Does your heart sink every time you have to make a car repair or pay a doctor's bill? Try sinking funds. Every month Jeanette and I set aside a certain amount of money into a fund to pay for "unexpected" expenses. For example, say you set aside 100 dollars a month for auto repairs. Six months later, you need work done that costs 500 dollars. Normally this would be a big hit and you'd be scrambling to come up with the money (maybe even having to put it on the credit card where you get the privilege of paying it off at 12% interest), but because you've been saving you just draw it from your sinking fund (where you've been earning 2% interest instead--14% differential). That 500 dollar bill is no big deal because you have 600 sitting in your savings account for just this sort of thing.
It might take some time to fine tune the amounts you should be setting aside. I think it's better to error on the side of setting aside too much.
It's amazing how much peace this brings.
Friday, October 31, 2008
Get out of debt as quickly as you can
Keep your possessions free from debt. Get out of debt as fast as you can, and keep out of debt, for that is the way in which the promise of God will be fulfilled to the people of this Church, that they will become the richest of all people in the world.
--Joseph F. Smith, Teachings of the Presidents of the Church, Joseph F. Smith
--Joseph F. Smith, Teachings of the Presidents of the Church, Joseph F. Smith
Wednesday, October 29, 2008
Joseph F. Smith in 1898
Another prophet speaking in 1898 that could have just as well have been speaking to the people of the world today. The United States has a history of boom and bust cycles driven by credit based speculation. Hopefully we learn this time. As individuals I think we might. As a nation I would be suprised.
"Now, I believe sincerely that one of the principal causes of the distress that exists among us--and I believe the same thing will apply almost universally through the land--is that people have gone beyond their means. They have borrowed largely, mortgaged their homes, their farms, and nearly everything they possess, to keep pace with their neighbors, competing one with another in putting on appearances and in carrying on their business on the credit bases that is so much in vogue in the world. . . .
. . . Many of us that have borrowed means . . . that we might put on an appearance at least equal to that of our neighbor, if we had not done so, but had lived within our means, and in addition had laid a little aside for a rainy day, today we would be the most independent people upon this continent. . . . So far as I am concerned, I would like to see . . . that whenever we buy a dollar's worth of goods we wither pay a dollar for it or something that represents a dollar, and that we do it without criplling ourselves at home or placing a mortgage upon us and upon our children. Every man that lives by credit is placing shackles upon himself and his family. . . .
Did you ever see anybody who went in debt and mortgaged and bonded that which he possessed, as free, as independent, as happy as the man who paid for what he had as he went along? We should live according to our means, and lay a foundation upon which we can build, and upon which our children can build after us, without paying interest on bonded debts incurred by us."
--Joseph F. Smith (1898) in Teachings of the Presidents of the Church, Joseph F. Smith
"Now, I believe sincerely that one of the principal causes of the distress that exists among us--and I believe the same thing will apply almost universally through the land--is that people have gone beyond their means. They have borrowed largely, mortgaged their homes, their farms, and nearly everything they possess, to keep pace with their neighbors, competing one with another in putting on appearances and in carrying on their business on the credit bases that is so much in vogue in the world. . . .
. . . Many of us that have borrowed means . . . that we might put on an appearance at least equal to that of our neighbor, if we had not done so, but had lived within our means, and in addition had laid a little aside for a rainy day, today we would be the most independent people upon this continent. . . . So far as I am concerned, I would like to see . . . that whenever we buy a dollar's worth of goods we wither pay a dollar for it or something that represents a dollar, and that we do it without criplling ourselves at home or placing a mortgage upon us and upon our children. Every man that lives by credit is placing shackles upon himself and his family. . . .
Did you ever see anybody who went in debt and mortgaged and bonded that which he possessed, as free, as independent, as happy as the man who paid for what he had as he went along? We should live according to our means, and lay a foundation upon which we can build, and upon which our children can build after us, without paying interest on bonded debts incurred by us."
--Joseph F. Smith (1898) in Teachings of the Presidents of the Church, Joseph F. Smith
Saturday, October 25, 2008
Piano Shopping
My wife's piano skills have outgrown our spinnet so we went to a great store (http://www.classicportland.com/) to "look" at pianos last weekend.
After seeing the price tag of the piano that we would really want to get ($9500) my wife insisted that we sacrifice for a while with our spinnet while we work to pay the house off. It will happen eventually, but most likely it will have to wait until the house is done. I'm really fortunate that I have a wife that is so dedicated to fiscal prudence and getting out of debt. If I had a wife that enjoyed expensive gifts I might be a very poor
man.
After seeing the price tag of the piano that we would really want to get ($9500) my wife insisted that we sacrifice for a while with our spinnet while we work to pay the house off. It will happen eventually, but most likely it will have to wait until the house is done. I'm really fortunate that I have a wife that is so dedicated to fiscal prudence and getting out of debt. If I had a wife that enjoyed expensive gifts I might be a very poor
man.
