Judge Not, O Indebted One

behavior quote

I have a confession: I judge other people’s financial behavior like nobody’s business.  If I know that money is tight, but I see you in a new dress…BAM.  Consider yourself judged.  Spent money on a vacation? I can only assume that you spent the entirety of that vacation foolishly disregarding your student loan debt. Oh, did you buy a brand new car?  I hope you enjoy living in it, because you probably just spent your mortgage payments. (How do I have any friends?)

Like the quote above says, we judge others by their behavior, and ourselves by our intentions.  The way I see it, both are pretty dangerous habits.

Judging Others by Their Behavior 

Maybe money is tight, but you found a cute dress on clearance that brightened your day.  Maybe you do have a lot of student loan payments, but you saved up for a vacation–and found some great deals while you were planning it. Maybe you researched new cars, saved up a good down payment, and had a decent trade-in for that new car.  Even those closest to me don’t know the intricacies of my finances, and likewise, I don’t know all the details of theirs.  And yet, I still find myself judging them, often very harshly, on the small pieces that I do know.

This mindset–that the behavior of those around me reflects poor intentions, or selfishness, or an inability to face reality–can only hurt my relationships.  It puts me in the unearned position of feeling superior to friends and family, when I should be approaching them from a position of love and support.

Judging Ourselves by Our Intentions

Do I always make the best financial decisions?  Absolutely not.  Do I make excuses for myself? Sure do.  Case and point:

We’ve spent almost two hundred dollars on takeout over the past couple of months. 

But we’ve been busy and too exhausted to plan meals and cook.

I went to New Orleans for work and exceeded my monthly “fun money” budget.

But the colors in the Pearl Jam print are beautiful…and it’s something that we’ll display in our home…and when am I going to go to New Orleans again?

 I purchased (yet another) black dress for the trip. 

But what would people think if I wore the same dresses I’ve already worn to other events?

Why do I feel that it is okay to hold others to different, much higher standards than those to which I hold myself?

Because I remember my intentions, and excuse my behavior. 

What should I do when I see someone making financial decisions that I don’t feel are appropriate?

  1. Be slow to judge–unless it has been explicitly explained to me (i.e. “Katie, I have $5 in my bank account, but I felt like making a foolish financial decision, so I went out and bought these shoes”), I need to remember that I don’t know why the decision was made.  Even if it was explicitly explained to me, back off! I don’t need to agree, but I need to respect that it wasn’t my decision to make.
  2. Ask myself–and honestly answer–what would I do in their position?  Or rather, what have I already done in their position?  I have certainly bought something small to brighten my day, even when it didn’t fit in my budget, and I distinctly remember purchasing a plane ticket to London when my credit card was nearly maxed out.  It happens.
  3. Offer support and guidance, if it will be welcomed. Nobody likes a know-it-all, but as someone who has worked to get out of debt, I do have something to bring to the table.  If nothing else, sometimes it just helps to have someone to talk to when you’re in a financial pickle.
  4. Redirect that energy towards my own debt.  There’s enough there to keep me busy for a few more years, eh?

What about you?  How do you interact with friends and family who make financial decisions that you don’t agree with?

Photo Credit

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Related Post:

Spending Excuses: My Big 3

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2013: A {Monetary} Year in Review

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2013 was a big year for us.  We started the year off by creating our budget and setting some financial goals.  Our #1 goal was to pay for our wedding in cash, with no assistance.  And guess what?

We did it!

We created a separate wedding budget, accounted for EVERYTHING we could possibly think of, and paid for our wedding completely out of pocket (about $13,000 when all was said and done. Whoever said a wedding had to cost $30,000 is a goober.  Check out this post to see how we did it!  I’ll write an update about how it turned out in a future post, but suffice it to say–best. night. ever.)

Meanwhile, back at the ranch…

While creating our goals and budget for the 2013, we knew that we didn’t want to throw everything we had at the wedding.  That’s where the budget comes in handy–by identifying our monthly income vs. expenses, we were able to reasonably identify how much was left over for debt reduction.  When all was said and done, we reduced our debt by about 23%.  We still have a lot left to pay off, but WOW…is this a great feeling.  We also have our $1,000 emergency fund and thanks to our wonderfully generous friends and family, we were able to recoup what we spent on the wedding and then some, which went right into the bank.

