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Today I have a guest post from Kevin and it’s all about student loans. Don’t forget to read my My $38,000 Student Loan Payoff Plan if you haven’t yet.

Getting a college education in the US today appears to be a double-edged sword. On the one hand, graduates are in a better position than those without a college degree when it comes to getting jobs. Yet with the cost of education rising, tens of thousands of students are graduating with piles of debts they spend years paying off.

Sometimes they are not able to pay, with unemployment rates remaining high and stagnant. Dogged by debt collectors, they resort to public protests and hiding. To add more props to the terrifying reality show of student debt, here are 12 facts about student loan debt that will make your hair stand on end.

1. High debt and fear of loans

Two thirds of college graduates from universities across the country in 2011 had debts from student loans, an early 2012 study by The Institute for College Access & Success revealed. There is a total of $1 trillion in outstanding student loan debt and the average debt is estimated at $26,600 per student. Fear of such high loans can keep students from receiving the education that they deserve.

2. Increase in loan averages

What is worrying is that the loan average for the country has risen by 5 percent from $25,350 in 2010 to $26,600 in 2011. This reveals the significant rise in the cost of education. In fact since the 1980-1981 academic year, the average tuition rate for 2-year and 4-year colleges has gone up by a whopping 144.6 percent.

3. High unemployment leading to loan default

As if the high cost of education isn’t bad enough, unemployment remained high through 2011 at 8.8 percent. This means that many students leaving college end up with no jobs and a high burden of debt. They enter into a life of debt slavery on leaving college and many quickly fall into default with no means of refinancing. In terms of statistical figures, one of every six student borrowers is a defaulter.

4. Total private loan debt at $150 billion

According to reports, outstanding private loan debt among American students stands at a whopping $150 billion. These private loans are issued by banks, schools, non-profit institutions and agencies sponsored by the state, as well as other financial bodies. They are also the least desirable types of loans with the highest costs.

While federal student loans offer the lowest interest rates and borrower-friendly repayment programs, many of these federal loans cannot be accessed by those that need them the most. For instance, students with fewer resources in low-income groups who have defaulted with federal loans in the past are not eligible for federal student loans.

5. $8 billion of loan default

The Consumer Financial Protection Bureau (CFPB) estimated in a report published in October 2012 that of the private borrowers, there are more than 850,000 individual private loan defaulters, with a total default amount of a staggering $8 billion.

6. Poor loan servicing

The state-run and non-profit financial institutions that offer private loans send third-party collectors to recover the debt amounts. These debt collectors cash in on the plight of students who are strapped for cash. The New York Times reported in September 2012 that students dogged by collectors are often forced to change their phone numbers multiple times to avoid them. The CFPB reports that student complaints against private student loan companies include complaints of being unable to contact them at times of need, too much paperwork and delay in correcting errors among others.

There are 7 major companies that hold a monopoly in the area of state and federal student loan services. These include Sallie Mae, American Education Services (PHEAA), Citibank, Wells Fargo, JPMorgan Chase, ACS Education Services and KeyBank. Of these, Sallie Mae has received the highest number of complaints at 46 percent (of 2900 cases it handled in less than 7 months in 2011) followed by PHEAA at 12 percent. KeyBank has the least number of complaints against it.

7. Bigger costs than credit card debt

The government usually recovers 80 cents for every dollar on defaulted loans. This is much higher than credit card default rates – lenders for defaulted credit cards are lucky if they can recover 20 cents to a dollar. This is a problem because the government doesn’t have any incentive to prevent the defaults in the first place.

8. A problem for all ages

It’s terrifying for many how long the burdens of debt can be carried forward or how often parents are taking out loans for their kids. A New York Federal Reserve Bank (FRBNY) report published in early 2012 showed that 5 percent of all borrowers are over 60 and 11.8 percent are aged between 50 and 59.

9. Bigger than most other consumer debt

Total student loan debts stand only second to mortgage loans in the US. Delinquency rates on in the case of student loan debt is almost double that of any other consumer debts. According to the FRBNY report, 21 percent of all student loan debt is delinquent.