Nothing New Under the Sun
That which hath been is now; and that which is to be hath already been
--Eccl. 3:15
"If the people known as Latterday Saints had listened to the advice given from this stand by my predecessor, under the inspiration of the Lord, calling and urging upon the Latter-day Saints not to run in debt, this great depression would have hurt the Latter-day Saints very little. . . . To my mind, the main reason for the depression in the United States as a whole, is the bondage of debt and the spirit of speculation among the people."
--Heber J. Grant (in 1932), Teachings of the Presidents of the Church, Heber J. Grant
"Now, brethren, I want to make it very clear that I am not prophesying, that I am not predicting years of famine in the future. But I am suggesting that the time has come to get our houses in order.
So many of our people are living on the very edge of their incomes. In fact, some are living on borrowings.
We have witnessed in recent weeks wide and fearsome swings in the markets of the world. The economy is a fragile thing. A stumble in the economy in Jakarta or Moscow can immediately affect the entire world. It can eventually reach down to each of us as individuals. There is a portent of stormy weather ahead to which we had better give heed.
I hope with all my heart that we shall never slip into a depression. I am a child of the Great Depression of the thirties. I finished the university in 1932, when unemployment in this area exceeded 33 percent.
My father was then president of the largest stake in the Church in this valley. It was before our present welfare program was established. He walked the floor worrying about his people. He and his associates established a great wood-chopping project designed to keep the home furnaces and stoves going and the people warm in the winter. They had no money with which to buy coal. Men who had been affluent were among those who chopped wood.
I repeat, I hope we will never again see such a depression. But I am troubled by the huge consumer installment debt which hangs over the people of the nation, including our own people. In March 1997 that debt totaled $1.2 trillion, which represented a 7 percent increase over the previous year.
In December of 1997, 55 to 60 million households in the United States carried credit card balances. These balances averaged more than $7,000 and cost $1,000 per year in interest and fees. Consumer debt as a percentage of disposable income rose from 16.3 percent in 1993 to 19.3 percent in 1996.
Everyone knows that every dollar borrowed carries with it the penalty of paying interest. When money cannot be repaid, then bankruptcy follows. There were 1,350,118 bankruptcies in the United States last year. This represented a 50 percent increase from 1992. In the second quarter of this year, nearly 362,000 persons filed for bankruptcy, a record number for a three-month period.
We are beguiled by seductive advertising. Television carries the enticing invitation to borrow up to 125 percent of the value of one’s home. But no mention is made of interest.
President J. Reuben Clark Jr., in the April 1938 general conference, said from this pulpit: “Once in debt, interest is your companion every minute of the day and night; you cannot shun it or slip away from it; you cannot dismiss it; it yields neither to entreaties, demands, or orders; and whenever you get in its way or cross its course or fail to meet its demands, it crushes you” (in Conference Report, Apr. 1938, 103).
I recognize that it may be necessary to borrow to get a home, of course. But let us buy a home that we can afford and thus ease the payments which will constantly hang over our heads without mercy or respite for as long as 30 years."
--Gordon B. Hinckley (in 1998), To the Boys and to the Men.
"Many years ago, on an assignment to the beautiful islands of Tonga, I was privileged to visit our Church school, the Liahona High School, where our youth are taught by teachers with a common bond of faith—providing training for the mind and preparation for life. On that occasion, entering one classroom, I noticed the rapt attention the children gave their native instructor. His textbook and theirs lay closed upon the desks. In his hand he held a strange-appearing fishing lure fashioned from a round stone and large seashells. This, I learned, was a maka-feke, an octopus lure. In Tonga, octopus meat is a delicacy.
The teacher explained that Tongan fishermen glide over a reef, paddling their outrigger canoes with one hand and dangling the maka-feke over the side with the other. An octopus dashes out from its rocky lair and seizes the lure, mistaking it for a much-desired meal. So tenacious is the grasp of the octopus and so firm is its instinct not to relinquish the precious prize that fishermen can flip it right into the canoe.
It was an easy transition for the teacher to point out to the eager and wide-eyed youth that the evil one—even Satan—has fashioned so-called maka-fekes with which to ensnare unsuspecting persons and take possession of their destinies.
Today we are surrounded by the maka-fekes which the evil one dangles before us and with which he attempts to entice us and then to ensnare us. Once grasped, such maka-fekes are ever so difficult—and sometimes nearly impossible—to relinquish. To be safe, we must recognize them for what they are and then be unwavering in our determination to avoid them. . . .