In review, here’s where we ended for 2013:

Paid $13,000 in cash for our wedding

Maintained our $1,000 emergency fund

Paid off 23% of our debt

Saved a large chunk of money to put towards our 2014 goals (and beyond!)

Exciting stuff, right?  You’d think we would get after it for 2014, right?  

Full disclosure: It is January 11th and we still have not revised our budget for this year.  Oops. (See, even the budget nerds trip up!)  That being said, we’re going to make it a priority ASAP, because we have some HUGE goals coming up, including:

  • Going on our honeymoon- and paying for it in cash
  • Buying our first home
  • Making some mini-budget nerds

…so let’s get budgeting!  Ready?  Break!

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Need help creating your budget?  Here are some great resources:

Dave Ramsey’s Budgeting Forms

Be Organized- Our New Budget Sheet (through trial-and-error, this is the method that has worked best for me.  What can I say? I’m a pen-to-paper type of gal).

Kiplinger’s Household Budget Worksheet

 

 

 

Walden on Wheels

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Photo Credit

I learned about this book the other day while listening to the radio.  I haven’t finished it yet, but have found it to be so relevant to my struggles with student loan debt that I wanted to help spread the word!

Here’s a brief synopsis:

Ken Ilgunas graduated from the University at Buffalo with $32,000 in student loan debt.  To get out from under that mountain, he worked a series of odd jobs in Alaska (including night cook and tour guide in a town with a population smaller than a typical college class). Determined not to go further into debt when he entered graduate school at Duke University, he secretly lived out of a van- on campus- while working on his graduate degree.

Although I haven’t finished it yet, I highly recommend this book to anyone who is struggling with debt.  Not only does Ilgunas discuss his own (albeit extreme) how-to strategy for paying off debt, I like that he went deeper.  I’m finding that he’s putting words to some of the emotions that I’ve felt about student loan debt–about how ridiculous it is that a bank would let an 18-year-old sign off on a double-digit loan, or how we all go into college believing that we’ll graduate and immediately make enough money to quickly pay off those loans.  He’s brutally honest about how paying off debt is an exercise in complete frustration at times, but a complete victory at others.  He’s also pretty funny and self-deprecating, which just makes the book fun to read.

Proposed Changes to Mortgage Lending Practices

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An article was recently written about proposed changes to lending practices in the mortgage industry.  Some of the changes include:

  • Creditors would have to take into account borrower’s income and employment
  • Monthly payments would be calculated based on highest payment during the first five years of the loan
  • Teaser rates wouldn’t be able to mask the true cost of the mortgage
  • Lender would need to consider borrower’s ability to repay the principal and the interest of the loan
  • Borrowers’ total debt payments could not exceed 43% of their pretax income

I think it’s great that the Consumer Financial Protection Bureau is taking steps to rein in an out-of-control lending market, but are these steps severe enough?  Forty-three percent of your income is a pretty hefty amount.  I had always heard and read that the amount of money spent on housing costs should not exceed 30% of your pretax income, which seems much more reasonable to me. Forty-three percent is a little to close to 50%, and giving away 50% of your income every month sounds like a bad idea.

Any thoughts?

 

Debt Buster vs. Burned Out: Budgeting as a Couple

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There was a post on Dave Ramsey’s blog the other day about the 3 main money fights couples have and how to prepare for them.  In many partnerships, there is a “Debt Buster,” who is willing to throw every penny at debt and a “Burned Out” mate, who is tired of foregoing the extras for the sake of debt reduction.

I can definitely relate.  My fiance and I handle our money differently–I love budgeting and personal finance (doesn’t everyone?), while he tends to spend more freely.  In the past, it didn’t matter how we spent our money individually, because our joint bills were always paid on time and in full.  Once we got engaged, though, I asked him to sit down with me so that we could set up a budget that we both agree on, that would help us achieve our mutual goals.

This seemingly simple request elicited the following response:

<<<Insert wide, fearful eyes and a slight tremble>>>

“…does this mean that I have to start shopping at Goodwill, too?”

Yes, I am very much the Debt Buster in the relationship.  I buy my clothes at Goodwill and groceries at Aldi.  But that doesn’t mean that I require the same of my partner.  What I wanted to do was create a budget that worked for both of us.  Here’s how we did it:

#1: Establish Shared Goals

If you don’t know where you’re going, you’ll never get there, right? We discussed what we want out of the next five years: to pay off our debt, pay cash for our wedding, and save for a house.  By setting these goals, we had a much clearer idea of how much money we needed to allot for each goal.

