To those who climbed out of debt 100%, how did your life change?

Gary, Mike,

I agree with both of you that properly used credit can be a effective tool. They way real estate is priced now in most of the country, its extremely difficult if not impossible to become a homeowner without credit. But beyond a home or land, I just cant think of much that is worth getting strapped down by debt for, even a little debt. If we both lost our jobs and ran out of savings would I use of CC to buy food? Of course...but I am also doing as much as I can today to make sure that difficult day doesnt come.

Mike, what do you mean by land poor? Huge mortgage and no cash flow? And what risks are you referring to in debt free lifestyle?

Thanks

Brian

Brian,
You will sleep a whole lot different when you get debt free. Email me six months after you get everything paid off, and let me know how much better you sleep at night.
Clove

I have to say that although we are not 100 percent debt free, we paid off cc's and a car in October and it has greatly improved our lives. We are currently working at paying everything else off. We are less stressed and are in a better position now to make better choices. A little bit goes a long way. We are very excited about our future!
You can do it, just take it one day at a time!

when i read about this dave ramsey, i see ppl who get out of debt in a few years, paying off more than they make?? how does this work? have many of you debt freers done the teaching of dave ramsey? or done it your own way?

we don't have a lot, but a family friend (older gentleman) recently came to see us, he is very well off, and mentioned how well we do without making alot. we only have our monthlies--heat, elec., water, etc. and soon a mortage. that will be paid off in half the time required. we have a plan, which helps alot. altho we dont[ have huge debt, its not always the easy road, but if we had more debt, i'd never have been able to be SAHM.

Peace of mind and worry free sleep result from a debt free life. There's no better way to live in my opinion. You can't really tell someone how great it is - they have to experience it for themselves.

Dave Ramsey urges folks to get serious, get a plan, reduce expenses, and raise extra money toward paying off the debt by getting additional work, and selling things for extra money to put toward the debt. Perhaps that's how you got that impression.

One of the main reasons I patronage this site....folks like all of you that think like my wife and I. Those of us with the iniatiative to get debt free (many have the desire, few have the motivation) are few and far between. I thought the Great Recession would change some people and perhaps it has some, but I have heard others talking about getting a loan to buy a harley or buying a boat AS SOON AS they get back to work. Unbelievable!!!

My wife and I know of only one other couple who are debt free like ourselves. Except for present company, of course!!!!lol.

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Hillbilly and Proud of It!

Land poor refers to having land but no cash or liquid assets and not having the wherewithal to work the land.

An example of a potential risk in a debt lifestyle compared to the use of credit is the need to cover major expenses (for example medical) that are unanticipated.

If you had to borrow against your land you have the risk of paying whatever the interest rate is at the time you are forced to take the loan. The alternative is being forced to sell your land at a time when prices are low.

You might turn to charity. I have no problem with charity at all. A person gives as they choose, either directly or through an organization. I do have an issue with "charities" funded by government. That is not charity.

Some folks are comfortable turning to the government to pay their medical expenses. But if you have any amount of property you may be forced to sell it or turn it over to the government. Then there is the ethical question. By relying on government largess you are basically taking from someone else to pay for your needs and wants - in that taxes are not voluntary.

Let's consider a tractor as an example. I normally pay cash for things other than land. That's a personal preference. When I get a tractor to replace our old 8n I may buy used or I may buy new. If I buy new I see that many companies are offering 3-5 years at zero percent interest. Instead of paying cash I may choose to put the money into a CD (or series of CDs) so that I am getting interest on the money.

We have our mortgages (home and farm) locked in at rates ranging from 5% to 6.25%. The payments are well within our means and we have enough set aside so that we could go for roughly 4 years without an income.

Consider if we used the money we have set aside to pay down the mortgages. If something happened, how long could we go without an income?

We are at the point where we will probably pay off the mortgage on our first 21 acres (with the cabin and well) as we only owe about $12k on it.

Now this isn't to say that we haven't paid down any of the mortgages early. I've made sure that we have re-amortization clauses in each of our mortgages. This means that if we make a lump sum payment of (for example) $10,000, they re-calculate the remaining monthly payments based on the new principle amount rather than simply shortening the term.

