Turning Lemons Into Lemonade

Just hours before my house caught on fire, the Lord told my pastor to change his message from Jude to one on Psalms 18:30, which basically says that the Lord's way is perfect, and he protects those that trust in him.

While I was in church listening to this message, my house was on fire, unbeknownst to me. The smoke detector woke up my dh, who saved my computer and the pictures contained inside (my hero), and put out the fire with the help of my neighbor who brought along a water hose after he used up our fire extinguisher on it.

When I got home and discovered that our house had been on fire, I was shocked. I still find it a little hard to believe. Isn't that one of those things that happens to other people? After finding out the real important information, that my husband was okay (and yes, the pictures), in a way you just have to let it sink in and figure out what to do next.

It looks like we've figured out what to do next, and I'm pretty happy about it. We're going to move to a new house, whether or not our house ends up being totalled or repaired, and we'll sell whatever house/land remains.

Our insurance company should give us the full amount that we are insured for for the contents of our house. The area that caught fire was the most expensive part of our house, with our computers, (musical) keyboard, a TON of software, etc. in that area. We also have to toss all of the baby's plastic toys because they could be toxic to him, all our plastic dishes, utensils, and kitchen tools, and there was smoke damage to everything in our house... some of it we will be able to clean, some of it is not cleanable. Anyway, we did a partial inventory of what was lost, and it easily adds up to our insured amount.

We put together a budget for what we plan on doing with this money, and we decided to turn our lemons into lemonade. As a fan of Dave Ramsey, sometimes I hear people call up and say "We're debt free! We sold all of our stuff on eBay, did this, did that, etc.". Well, we're not selling our stuff on eBay, but we have decided to NOT replace all of our stuff. We will replace some of our things, and use the rest of the money to pay off our car, pay off my student loan, and start an emergency fund.

We will have no debt payments, and our expenses will be lower because we will be living in family housing at dh's school. His job is right by our house, so we will save on gas because he can walk to class and is within minutes of work. The housing includes high-speed internet and cable television, so that will save us $100 a month as well. Since the house will be smaller than the one we were living in, we should have lower electricity bills as well. We're going to put together a budget, and for the first time in years, we will actually have a little money left over after paying for necessary expenses. So we should be able to slowly replace some of the other things that we lost over time, even if we don't buy them right away. And we won't be paying interest to the banks any more!

I don't recommend having a house fire to get out of debt, but at least in this case, we will be able to take a bad situation and use it for good.

Our National Debt

The other day, I started reading America The Broke. Even though it's four years old, it's just as relevant as ever... perhaps even more so. Me and my husband are seriously considering taking $1000 of our tax returns this year and investing in gold. It's not a new idea from this book... I asked my grandma earlier this year if she'd consider moving my inheritance from Microsoft to gold because I'm a little bit wary of what might happen to the stock market... but this book paints quite a scary picture. Especially chapter 3. If you can't afford to buy the book and your library doesn't have a copy, go down to Barnes and Noble and read just that. It's something that could happen.

I remember as a kid I didn't care very much for Ronald Reagan. I now know more about him and I respect him as a Christian, but he did a very bad thing with our national debt and deficit. Even as a kid I knew it. I was quite happy in the Clinton years when we started to have a surplus (don't get me wrong though, there were plenty of things he did wrong)... and I'm pretty nervous now as Homeland Security and the Iraq war continue to rack up the debt today.

I know more than I want to about being in debt. All we have right now is a car loan, mortgage, and a student loan... that and the medical bills from when my kids had to go to the ER last summer when we were waiting to get approved for health insurance, but there was a point in my life when I had more debt.

Back then, I was making a lot of money. The debt was manageable, but we were still trying to pay it down. We could have saved a lot more and spent a lot less, and sometimes I want to kick myself for not being more financially frugal back then. Because when I got out of the military and my husband became the breadwinner, we took a 66% pay cut. And the debt was swallowing us alive. I couldn't imagine if today we had credit card bills to pay right now, with no job and living off temporary assignments and unemployment (if it ever comes through).

After learning of Dave Ramsey, I grew to hate debt. I realized how much of our income every month was being wasted in interest. I imagined how much cash we could have freed up if only we didn't have a mountain of debt in front of us. We have since tried to keep an emergency fund... which is a good thing because almost every time we got one last year, dh would lose his job again.

This book talks a lot about our national debt. While it's not the same as personal debt, we still have to pay interest on it. A lot of interest. This book says that on average, every person in America pays $1000 a year to pay interest alone. I don't know about you, but I would rather have that money go towards something useful like roads, or even the schools... or you could always put that into the taxpayer's pockets.

