In the past two years, as we’ve tried to navigate the difficult road of living on one income I’ve immersed myself in the financial blogosphere. It has been an interesting experience to say the least. Some of the philosophies made sense to me. Avoid debt. That was one my parents taught me as a young child. They told me two things were worth going into debt for, a home and an education. My parents each finished college thanks at least in part to some student loans. Though back then student loan rates were in the 1-2% range and savings accounts were earning upwards of 17% interest. (Hard to imagine a world like that, huh? My husband’s student loans are at 6.8% and our savings account doesn’t even earn 1% interest anymore). My parents also had a mortgage on each of the homes that they lived in over the years, including their current one. Granted, back then getting a mortgage was harder; underwriting could take months and a decent down payment was a necessity. My dad was lucky enough to have a good job. He was never unemployed for any period of time during my childhood, though seemingly inevitable layoffs often loomed. He had little or no help from his parents in attending college and yet managed to get a degree in chemical engineering, graduating in 3.5 years instead of the usual 4. (When was the last time you heard of that?) He went into a field that he enjoyed and was talented in, but that also had reasonable earning potential. (Something I’m sure he kept in mind when he took out some student loans to help cover his tuition). We lived in a modest house in relation to my father’s income. My parents kept a sizeable savings account. They always paid cash for cars, never buying new. So avoiding debt made sense to me.
But then the other popular financial blog topics made their appearance. Don’t use credit cards, they are evil. Well, I can understand the potential problems with credit cards. My parents had taught me about interest and how in the end you owe more than an item is often worth when it is bought on credit. But my parents definitely had credit cards. They weren’t often used, but when they were, the balance was paid off each month. I got my first credit card right after I was married at 20. My husband has just paid off past credit card debt and swore never again to use a credit card. So we compromised. We each got a card for the purpose of building our credit. (Yes, I know there are other ways to do this, but I didn’t have the fear and hatred of credit cards that many in the financial blogosphere do). My card was used for gasoline only. His card was used for groceries. For everything else we used the debit card. This helped us better track our budget in the early days of low income. (I believe he was making $25,000 before taxes and I was a fulltime student). We never carried a balance and we never spent money we didn’t have in the bank. We treated them like debit cards.
Then there is the infamous, college is too expensive and student loans aren’t worth it argument. Possible solutions including working part to fulltime while in school and/or opting not to go to college until you had saved enough to afford it. Now I grew up in a family that placed great value on education. My parents are probably some of the last of a generation who believe that college is not just there to help you get a good job, but to help you become an educated, well-rounded person. (My mother is a perfect example. She was the first generation in family to go to college, yet she ultimately became a stay-at-home wife and mother. Something she has rarely, if ever regretted. But never has she spoken of her college education as a waste. She is one of the smartest, best educated people I know. She has never let that go to waste even if she isn’t in the traditional workforce). Which school would give me the most value for the education was deciding factor when I was doing the college search. Ultimately I chose a school that I loved, and who offered a good financial aid and scholarship package. However, it was not the least expensive option. After discussing it with my parents we concluded that finances were not the only consideration. For that matter neither was prestige. The question was, where would I learn the most and where would I get the best possible education? I lived on a small quiet campus were partying was rare. Most students there were there to study and seek other academic pursuits. I probably didn’t take advantage of extra curricular activities and networking events as I could have. But I learned a great deal, much of it in subjects outside my major that have affected who I am as a person in very positive ways. I also managed to graduate a semester early, saving more money, something I couldn’t have done at a larger or more prestigious school. I consider it money well spent. (Oh, and thanks in part to my incredibly hard work in high school and my parents support I was able to graduate loan free, even though I did qualify for some loans that I could have taken advantage of to make my experience more luxurious. Instead I worked summer jobs to pay for my yearly spending and book money.)
