The Story Behind the Debt
Once upon on a time, there was a girl who graduated college and was excited to begin her future. With stars in her eyes and a wedding ring on her left hand, she landed her first teaching job and bought her first home with her new husband. The new husband was a design engineer and both were bringing home some good bacon.
The girl and boy were living the dream.
Each had their own car and spent money on whatever they wanted.
The girl shopped nearly every weekend.
The boy spent money and bought expensive parts for his dune buggy.
For something to do the newlyweds would go out to eat 3-5X a week. The fact that they did not have money meant nothing, they knew they could qualify for a loan or could use a credit card. Fast forward a few years the newlyweds realized lack of money was not the only problem. The overwhelming and often overdue bills were causing stress.
The not-so-happy newlyweds had accumulated debt on loans and credit cards, and a few children over the years. The girl became a stay-at-home mom, thus quitting her teaching job.
Money was tight already, with the girl home it got even tighter. However, both knew things had to change, but were reluctant to make those changes. They stuck with behaviors that were comfortable and routine.
A few more kids later, the now wised up and tad more mature couple knew something had to change, and fast. They had learned they were starving because they never saved any of that bacon. The piggy bank had been sucked dry. There was no more bacon. Not even bacon bits.
The now not-so-new newlyweds had more children and decided to become debt free!
Facing debt meant coming to terms with our dire financial situation. It meant hours of sitting at the table often with tears and tirades. It meant piles and piles of papers, receipts, and bills. It meant hours on the phone with all the companies we had loans with and credit cards with.
It meant making a budget and sticking with it. It meant coming to terms with the fact that, no, in fact, we do not deserve everything we wanted. It meant telling ourselves and each other no. It meant holding each other accountable at all times.
It involved hours of discussions, entering receipts into the budget, and deeming what we consider budget-worthy. We posted our total amount of debt and looked at it daily. Every one hundred dollars we colored in a line with a red pencil. We began making progress!
No eating out, no buying clothes, no trips. Nothing was bought that was not necessary. We only spent money on necessities such as utilities, gas, food, and our tithe. We sold things. We worked whatever jobs we could do. We had garage sales. Every extra penny went towards debt. We lived for crossing off that line!
Did you know that the average American family has credit card debt of just over $16,000 and total overall debt of $132,000? Isn’t that crazy! We have no credit cards. We quit using them years ago. We have no student loans either. We do have a mortgage and I cannot wait until the day it is paid off.
Brian and I quickly learned that debt is not healthy. There is nothing good that comes out of having debt, not even a good credit score. In fact, we have no credit score and it has not stopped us from doing anything. It is a myth that you need to accumulate debt in order to build up your credit score or as Dave Ramsey say’s the “I-love-debt-score”…”The dreaded FICO score. It’s that number that’s associated with every credit report. We all know about it—most people have one—but what does the credit score really mean?
Like it or not, your credit score is not an indicator of winning financially. All it tells you is whether you are good at borrowing money and paying it back. That’s it.
But let’s take a deeper look. How is your FICO score determined?
- 35% of your score is based on your debt history.
- 30% is based on your debt level.
- 15% is based on the length of time you’ve been in debt.
- 10% is based on new debt.
- 10% is based on the type of debt
In order to have a good credit score:
- one must go into debt
- stay in debt
- pay bills on time all the time
- stay in debt as long as possible.
“But can I get buy a house without credit?” Yes. Why yes you can. It is called manual underwriting. Churchill Mortgage is one such company that does this. However, there are requirements to getting a mortgage without a credit score.
On the other hand, you do not need a credit score. Pay with cash. Save money. Dump your debt.
When one is free from debt there is no worry about making those payments every month that drag you down mentally, physically, and financially. You’re not paying extra for everything you buy in the form of interest and fees. You’re much more free to live life the way YOU want to live it and have less stress because you are no longer a slave to the lender. (Proverbs 22:7)
Why debt is not good for you:
“Debt is Dumb, Cash is King” Dave Ramsey
- Relationships: Money problems is the number one cause of divorce for married couples.
- Stress and medical problems: Your health is worth it.
- Debt encourages you to spend more than you can afford
- Debt causes us to spend more money
- Prevents you from achieving your financial goals
- It can prevent you from owning a home