Trying to raise my kids the best I can

Thursday, July 13, 2006

Debt

Ah debt, the scourge of life. The theif of joy. The plague on America. I've been coming to some conclusions on debt recently. The first one struck me when I watched a show about a family with something like 15 kids. They were the kind of family I really look up to and want to emulate... well behaved kids, all homeschooled, Bible believing. Anyway, on the show they talked about how they could afford so many kids and the answer was that they never incurred debt. Not even a mortgage. I really respect that. And I decided that that is how it should be. It's how I want to live my life too. And in my opinion, it's the way to move up in society. I mean granted there are exceptions, but in general debt is handcuffs keeping the lower class down.

Many of my friends and I are struggling to get off that roller coaster and I have some thoughts about that too. First of all, there are no easy answers, no quick bail outs. The only way to see results is to stop incurring new debt and wait out the payments on the old. It sounds simple right? But to really REALLY stop incurring debt is a life changing move.

My second thought is that your goal for life can't center around being "debt free". You can't have the mindset that you are going to start enjoying life when that day comes. Because it could be years and years down the road and in the meantime precious life is going by. You have to find your peace and your meaning NOW. What is your purpose and your happiness now?

1 Comments:

  • At 5:50 PM, Blogger Ben Meyer said…

    One good reason to stay in debt is when a long term outcome is better then paying it all off immediately. For example if you have low interest collage loan (say 2% interest) you shouldn't pay it off right away just to be debt free, but invest that same amount in an index fund or something which would earn more at say ~7%. Then you pay off the minimum each month of the collage loan as they come and when you are finished paying off your debt you have money left over.

    Lets say you have to pay off $1000 in one year. You could pay it off right away or at the end of the year for a total of ~$1020 (interest). If you invest your $1000 then at the end of the year you would have ~$1070 and paid in total ~$1020, leaving you with $50 left over that you wouldn't have if you had paid it off when you started.

    It is frustrating how little schooling about money the middle class get in the public educational system. We are not taught a lot of basics and are forced to learn it on our own. For example lots of people (including me in the past) had their money in savings accounts that have low interest such as (0.5%). If you have $1000 in your bank then at the end of next year you will have $1005 which is good until you realize that the inflation rate has gone up 3%. Last year you could buy 500 loaves of bread for $1000, but this year with $1005 you can only buy 490. If all your money is in a savings account that is earning less then the inflation rate then you are loosing money! Why don't they teach you this kind of stuff in school?

    I recently read an article about a guy that was
    teaching basic economics to fifth graders. Quite amusing and a fun read.

     

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