So I turned 30 a few months ago and it seems that the universe is really trying to ensure I understand that I'm an adult now.
Witness the unsolicited phone call I received from my bank a few weeks ago. It was about refinancing my mortgage. Talk about adult things.
If you know anything about me, you know that I know nothing about finances. Check that, I know all about spending my finances. Spending I've got down. Saving I've got to work on. Refinancing mortgages? That's a foreign language.
So naturally, my first step is to call my daddy. (Same thing happens when I hear a funny noise in my car. Or something breaks at my house.)
My dad listened carefully as I explained what the bank guy said.
E: So then he said something about equity...what's that mean? Oh, and...um...amortization? Is that how you say that word?
Dad: Sigh.
After translating the banker speak into English, my dad follows up with this little gem:
Dad: You can refinance for more than what you owe and use your equity to pay off credit card debt if the numbers work out that way.
My eyes widened. What's that? Pay off my credit cards? So far I've treated my credit card debt with the Becky Bloomwood theory from the "Confessions of a Shopaholic" book series: If I don't acknowledge it, it just isn't there. That theory makes for a fun read, perhaps, but not the most sound financial advice.
Well, that was it. I was sold. Sign me up for a refinancing! I was so proud of myself. I was making a mature decision! I was going to refinance my mortgage and pay off my credit cards all at once! Take that, world!
Then I went to work the next day and told some lovely co-workers my plan. One particular co-worker was incredibly supportive:
Incredibly Supportive Co-worker (ISC): I think you're forgetting one thing.
E: No! I have it all figured out!
ISC: You realize that for this to work out to your advantage, you have to actually stop using those credit cards so much after you pay them off, right? Otherwise this is all going to happen again except you won't be able to refinance that time.
E: Um...
ISC: Yeah, that's what I thought. Never going to happen.
So then he asks if I've considered transferring my balances to a lower-interest credit card and paying that off.
E: Wait, so I can essentially use one credit card to pay off another credit card??
Cue the incredulous look from ISC.
My statement resulted in a full-on financial lesson. Complete with white board drawings, bell curves, a+b=c, and all sorts of other things that had me flashing back to high school math class. It went on for a good 30 minutes. Yet another co-worker appeared to counsel me on interest rates and that amortization thing again.
I feel the need to clarify here that I am not dumb. Math has just never been my thing. So I'm pretty sure I stopped listening around minute seven or eight. I mean they were making sense and I greatly appreciated the help but, wow, numbers are so boring. (Huh, come to think of it, the same thing resulted in me getting a C- in AP Calculus in high school.)
So long story short, I decided against refinancing - turns out after all that, I don't have enough home equity to really make it worthwhile - and decided to just start being more responsible with my money.
ISC had one more idea to help me. Each month, I should just give him $100 to hold for me. I'd get it back after one year when the total grew to $1,200. He'd even toss in interest because I'm nice.
E: You mean like a savings account? I already have one of those. I could just set that aside myself.
ISC: Yes, except let's be honest. You would spend it the second you saw some pair of shoes you wanted.
(Full disclosure: He's probably right.)
Then he pulled out the dry erase board marker.
ISC: Do you need me to explain budgeting again?
E: No! I mean, I get it. Thank you so much for helping.
Lesson learned from all of this? I need to marry a financial advisor.
