Tag Archives: house payment

The Wisdom of Becoming Debt-Free

By Claire Posted in Debt-Free, Personal Tagged , , , , ,

Every day around three o’clock, local young parents zip past my house on their way to pick up their kids at the nearby school. I am astonished at their vehicles, which are usually brand new SUV’s. These parents whizz by in their expensive transportation while chatting or texting on their not-inexpensive smartphones, as I mentally calculate how much they’re spending each month to live this lifestyle.

This is why I’m particularly proud of one of my younger kids and their spouse. They’ve chosen to become debt-free. They rent a nice duplex while all their friends are out buying houses. They share one old car while their friends drive around town in late-model SUV’s and pick-up trucks. One of their co-workers told them they spend $1000 per month on their new pick-up, including insurance. My kids were stunned to hear this. They had two older cars with car payments, but sold one to pay off its loan, and are about to pay off the car they’re currently using. They’re also working hard to pay off their credit card, the balance of which was greatly enlarged by medical bills that their lousy health insurance from work wouldn’t cover.

I know how hard this is for them because I’ve been there. It’s not easy to live modestly when almost everyone around you is living large. But those living large never stop to consider what will happen if they lose their job and don’t find another at the same income level right away. They won’t be able to make their car payments and their vehicles will be towed off, they’ll fall behind on their mortgage payments, and then they’ll lose their home to foreclosure. This happens every day all over this country, but most people, and especially young people, think it will never happen to them.

So I’m really proud of my kids, but there’s a little self-interest here, too. You see, if they become debt-free, it’s much more likely that I’ll never have to see them suffer the repossession of their vehicle or their home. And that would be just fine by me.

Downsizing for Flexibility

By Claire Posted in Debt-Free, downsizing, My Books, Personal, Small-House Living Tagged , , , , , , ,

As I said in my last post, for years I’ve kept a record of how much money we spend each month and each year. It includes categories, which is very helpful because you can see which categories are becoming too large and eating up too much of your money.

In our case, it was obvious which category was becoming too large, and its growth was beyond our control: housing.

The irony here is that we had paid off our house several years earlier. But the property taxes had been going up from 5-10% annually, and were approaching $600 a month. My husband’s business was declining, so the bulk of our income was shrinking. Once he had to close the business, how would we pay nearly $7000 a year in taxes? (Since he’d worked in that industry for over 30 years, he wasn’t trained to do a different high-paying job; $10 an hour at Home Depot was not going to be enough to cover our expenses.)

We didn’t want to risk losing our paid-off house because we couldn’t pay the property tax, so the issue of downsizing finally became very real for him as well as me. We had to find a cheaper place to live; once we did so, we could figure out the income side of the equation.

Downsizing wasn’t an easy decision, even though it was an obvious one. It meant moving away from nearby family and friends because we had to go some distance to find housing that we could afford in an area that we knew and liked. But doing so gave us a lot of flexibility in terms of figuring out what to do next.

If you’re in this position, or suspect that you are, you’ll need to crunch numbers even though you already know you need cheaper housing. Find out just how much money you spend each month vs. how much you earn; then you can determine the number that qualifies as an affordable housing cost for you.

It’s possible that you can find more affordable housing nearby. If housing costs aren’t exceptionally high where you are, you may be able to go from a big house to a smaller one, or from a house to a townhouse or condo.

Another option is renting. That’s what we did, and I must say we enjoyed the break from homeownership. Renting is also a great way to buy time while figuring out your next step.

Whether you buy a more affordable home or rent one, trying to put yourself in the black (or stay there) is always a good thing. Earning less than you spend is the only way to find financial peace; it’s worth whatever changes you have to make to your lifestyle.

Making those changes is where flexibility comes in. Releasing yourself from high costs gives you the flexibility to move anywhere, work anywhere, live anywhere. As you consider the possibilities, you realize that downsizing isn’t just about finding a cheaper place to live. It’s about changing the path that you’ve been on for years to do something different. I share stories in my book about people who have been able to pursue their dreams once they realized they had to downsize their lives.

So many people find themselves trapped in order to maintain their lifestyle. By downsizing, you’re no longer tied to one way of living. Even if your housing costs aren’t climbing like ours were, or if they are but you can afford them, downsizing might let you switch to a career you like better that pays less, or move to an area where loved ones await.

The flexibility that lets you consider such possibilities is a wonderful by-product of downsizing.

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