Credit = leverage. Great when it works for you, painful when it works against you.

We never could have purchased the 4 parcels (55.5 acres) that comprise our farm without credit/debt. Did we take a risk in doing this... absolutely, a carefully calculated one.

We have 2 homesites prepared (septic, well, electric, sites leveled) on the parcel with the front lake. At some point we will probably borrow for building. Those homesites are intended as vacation (or longer term if we choose) rentals that leverage other aspects of our property. Is there a risk to borrowing? Absolutely! Could we build the rentals in a reasonable timeframe without borrowing....almost certainly not.

Final recap.... we don't borrow for "consumer" items. We do borrow for business or investment purposes but fairly conservatively.

Every persons circumstances are unique.

Just my 2 cents.

Mike

We aren't totally debt free- mortgage still.

What not having debt, and having an emergency fund and a generous retirement fund, gives us is freedom. Freedom to know if I or DH can't take my job or his job (Army) anymore we can quit that job (DH has to give a lot longer notice) and not have to immediately find another one that pays at least as much as the old one. Freedom from worry about retirement or the other expected costs (kids). Freedom to pick up and move wherever the Army sends us even if I can't get a job. To have this summer off if I want.

Every day I go to work it is by my choice not my necessity (BTW I stopped doing so last spring but may start another job this spring). There is ONE drawback to this freedom: when you ARE working it may be easier (but not nicer) to know there is no choice so get up and shut up and suck up. I'd still be working if we had the usual two car payments, mortgage as big as 1/3 our total pay, credit card payments on stuff we bought five years ago....

BTW we did not climb out of debt (except college loans for me and a car loan once), we avoided ever going in to it. Army scholarships/pay during school, always paying off credit cards monthly so they were never really credit cards, knowing we would want one of us home with the kids and therefore living off one income even when we had two incomes (and stashing the extra away for later), and following the zen/HT creed of happiness is not wanting too much, unhappiness is having almost everything you want.

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US Army veteran, military retiree spouse, and military; civilian; British NHS; and VA doctor.

I just never really had any debt. When I bought my first house, you could assume a loan for a $50 fee(much, much cheaper than closing costs) so I went that route. The only real debt I had was a partnership with a guy to buy a house, fix it up, and resell it. He arranged all the financing, but my name was on the papers too. Then, when I moved here, I bought this house, fixed it up real nice, all with cash. I believe I had paid $11,500 for the house, then about $15,000 to fix it up. Then, once I was all done, borrowed $25,000(10 year mortgage) to repay myself. I put the money in the bank and used it as a cushion while I rebuilt my cash reserves. In 3 years or so, I paid back the bank. That little exercise cost me close to ten thousand dollars, with all the closing costs, loan origination fees, etc, and interest at 10%. It had cost me 40% of the amount I borrowed for only 3 years!! Absolutely ridiculous. So, if I ever needed anything after that, i made sure I could handle the cost without needing the cash back.

Mike,
I agree with borrowing for business or investment...that is how we started our businesses and 99% of all other businesses get started with some form of credit.

When you are debt free in your personal life, it is much easier to take risks on the business side of things. If anything, I believe it causes you to even more thorough in your analysis of the risk before venturing into it. I know it has for me and because of that, I tend to look at more opportunities when they come my way. More so, than if I had a lot of consumer debt to deal with.

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Hillbilly and Proud of It!

DH and I hope to pay off everything in 6 months. *sigh* it seems like we keep getting further and further in debt though. With the new year all our extras expenses should be caught up I hope to hit it hard the first few months. We have paid off a few things but fall/holidays gets us every year.
After that we'll just have our mortage and my school (paying as I go) and we need to decide what we're going after next . . . paying down house, saving down payment for new house . . . ect. I can't wait.