10. 10 % of borrowers owe over $54,000

According to the FRBNY report, in the first quarter of 2012, 10 percent of borrowers owe more than $54,000. A fourth of all borrowers owe over $28,000 and 3 percent owe over $100,000. The most unfortunate of these is the 1 percent that owes over $200,000.

11. Highest loan debts for students of for-profit institutions

This doesn’t come as a surprise, but the for-profit institutions and universities are the ones whose bachelor’s degree students have the highest loan debts. While public 4-year college graduates have median debts of around $7,960 (according to College Board reports) and around $17,000 for private colleges, the private for-profit college students have the highest loan debts at $31,190.

12. Highest debt in the Northeast and Midwest

In 2011, the state averages for student loan debt lay roughly between $17,000 and $32,000. The Northeast and the Midwest states had the highest average debts, with New Hampshire topping the list and Pennsylvania following close behind.

After having shared with you 12 facts about student loan debt that will make your hair stand on end, you can hardly expect me to say that it may not be entirely hopeless for you to get a college education despite the issues. But it’s true, it’s not so bad.

Over the last five fiscal years, the Education Department has made $101.8 billion from student loans with fixed interest rates. With the job market looking grim and the rising costs of education, there have been several protests staged across the country over 2011 and 2012. The government has taken note, and the White House plans to propose and implement a plan to benefit borrowers, by making interest rates on federal student loans proportionate to market rates.

In the meantime, students looking for loans should avoid private borrowing and look to federal student loans for help. There are some (rare) colleges and charities that will give you low or zero interest rate loans. But most of all, even if you have to spend some time shopping around for the best and reasonable loan rates offered, be sure not to give up on the education you deserve!

My name is Kevin Watts and I am the creator of Graduating from Debt. I was like millions of recent college graduates in heavy debt with very little hope. With the right attitude and discipline I took control of my financial picture and now I can say proudly that I am debt free.

How much do you have or expect to have in student loans?

What are you doing to eliminate them?

Today’s post is by my awesome staff writer Jordann.

I love being a minimalist. I love the freedom it gives me, and the financial power.

Over the years I’ve extended my minimalism to most areas of my life. From my wardrobe, to my furniture, to my book collection, I’ve been slowly and surely trimming away unnecessary items in my life for years now. The result is that I can live comfortably with my spouse in a 400 sq. ft. house, which helps us save all kinds of money.

There are some parts of my life, however, that minimalism hasn’t touched. In fact, there are some things I still love to have a large collection of. I know that, in these areas of my life, minimalism has failed spectacularly, but I’m ok with that. Here are my minimalism fails:

Workout Gear

I wouldn’t say I have a huge collection of work out gear, but I definitely have more than I need. I love to work out but I’m not naturally athletic, so being active can be a challenge for me.

To help combat this, I’ve collected a large selection of high quality work out gear. I definitely don’t need as much as I have, but I love adding to this collection, filling gaps here and there and keeping an eye out for the perfect piece that will make my runs that much more comfortable.

There are lots of women out there who have several times the clothing I do, so I don’t think I’m hoarding clothing by any stretch of the imagination.

Camping Gear

Camping, in itself, is extremely anti-minimalism. Having a large collection of camping gear that I get to use, at most three or four times a year (it’s usually closer to two) is such a waste of space and resources. The space needed to store this gear could be put towards something I’d get a lot more use out of, as could the funds required to maintain the gear!

Then there’s the sheer superfluous nature of camping. I have chairs that are just for camping, along with plates, forks, knives, a small BBQ, a cooler, tons of stuff that I already own, but have separate specific stuff just for camping.

I don’t mind though. I love camping and having this large bunch of equipment taking up space in my garage is totally worth it.

DVDs and Records

Ok, this isn’t my collection, and if I had my way it wouldn’t exist, but my fiance loves to collect DVDs of his favourite movies and vinyl records for our record player. He’s a film major, and some of his favourite movies he’ll literally watch over and over. So, for those particular movies (or TV shows) he’ll buy the actual DVD instead of just watching it on Netflix.

His collection is a reasonable size, and he doesn’t spend much money on it every year, so I don’t complain too much.

