First Person: We’re Not Part of the ‘Nation of Deadbeats’

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In a recent speech regarding the budget ceiling, President Obama said "we are not a nation of deadbeats" but a recent article on MSN Money entitled, "US might be a 'nation of dead beats'" might beg to differ, quoting, "Far from paying our bills, the current generation of Americans -- or some of them -- have set records for default which probably have no parallel in the history of the human race. During the last five years, U.S. individuals have walked away from a staggering $585 billion in mortgages, credit card debts and other personal loans. That works out at about $6,000 per household."

Here is how our family avoids becoming a part of this great "nation of deadbeats".

Becoming Debt Free

According to creditloan.com, the average American's interest payments on debt accumulate to $600,000 over the course of a lifetime. My wife and I set about to become debt free early in life and hope to stay that way. By doing so, rather than defaulting on our bills and calling it a day, we paid off our bills as quickly as possible. Student loans were paid off in less than three years, we made extra payments upon our home until we downsized, and with the remaining equity we were able to buy a home outright. We have always purchased vehicles outright. And in the process of doing these things, we've avoided not only the statistic of $6,000 per household in debt that has been walked away from in the past five years, but we've also cut heavily into that $600,000 in lifetime interest payment amount on debt.

A Bill Pay System

We have never paid a late fee on a bill…that's right, never. In fact, we've only been late once with a rent check because it was lost in the mail. Other than that, we've always made our payment obligations on time and in full. This isn't because we're wealthy or came from families with money, it's because we use a bill pay system that works.

Our system is simple. It doesn't involve bank transfers or electronic payments as we still rely on writing checks and mailing them. I know, how quaint, right? But it works for us. We pay our bills on a first-in-first-out, pay-'em-as-we-get-'em strategy. This allows us to avoid forgetting about or losing bills that could begin a snowball process of late fees and interest payments.

Covering our Assets

But it's not just about how we pay our bills that keeps us from falling into the deadbeat crowd, since without money, it wouldn't matter what our bill pay system was. We also keep an emergency fund stocked and ready to go should something happen to our regular income.

We typically keep this fund at right around $5,000, and this way, even when unexpected bills arrive or bills are higher than we expected (like our property taxes or vehicle repairs), we are able to cover them without going into debt. Therefore, we aren't caught with our financial pants down, wondering how or even if we will be able to pay our debt obligations, and definitely not walking away from them.

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Disclaimer:

The author is not a licensed financial professional. The information provided in this article is for informational purposes only and does not constitute legal or financial advice. Any action taken by the reader due to the information provided in this article is solely at the reader's discretion.

Sources:

Arends, Brett. MSN Money. "US might be a 'nation of deadbeats'". January 15, 2013. http://money.msn.com/debt-management/article.aspx?post=36884800-f4f2-4e84-9dff-f32e969c5d57. January 19, 2013.

CreditLoan.com. A Lifetime of Debt: The Financial Journey of the Average American. 2009. http://www.creditloan.com/infographics/a-lifetime-of-debt-the-financial-journey-of-the-average-american/. July 2, 2012.

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