Ways to avoid debt?

I would love to have that.

 

KG, if I brought you home with me, she'd take you to dinner, buy your drinks and make you cookies before you left -- and probably take you to the casino. She loves retirement. I'm a fan, too.

 

I rented a place like that at my last job. It was phenomenal, esp. since I lived in Montana and needed to run the heat for like 10 months a year.

 

Threads like this always make me cringe.

I would love to own a home. Even a condo. My parents and well-meaning relatives have been after me to buy a home. The pressure will increase now that my brother, in his first year out of law school, will be buying a home soon.

In the county where I live, the current median home price is $415K. Yes, that's adjusted for a bazillion foreclosures. Let's say, for the sake of round numbers, that I could find a small home in a safe neighborhood for $300K. Let's also say, for ease of math, that I make $30K per year (I just did my taxes, and I did not clear $30K in 2007).

Generally you are expected to put down 10 percent of a home's cost as a down payment. Ten percent of $300K is $30K. How long do you think it would take me to save one year's worth of pre-tax income? Especially when I have to, you know, live on that income?

Now I know there are first-time homebuyer programs that only require a 3 percent down payment. But 3 percent of $300K is still $9K. It would still take me a few years to save that amount.

Some of you will look at these numbers and say "geez, homes aren't that much where I live." I know I live in an expensive part of the country, but it's not just here. In the past five years I've lived in three states. Looking up the numbers, the first county's current median home price is $281K and in the second county, the magic number is $355K.

I would really, really love to own a home. I want a garage and I want to fix things and I want to grow things. But it's not a possibility unless I change professions. And it's not a matter of cutting back on Starbucks to save up, because $9K is equal to 2,337 lattes, and even I can't drink that much coffee.

 

I've always been great with money. One thing I decided when debt snuck up on me was to get a line of credit and transfer credit card debts there instead of carrying the card debt. My LOC ran up 7 per cent interest whereas my cards were 18 per cent. That's big savings right there.

Next thing was get a second job. I drove for Pizza Hut for a year on my off-days from work at the paper and made an extra $10,000. My wife joined me for a while and together we took ourselves completely out of debt. Was it fun? Not exactly, but it wasn't hell either and looking back on it, that was one of the smartest things I ever did.

Now that we're in the black we got a savings account and put every penny we can into it. I've found that trying to save money into my regular chequing account is difficult because you tend to spend what you've got. Constantly taking stock of how much money I've got and thinking ahead budget-wise has enabled me to save a lot more money than I otherwise would have.

And, of course, getting regular pay increases didn't hurt either. Nor did marrying an accountant.

Good luck, all.

 

Stupid, yet serious, question time (and this isn't directed at Cadet): What's the attraction in owning a home?

Being a wanderer by nature and one who will likely rent housing until I die, I guess I don't see the appeal of tying yourself to a home and/or mortgage for such a large length of time. I'm not disparaging the practice in the least, but with our business in its current state and likely not getting better any time soon, I do wonder why someone (especially those without a family) would choose such a path. What is it about owning a home that makes it supposedly such an integral part of the American dream?

 

In four years I will make my final mortgage payment. My only housing costs for the rest of my life will be taxes and insurance.

And I will have $300,000+ in home equity that I can use in any number of ways, should the need or desire arise.

For me, owning vs. renting is basically the difference between investing and spending, the difference between a secure future and an insecure one.

 

I can't agree enough with the Dave Ramsey posts. He's tough, and it requires a lot of sacrifice, but it's necessary. A lot of people want to get rid of debt without giving up a whole lot. Hell, a former co-worker of mine filed for bankrupty, but kept his golf course membership. : My advice would be to first take care of the things you can, like from this point on, no credit card debt. Always pay off at the end of the month. Honestly, that's usually the most managable, so take care of that, and figure out how to live on minimums. It's not for the rest of your life, just until you get your debts out of control. The wife and me lived of of the envelope system for quite a while. Figure out your budget, take the money out of the bank at the start o the month, divie up the cash in envelopes for food, clothing, etc., and never, ever spend more than is in them. The worst we ever did was to borrow from one to pay the other, but at the end of the month, don;t spend more than is in the envelope. Plus, anything that is left over could either be carried over to the next month to slurge or put it in savings. just my $.02.

 

That works if you intend to stay in one place. If you're a wanderer or gypsy type, it really doesn't. Home ownership isn't for every one.

 

And in this business we tend to move a lot, especially in the first 10 years. There are legitimate reasons to rent, depending on circumstances.

 

About three years ago I look at all my credit debt, broke it down and just started paying it off in bigger chunks every month and scaled back on purchases that I did not need and began taking advantage of things like free museums, cheap video rentals instead of going to the cinema and more. The social life was not as packed, but instead of going to bars with our friends, the wife and I hosted small parties at our place (BYOB) and cooked and it helped eliminate some expenses. As of last month, the only debt we have is our monthly mortgage. It takes effort and sometimes it feels like it won't ever end, but just stick with it and, when you're out shopping, ask yourself if you really need that blender or new CD or DVD. Chances are, you don't.

Good luck with it and stick to it.