While minimalism has helped me so much to get where I am today, it hasn’t completely permeated my life. I still like to have a few small collections, that I get a lot of joy and use out of. I don’t feel guilty about these collections, because they don’t take up too much space, and they aren’t hindering my lifestyle. I’m not one of those hard-core minimalists who try to live on 100 items or less. I like my stuff, I just don’t need much of it to be happy.

Do you have any collections or hobbies that require a lot of stuff?

We had a TON of fun in St. Thomas. I’m still recouping, so for today please enjoy these pictures. I didn’t really use my camera and used my iPhone for nearly all of my photos, so sorry about all of the Instagram pictures.

I will do a full recap eventually, and if you have any questions about St. Thomas or the U.S. Virgin Islands, please ask below or email me so that I know what to absolutely include in my St. Thomas, U.S. Virgin Islands’ recap post.

In the near future, I also plan on talking about blogging and getting freebies. Specifically blogging and getting travel freebies. Some of you know this already, but lately I’ve been able to score a lot of vacation freebies. These have included: free hotel stays, guided tours, snorkeling/kayaking excursions, dinners, drinks and so on. It is something that I just started with in the end of 2012, and I’m still learning more and more about it. Is there anything specific that you would like for me to include in the post? Look out for my post on Blogging for Free Travel soon!

Lastly, don’t forget to read my latest life update and extra income post

The lovely beach at the resort! Half of the beach is a little rocky, but the left hand side is perfect for getting in without it being rocky and hurting your feet.  The water is crystal clear and BEAUTIFUL.

This is our view of the beach from our hotel room. We could also see the pool from our room, and more of the bay, but I couldn’t fit it all in one picture.

I SUPed for my first time! I’ve been wanting to do this forever. I just got out on one with no lessons or instruction and didn’t fall! WOOHOO! And that means a lot because I’m terrified of kayaking in the ocean, and yet I was very far away from the beach on a standup paddle-board and still did good without scaring myself.

Parasailing for our first time ever! It was around $200 for the both of us (pictures included by the company). We were up in the air for around 10 minutes and it was a lot of fun. I definitely overcame a lot of my ocean and shark fears this vacation haha.

This is me on the first (maybe second) day of our vacation. The view is just so pretty! I could never get sick of this view.

Iguanas were all over the place. We noticed them on our last trip, but this past trip just had these guys crawling all over. You couldn’t even eat without 4 or 5 of them right at your feet!

This is my sister standup paddle-boarding. She was terrified but didn’t fall also!

Hey everyone! Happy Monday. We are leaving St. Thomas today and we had so much fun. I’m sad that my vacation is over, but I’m honestly ready to go home. I miss my dogs, oh yeah and I miss W It was a vacation with my sister and it was much needed!

A couple of you have asked me to do a full St. Thomas recap since you will be going on vacation there soon, so look forward to that! We both took tons of pictures. We spent a lot of time at the beach, got really sun burned, SUPed (for the first time!), went kayaking, and went parasailing (first time for this also). We didn’t leave the resort once in the whole 5 days but had tons of fun. Usually I explore the area where I go on a vacation to, but we decided to just stay and have a relaxing time at the resort.

I announced the winner to my Novica giveaway but haven’t heard back yet. If your name is Erika, please check the Facebook post where I announced the giveaway so that you can see if it’s you. I want to give you your certificate code!

Oh yeah, and go congratulate my sister, she is now a personal trainer! AND this is my birthday month so you all better be super nice to me for the rest of May. I kid, I kid, you should be nice to me all the time I definitely know what I want for my birthday, and that is a stand-up paddle board.

Spending

Posts from my blog:

1. Home Updates – How we Plan on Selling Our House Quickly – We have a tooooonnnn of things that we need to repair/replace/update in our house, but luckily most of it is pretty small.
2. Why You Should Start a Blog – So Many Positives – In this post, I talk about all of the awesome reasons for why you should start a blog. What are you waiting for?
3. How Being a Minimalist has Helped my Finances – This is a great post by Jordann. Hope you loved it!
4. I want to learn more about you  - I took an idea from another blogger and asked all of you a few questions. Loved the responses! Looks like W and I need to work on our food budget…

Link Love

1. Fighting Boredom and Restlessness as you Work on Long-Term Goals The Frugal Farmer
2. 3 Businesses you can run from anywhere in the world Young Adult Money
3. Why Having Two Jobs Pays off Budget Blonde
4. Do You Hoard Vacation Days Squirelers
5. What are you willing to do for money My Shiny Pennies
6. Pros and Cons of Living in a Smaller Home Retire by 40
7. Why I will never regret a dime spent on vacations The Happy Homeowner
8. Finance Carnival for Young Adults – I was included!