Now, my husband attended college at age 26, and did it all on student loans. Do we regret that? Yes and No. If he hadn’t returned to school he would probably still be making $25,000 a year in a dead end job he hated. Do I wish it had cost less? Absolutely. But at the time there was very little other choice. Looking back, he doesn’t feel that his education had the same value as mine, while in the end it did cost more. If we had it to do over again, I think we would have tried to find ways to pay off some of the bills as we went instead of waiting until the end to pay the giant balance. But we can only move forward from here. Those two bachelor’s degrees that my husband obtained have opened doors for him that he would still be banging his head against right now had he never returned to school. While our income is still relatively small (apparently we are considered legally poor by theU.S.government), his income earning potential has been significantly increased, and his work has become a source of self-value rather than a drudgery. When our children approach college age the system will likely be very different. We would like them to avoid the debt cycle, but we both still believe in the value of education. Colleges today are not always (in fact, rarely) producing well-educated, well-rounded people. Those students who emerge as mature, educated adults owe more of that to their own efforts than anything special the university system itself is offering. The education is still there for the taking, you just to look harder and dig deeper for it. Otherwise you could very well graduate with a piece of paper and very little actual education.
My husband and I also purchased a home with no downpayment. Was it ill-advised? Perhaps. Is it frustrating to see our home with so little equity, even after 5 years? Definitely. But I can’t say we regret the purchase of this home. With rising rents and other local housing issues, we would likely still be living in our two bedroom apartment in a very sketchy neighborhood and probably paying almost as much in rent as we do now for mortgage. We’d probably be spending more for heat and electricity too. We would never have started our family.
It’s easy to stand on the outside looking in and make declarations about the financial decisions of others. Heck, I do it too sometimes. It’s hard not to. I love how much I’ve learned from the financial blogosphere. It has encouraged me to review my own values and make sure that my financial decisions reflect those values. I’ve learned about frugal practices I never would have considered before I found financial and lifestyle benefits. I now try to see my finances in a more long term way. It would be easy to make the minimum payments on the student loans and just accept the long haul to debt freedom. It feels so overwhelming at times. But I’ve learned that making small sacrifices now can mean reaping rewards later on. I now see a debt free lifestyle as more appealing than a more luxurious one. (I’d rather live in our little house with no mortgage than move to a bigger one and face mortgage payments for the rest of our lives).
But I’ve also learned to take financial philosophies with a grain of salt and see how they fit into my own life. I still hate the idea of ever having a car payment, but it may very well be something we have to resort to in a few years. I think credit cards are a tool to be used for convenience or even profit (let me tell you how often those cash back checks have come in very handy at times we needed a little extra money most). Sometimes it’s easier to have a holier than though attitude regarding certain financial issues like credit cards, car payments, student loans and mortgage down payments. (Hey, even mortgages sometimes. When people tell me how they paid cash for their houses and I should too or I’m making a financial mistake I try not to laugh. In our area, with our income, I might have become a homeowner just in time to retire by the time we saved enough to pay cash for a home, even a small fixer upper in a rough neighborhood). I’m finally to the point where I don’t even comment on discussions on the above topics anymore. The cacophony of voices all of whom agree with each other is loud enough. Any compromise I might try to express would only be shouted down. Besides, I don’t need to defend my financial decisions to anyone by myself and my husband, much less the anonymous blogosphere.
The truth is I’m Ok with my credit cards. I’d like to pay down our mortgage and student loans faster. No, I’m not saving 10-15 % of my income toward retirement, nor do I have 20% a month going into my emergency fund/savings account. I don’t have a year’s worth of income saved in the bank and it will probably be a long time before I will. But I do have an amazing two and a half year old daughter that I love and who drives me crazy. I have a baby boy due to make his appearance in the next month or so. I have a husband who has a job he enjoys but is still working towards a career he will love and I have the rare opportunity to be a stay-at-home mom who dreams of being a professional writer. I like watching some TV in the evenings (online for free of course) and I like to read just to fun, even when it isn’t necessarily educational or informative. I may not follow all the traditional financial tenets and I certainly won’t be moving to my retirement villa inTuscanyat age 50, but I have a life I enjoy and a family I love. Oh yeah, and I also pay all my bills on time. What more could I ask for?