Financial Peace Baby Step #2- Paying Off Debt

This week in Financial Peace Class, we learned about the debt snowball and paying off debt.  Before class, I read ahead to see what we’d be talking about, and I was kinda like DEBT… oh, okay.  *shrugs*.  See, I’ve never actually had debt, although I can imagine the stress that goes with having it.  Most of the people I know who have debt, have student loans and car payments.

I was very fortunate to have gone to one of the most budget-friendly colleges in the state, and by the end of college, the school was paying me each semester due to overages in scholarships I received.  The year after I graduated, my university’s state funding (and that of other colleges and universities) was cut like crazy and tuition went up.  It’s hard to believe, but when I started college in ’03, tuition and fees for a semester, not including housing and books, were around $2,600.  This year, tuition and fees are around $4,240.  Again, that figure doesn’t include housing or books.

I’m so glad to be done with college.  I thank God every day that I was able to graduate on time, debt-free, and work at a job in my field less than a month later.  I loved every minute of college, and I don’t regret any class I skipped or any night I didn’t study- because those nights were spent with people who’ll never forget.  I love giving back to my college through volunteering and speaking to students.

But would I go back? NO WAY.

Unfortunately, my story is very uncommon.  I know that if I was a first-semester freshman heading off to FMU this Fall, even with the same high school GPA and SAT,  my financial aid statement would include loans as well as all those scholarships.  I would’ve come out of college with some debt, but FMU was a good value for the price and having a degree IS worth it in the end.  With the cost of tuition increasing each year,  it seems like more and more kids now go to community colleges for the first two years and transfer.

My first car was given to me in high school, and my second car was bought using trade-in money from the first car as well as inheritance money when my grandmother passed away in 2005.  She always wanted me to have a nice car, and she specifically told my mom to put that money toward a car for me.  It really worked out well, because that next year, we found a great deal on my current car and I moved up from the ’95 Probe to the ’01 Accord.  Although the Honda was what I wanted, I’m very thankful my parents didn’t let me get a brand new car or a much newer car that would’ve required payments.

However, the lesson on debt and my experience at the mall the other day really opened up my eyes to how easy it is to get into credit card debt.

I got a credit card at the beginning of this year.  I was tired of not having anything in my name (besides my car and insurance), and I want to build credit and eventually purchase a house.  It’s a card for a store at the mall, and I’ve never had more than a $40 balance on it- which I’ve paid off every month when the bill arrived.

Last week, the store where my credit card is for had a semi-annual sale.  I went to the sale and bought several bottles of lotion, body wash, body spray, and other goodies to give as Christmas and Birthday gifts (Yes- now I realize that EVERYONE knows what credit card I have).  My total was a little over $30, which I put on the card.

Apparently, there’s a new deal at this store where, if you pay your credit card bill and then charge another purchase in the store that day, you earn double points.  Once you earn so many points by spending so many dollars (which I’m surely far from), you get a platinum card or some special card for the store.  Anyway- your card is upgraded.

Does anyone else see the irony in this? Isn’t the purpose of paying your credit card bill to REDUCE your debt?  Whether you pay it all off each month or make the minimum payment, you’re going into the store to pay them instead of come out with more stuff (and more debt), right?

I guess if you have the platinum/special card, you get more coupons for free stuff or you get to shop the sale prices before anyone else.  I don’t really see how a coupon for a free $10 body wash (which is really worth about $2 but sells for $10 because of markup) is worth going into more debt for and potentially ruining your credit.

Fortunately, I have the self-restraint to say no- and I did.  But many people don’t.  Sometimes the offers are pretty enticing, but you shouldn’t settle what you want now instead of what you want in the end.  And hopefully in the end, we’ll all have a lot less (or no) debt and a lot more money in the bank :).

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4 Responses to Financial Peace Baby Step #2- Paying Off Debt

  1. We both share that uncommon story! You are right we are very lucky to have gone through college and not ended up with loans. From the cost of college now almost everyone has to have a loan. I am so used to being on top of my finances I can imagine that debit would really stress me out all the time

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