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Hey everyone! Happy Friday. I’m currently in St. Thomas and most likely I am having a blast. Well, actually, I’m probably sleeping right now…  I was inspired by Johnny and Joanna and their About You series, and wanted to do this on my own blog! I want to know more about YOU. I talk about myself probably a little too much on my blog, so why not switch it up?

Answer one question or answer them all

1. What is your job? Do you work full-time? Stay at home parent? Go to school? Is this your dream job?

2. What is your biggest pet peeve?

3. What are your financial goals?  To retire early?  Start your own business?  Pay off your house?

4. How much do you spend on food per month?

5. What would you do if you had no debt?  How much debt do you have?

6. What is your dream income/salary?

And here are my lovely answers:

1. I’m a full-time analyst and full-time side hustler Still unsure of what my dream job is…

2. My biggest pet peeve… Hmmmm… I have a long list: bad driving, people who don’t know the difference between “there,” “their” and “they’re”, or how about “it’s” and “its,” and so on, people who think I’m in middle school, and the list could go on for quite some time.

3. I have a lot of financial goals! I want to pay off my student loans, be financially independent and do what I love in life.

4. We spend too much… Lately we’ve been doing much, MUCH better and we are at around $700 a month for food. This includes going out to eat and drinks too though.

5. If I had absolutely no debt, I’d probably go crazy and reward myself (but not go back into debt!).

6. If my debt were gone (that includes no mortgage debt), I’m sure I could live on a small amount such as $40,000 and be perfectly happy.

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I didn’t always have minimalist tendencies. Though I never considered myself a collector, I did have a ton of clothing and furniture while in University, and the size of my book collection growing up bordered on the absurd side. For the last few years though, accumulating large volumes of stuff wasn’t really on my agenda anymore, it just didn’t hold the same appeal that it used to.

I didn’t know my new found feelings were called minimalism until I started trying to get out of debt, I realized what a great advantage my natural habits were, and how much they could help me if I was willing to hone them a little.

Minimalism Helps Me Stay On Budget

When I first started trying to get out of debt, I knew that I needed to cut my expenses and develop a budget. I also knew I needed to get a handle on my shopping habit. Even though I was no longer into collecting many material possessions, I still had the bad habit of purchasing dumb stuff like magazines and candy, which, when added up at the end of the month, represented a huge waste of valuable cash that could go towards paying off my $38,000 debt load.

So I set a budget, and challenged myself to cut out all of the waste that I’d been paying good money for.

The effect was amazing. Over the past 17 months I’ve given up almost all of those silly little money wasting habits I used to have, and not partaking in them has cleared my mind and my home. I used to get so frustrated with all of the stuff I’d end up dragging into the house. Receipts, wrappers, magazines, flyers and the like were the bane of my existence.

Now, that stuff never makes it into the house, because I never buy it in the first place. This has freed up a ton of cash in my budget, that I’ve put towards paying off my debt.

Minimalism Helps Me Increase My Income

Once I’d realized how much I love simplifying my life, I started looking around at all of the other stuff in my life that could be simplified. I had a lot of furniture that, after moving from the city, no longer had a place in my new, 400 sq. ft. digs.

So I sold it. Not only did I make a little extra cash on furniture that I wasn’t even using, I cleared out a lot of storage space.

Minimalism Helps Me Get out of Debt

By decreasing my spending and selling off extra possessions I had no use for, I suddenly had more excess cash available. So, naturally, putting that excess cash flow towards debt was the logical thing to do. My living expenses now are lower than I ever thought they could be. Instead of spending all of my income on clothing or furniture or a large expensive rental, I spend it on debt.

Now, if I really want a book, I’ll still buy it, but I’ll get the eBook version, and I’ll appreciate it that much more because it’ll be the only thing I buy this month.

