Avoid having a car loan and a house loan at the same time

Another suggestion I have for young Christians seeking to have low-stress finances throughout their lives is that they make a very serious attempt to get through life with only one debt commitment at a time. This, like some of my other suggestions, may seem difficult to do, but is often possible if you plan ahead.  Before you take out a loan for anything you should consider whether or not you will be able to pay that loan off before you need to borrow more money for something else. If you are not able to do this, you might not be financially ready to go into debt just yet.

This means, for instance, that when you borrow money to buy a house you should make sure ahead of time that your current salary will allow you to save up enough to purchase your next vehicle with cash while simultaneously making all your loan payments. For instance, if you expect to need $6,000 to buy a new vehicle in three years, then you should have a plan in place to save an average of $2,000 a year for that purpose. Saving up money ahead of time for this expenditure will allow you to constantly keep reducing your debt, rather than having to go backwards. This is a good thing! but this will probably not be possible if you do not plan ahead.

The problem, of course, with plans like the one above, is that your car could break down at any time. You may have to replace it a year and a half before you anticipate, which will still leave you $3,000 in the hole. However, if you have a safety fund set aside as I mentioned in my previous article, then this is an acceptable risk. You can always “loan” yourself the money out of your safety fund and pay it back over the next year and a half. That’s what the safety fund is there for. It doesn’t cost you any interest.

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