DH = Dear Husband
Why I started blogging
When DH and I became committed to a pursuit of debt-freedom almost five years ago, I decided that I’d blog about it. My thought was that by writing, by putting our debt numbers and our repayment progress “out there”, we’d have a built-in accountability system that would make it impossible for me to slip back into my old, well-worn, head-in-sand financial mismanagement – the mode that had kept me in chronic, chaotic indebtedness for
years decades. I wanted out. Big time.
Vast (confusing?) range of pf blogs
Little did I know as I began to write how big the personal finance bloggosphere was. My naive understanding was that everyone who wrote about personal finance was, like me, trying to get out of debt. My assumption, since high household debt is such a common stress, was that all personal finance writers saw debt as a problem to be overcome. But that’s not the case.
Pf blogs focus on everything from investing to dumpster-diving; from proactive couponing to meditative minamilism; from DIY tips to using credit cards to get points for travel. Different life experience, different motivation, and different mind-sets are behind different blogs.
“It’s good for people to have a choice about what to read.” True. “People need to find the voices that speak to them.” Also true. But I wonder how much confusion this vast range of pf blogs stirs up in some readers?
Grounded in Ramsey’s Total Money Makeover
Speaking for myself – as someone who was in stubborn denial of my money management disaster for all of my adult life until 2012 – I can tell you that I would have been lost in the conflicting points of view presented in pf blogs if I hadn’t first identified with what Dave Ramsey had to say about debt-freedom in his book The Total Money Makeover. I’m so grateful to Ramsey for taking the chaotic spin in my head and coaching it to a clarity of direction that really has changed my life.
In 2010, our debt-to-income ratio was double the record breaking national average. In 2012, our total debts amounted to $257,400. Now, we’re only left with a mortgage of $84,000, and we have a healthy emergency fund as well as growing investments. Our debt-to-income ratio is way below the national average. We’re financially fit, and you can’t put a price tag on the confidence, freedom, and room to dream that offers.
Getting real: “Know thyself”
“Know thyself” – these words were inscribed into the forecourt of Apollo’s temple at Delphi in ancient Greece. Only two words, but they offer such profoundly wise advice. Anyone seeking greater financial fitness by reading pf blogs should take it to heart. Know thyself – because not all of the ideas you read will work for you.
Here are some of the essential pf questions DH and I have been able to answer by getting real – by knowing ourselves.
To “debt snowball” or to “debt avalanche”?
Debt snowball starts with the smallest debt. Debt avalanche starts with the debt with the highest interest rate. Debt snowball gives psychological rewards: “We paid off the first debt so quickly!” Debt avalanche makes more mathematical sense.
Answer: Debt snowball. For us, there was actually no conflict since our smallest debts also had the highest interest rates. Still, I can tell you that the psychological reward of completely paying off our smallest debts was powerful in breaking the hopelessness we felt at first about our situation.
To credit card or not to credit card?
Credit cards get high praise by some pf types for allowing easy tracking, for building good credit, and for offering the added benefit of rewards points. Others warn that credit card companies are multi-billion dollar industries that employ brilliantly effective strategies to entice people to buy more than they can afford – or at least more than they would buy with cash.
Answer: I avoid credit card use. I’m more susceptible to mindless spending when I use one. Rewards points would be outweighed by overspending in my case.
To emphasize mortgage or to emphasize investment?
“Why hurry the mortgage payoff? Interest rates are so low. Take that extra money and invest it for greater returns instead of putting so much against the mortgage.” vs. “The psychological rewards of being mortgage-free are worth the extra payments.”
Answer: Emphasize mortgage payoff. This is a tricky one, and it’s heavily influenced by my luck in having a good old-fashioned retirement plan through work. DH doesn’t have as much in retirement savings (he lost about 10 investing years to career upheaval and high expenses in the early days of self-employment), but my pension will benefit us both.
The psychological reward of complete debt freedom is very gratifying for us, so we’re motivated to emphasize mortgage repayment. We invest 15% of our gross income (this includes my pension contributions) as we pay off the mortgage as aggressively as we can. This rate of investment is way under the 50%+ of FIRE types. I can respect someone else’s choice to hold onto the mortgage and max out on investments, but it’s not a compelling strategy for us.
Do you know thyself?
Do you find, as you read pf blogs, that you have to sift through the information and opinions on different sites to distinguish between what would work for you and what wouldn’t? Do you ever get confused by conflicting viewpoints? Does “knowing thyself” give you confidence to choose between competing options? Your comments are welcome.
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