Sometimes you stumble across a blog that steals your heart. This was definitely the case when I found Sequoia’s blog. (There is a link to it at the bottom of this guest post! You must check it out!) She is an amazing writer, and the topics covered on her blog go right along with everything that I feel is important. Not to mention that she always has wonderful pictures to accompany each post!
This guest post that she has so wonderfully supplied for my blog is amazing. She highlights the importance of financial security. This is a MUST for those hoping to work on being prepared. If you don’t have your finances in order, you can not think seriously about getting ready for the future. The thing that makes her post so credible is that it is the true story of what happened to her family several years ago. She has applied principles from Dave Ramsey, who I am a huge supporter of. Enjoy this awesome post, and take her advice to heart!
DO AS I SAY, NOT AS I DID
By Sequoia Scott
We’ve all heard the advice, have 6 months to 1 year of living expenses in an emergency savings account. I must have heard it hundreds of times and I always thought, how am I supposed to save money when I’m already struggling to pay the bills I have now? Well, now I know, you just do it. Why? It’s all part of being prepared for the unthinkable. That day came for me and my husband at the end of 2007.
My husband and I had created a really nice life for ourselves. We had just built a new home on 5 acres of rural land. I was able to stop working and start spending my time doing all of the things I love to do like sewing, gardening, raising a few chickens and finally learning how to cook. We had doubled our money on the sale of our last house, paid off all of our debt and bought two brand new cars, cash. What a great life!
By the time our unthinkable day came, we were back in debt with 7-8 credit card balances, no savings and a mortgage. Then, no work. None. Nada. No work for months. I tried looking for work, and I’m a R.N. and I couldn’t find a job. We tried to refinance the house. Nope. We tried to list it for sale. Nope, the value was going down fast and we wouldn’t even be able to break even. The bank took away our line of credit on the house (our only emergency fund). We tried to get a loan modification but because we hadn’t missed a payment, the bank just laughed, literally, laughed at us. One of our credit card companies tripled our minimum payment. We had to file for unemployment but, of course, that wasn’t enough. Our entire net worth was invested in this house and land and we were facing losing it all.
I was terrified. That first year was the worst. We had to live on the only savings we did have which was intended for the property tax bill coming in April 2008. We filed our tax return on January 2, 2008 so at least we would get our refund and have some money in the bank. We bought only the barest minimum at the grocers. We didn’t turn on the heater for an entire year, and it snows here in the winter. We didn’t buy gifts. We just sat here in the dark and the cold and talked about how if we get out of this one, we will never be in this situation ever again.
The first thing we did was put money into savings. It took us all of 2008 to put away $5,000. In 2009 we started paying off the credit cards. We finished all of the debt in 2010 and started on the house. I’m very happy to say that now in 2012 through a recession with a income at 50% of what we’re used to we have the principle on the house down by half, we have no credit card debt and we have a large amount in savings. I won’t feel really safe until the house is completely paid off, but I feel better, much better.
Of course an emergency savings account won’t fix every disaster you might be faced with but it is part of being responsible for yourself and not depending on the government to bail you out. It goes along with protecting your family by being prepared for an emergency. We made every financial mistake you can make, this is what we learned:
1. Don’t use credit cards. You can have one, ONE. If you do use it, say to book a reservation, subtract that amount from your checking account balance. When the bill comes, pay it off every single month, no exceptions.
2. Don’t co-sign on a loan for anyone unless you are emotionally and financially prepared to pay the loan off yourself.
3. Do keep an emergency savings account. The banks aren’t paying much in interest, but it’s still the safest place to keep your money.
4. Pay off all of your debt. The debt snowball really works. Start with the lowest balance and work your way up to your highest, for us that was the mortgage. Use the cash that you would have paid on the lower balance and apply that to the next until that is paid off, then take all of that cash and apply it to the next and so on.
5. I still think real estate is the safest investment. This recession was triggered by the inflation of housing prices and poor lending practices, but now is actually a great time to buy when prices and interest rates are low. However, don’t buy the most expensive house you can afford, buy one that is less than you can afford. You can always upgrade as your income increases over time, but you certainly don’t ever want to struggle to make your house payment if your income drops.
6. Teamwork; My husband and I may not have always seen eye to eye on how to spend money in the past but we know exactly what we need to spend money on now. If we couldn’t have come together to get through this, we would never have been able to be successful. Almost every single person my husband works with lost their house. We have ours because we worked as a team.
7. I know it’s tough but don’t take on student loans. I put myself through college by working part time at two jobs and going to school part-time and that was hard, really hard. I was just determined not to graduate with debt. Although I did that for myself, I couldn’t say no to my daughter, that was part of what was on those credit cards. If you do have student loan debt, put that on your debt snowball list. Student debt is not allowed into bankruptcy so no matter what, you have to pay it off. Might as well get it over with, it’s not going to go away.
8. Finally, don’t believe credit monitoring companies. You can get your credit report for free from the three main credit agencies once a year. You don’t have to pay to see your credit report. Pay your bills on time and your credit will be just fine.
I have a whole new attitude about being prepared for emergencies, not just money. What other disasters could befall us and what do I need to prepare for those? Right now I’m working on storing a year’s worth of food, that would have helped in 2007 I’m sure. We’re also studying power sources, water storage and the list goes on.
Join me at sequoiasgarden.blogspot.com for more ideas on food storage.
Thanks Emma for inviting me to write a post