It is a shame that the education system in the United States of America does not prepare its young people for understanding finances. Finances are something that used to be taught at home. Your parents would teach you what to do or pass down something to you to learn to manage. Finances were taught in the home and in general, our culture has interesting reactions to money. Talking about money makes people uncomfortable. Many people just want to ignore money and its complexities.
It is a rather ignorant way for us to face the world and one that I feel is cultivated because we do not teach money as part of mathmatics. Interest rates for example. When the federal government came down on credit card companies during the recession in the early 2000’s part of what they did was to make the money owed clear.
Now, if you look at your credit card receipt you will see a section that shows if you only pay the minimum payment, not only will it take until the sun cools for you to pay off a debt of a few thousand dollars, but you will pay for that money 2-4 times over again or maybe even more. This does not stop people from going into debt but it does give some clarity into what they are stepping into. Not everyone thinks of the future but for some, a simple set of numbers and figures can help them make better decisions or take on debt at need instead of just because debt exists.
I remember when I used to think I could afford a corvette on a waitress salary with some savings. Now, when I can afford a corvette I have no wish for one. It comes from understanding financial responsibility more, as well as tastes changing. I can do a lot of travel for the price of a corvette and that interests me more.
I read financial news and discussion. In this last few months I’ve been a bit more hot and heavy into my finances then normal. I eliminated the last of my credit card debt. I paid off my car. I paid off my school bill. And now we are refinancing this house and looking to buy a second. This place will be converted to a rental property.
Refinancing was to avoid mortgage insurance. It reduced our payment by an enormous amount and now rental rates around here will cover the mortgage and leave enough extra to take care of the HOA fees and the housing costs such as HVAC maintenance. We have also built up a comfortable equity in the home and if we did have to sell it, it’d be worth our time. However, we want to invest in real estate and plan to keep both properties.
Refinancing means understanding interest rates. It also means understanding how loans work, how credit reports work, and all sorts of fun questions about income calculations. I’ve been grooming my credit report for the last year for this move. By grooming I mean I’ve built up my credit, lowered my credit used, and not cancelled anything.
By not cancelling any credit cards (which I want to do because I have empty cards I used for points or refinancing) I improved the aspect of my credit that discusses credit over time and the positive impacts that gives me. It creeps the score up and the worst thing that can happen is they ask me to close some of the credit lines to close on the house. Once they have already approved it, I’m happy to do so.
As it stands, my closing is in two weeks on this house. We wind up with a better rate and I can close down all of my unused credit cards. I get tired of checking them every week for fraud. I have no desire to use some of them but I’ve kept them open until now.