The funny thing is, even though I’ve drastically changed my consumption habits, I’m still just as happy or even happier than I was before. Having healthier finances has made a world of difference in my peace of mind, as has stepping of the consumer hamster wheel.

Have you ever reduced your consumption to help your finances?

This was another awesome post by my wonderful staff writer Jordann. Hope you enjoyed it!

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Every single day, many, many blogs are started. And it seems like there are more and more new blogs in the personal finance community.

I’ve heard some people say that there are too many new blogs out there, but who cares? I LOVE reading new blogs and hearing what they have to say. Who wants to hear the same ol’ story over and over? I want new and fresh perspectives on everything!

I started my blog in August of 2011 for multiple reasons. I wanted to have a “journal” so that I could go back and track everything that I’ve done. Before I knew it, I got sucked into the community and blogging has become a really fun hobby and side hustle of mine.

When I started my blog almost two years ago, I didn’t really think of the direction that my blog would go in, or where I’d even be with it in the future. I didn’t think I was going to be blogging for a year, or anything related to that.

Before I started my blog, I was doing what I thought was “normal.” Paying down my student loans little by little, and assuming that I’d completely pay off my student loans 10 or 15 years from now. I also never I never really even thought about becoming “financially independent” because I didn’t know that it was even realistically possible.

My views on life and personal finance has completely changed since I started my blog, and all for the better. Being more involved in the personal finance community has helped improve my life overall. If you are interested in starting your own blog, please read my post How To Start a Blog, and also be sure to check out all of my other posts in my blogging series. Below are reasons for why you should start blogging:

To Have Fun

Before I started blogging, I never gave it a single thought. Now that I’ve been blogging for almost 2 years, I couldn’t imagine not blogging. I like reading posts on other blogs, finding new people to talk to, giveaways, and especially writing. Blogging is a fun hobby to have, regardless of the subject that you talk about. Blog about what you enjoy to talk about! Pursue your passion…

To Blog For Others

Not everyone blogs for others, but I like to talk about personal finance so that maybe I can help others as well. For me, I have learned a lot (and I’m still learning) about blogging, extra income, personal finance and everything else – all from other bloggers. If other bloggers never talked about extra income, I probably would have never pushed myself to create side hustles.

Hopefully my blog posts help others and motivate others to be awesome with their finances as well. For example, I hope that all of my extra income posts help motivate others to create multiple streams of income. I hope that others will want to pay off their high interest student loans. I hope that others want to become more in control when it comes to their finances.

To Be a Part of an Awesome Community

I’ve made a lot of good friends through my blog. And I love receiving emails from readers and blog-friends that I’ve made. Being able to connect and learn from others is one of the biggest positives of blogging. I’m excited for FinCon and all of the fun that will be happening there. Are you going? My hotel is booked and ticket bought! Luckily I don’t have to fly since I live in the St. Louis area already.

To Grow

Without my blog, I don’t think I would care as much about personal finance. Yes, I care, but I most likely wouldn’t be so focused on extra income like I am now. I also wouldn’t make so much extra income as well. I didn’t start my blog to make money, and I do think that’s one of the reasons for why I’m doing so well with making extra income from my blog.

Why did you start your blog? Why haven’t you started one?

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Happy Monday everyone. Today’s post is all about how we want to update our house so that we can enjoy it while we live here, but to also sell our house more quickly when we put it up for sale. Usually on Monday’s I post my Extra Income and Life updates, but I figured that I talked about myself twice last week and there’s only so many times in a 7 day period that you probably want to read about my life!

Next Monday I will do a full life and extra income update and weekly roundup. I’m also going on vacation from this Thursday to next Monday and am going to the U.S. Virgin Islands with my sister. WOOHOO! Also, I currently have a Novica giveaway that you should check out because it ends this Wednesday.

There are many things that we want to do to our house. Most of these will improve the value of our house and/or help it sell more quickly when the time comes. AND there are some things that are on this list that will make living in our house more enjoyable as well. We still have at least another year in this house, so why not enjoy it?

We love our house, but over the years we haven’t been keeping up with the maintenance like we should have been. These are all things that have been on our list forever. We want to be able to sell our house quickly and with little problems, while also getting maximum value for our house.

