me to pay my student loan payment, put gas in my car, food in my fridge, etc.

Instead of pay my loan in full, I mitigated my risk by paying bigger payments over a six month time frame. I’d throw a couple thousand at the loan each month, significantly reducing the balance, while still giving me time to replenish my savings. The peace of mind this strategy provided was well worth the $300ish dollars I paid in interest over those six months.

For this Ninja, liquidity is king. A house is only worth as much as someone is willing to pay for it (subjective), but a $100 dollar bill is worth one hundred dollars (objective). If you had $200,000 in the bank and you wanted to buy a $180,000 house, would you pay cash for it? Why or why not?