Debt Snowball, The Kids Have Eyes and Ears

The kids are on board now with our family's mission to eliminate our debt, our frontal assault. I have not done any direct teaching with them which is usually my tendency. For now they've engaged themselves in the process. Could it be because my wife posted our snowball plan on the kitchen cupboard?

This week while driving to a child event:

Sarah: "Dad, you know this debt snowball thing? When you and Mom are done, can we go on a vacation to Disneyland."

Me: "That would be excellent, sweetie!"

Sarah: (In typical quick-thinking-strike-while-its-hot-she'll-be-in-sales fashion) "This summer?"

Man I wish! If I had a credit card I'd be tempted to charge it just for my sweetie.

While driving away from the window at McDonald's:

Josh: "Dad!! Did you just charge that? Did you just go into debt for Happy Meals?"

Me: "No son, I used the Debit card."

Josh: "Dad?! The card said Mastercard! Are you sure? I think you charged it."

Me: "No son, Debit means cash. There is cash in the bank to pay for that meal."

Josh: "How do you know how much cash is in the bank."

Me: "We keep a budget and watch it very closely.'

Josh: "What's a budget?"

On and on the conversation went until we pulled in the driveway. Josh is a thinker and invites my direct teaching - he's also a challenger and it helps keep me sharp. Our sit down McDonald's meal lasted 2.34859 seconds leaving me feeling guilty that I fed poison to my children again and dropped a $20 at the altar of ease.

In Debt, Taking Inventory

There is an abundance of information and resources today to help one get out of debt, not that they are all good options, but nevertheless, asking "How to get out" is easily answered. Plans are drawn up. Systems are created. Actions are taken. Hope seems to strengthen. But obstacles, or as my employer likes to correct me with, opportunities arise that help you improve your skills in matching your talk with your walk. When times are tough taking on more debt just to get through seems viable. In order to avoid more debt I need to know my deeper motivation. In order to persevere I like to ask why.

Why My Family Got In Debt

It's all my fault. It has happened over the years. At times big chunks of debt but mostly it happened with each slow leak freezing itself to the ice block of our enlarging debt balance. I was the one that made all the final decisions to live with a leaking faucet. My wife is very thrifty and on her own would turn to debt as the only last option. I can't ever remember her saying "Oh, let's just charge it."

I allowed my family to go further into debt by first and foremost believing promises which are really only lies. On the surface I knew I was placing more burden on my family but I never slowed down enough to sincerely consider the extreme long-term shadow of limitations debt would cast years in to the future.

The promises of a good life offer some truth strong enough to veil the profound lies of debt slavery. For example, debt is a tool and can be used effectively to build a good life. In personal finance, this truth is very thin and the promise is not global enough in scope, thus it should, I think now, only be applied to certain contexts (i.e. a mortgage) Also, the idea that debt is paid off as planned is absurd. Loans come with an end date, when it all must be paid back, everything is disclosed. For most, I think this creates a false sense of pride and believability that one will actually pay off the entire amount as planned and then be free of the burden. What I think is more realistic is debts are just rolled around from bank to bank, never decreasing but only increasing. If people are responsible enough to pay as planned then I guess I need to re-interpret the stats I presented yesterday?

I got into debt because I believed lies, which at first glance appeared as promises.

Why We Want To Get Out Of Debt As Fast As Possible

I am still working on this list but here's a few reasons:

1. My family will be relationally stronger.
2. Resources are tied up and unavailable for much greater purposes. Sometimes the guilt is overwhelming.
3. I want to live in reality. Debt seems to evoke denial.

The Good Life (On Credit), Staggering Stats

• There are over 1.3 billion credit cards in circulation in America.
• The total American consumer debt is more than 2.7 trillion.
• The credit card industry takes in $43 billion per year in additional, unexpected fees from the consumer, such as late payment, over-the-limit, and balance transfer fees. Late fees alone bring in more than $11 billion.
• The average household credit card debt has increased approximately 167% in the past 17 years.
• It would take over 13 years to pay off the average credit card balance if only making minimum monthly payments of 4% at an average interest rate of 15%.

My son, if you have put up security for your neighbor,
if you have struck hands in pledge for another,
if you have been trapped by what you said,
ensnared by the words of your mouth,
then do this, my son, to free yourself,
since you have fallen into your neighbor's hands:
Go and humble yourself;
press your plea with your neighbor!
Allow no sleep to your eyes,
no slumber to your eyelids.
Free yourself, like a gazelle from the hand of the hunter,
like a bird from the snare of the fowler.
(Proverbs 6:1-5, New International Version)

The stats come from FPU participants manual.

FPU 8: How to Buy Only Big, Big Bargains

One of the tag lines for Financial Peace University is "If you live like no one else, later you will be able to live like no one else." In this session Ramsey presents a few ideas on what this phrase means in practical terms. He teaches three keys to saving money on larger purchases by finding bargains.

Great deals can be found if you set out with the right intent to be truthful, to be harmless, and to create transactions that are good for both parties. The keys to good deals are:

1. Negotiate everything (that's everything)
2. Be patient
3. Get knowledge

I enjoyed this session because of the story telling. More or less it was about building the confidence to ask for deals. You always have to ask and cash helps. Dave loves cash. Cash presents a certain purchasing power still in this credit economy. I agree with Ramsey, although only in principle because I've never really had cash to swing the bigs deals.

My cynical mind asks "Yeah but how much cash do you really need to be able to reel in the big ones?" Also, Dave makes negotiating look really easy but how do you deal with situations where the other party is just as good of a negotiator as you try to be. I've been in and out of sales throughout my career and negotiating is an art for sure. There are principles that help but realistically, patience plays a major factor, more than the power of cash I believe.

The last big deal I reeled in was a refrigerator. We upgraded from a 35 year old to a 10 year old for $80. At an appliance refurb shop I would have paid $250 at least. The seller had it listed on craigslist for $100. I showed him $80 cash and he took it. It matches perfectly with the stove too!

Ramsey on Dumping Debt

We're paying off a small debt today. $371.18 that's been hanging on for a few years by minimum payments. This week I believe we'll also knock off a few other small debts totaling close to $500.

The Dumping Debt session in Financial Peace University rattled me, shook me up. God used it to peel the blinders off and inspire me. I found the entire session on YouTube.

Part 1



Part 2
Part 3
Part 4
Part 5
Part 6
Part 7
Part 8
Part 9

Up until Feb 2, 2008, I would have left the $371.18 in our family checking account to build up our cash "cushion" so that we'd have some "float" in between paychecks. I never wanted to consider why I was always building up the float money and never seeing the cushion. Sloppy budgeting ate it up each week. With the initial $1,000 emergency fund and a zero-based budget, that excuse is out the window. PAY OFF THAT DEBT!