Subscriber Swap Saturday: No Debt Plan
Today Mr. ToughMoneyLove wants to introduce my readers to another personal finance blog that I like to read, No Debt Plan.
No Debt Plan is about getting and staying out of debt with a plan. Kevin, the author, is passionate about budgeting, saving for the future, and using goals to reach financial freedom. You can subscribe to his blog by RSS or email.
This is the second Subscriber Swap Saturday that Kevin has run. The basic idea is to get the subscribers of one blog to subscribe to the other blog for at least a week, just to try it out. After a week if you don’t find that blogger’s content enticing, drop it. The hope is that over time you will find several writers that you weren’t familiar with that provide meaningful content to you. (You can read more about Subscriber Swap Saturday at his blog.)
I had a chance to interview Kevin to briefly talk about himself and his blog:
Mr. ToughMoneyLove: From the title of your blog, you are obviously not a fan of debt. Some folks consider mortgage debt and student loans as “good debt” that is not really a problem. Do you agree?
Kevin (No Debt Plan): That’s quite the loaded question. Each situation is going to be unique, and I could honestly answer “Yes, those are good debts” and “No, those are terrible debts.”
Generally when I get these type of questions I respond with my own questions: How large of a percent of your income is the mortgage? Are you at or under 30% of income for the mortgage? Are you guaranteed a high paying job when you graduate? Are there less expensive education options? Etc.
I think living without debt is a great goal. Period. Yet we live in a house with a mortgage, and I’m okay with it. Our budget can easily withstand our mortgage payment and we have an emergency fund. I also have students loans in deferral because I’m still in my MBA program — but we’ve got the money set aside already to pay for them. In our instance, I think our debt is “okay”. Would we love to be 100% debt free? Yes. But we’d have to wait 20 years or so to pay cash for a house, so we made the decision to get a mortgage.
The debt I am against is the “dumb” debt. Credit cards. College loans that are above six figures regardless of what you possibly could make upon graduation. Mortgages that are 50% of the household income. All of these are very, very dumb debts.
Mr. ToughMoneyLove: I see that you occasionally talk about your wife on your blog. How closely do you and your wife work together on your budgeting? Do you have separate or combined finances?
Kevin (No Debt Plan): Let me start by saying my wife is amazing. Before we were even engaged I got her onto an Excel spreadsheet budget. Any woman that will let her boyfriend do something like that should be commended!
Our budget process is teamwork. We definitely work together. I don’t hold all the cards and tell her what to do. We sit down once per week to discuss things — how much did we spend on groceries this week, this is how much gas money we have left for the month — things of that nature.
We have combined finances. I think that’s the way it should be if you are married. I mean you did solemnly swear to love each other and to share each other until the day you die, right? Keeping separate finances opens up too many relational holes for me to comfortable — it’s too easy for one person to have side money (or debt for that matter) elsewhere. When your finances are shared it’s like everything is on the table. There is no hiding. You are financially naked. It can lead to some difficult questions if you were trying to hide something from your spouse.
I will say that there is a piece of separate finances that we have integrated into our financial life that has provided a great solution: we each get spending money based on the total income we bring in. At the beginning of the month when I redo our budget categories we each are allotted 2% of our combined total income for the previous month. That money stays in the same mutual checking account we always use, but we can save or spend it as we see fit. If I want to purchase computer parts, I can. If she wants to buy dog toys, she can. Neither of us can point the finger and say “You’re wasting money!” because it is our money to waste.
Mr. ToughMoneyLove: You are presently in an MBA program. Do you intend to become a finance professional and will you continue to blog about finance when you finish the program?
Kevin (No Debt Plan): I am indeed finishing up my MBA program. I will graduate in May or August of 2009. As far as being a financial professional, it depends. My dream job is being a personal finance blogger full time that can also work with clients on the side. I am hesitant to join a “Financial Advisor” program that many of the large financial institutions have because they are really sales programs designed to earn the highest revenue for the firm. That makes sense, but I don’t believe in it financially. So I’m hoping this blogging thing works out!
Mr. ToughMoneyLove: What in your opinion is the most common mistake that married couples make in trying to operate within a budget?
Kevin (No Debt Plan): You’ve hit on a few with your questions. Not setting up a budget is a huge mistake, as is having separate finances. Generally I would say spending more than they earn is a huge problem for many people — married or single.
For young newlyweds in particular I think there is a draw to unaffordable home ownership.
Mr. ToughMoneyLove: Have you learned anything in your MBA studies that has changed the way that you think about personal finance?
Kevin (No Debt Plan): I took a really interesting behavioral finance course that showed that managers often know the correct way to analyze a situation (because of education) yet they still take mental shortcuts that costs firms money in the long run.
I think the same can be said for personal finance. A lot of personal finance is habit, although education is certainly a key part. The “work” part of finance is what keeps people from sitting down and creating a budget.
Besides, being honest with ourselves about our spending is painful. And people want to avoid that as much as possible.