Selling it quickly would be awesome, but we don’t want to sell it for super cheap either. We don’t mind keeping the house while waiting for the best offer.

We’re not putting our house up for sale until next year, but as I said, we still want to enjoy the house while we live in it now, and we want to be able to do things slowly.

Landscaping

We’ve already done some landscaping, and paid someone to clean everything up the other day.  For some reason a couple of people have been using the side of our house as storage, and there was TONS of garbage that people left. A full carpet (that was actually ours, oops), 4 tires, broken ladders, crutches (yes I said crutches), a huge metal cabinet, a dishwasher and so on.

The side of our house turned into a hoarder’s house and I’m sure our neighbors hated us for it. We paid someone to just take all of that and throw it all away (our trash company will not take these items) and we also paid the landscaping company to clean our gutters and clean up all of the leaves and other debris in our yard. This way our grass and plants can actually grow.

We plan on fixing up our front yard and making the grass green again and grow flowers.

Kitchen

Our kitchen was brand new when we bought our house and it still looks great. However, they put really ugly gold knobs on all the cabinets, and I think if they were changed to a darker color, then the kitchen would look MUCH better.

I priced out knobs and this would probably cost around $150, or we could just take all of these knobs out and spend probably $10 on that Rustoleum paint that everyone seems to be spraying all of their homes lately on doorknobs. We will probably do that so that we aren’t just wasting all of the knobs that we currently have. Cost: $10.

We also need to touch up the paint in the kitchen because whoever repainted the kitchen after the cabinet installation did a horrible job. There is leftover glue/paint on the walls and it just looks messy. We have the exact paint downstairs so the cost for this would be $0. Cost: $0.

Door Frame

We need to repair the door frame in our garage. Last year when we went to Kauai, we had a friend watch our house and she got locked out. She cracked the door frame trying to get back in. This will cost around $700 from what I’ve been told. However, I have heard others say that this might cost over $1,000. Have you ever replaced a door frame? Is it easy enough for us to do? Cost: $700 if we pay someone else to install a doorframe.

Guest Bathroom

There are only small things that we want to do with our bathroom. I bought a mirror a long time ago for super cheap, and we want to replace the current mirror in the bathroom with this one. We also want to touch up the paint on the cabinet. Cost: $0.

Miscellaneous

There are lots of other little things that we would like to do, such as switching out all of our door knobs in the house to a silver color instead of the gold that we have now. We’ve looked into it, and a little change like that can make a house look more modern. Some in our house are already the correct color, so only a couple need to be replaced. Cost: $75

We also need to somehow cover a pipe that we have in the basement as well. Right now our basement is finished but we had to replace this pipe last year so now it’s uncovered and doesn’t look good. Cost: I have no idea. 

The garage door also needs to be replaced. When we first moved in, W pulled the truck out of the garage (it’s a classic and we never drive it), and it slipped into reverse when W put it in park and got out of the car for a slight second, and hit the garage door. The garage door isn’t horrible looking, but it definitely needs to be replaced before we try selling the house. Cost: maybe $1,500? We have been told that we could just buy the garage door ourselves for around $500 and do this ourselves.

Decluttering is a MAJOR thing on our list that needs to be done. We have way too much in storage in our basement. This of course is free to do because we will declutter ourselves.

And lastly, the carpet in the living room needs to be replaced. This is something that has been on our list for quite some time. We pulled up the carpet in the living room when we first moved in because we didn’t like the carpet. It turned out that the hardwood floor underneath was extremely ugly and whoever put the carpet down did a horrible job and ruined the hardwood floor. So we need to replace this. Cost: $600.

What would you do to increase the value of your home and help it sell quickly?

How much have you spent (or would you spend) in order to sell your house more quickly and for a higher value? 

Hey everyone! Happy Saturday. I just ordered the awesome serving plate to the left thanks to Novica. I love the colors and the detail in it, and I know it will look great on my dining room table.

I received an email from them recently asking if I wanted to give away $40 to their awesome website, so why not? I’ve ordered 3 other items from them as well, and have never been upset.

