3 Financial Quandries–What Do You Think?
A few years ago, when I was aggressively paying off debt, I would listen to Dave Ramsey’s podcast in my car as I drove to and from work. As you might be aware, Los Angeles is not the most god-fearingly Christian of cities, and we tend to stick our noses up at both the thought of saving money and of taking advice on spending money from a Southerner. Maybe that’s just me, actually–but in any case, Dave wasn’t on the radio here, and I liked to listen to his show both to keep myself on track and also to get answers to those nitpicky questions about staying on a debt recovery plan. Not every scenario is covered by any one plan, which is why I think you ultimately have to come up with your own personal financial philosophy to meet your own needs. But still, when I read personal finance blogs, I do see these kinds of questions coming up again and again, so I thought I would address some of these here and see what you guys think.
- Should you tithe while getting out of debt?
This is an easy one for me, because I don’t tithe. I don’t practice any form of organized religion, in fact, so tithing has never been an issue for me. However, I figure that for agnostics, the question might be, “Do you give to charities when trying to get out of debt?” My answer has been, “No,” in the past. However, I do wonder about this. A cornerstone of the Dave Ramsey program involves giving even when you are in debt–this is based on tithing in Christianity, but you might also think of it as a Law of Attraction kind of thing. The theory is that you get back more than what you put out. I don’t know, though. I tend to think that you should apply all that money to debt repayment.
- Does your budget each month allow for annual payments?
Some people budget fifty dollars or whatever each month toward payments that are due annually, like life insurance and homeowners insurance premiums. This tends to create too many different things to keep track of for me, and I forget how much money I’ve put aside or where it is, unless I make up a new account for every single payment, which is just crazy. So what I have taken to doing is putting money in a “sinking fund” for that kind of stuff. I put money into the sinking fund as it is needed, and then write checks out of that when these kinds of payments are due.
- Pay off student loans before putting 15% toward retirement?
Dave Ramsey is pretty adamant about being completely out of debt (other than the mortgage) before you start putting money toward retirement. Once you do start, though, it is supposed to be 15% of your income, which is higher than many people save. The thing is, if you have advanced degrees, and/or if you have anyone who went to a private school, your student loans probably total more than a house does in some parts of the country. In these cases, I tend to think you should save toward retirement while you’re paying off your student loan debt, so that you get the benefit of savings in the early years, even if your student loans are not paid off as aggressively.
Now it’s your turn. What are your financial quandries? How have you decided to handle them?