Growing up poor my family didn’t have credit cards or an insane amount of debt, but we were underprivileged and a lot of times went without. When I became an adult I didn’t know anything about money, budgeting, or how debt even worked. I quickly found out what debt looked like after I turned 18 and was able to start making financial decisions for myself
I wanted to start out “our debt” series on what really debt looks like. When you’re taking out debt, you don’t always know the full face value of it. I wanted to share some examples of “debt” we got ourselves into and can’t get out of. It looked great at the time, but there were major consequences for our actions.
What Debt Looks Like
Buying Our First House
My husband and I got married when we were really young (19 & 21). We thought our best option was to buy a house first. We went the route of buying a modular home because the initial investment was very small. Little did we know that we would pay on our house for a little over seven years and only pay off around a $1,000 on the principal.
Later in our twenties, we were smart enough to start looking at WHAT we did when we bought that house. We had actually taken out a $35,000 loan on a “trailer” and the interest rate was at 12.5%. By the time we paid off our house and lot rent in 15 years, we would have paid almost 200,000 dollars. Isn’t that an insane amount of money for such an “affordable” home? Read: 4 Quick Ways to saving for a house
Taking Out Student Loans
Since my husband and I got married so young, we didn’t really think about the impact student loans would have in our life as parents. Instead, we went to college and took out loans to pay for all of our schooling. Not only did we take out loans, but we also went to expensive ‘private’ collages. The college we went to was around $25,000 a year.
And because we were married and working full time, it took us even longer to get through college. It took me around six years to finish school and it took my husband seven years. By the time we were both done with college we both owed around $100,000 EACH in student loans. Half were private and half were federal loans.
Currently, we pay around $800 a month just in private student loans a month. Thankfully, the government has an income based repayment plan in place that allows you to make payments based off of your income. You’re thinking “WOW” that’s a lot of debt for school. Well, the crazy thing is that there are worse stories out there; our story is quite mild compared to theirs.
Because of my decision to go to college, I am a working mother that works basically just to pay for student loans. I’m not saying it’s bad to go to college, but it’s bad to take out a ton of debt not realizing the impact it will have on you later in life.
What does debt look like?
- Working more hours than you want to just to pay off debt you didn’t HAVE to take out.
- Sacrificing buying a home because you can’t quite swing student loan payments and a house payment right now.
- Budgeting very closely just to make sure you can pay your debt on time every month, so you don’t get a phone call from creditors.
- Sacrificing time with your little ones, so you can pay debt that you took out over 10 years ago.
This is just a small portion of what debt looks like.
How does this all tie in?
Because of our debt and our desire to get out of debt, we decided to start looking at Dave Ramsey and what his financial freedom plan looked like.
Follow along in this series as I talk about how we used the Dave Ramsey method to tackle debt and keep our sanity.
Be sure to come back next Monday to read about 4 Ways We Conquered Debt. In the meantime be sure to read 27 Ways to Start saving money on Christmas!