For today’s giveaway, all I ask is that you head on over to my Facebook page and comment on the post that is related to this giveaway. Easy as that! I will then use Random.org to choose the winner from the Facebook comments on Wednesday, May 8th.

Also, if you haven’t yet, be sure to check out my $7,859 in April Extra Income and Goals post.

Hey everyone! Today I have a post for my debt payoff series. Many of you have e-mailed me and said that you have LOVED this debt series because you are able to hear about so many different views of debt payoff stories. Glad I can keep this series alive and going! Be sure to come back tomorrow for a $40 Novica giveaway.

Hi everyone! My name is Justin and I write at The Frugal Path. I’m excited to share my path into debt today.

For the past five years my wife and I have been struggling to pay down our consumer debt. While it has always been below the amount carried by the average American household, $15,000, it still acts like a parachute on the back of a race car and slows our progress to financial freedom.

The Money Pit

As a child The Money Pit, staring Tom Hanks and Shelley Long was one of my favorite movies. The movie opens with a couple purchasing a beautiful old house. It’s perfect and doesn’t need any work, or so they’ve been led to believe. However, the sweet couple had been swindled and the house needs a complete overhaul. This isn’t a small 1,000 square foot starter home, like mine. It’s a big beautiful country house with every inch in need of repairs.

A similar story unfolded when we purchased our very first house in 2007. The housing market was softening and we thought our house was a steal of a deal, (If I only knew). It needed a lot of work. Before moving in we replaced the furnace/AC, windows, garage door and entry doors. Oh, there was also a small mold problem in the attic and we had to tear out the finished basement for the same reason (only on a much bigger scale).

We were unaware of many of these issues when we put our offer in. Most of the problems were discovered during the home inspection, but our inspector and agent told us that we were getting a good deal. They also knew we had a decent chunk saved up for the down payment and talked us into using the money to fix up the house instead.

Our gut was telling us to back out. In fact, the words came out of my mouth a few times. However, the inspector and agent “assured us” that the house was still a deal and we could ask for a reduced price. So we listened. If you’re ever purchasing a home, go with your gut feeling after the inspection. You may end up losing the inspection fee, but it could save you a lot of money.

We weren’t living above our means.

Consumer debt can be pretty vile and toxic to your financial situation. With high interest rates and no tax breaks associated with it, credit card debt has very few virtues and plenty of pitfalls.

Every so often I would watch a talk show or personal finance pundent on television interviewing families deep in debt. Often these people live far beyond their means with weekly shopping sprees, extravagant vacations and many times their houses were four or five times the size of mine with mortgages to match.

Our debt wasn’t caused by an extravagant lifestyle. It came from a home in need of repairs. Surely we were better off financially than these people.

Or were we?

I had to face a simple fact, we were in denial about our financial situation. When it came to everyday expenses, we were living within our means. But we didn’t plan for the future. When our cars unexpectedly broke down we charged it. When the roof of our lovely house began leaking two years ago did we pay with plastic or paper? Plastic please.

Living beneath your means doesn’t mean just ensuring that you have enough money to cover everyday expenses. It also requires a plan and a rainy day fund for when emergencies rear their head. If you can afford these costs on top your regular living expenses, then you really are spending less than you make.

You Need a Plan

It has taken us far longer than it should have to pay off our debt. Since 2008, every single extra dollar that we had was thrown at the debt and it was rapidly shrinking. In fact, we were on track to have the debt gone but a lack of planning continuously threw a wrench in our plans. There were several car repairs, the new roof and, well life in general kept getting in the way.

From the tail end of 2011 thru September of 2012 we had basically given up. It seemed as though we’d never get out from under our debt. I finally pulled myself out of despair and began blogging about our financial situation. It was a way to stay motivated and learn new methods for managing our money. We began putting some of these techniques to work and slowly increased side income.

Our path to financial independence is looking possible, it’s just a matter of taking the first steps. We learned a valuable lesson from our roof and no longer throw every dollar towards the debt. We now allocate a quarter of our extra cash towards an emergency fund. It may take a bit longer to pay down the debt, but if Murphy visits us we’ll have an account full of cash to rub into his face.

What obstacles have you faced with your personal finances?

How did you kick Murphy to the curb?