The problem is, our country thinks that it can buy whatever it wants, pay for whatever it wants, and we'll be okay. It doesn't work that way. In my personal budget, I have to make choices as to whether I buy clothes, take the kids to Jamba Juice, or buy something else. I can't buy everything that I want. And neither can the government. Our politicians think that they can, but we pay for it... and will continue to pay for it until it gets fixed.

We want to pay for an expensive war, give senior citizens social security, give medical help in the forms of Medicare and Medicaid (which I currently receive), pay for the roads, pay for education, pay for welfare, prisons, farm subsidies, and on and on. Many of these are noble things. Who doesn't want to help the poor? Who doesn't want to help the elderly? But the problem is, we can't afford everything that we want to fund.

This book is a quick read and I'm just starting the last couple of chapters where it gives suggestions on what we can do to improve the situation, but right now, this book is scary. It's no wonder that foreigners are buying up our assets, when we have this massive debt. It's no wonder that so many other countries of the world hold us in contempt. We're like some lazy cousin who is mooching off everybody else, promising to pay them back later, while they are working hard and loaning money to us.

We used to be a nation that loaned to other nations. Even the Bible says that you should be one who lends to others, and not one who borrows. We used to be more self-reliant as a people. Now we're a people that builds houses on barrier islands known for hurricanes, and expect the government to bail us out when it gets destroyed. Now lenders get the government to bail them out, after they gave out bad loans that they probably shouldn't have been giving out in the first place.

Perhaps one day something will happen to make us a nation of people that rely on ourselves and try to foresee circumstances in which we might need to be prepared. Until then, wanna buy some gold? Just in case we end up with runaway inflation... you never know. Wouldn't be a bad idea to stock up that pantry with food, just in case the prices start skyrocketing as well.

Why Does Our Government Encourage Stupidity?

My Excite News today said that our lovely president wants to give everybody tax rebates. The hope is that we'll take the $800-$1600 that they want to give us and go hit the mall.

As much as I'd really like to have a wii and some new clothes, that's the last thing I'm going to be doing with my money right now.

My husband lost his job 3 times last year. Not because he was goofing off or anything, but he just happened to get hired into jobs that didn't have their contracts removed or had to make cutbacks. With all indications of America's economic bubble bursting at some point, we don't expect things to get better soon. If we get the money, we're saving it. Maybe we'll invest it in gold or some other precious metal.

A couple of days ago, my husband suggested to me something that I never would have imagined that he'd say "let's live like misers." He loves to spend. However, he wants to be prepared in case he loses his job. So our goal is to save up $5000 in case he loses his job again.

It seems as if America has lost all touch with common sense. If you get into debt or spend money that you don't have, eventually you're going to have to pay it back. Visiting my family over Christmas really showed me the effect of being smart with money, and living within one's means, or being stupid. The people that got into debt when I was younger sure had fun then, but they're not exactly that well off any more.

Dave Ramsey is a pretty smart guy when it comes to money. He has a lot of common sense. He has a few baby steps that he suggests that people use when they are trying to work their way to financial independence:

Step 1: save up a baby emergency fund
He suggests that you save up $1000 as a baby emergency fund, in case the car breaks down, the refrigerator stops working, or something unexpected like that comes up. $1000 isn't going to help a whole lot, however, if you lose your job. We're trying to save up $5000 right now... actually we're trying to save up $6000, $5000 in case of a job loss, $1000 in case the car breaks down.

Step 2: pay off all debts except the house
We have a student loan and a car loan that we need to pay off. Oh, and some medical bills when we had to go to the ER last summer (3 times) when dh didn't have a job. So that's what we have to pay off after we save up our emergency/job loss fund. You pay interest on all of your debts, so it's a good idea to get them paid off. Once you have no debt, you have more free money every month. Yay!

Step 4: save up 3-6 months of expenses
This is where Dave suggests that you save up in case of a job loss. We're doing more of step 4 in step 1, primarily because the threat of a job loss seems a little more looming than even the refrigerator breaking down. But we'll probably add to our savings here.

I think that step 5 is pay off the house, but it could be save up for retirement or save for your kid's college funds. If I ever get to these steps I'd be all over it ;).

I don't see anywhere in here the instruction to "go out and waste money at the mall." That might postpone the inevitable downturn in the economy, but it's going to happen. You can borrow and live beyond your means forever, even if you are a government. We can try to put our head in the sand and pretend that when our economy grows enough, we will pay off the national debt, but that's just like somebody who goes out and charges up their credit cards saying to themselves "I'll pay it off when I get a raise." When that raise comes, they just want to spend more money on other things.

If we get these tax rebates, I'm saving mine. I'm going to need it whenever the bubble finally bursts. And if everybody else rushing off to the mall or going on vacation ends up prolonging the inevitable, then I guess that gives me a little bit longer to prepare.