Is a debt-free life possible?

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onlinefreak
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Is a debt-free life possible?

Postby onlinefreak » Mon Nov 08, 2010 3:18 am

So far, I have been debt free thanks to the efforts of my mother who taught me how to steer clear of it. But I wonder if it is possible to remain debt free in future considering the rising cost of education, the difficulties of purchasing a house, and so on. What do you think about it?

Tightwad
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Re: Is a debt-free life possible?

Postby Tightwad » Mon Nov 08, 2010 9:01 am

I believe it is. It's not easy & it takes alot of self discipline. But when you deposit your paycheck in the bank as mostly profit (minus monthly expenses :) ), it's a wonderful feeling.

I believe that in addition to living below your means that it is vital that you plan for things such as retirement, education, emergency fund, etc and many in our society today can't see past the end of their nose so planning goes out the window.

stannius
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Re: Is a debt-free life possible?

Postby stannius » Mon Nov 08, 2010 11:07 am

It is definitely possible. It may or may not be advisable. Debt is like a power tool - it costs more than the alternative (in the analogy, a manual tool) and dangerous (if you aren't really careful and even respectful), but it can also enable you to finish a project much faster.

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Re: Is a debt-free life possible?

Postby DoingHomework » Mon Nov 08, 2010 12:47 pm

Living debt free is certain possible. That's what people used to do until the last few decades.

Debt is a tool that can open up opportunities but can also be a trap. Debt incurred for things that lead to positive future cash flows can be good. Student loan debt for "good" degrees allows one to increase future earnings. Debt on a house allows equity to be built instead of paying rent.

Debt for things that provide no future cash flow is bad. Incurring to buy a car is usually a poor financial choice. Debt for groceries and normal living expenses is bad.

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Re: Is a debt-free life possible?

Postby peachy » Mon Nov 08, 2010 6:04 pm

It's possible, but why do it?
I have a minimal debt-free life, and it suits me just fine. I'm sure if you want to try to live your life that way, it's feasible, but it doesn't make sense for my life (lifestyle).

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Re: Is a debt-free life possible?

Postby fantasma » Tue Nov 09, 2010 6:20 am

Its possible but not a good idea, sometimes you just need a credit card not for the cash but for convenience. Its alot easier to rent a car with a credit card than a debit card w/a visa logo. Maybe in another country but not the USA imho. Keeping a certain amount of debit is "good" for your credit.
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bel
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Re: Is a debt-free life possible?

Postby bel » Fri Nov 12, 2010 6:21 am

We are debt free with a paid off house. I don't really see why it would be impossible for us to continue to be debt free, unless you consider using a CC as not debt free. And I don't see anything stupid about us not getting any debt ever again.

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Re: Is a debt-free life possible?

Postby Tightwad » Fri Nov 12, 2010 7:26 am

Way to go Bel. Life is so much easier when you don't have debt payments.

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Re: Is a debt-free life possible?

Postby stannius » Fri Nov 12, 2010 2:56 pm

bel wrote:We are debt free with a paid off house. I don't really see why it would be impossible for us to continue to be debt free, unless you consider using a CC as not debt free. And I don't see anything stupid about us not getting any debt ever again.


Did you ever have a mortgage on that house? That is the question that is being asked here.

I too am debt free, but I did take out a reasonable amount of student loans (long since paid off). I also had a vehicle loan, which I could have lived without. Some day I will buy a house and will most likely get it with the help of a mortgage.

I do agree that there is some point in one's life where they should probably be debt free and stay that way.

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Re: Is a debt-free life possible?

Postby onlinefreak » Fri Nov 19, 2010 2:50 am

DoingHomework wrote:Living debt free is certain possible. That's what people used to do until the last few decades.

Debt is a tool that can open up opportunities but can also be a trap. Debt incurred for things that lead to positive future cash flows can be good. Student loan debt for "good" degrees allows one to increase future earnings. Debt on a house allows equity to be built instead of paying rent.

Debt for things that provide no future cash flow is bad. Incurring to buy a car is usually a poor financial choice. Debt for groceries and normal living expenses is bad.


