We aren’t the type to be frivolous with our finances. We take pride in our fiscal responsibility and I guess this sets us apart from our federal government. While we’ve watched friends, family and even our own government dig themselves into debt or pitch money away recklessly, we have no desire to follow suit. Therefore, we’re working hard not to handle our finances like our fine nation is doing.
We’ve worked hard over the years to achieve a situation in which our debt levels are virtually non-existent. Sure, I guess you could say that technically we carry debt on our single credit card throughout the month, but this bill is paid in full at the end of each statement period.
Unlike the federal government, which according to treasurydirect.gov, in 2013 paid over $415 billion in interest on debt, we pay nothing. By downsizing our home, we were able to buy a smaller place outright, eliminating the need for a mortgage. By continuing to drive a used vehicle, we’ve rid ourselves of the need for a vehicle loan. And by buckling down and avoiding things like new cars, lengthy vacations, and regular dinners out, we were able to pay off our student loans in a fraction of the time allotted for such debt repayment. In the process, we’ve saved ourselves tens of thousands of dollar in interest on debt over the years.
Avoiding credit whenever possible
The federal government loves credit, that’s why our national debt currently sits at over $17 trillion dollars. It’s like the country is one giant credit card.
I liken credit cards to casino chips. They tend to make it easier to spend since we don’t have to see those dollar bills leaving our wallet. Instead we just swipe a card to rid ourselves of our hard-earned money.
When we’re out shopping, we’re often asked about signing up for store credit cards, and we graciously decline, choosing to hold just one family credit card. We’ve realized over the years that just swiping a credit card for a gourmet coffee, some fast food, or a purchase at the local quick-e-mart, is extremely convenient, and that’s just the problem. Convenience can lead to complacency, and complacency – in financial terms – can be costly due to additional and frankly unnecessary expenses.
Avoiding the “tax-and-spend” approach
The federal government has perfected the “tax-and-spend” approach. In fact, they exceed their abilities in this area, which is why – according to the Congressional Budget Office – in 2014 we’ll have a nearly half trillion dollar budget deficit.
Our family also has a budget. But we don’t have a deficit as we prefer the “tax-and-save” approach rather than tax-and-spend. We tax ourselves through regular savings options and reserve amounts that we’ve built into our budget. Beyond our regular savings, we build an excess reserve fund into each monthly budget, which allows us to cover unexpected costs that might arise but also acts as additional savings if we don’t utilize this reserve fund. In this way, we create a sort of forced savings that not only protects us in the near term from nasty little financial surprises but potentially builds our longer-term savings as well.
More From This Contributor:
Building a Revenue Producing Blog
I Won’t Be Waiting to Take Social Security
Preparing to Publish My First E-book
The author is not a licensed financial professional. This article is for informational purposes only and does not constitute advice of any kind. Any action taken by the reader due to the information provided in this article is solely at the reader’s discretion.