Letting Family or Friends Borrow Money

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After I posted ‘The Debt Shoebox’ story, I received an email asking me exactly how Mr. Money and I dealt with the debt shoebox. The person was curious why I wasn’t more upset about the debt and what exactly came of the situation. What I did at that time wasn’t something I’d probably openly advocate, but I am so thankful it worked out for us. I let Mr. Money borrow cash from me to pay off a lot of his debt.

These are actual pages from the notebook I used to keep track of his debt repayment.  This totally makes me laugh!  I remember a lot of the time he would just pay all the rent one month ($650) and I would deduct $325 from his balance because that was my part of the rent.  Six years later I think it’s hilarious that I tracked it this way!

At 19, I had about $3,000 to $5,000 saved up in my savings account (I can’t remember exactly), which I think is a pretty decent amount of money saved up for someone that age. The amount of debt he had wasn’t horrible, but it was something I knew he needed to take care of quickly. I do remember he had balances of about $2,000 on a student loan, $360 American Eagle credit card, $200 Discover card, $100 BP credit card, and $300 RadioShack card. All of those minus the student loan had gone to collections. Ugh. He had set up payroll deductions to pay on the student loan, and nothing else on the others. We called the companies and settled on an amount, they drafted the money from my checking account and he was free and clear. But not with me. He now owed me money, which we kept track of in this book. Every time he made a payment, I’d subtract the amount he’d paid from the amount he borrowed.

Being older now and definitely more mature and financial savvy, I realize that the decision I made to let him borrow money probably wasn’t the smartest. I am thankful that it all did work out though, and here we are now, married for over four years. At least it all worked out.
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Have you ever let friends or family borrow money? Would you advise people to do so?

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Snail Paced Intensity?

snail.jpgIf you are a Dave Ramsey fan, I’m sure you have heard of gazelle intensity.  Basically the gist of it is that you do whatever you can to pay off your debt in the least amount of time possible. Sell things you aren’t using, cut your cable, put the nix on going out to eat, and so on. We attacked our student loans with gazelle intensity, and paid it off a lot sooner than we had hoped. Now the only unsecured debt we have remaining is our car loan at 0%, and I’m not in a hurry to pay that off any time soon.

I almost feel like so much time and energy was focused on paying off that student loan that I’m exhausted from it.  I’m tired of pinching pennies and scrounging up extra money and putting any snowflakes towards debt.  I feel like we’ve accomplished a lot in a short period of time, and now I want to take my time paying off this car.

Seeing that it’s at 0%, it’s not like I’m paying tons of interest if I don’t pay it off quickly.  I won’t save any money if I pay it off early, but that’s definitely not saying it wouldn’t be awesome if we could pay that off by the end of next year as well.  That would rock.  However, I think now I’m going to focus more on saving money for whatever.  I think we’ve got a pretty good emergency fund established.  I’m contributing the max match rate to my 401k.  So I think I’m going to work on saving for the chance we may move back home in the future (2 – 5 years).  I’ll call it my hopes and dreams fund.

Even if we never move back to Colorado, I can still take that money and apply it to the principal on our mortgage, use it as a baby fund, or whatever.  It never hurts to have that extra cash.

Do you think I should work on paying off that car loan as soon as possible, or is my plan better?

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We are Student Loan Debt Free!!

grad.jpgWe are student loan debt free!!  On Friday, I made the final payment online, checked this morning, and it had posted.  I can’t tell you how excited I am to be rid of this debt!  We have paid off this last loan of $12,333.80  in 1 year, 3 months, and 25 days.  Yes!

I don’t think I’ve ever mentioned it on the blog before, but this $12,333.80 is not the only student loan debt we had.  In 2004, Mr. Money enrolled in culinary arts school and we moved across country for him to attend.  Fast forward to October 2006, and now he’s got his degree and has left school with over $36,000 in debt.  Yes, that is not a typo.  $36,000 was more debt than I ever cared to accumulate, and we went full force attacking it.

We paid off  almost $24,000 in two years, on mainly my salary of $12 an hour full time, plus Mr. Money’s salary of $8(?) an hour part time.  Needless to say, we lived pretty poor to be able to pay off that kind of money in that short of a period of time.  In 2007, we bought a house and added more debt to the plate.  At the start of this blog, we had $12,333.80 left. I knew I wanted to pay this off as quickly as possible. One of my 2009 financial goals was to pay off this student loan and I thought it was a hefty goal. Here we are, halfway through the year and we’ve done it.  It is quite an amazing feeling!

It doesn’t feel real that we’ve paid of $36,000 worth of debt (just in student loans!) in 2 and a half years.  Looking at how much money we made doesn’t even make it seem possible but we did it all while saving for an emergency fund, putting a nice down payment on a car, and paying extra on our other loans.  The fact is, we did it, and I can’t imagine a greater feeling.

Now onto chipping away at our car loan and living a debt free life soon!

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