A lot of talk about the economy lately surrounds the "mortgage crisis," and I guess I didn't understand what the problem was. I mean, when I bought my house in 2001, I had a great fixed rate just under 6%. Even when I refinanced in 2006 with a no-cost loan, it was just over 7% (my thinking was that I'd refinance when I move, and the difference between the interest and the closing costs works in my favor for about four or five years). I wouldn't say my payment is particularly low, but considering what similar houses around my neighborhood are going for, I've got a shit load of equity if I could actually sell it.
So I'm watching ABCnews, and they profile a couple that bought their house for $174,000, bigger than mine, with an introductory rate of 9%. 9%! It's an adjustable rate mortgage, and they were now paying 14%! I had no idea that kind of thing went on. I mean, the credit cards I carry a balance on (business cards) are less than that. With their combined income around $80k/year, they were paying over $2k a month. That's insane.
The story made me wonder then how exactly we got to this point. Is it a lack of education? Poor credit ratings? Predatory lending? Gotta have a new McMansion?
When I think back to growing up, it occurs to me that I never had any formal education when it came to borrowing or saving. Those seem like two pretty fundamental life skills to be aware of. My first house buy was made possible from the sale of popworld.com, and after several cars I didn't find the mortgage process that different from a car loan (aside from the escrow account for taxes).
On the other hand, I wasn't that responsible with credit cards, starting about two years after college. I never got behind or in any kind of financial peril, but I was certainly pissing away money on interest. The popworld.com sale kind of bailed me out on that too. Later I'd rack up and pay off $10k balances during lay-offs and my self-employment efforts.
I always knew that saving money was important, but I never really did much of it. I have the equity in my house and a decent chunk invested, but getting to that millionaire status by 55 isn't going to be easy.
At least being alone for a couple of years gave me the chance to really stop and think about what the hell I was doing with money. I feel like I'm headed in the right direction, provided I stay with this job for the foreseeable future. I have no personal credit card debt, a low car payment and a mortgage I can afford. Even the business is starting to get under control, with debt under five figures and total interest expense last year around $500 (it used to be three times that).
Again, I wish that you learned about this stuff in school.