Finances, Part IV

In this post, I’ll break down the four things we are doing right now to improve our finances.

I’ve spent the last few weeks looking back on some of the lowest parts of my own personal story, and then how my husband and I came together and saw our own family financial struggles. It’s easy to keep your head down and keep moving forward without looking back. And most of me thinks that’s the best way to operate: spending time in the moment and the future, not in the past.

But it’s hard to know how far you’ve come, and motivate yourself to keep going, if you don’t know exactly what you’ve accomplished.

After writing about the nine things we did to fix our family finances, I was left feeling super proud of us. I had forgotten about that chapter in our lives. I didn’t realize it we had done that much to dig ourselves out.

My goal in sharing our experience in detail is not to brag – please don’t interpret it that way. The hope is that you can see an example of someone who was at a very low point financially (and personally) and was able to turn things around completely in less than ten years.

If you are at your own low point, create a plan, and take your first step. Keep going.

Last week, I shared some of our experience with selling our first home. The sale of our home allowed us to pay off all debts except my car loan, and we had money in savings (while still working and excelling at our jobs). We had a larger mortgage payment than our first house – but it was only a swing of a couple hundred dollars/month because we paid off our other debts.

We didn’t want to ruin the progress we had made financially. Having the larger house payment made us nervous.

4 ways we’re improving our finances:

1. Live by a “no debt” policy.

If we can’t afford something, we don’t buy it. Period. That means no borrowing money from family to make it happen, no putting it on a credit card that won’t get paid off that month. Not only does this prevent new debt from occurring, but it forces us to have a conversation with each other on how important that thing is to us. If it’s important, we figure out a way to make it happen (work harder to earn more money, cut out something else to make room, dip into savings).

Earlier in our marriage, when we bought our first home, the backyard was unfinished. Brian opened a Home Dept credit card to put the tools, pavers, sod, etc. on. Sure, you could argue that helped our home increase in value, and was money well spent… but that credit card had a 30% interest rate. And our home would have increased in value without us charging the materials to a credit card.

2. Use our Costco credit card for everything to earn free money.

And pay it off completely each month. We earn anywhere from 1% to 4% cash back on all purchases made with our Costco Citi Card. They will cut you a check that you can deposit into your bank (or cash) at the end of the year. We earn over $1,000 per year in free money by using our credit card for daily purchases (or for home renovations, if the contractor takes credit cards… use that card whenever you can). But just as importantly, we pay off the balance in full each month.

The Costco credit card is just an example, there are other cash back rewards cards out there.

*Note* If we had tried to implement this strategy before fixing our finances and paying off debt, it would have been hard to be disciplined enough to pay it off monthly. Have you heard people say they don’t trust themselves with credit cards? Or maybe you’ve said it yourself (and that’s okay). That’s a sign you aren’t ready to use a rewards card for everything – you will likely rack up debt. Instead, try implementing the nine things we did first.

3. Resist the urge to buy new cars.

This one is hard. There is almost nothing better than driving off the lot in a new car that’s yours. There is a lot of pressure to have a nice car, or if you don’t have a nice car, that somehow your life sucks, and you should be embarrassed. That is ridiculous.

Once we changed our mindset and stopped focusing on what we wanted to buy next, and instead focused on keeping our money, all I see is car payment amounts when I see nice cars. Oh, you have a brand new truck? I hope that thousand-dollar car payment is worth it.

4. Spend money on quality items vs. cheaply made items.

How long does a pair of cheaply made shoes, purse, or jeans last you? In the long run, you will spend more money replacing things than investing in quality items from the start.

For example, when I buy inexpensive purses, the handles will start showing wear (even cracking) after just a few months. On the other hand, I had a brand name purse that I used every single day for four years, and it still looked new. Yes, it may have been $250 instead of $40. But would that $40 purse have lasted with daily use for four years and counting? No.

Just don’t charge the quality item on a credit card… see step #1 ?

The Toyota Rav4 we bought almost five years ago… and still have. Even though Kanye West raps about what an embarassing car it is. It’s been great for our family!