The final maka-feke I wish to mention today is one which can crush our self-esteem, ruin relationships, and leave us in desperate circumstances. It is the maka-feke of excessive debt. It is a human tendency to want the things which will give us prominence and prestige. We live in a time when borrowing is easy. We can purchase almost anything we could ever want just by using a credit card or obtaining a loan. Extremely popular are home equity loans, where one can borrow an amount of money equal to the equity he has in his home. What we may not realize is that a home equity loan is equivalent to a second mortgage. The day of reckoning will come if we have continually lived beyond our means.
My brothers and sisters, avoid the philosophy that yesterday’s luxuries have become today’s necessities. They aren’t necessities unless we make them so. Many enter into long-term debt only to find that changes occur: people become ill or incapacitated, companies fail or downsize, jobs are lost, natural disasters befall us. For many reasons, payments on large amounts of debt can no longer be made. Our debt becomes as a Damocles sword hanging over our heads and threatening to destroy us.
I urge you to live within your means. One cannot spend more than one earns and remain solvent. I promise you that you will then be happier than you would be if you were constantly worrying about how to make the next payment on nonessential debt. In the Doctrine and Covenants we read: “Pay the debt thou hast contracted. … Release thyself from bondage.”
--Thomas S. Monson (2006), True to the Faith, emphasis added
--Eccl. 3:15
"If the people known as Latterday Saints had listened to the advice given from this stand by my predecessor, under the inspiration of the Lord, calling and urging upon the Latter-day Saints not to run in debt, this great depression would have hurt the Latter-day Saints very little. . . . To my mind, the main reason for the depression in the United States as a whole, is the bondage of debt and the spirit of speculation among the people."
--Heber J. Grant (in 1932), Teachings of the Presidents of the Church, Heber J. Grant
"Now, brethren, I want to make it very clear that I am not prophesying, that I am not predicting years of famine in the future. But I am suggesting that the time has come to get our houses in order.
So many of our people are living on the very edge of their incomes. In fact, some are living on borrowings.
We have witnessed in recent weeks wide and fearsome swings in the markets of the world. The economy is a fragile thing. A stumble in the economy in Jakarta or Moscow can immediately affect the entire world. It can eventually reach down to each of us as individuals. There is a portent of stormy weather ahead to which we had better give heed.
I hope with all my heart that we shall never slip into a depression. I am a child of the Great Depression of the thirties. I finished the university in 1932, when unemployment in this area exceeded 33 percent.
My father was then president of the largest stake in the Church in this valley. It was before our present welfare program was established. He walked the floor worrying about his people. He and his associates established a great wood-chopping project designed to keep the home furnaces and stoves going and the people warm in the winter. They had no money with which to buy coal. Men who had been affluent were among those who chopped wood.
I repeat, I hope we will never again see such a depression. But I am troubled by the huge consumer installment debt which hangs over the people of the nation, including our own people. In March 1997 that debt totaled $1.2 trillion, which represented a 7 percent increase over the previous year.
In December of 1997, 55 to 60 million households in the United States carried credit card balances. These balances averaged more than $7,000 and cost $1,000 per year in interest and fees. Consumer debt as a percentage of disposable income rose from 16.3 percent in 1993 to 19.3 percent in 1996.
Everyone knows that every dollar borrowed carries with it the penalty of paying interest. When money cannot be repaid, then bankruptcy follows. There were 1,350,118 bankruptcies in the United States last year. This represented a 50 percent increase from 1992. In the second quarter of this year, nearly 362,000 persons filed for bankruptcy, a record number for a three-month period.
We are beguiled by seductive advertising. Television carries the enticing invitation to borrow up to 125 percent of the value of one’s home. But no mention is made of interest.
President J. Reuben Clark Jr., in the April 1938 general conference, said from this pulpit: “Once in debt, interest is your companion every minute of the day and night; you cannot shun it or slip away from it; you cannot dismiss it; it yields neither to entreaties, demands, or orders; and whenever you get in its way or cross its course or fail to meet its demands, it crushes you” (in Conference Report, Apr. 1938, 103).
I recognize that it may be necessary to borrow to get a home, of course. But let us buy a home that we can afford and thus ease the payments which will constantly hang over our heads without mercy or respite for as long as 30 years."
--Gordon B. Hinckley (in 1998), To the Boys and to the Men.
"Many years ago, on an assignment to the beautiful islands of Tonga, I was privileged to visit our Church school, the Liahona High School, where our youth are taught by teachers with a common bond of faith—providing training for the mind and preparation for life. On that occasion, entering one classroom, I noticed the rapt attention the children gave their native instructor. His textbook and theirs lay closed upon the desks. In his hand he held a strange-appearing fishing lure fashioned from a round stone and large seashells. This, I learned, was a maka-feke, an octopus lure. In Tonga, octopus meat is a delicacy.
The teacher explained that Tongan fishermen glide over a reef, paddling their outrigger canoes with one hand and dangling the maka-feke over the side with the other. An octopus dashes out from its rocky lair and seizes the lure, mistaking it for a much-desired meal. So tenacious is the grasp of the octopus and so firm is its instinct not to relinquish the precious prize that fishermen can flip it right into the canoe.