I simply enjoyed reading your post. I had never thought of debt as that way. I grew up in a family where most of the people had debts; so I guess I have a horror of it. But I am inclined to agree with you when you say that it can open up opportunities and that debt incurred for things leading to positive future cash flows can be good.

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Re: Is a debt-free life possible?

Postby N2Deep » Fri Dec 17, 2010 8:11 pm

144mph wrote:... or simply realize that the owning a home dream isn't exactly as fantabulous as people would be led to believe, then you've got some very reasonable options for yourself.



Now I will admit Im probably not the smartest when it comes to money... but this makes absolutely no sense to me. Why in the world would you want to rent all your life and throw your money away. You have absolutely nothing to show for it. It's like a bottomless pit that keeps taking. At least after 25 years my home will be paid for and I will no longer have to pay for housing. At least when Im in my 60's I wont have to worry about paying rent. My place will be paid for.

What is not fantabulous about that?
I can not dwell over that to which I have no control...

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Re: Is a debt-free life possible?

Postby JonasAberg » Wed Jan 19, 2011 7:14 am

I’ve actually done some calculations on this.
However, to do so I had to look at the entire financial picture over the course of my lifetime. The ultimate goal for me was to have a secure retirement when I get to that age. When my grandfather died at the age of 95 I told everyone that I’d “beat” him so I’ve planned to live until I’m 96.

My conclusion was that while it is possible to live a life debt free, even with buying an apartment or a house, it would be advantageous to take out a small loan and pay it back over a maximum of ten years. The numbers indicate that if I do that when it comes time for me to buy a home I will be in a much better position financially when I retire.

I’ve also done some medium term calculations and come to the conclusion that at this point in my life, it would actually be worse for me to buy a place than to rent as I’d be paying more in interest over the entire term of the loan instead of sticking to my previously mentioned plan.

Edit to add: That's the big plan. I don't mind credit card debt in the sense that I pay it off in full every month so I don't have to pay interest.
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Re: Is a debt-free life possible?

Postby suzwantstobefree » Wed Jan 26, 2011 4:47 am

I own a home and have a mortgage on it right now. However, I am not sure if homeownership is better than renting, especially depending on your personal situation. I am accelerating my mortgage payments and am "ahead" of my amortization schedule. However, once I pay off my home it will still cost me in terms of real estate taxes and insurance. These will cost me approx. $400 per month now and those costs wil continue to rise. In addition to that, I am not a handy person at all and I have to get someone to take care of maintenance and repairs. Now it isn't that big of a deal since my home is new, but later on it will be more expensive.

I look at my home not as an investment but as a home that I live in and personalize and have made it a home. It works for me, but it also limits me. For example, if I was offered a job right now in another area I would have to sell my house and wrap up everyting here. Right now I would probably lose on the deal - if I was in an apartment I could probably leave with no penalties (or perhaps I would have to buy out some part of my lease worse case scenario).

But to answer your question - I think it is possible but sometimes you need debt to build your long term wealth. For example, I had students loans when I went to college in my 20's. Now that I am in my 40's I have a career that pays really well (over $100K per year). If I waited until I could pay cash for my education it would have meant that I would not have been able to make the amount of money I do at this point in my life. I would have given up all those years of earning potential.

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Re: Is a debt-free life possible?

Postby shorty j » Fri Jan 28, 2011 11:26 am

N2Deep wrote:Now I will admit Im probably not the smartest when it comes to money... but this makes absolutely no sense to me. Why in the world would you want to rent all your life and throw your money away. You have absolutely nothing to show for it. It's like a bottomless pit that keeps taking. At least after 25 years my home will be paid for and I will no longer have to pay for housing. At least when Im in my 60's I wont have to worry about paying rent. My place will be paid for.

What is not fantabulous about that?


That's great for you, but that doesn't make it the ideal solution for everyone, especially those of us who live in areas where cost of living is high.

The "renting is throwing your money away!" argument is just... well, silly, for a lot of people, and that pervasive "you must own a home to be a grown-up" attitude is a large part of why many of my friends and cohorts have found themselves stuck after buying homes they can't afford or don't want to live in, just so they could own something.


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