Tip 9 | Debt

The fourth most common reason for divorce is marital financial issues.

Avoid debt. It is slavery

The American financial system is stacked against the young couple. First, college is more expensive because of easy to obtain student loans. The easy availability of student loans has allowed colleges to raise their tuitions without fear that students will not be able to pay. It is not uncommon for a student to graduate with tens of thousands of dollars in debt. This year total student debt surpassed a staggering $1,000,000,000,000 dollars in the USA.

I’m not saying don’t get a student loan to go to college. I am saying that if you go into debt for a degree that has little hope for income you might want to think twice. In 2013 the worst ROI degrees are: Sociology, Fine Arts, Theology, Hospitality, Nutrition, etc. Getting an economically worthless degree and then entering marriage with a lot of debt is a recipe for problems.

Then there is the purchase of the first home. The US tax code allows a young couple to deduct the mortgage interest off of their taxes. If one assumes that home values and rents will continue to rise, then it becomes obvious that buying a home is a good deal. This first home adds another big pile of debt onto the young couple and their family.

Along with the home comes the maintenance, the property taxes, insurance, etc. Consequently, the young couple is stretched to the limit and worried about losing a job, worried about having a child, worried about car trouble, and worried about student loans. The government and banking system love debt slaves because debt slaves are profitable and usually behave themselves.

If you buy a home, buy one that is easily affordable. This means a home which the cost is  never more than one-third of your monthly income.

Keep your finances clean

Twice in my life I’ve had to learn hard financial lessons related to real estate.

As a young man, I desperately wanted to get Jennifer and my two little girls out of an apartment and into a real home. Why? It was probably just pride. I bought about the only home I could qualify for at the time. It cost just $88,000 in Everett, WA. The chimney was falling down, the roof needed replacing, the siding was falling off, and the doors hung crooked. The home was built around 1916.

In fact, the roof was in such bad shape that the bank would not give us a loan unless the roof was replaced. We fixed up the little home. However, after my Dad fired my older brother and me from his company, I was left with a mortgage, no job, and no friends. Being raised “Closed” Plymouth Brethren and shunned after I left that community didn’t help the job prospects.

Thankfully, Analog Devices hired me in Santa Clara, CA. This meant we had to move. Jen and I decided to hold onto our home in Everett and rent it out. The rental was a financial problem and a big headache. Don’t be a part-time landlord while living in another state.  After a few financially painful years, we learned our lesson and sold the home. It is doubtful we ever made back the money invested and certainly not the time.

Unfortunately, I didn’t learn my lesson very well and I did not sell my next Washington home when we again moved to California around 2004. This time we lost an estimated $150K over the years in renters who didn’t pay, an empty house, and ever higher property taxes.

Debt guru Dave Ramsey’s material is recommended.