Essay: Patricia’s Money Philosophy Series. Part II of IV: Debt

I believe in paying attention to your money.  I think that how you care for it and what you spend it on make a difference—not only for your own piece of mind, but also in the context of the universe and energy and whatnot.  Money ignored is money that won’t be around for long.  So here’s an incredibly long and detailed four-part series about how I manage my money.  To see the entire series look for the tag “Money.”

I avoid debt as much as possibly can.

Aside from a brief period in my twenties, where I combined my lack of skills with an iffy job market and no clear idea of what I wanted to do for a living, I have avoided credit card debt.  At the time, I had about $800.00 charged to a high-interest card, which was the only kind I could get due to the fact I did not establish credit while in college.  I also had a $2000.00 computer loan and $16,000 in student loan debt.  And I had no job.

I often read financial stories of people who come into a windfall and happily pay things off, or realize that they could sell the rental property they own and make more money than being a landlord.  These stories leave me with an intense feeling of jealousy.  “I wish I just had a windfall like that.” I mutter to myself.  But the truth is, I had a windfall and it saved my bacon.

Beginning when I was in elementary school, a check used to arrive every month made out to Patricia and Chris Collins.  Every month my brother and I would endorse it, with me grumbling that I had to write my full name (I was Patty then) while Chris got to write his nickname.  The check was for $128.00 and change and was a mortgage payment made on my father’s boyhood home.  I’ve never really understood why we got the mortgage payment monthly, but it happened for twenty years.

The money was deposited into an annuity account, which I’ve since learned was a horrible investment vehicle for children still in elementary school.  My brother and I cashed out the annuity in our twenties and the amount I received was enough to pay off the credit card, the computer and the student loan, along with putting something in savings.  This gave me the heady feeling of being debt free, which not only was an amazing feeling, but also kept me from ever wanting to carry credit card debt again.  So I had my windfall and something good came of it.  But I am also happy to accept windfalls in the future too.  I am just putting that out there, universe.

I do have debt, though.  When I went to graduate school I took on student loan debt again.  Because I had used the windfall to pay off my undergraduate loans I left graduate school with loans that totaled just a bit under what I expected to earn my first year as a teacher. Loans equal to or less than expected first-year salary is the phrase that is bandied about when advice is given about student loans.  I’ve slipped into the passive voice in that last sentence because I know that I read that advice multiple places and yet I’m not sure who is giving it, or if it is good advice.  I’ve been paying those loans for seven years now and have thirteen years left to go and I’ve yet to work a year as teacher.  To say these student loans drive me crazy would be an understatement.  My monthly payment is one I can easily meet each month. I was faced with bleak employment prospects coming out of graduate school, so I chose the graduated repayment plan over 20 years.  Right now I pay $160.00 per month.  Would I love to accelerate those payments and get rid of this debt early? You betcha.  Would I be willing to work 40 hours per week instead of 32 to do so?  Not in my current job, no.

The other debt is the mortgage.  Mortgage debt seems a fact of life for everyone I know, so I don’t begrudge the debt, though when I look at the interest-to-principle ratio my tightwad self shrivels a little.  However, while I regret the student loan debt, I think we did it right with the mortgage.  For one thing, we didn’t overbuy.  Our house is modest, but is as much house as we need, as far as I’m concerned.  Also, we bought our house from a land trust, which means that the land trust owns the land below our house and we pay a small fee for the lease. Since the value of the land isn’t included in the purchase price, our mortgage is that much less.  When we bought the house, I felt comfortable that I could lose my job tomorrow, pick up temp work while I looked for a new opportunity, and still be able to meet the mortgage.  In addition, should we ever decide to sell our house, it will be resold to another first-time homebuyer, which preserves an affordable stock of housing for people who would have otherwise been shut out of the market, like we were.  This is a very important concept to me.

For me, owning a house was important psychologically—once we got into the house and unpacked, I felt incredibly settled.  Here was where I could live for the rest of my life, if I so chose.  This brought a feeling of peace that was not present through the apartment living period of my life.  Apartment living has its advantages, but I always felt an underlying bit of tension.  You never know when the landlord is going to raise the rent, sell the house out from under you, or tear down the beautiful building to build a parking garage.  I didn’t like that feeling of insecurity.  There are tradeoffs, though.  Before I bought my house, homeowners told me that they were astounded at the amount of time they spent on the house.  “Oh, but I will love that time spent,” I told them, all heady with the idea of projects.  I’ve done a lot of projects over the five years we’ve lived here and they have been mostly satisfying.  Before the house, I used to be bored on a regular basis.  After the house, I think I’ve been bored maybe two days.  This is good and bad.  Sometimes the house can seem a bit overwhelming, but at least I don’t have a regular sense of ennui.