It was an easy transition for the teacher to point out to the eager and wide-eyed youth that the evil one—even Satan—has fashioned so-called maka-fekes with which to ensnare unsuspecting persons and take possession of their destinies.
Today we are surrounded by the maka-fekes which the evil one dangles before us and with which he attempts to entice us and then to ensnare us. Once grasped, such maka-fekes are ever so difficult—and sometimes nearly impossible—to relinquish. To be safe, we must recognize them for what they are and then be unwavering in our determination to avoid them. . . .
The final maka-feke I wish to mention today is one which can crush our self-esteem, ruin relationships, and leave us in desperate circumstances. It is the maka-feke of excessive debt. It is a human tendency to want the things which will give us prominence and prestige. We live in a time when borrowing is easy. We can purchase almost anything we could ever want just by using a credit card or obtaining a loan. Extremely popular are home equity loans, where one can borrow an amount of money equal to the equity he has in his home. What we may not realize is that a home equity loan is equivalent to a second mortgage. The day of reckoning will come if we have continually lived beyond our means.
My brothers and sisters, avoid the philosophy that yesterday’s luxuries have become today’s necessities. They aren’t necessities unless we make them so. Many enter into long-term debt only to find that changes occur: people become ill or incapacitated, companies fail or downsize, jobs are lost, natural disasters befall us. For many reasons, payments on large amounts of debt can no longer be made. Our debt becomes as a Damocles sword hanging over our heads and threatening to destroy us.
I urge you to live within your means. One cannot spend more than one earns and remain solvent. I promise you that you will then be happier than you would be if you were constantly worrying about how to make the next payment on nonessential debt. In the Doctrine and Covenants we read: “Pay the debt thou hast contracted. … Release thyself from bondage.”
--Thomas S. Monson (2006), True to the Faith, emphasis added
President Faust paid off his mortgage
“President Faust would not tell you this himself. Perhaps I can tell it, and he can take it out on me afterward. He had a mortgage on his home drawing 4 percent interest. Many people would have told him he was foolish to pay off that mortgage when it carried so low a rate of interest. But the first opportunity he had to acquire some means, he and his wife determined they would pay off their mortgage. He has been free of debt since that day. That’s why he wears a smile on his face, and that’s why he whistles while he works.” --President Hinkley To the Boys and to the Men
http://www.lds.org/ldsorg/v/index.jsp?vgnextoid=2354fccf2b7db010VgnVCM1000004d82620aRCRD&locale=0&sourceId=cac5605ff590c010VgnVCM1000004d82620a____&hideNav=1
Our mortgage is 5.375% 30 year fixed, and I've gotten the same advice about how much better I could do investing than paying off my house. I'd rather follow President Faust's example.
http://www.lds.org/ldsorg/v/index.jsp?vgnextoid=2354fccf2b7db010VgnVCM1000004d82620aRCRD&locale=0&sourceId=cac5605ff590c010VgnVCM1000004d82620a____&hideNav=1
Our mortgage is 5.375% 30 year fixed, and I've gotten the same advice about how much better I could do investing than paying off my house. I'd rather follow President Faust's example.
Debt Free Saints--Here we come
This blog is about the journey we're on to become debt free. Over the last 7 years we've paid off 42,000 in student loan debt, 13,000 in car debt(stupid tax in Dave Ramsey lingo), and bought 2 other cars with cash (used of course). It's now time to attack the monster mortgage debt and become totally debt free. Our hope is that others will share their stories that we can then post as well.
We are strong believers that the Lord wants us be free from debt, and has repeatedly told us so in both the scriptures and through the prophets. We believe firmly that as we seek to follow the commandment to become debt free that the Lord will strengthen our efforts and help us to achieve our goal.
“And again, verily I say unto you concerning your debts – behold, it is my will that you shall pay all your debts.
And it is my will that you shall humble yourselves before me, and obtain this blessing by your diligence and humility and prayer of faith.
And inasmuch as you are humble and faithful and call upon my name, behold, I will give you the victory.”
--D&C104:79, 80, 82
We are strong believers that the Lord wants us be free from debt, and has repeatedly told us so in both the scriptures and through the prophets. We believe firmly that as we seek to follow the commandment to become debt free that the Lord will strengthen our efforts and help us to achieve our goal.
“And again, verily I say unto you concerning your debts – behold, it is my will that you shall pay all your debts.
And it is my will that you shall humble yourselves before me, and obtain this blessing by your diligence and humility and prayer of faith.
And inasmuch as you are humble and faithful and call upon my name, behold, I will give you the victory.”
--D&C104:79, 80, 82
Subscribe to:
Posts (Atom)