Thursday, August 9, 2012

Sometimes debt cannot be avoided

My husband and I have never had to sit down and work out a plan to be debt free. The truth is we never tried to be 100% debt free because we came up from being very poor and living on a great deal of government assistance so we took what loans we needed so that we could dig ourselves out of the poverty hole. We took small loans for medical expenses when needed and paid them off as quickly as we could, we took out two auto loans because very quickly both of our cars died but thankfully only after we had started to see the light at the end of the tunnels which was my husband getting a good job. We took a loan out for the house we are living in but we didn't go for the max amount we were being offered back before the housing crash but we worked out what we could afford reasonably and found a house in the school district we wanted. We took a loan out for my education though I went to a community college so we have since paid it off.
I learned to budget at an early age and to pinch every penny but it is true what they say the more you make the more you spend. 10 years ago we could have lived off of $800 a month now we run a nearly $3k/mo. household. What happened to us? We got comfortable. We were still putting money back but not as much as we could have been and we got used to having cable TV, gym memberships and eating out every time we felt too tired to cook. I was shopping deals but I was buying more than we needed and over stocking all the cabinets. We may have been living within our means but it wasn't healthy living and we were barely staying within those means.
With the bed bug treatment, Brielle needing new glasses, a $350 electric bill, school starting back up among other things we got hit bad in our savings. Thank goodness we had some savings but now we have to start the rebuilding process. Also, our air conditioner broke and we were told we would need to replace the outside unit and the inside furnace due to the age of our current set up. My husband decided that instead of limping through on the rest of the summer and then using our furnace (which still functions) until spring to go ahead and bite the bullet and purchase the new central air system. Friday we will be having cable TV turned off, I've held off on purchasing too much food and have worked out the menu for the next few weeks working with what we have on stock so that we just have to buy a minimum amount of stuff. My hope is to keep the grocery budget around $50 a week instead of the $100. The kids have started eating breakfast at home which was their own choice I had already paid up school lunches and breakfasts but it will definitely help stretch that lunch money a bit further.
Sometimes debt can't be avoided but being smart about how you handle that debt is key. We could just keep going how we were and and add another bill and start breaking even but instead we started making cuts to give room for the loan payments plus some extra to start recovering our savings and paying more back on the loan than the minimum payment when can.
Most families are one accident away from financial ruin and I've recently seen a trend where people are trying to be debt free but instead of putting that money away for those unforeseen problems instead they plan a fancy vacation. Debt free is great but if you can put money aside for the problems you don't count on and remember there is good debt and bad debt. Using a credit card to buy Christmas gifts? Bad debt, work within your means and remember it is the thought that counts. Taking a loan for education or needed home repair, good debt but never get a loan for more than you can comfortably afford.

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