#2: Make a List of Your Expenses

Figure out how much you each spend on a monthly basis, both on fixed costs and variable costs. Here are the costs that we tallied up:

Fixed Costs

  • Rent
  • Electric
  • Gas
  • Cable
  • Internet
  • Car loans
  • Car insurance
  • Student loans
  • Gym membership

Variable Costs

  • Credit card payments
  • Groceries
  • Shopping/entertainment
  • Misc (e.g. gas for the car, etc.)

(This is not an exhaustive list; add or remove items as needed).

#3: Decide Which Changes to Make

Can you get rid of cable, and use a cheaper service, like Netflix or Hulu?  Can you get a shared phone plan?  Are you using your gym membership, or can you exercise at home?  There is no right answer for anyone–it depends on your lifestyle and your priorities.  Figure out what you can’t (or really don’t want to) change and change the things that don’t matter so much.

#4: Create Your Budget

Tell your money where to go.  Plan for, and account for, every penny.  If you leave too much leeway, I guarantee you the money will disappear.  Even in my role as the Debt Buster, I’ve been in situations where I’ve found myself thinking, “you know, I’ve done so well these past few months–I deserve a break.  I deserve some new clothes/a meal out/a drink with friends/something fun.”  This simple thought might be okay if I stuck to one small treat, but inevitably, that thought snowballs, and before I know it, the money that could have been used to pay off debt has instead been used for mostly meaningless purchases.

For our joint budget, we are using Google Docs (as noted in the picture above–and by the way, Oliver is our dog.  Though not gainfully employed, he’s a valued member of our little family).  That way, we can both access the document at any time to enter updated information or check on our progress.  There are a million different ways to set this up, though, from a spiral notebook,to an Excel spreadsheet, to budgeting software.  It’s all up to personal preference.

We entered our fixed costs and variable costs into the spreadsheet, along with the extra money that we’d throw at debt and savings.  For variable costs, I find it easiest to lump them into three categories: gas, groceries, and miscellaneous.  That makes it very uncomplicated to keep track of my spending.  

We decided that my extra money would go towards debt repayment, and his would go towards wedding and house savings.  I also have an emergency fund of $1000 set aside for us, for the inevitable “Murphy’s Law” incidents that tend to come at the most inconvenient times.

#5: Get Both Partners to Buy-In

This is absolutely, 100%, the most important step.  We identified our goals and created our plan together.  As the Debt Buster, I was much more excited about this process, but I was sure to make it clear that the purpose of the budget wasn’t to keep tabs on his spending.  The purpose of creating a budget was to create a blueprint for how we will achieve these goals together.  This process can’t be one-sided; while that might work for a few months, it probably isn’t realistic long-term.  Budgeting is a team sport, and to be successful, both sides need to have input and agreement at each step in the process.

 

A New Path

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Ah, back to the beginning.

I started Rebel a couple of years ago, after some major life changes led me to move back in with my parents at the age of 27 and go back to working in retail, despite having earned two Master’s degrees.  Trust me, few things humble you more than moving back in with mom and dad while all of your friends are getting married, buying houses, and having kids.

Since that time, I have moved to a different city (but I am, of course, eternally grateful to my parents for their kindness and support), gotten engaged, and gotten a job that I actually enjoy.  By all accounts, life is very good.  And yet…

Between undergrad, graduate school, and a car loan, I built up over $90,000 worth of debt.  Prior to a year or two ago, I thought that was completely normal.  Most people I know have student loan debt and a car loan.  I actually thought I was doing a good job, since I steer clear of credit card debt.  

When I moved, I had no job and quickly realized that my “normal” amount of debt was stifling my ability to live the life I wanted to.  Although I had saved up enough money to float me while I job-hunted, it was extremely disheartening to give my hard-earned money to the loan companies and yet, the balances never seemed to get lower (why hello, compound interest!  It’s not that great to meet you.)

About a year and a half ago, I made the decision that I was going to pay off my debt much, much faster than those darling loan companies wanted me to.  Since that decision, I’ve paid off over $30,000, on an average salary in the $35,000 per year range, leaving my balance a little over $60,000.  

In an effort to document my journey to zero, I tore down the original blog and now present you with the new Rebel Without a Dime.  

<<<Applause>>>  <<<Cheers>>> <<<A little more applause>>>

Here we go…