Tuesday, April 22, 2014

Be Money Smart.

I have people in my life who are younger than I am and are just embarking on “adulthood.” I hear more and more foolish things come out of their mouths that remind me so much of myself at that age. And most of it has to do with money. There are so many conversations where people are not managing their money wisely and are making some very bad decisions because of it. I just want to jump in and yell “stop! This is what you are doing wrong and this is how you should fix it!” but that kind of unsolicited advice is not always welcome or appreciated. :) Besides they already think I'm "old" which I am totally NOT.

“We’re wasting so much money on renting a place. For the money we spend on rent, we should buy a house.” My response: have you really calculated what home ownership costs? Not only is there the base price of buying your house, but there are property taxes, home insurance, mortgage insurance, house repairs and just maintenance things like lawn mowers. How much of a down payment do you have saved? Did you also factor in heat, gas, water and electricity? Not free. My guess is you probably want furniture too, so there’s another cost. And I can tell you that I have more friends that I can count on one hand that have had sewer and septic tank problems. There’s a good way to see $15,000 go down the drain (literally!). Lance and I are some of the foolish ones who bought a house the first year into marriage. Looking back, it was not our best decision. We were smart (mostly Lance) and purchased a house within a decent price range that hasn’t robbed us blind. We’ve also been lucky that we haven’t had to replace appliances. Knock on wood because that’s an expense too. But what I’m trying to say is this: you should have ZERO debt before you take on the major debt of home ownership. You should have a full emergency fund. You should have saved up a decent down payment. If you can’t afford a decent down payment, that’s a sign that you can’t afford home ownership.  

”I’m not contributing up to my employer’s match on my 401K.” Dumb, dumb, dumb. It’s free money. Free. As in it didn’t cost you anything to obtain it. No brainer. Start contributing the bare minimum to get your employer match.
“I just picked the most expensive health insurance because it seemed like the best.” Argh people! Health insurance is not cheap, not by any stretch of the imagination. Depending on your situation, a high deductible health plan or an HMO plan are really good choices and can save you so much money over the course of one year. The only thing I ask is this: if you are given a choice, weigh your options. Calculate what comes out of your paycheck each pay period. See if your regular doctors are still covered. Determine if you have any major upcoming medical expenses for the year. 

“I just want to go on a trip somewhere.” Yeah, we all do. After spending a really long, cold winter in Iowa, we all want to go somewhere tropical for a week. I get it, I do. It’s been four years since we’ve taken a “real” vacation – meaning somewhere not within driving distance of our house. But right now it’s not in our budget plan. Our budget plan meaning: paying off Kara’s school loans now before we get locked into any other financial burdens. It’s so much easier for us to buckle down and get things paid off now, before it has any further ramifications on our family – like not being able to enroll Lucan in activities because we don’t have the extra cash. Trust me, I feel like I deserve a vacation too. I can’t wait until we’re able to take Lucan to Disney World for weeks upon weeks and make those memories as a family. So in hopes of making those memories, I’ll table my personal vacation dreams temporarily. 

“I just have a few credit cards. There’s no interest on them right now, so it’s like free money.” Omigosh, this statement just makes me want to shake you hard. Really, really hard. Even if you pay them off every month, there is always that lag time in between where you’ve bought the item and they have yet to bill you. Interest rates are astronomical. And most people find they exhibit less self-control when they aren’t handing over the physical money right then and there. What happens if you suddenly lose your income and can’t make the payment? You’re still stuck with owing the credit card company money. Bad, bad, bad. 

Okay, I’m done harping on you. I’ve made most of the mistakes I’ve talked about, so I can’t be too condescending. I still make plenty of money mistakes on my own. I still like shopping. I have a tendency to be able to justify everything (Lance keeps me honest and accountable. He’s so mature like that.) I can never remember when I get paid (is in the first and third Friday every month? Or do I get paid the 15th and the 30th?) and it’s ridiculous. All I know is that we’ve made plenty of money mistakes with our money and it would be irresponsible to not try and keep people from repeating them. Learn from me! I’m trying to teach you how to fish!

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