.............Live and learn is one motto ; too soon old , too late , smart ! I traded in a diesel pickup that was giving me trouble on a new 2008 ranger 4 cylinder too commute back and forth to work but I was madd at the diesel , now I don't have a tow vehicle to pull my trailer ! So , in June I found a used Chevy 3500 dually with 46k miles with an 8.1 gas engine , and got a very good deal . Now , I've got two vehicle payments which I can make with no problem , and in two years I'll have the Chevy paid off . It's a gamble I suppose cause I'm 63 and in relatively good health for my age , lol . But , I don't think anyone should allow their age too prevent them for making plans for several years down the road . IF a person doesn't have a few UNfulfilled dreams too work towards life can get kind of Mundane and seem to have no purpose . I plan on doing lots of traveling once I get my vehicles paid off so I'm all booked UP with Plans until I'm atleast 75 or so . , fordy

The only debt the DW and I have is our mortgage. I'm retired military so I guess as long as the "gubmint" stands as is I am good for a little income. I still work and drive the junkiest little import you ever saw to work. It's paid for and been totaled out by a rear ender. I chained it to a stout tree and yanked the trunk and frame out as best I could and screwed the trunk lid down and used expanding foam to seal it. The next year, a big buck runs into the side of the car and I pulled out what I could with the 4 wheeler so the door would shut and I still drive it. I have no one to impress at 50 yrs old I guess. The young kids at work ask me why I drive such a junker and I can only respond with " It does the same thing as all vehicles are suppose to do, go from point A to point B. Now how much comfort (emotional and physical) do you need getting there? I might be getting through to them a little. Hehe. Still saving for my dreams. And a brand new $30,000 4x4 truck is not at the top of the list.

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We have now officially entered the twilight zone.

I have been thinking about this thread/topic for the past few days.

In today's mail, we recieved the year end balance for our mortgage. You know the one that reads "Important Tax Document. DO NOT DESTROY."

I got to reading that, and while I am not new at understanding compound interest, it is amazing how much we have paid in interest this year alone. The interest we pay in five years time could buy a brand new Chevy. It might be a cheap Chevy, but we could pay cash for it.

I know several people that have inherited homes. I know two people that have inherited several homes, and have never made a house payment in their entire lives. No wonder they drive fancy vehicles and take super nice vacations.

If I could just figure out how to pay off this mortgage....anyone got a good business idea or want to send me some money?

Clove

Someone related it to freedom, nothing could befurthur from the truth unless you're debt free because you sold everything. Freedom comes from fewer possessions, not from paying off possessions.

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"Education is the ability to listen to almost anything without losing your temper or your self confidence"
Robert Frost

debt free is freedom

I will let you know how it feels when I get there



But I have paid of alot of those "little killer debts" and am working on the big ones now and not going into any more debt. I am saving money in the bank also.

So I am heading in the right direction.

Debt free you live good----tons of debt, you live hard! Ugh

.............There is always a trade off when it comes too the Rationale for the cost of borrowed money vs driving a Very used vehicle that will eventually get to a point of yearly repairs ! I purchased a new 2008 ranger and a 6\60k extended warranty because I need something I can depend upon too get me to work without breaking down and I need 20+ mpg , so the ranger was an acceptable solution . I financed $12k and took out add'tl ins. available from C. Union that will make my payments should I get sick and am not able to work . Plus , I am not a mechanic and don't want to stand over the engine (in 20 degree weather) trying to diagnose a NO Start condition . These newer vehicles are much more dependable than earlier ones , But much more complex so the Shade tree stuff doesn't comport with successful solutions too keep a modern vehicle running so I can get to work . , fordy

Watched families fall apart during layoffs some years back. In debt, way over their heads, with no money in the bank. Basically they had one month or less of cash / credit available once the paychecks stopped. Talk about throwing a match in a powder keg.

Couldn't live like that. Quite honestly, there was no magic moment, no music or fireworks the day I paid off the mortgage...but I did sleep like a baby that night. Company I work for went through layoffs again just this month. Didn't know if I would survive the cut or not. Not having to worry about losing the house was just that much less stress.

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CJ

Fordy,

Being debt free doesn't mean you have to drive an old beater. Check out Dave Ramsey's site - he has a link specifically on that subject.

The objective is to drive the older cars while you sock away money for a newer one, and then pay cash so you never have a car payment.

Will that additional insurance you purchased make the car payments if you lose your job? Probably not. If you defaulted, your car could be repossesed and you could still be liable for a deficiancy judgement on the remaining debt. But if you had socked that "car payment" into savings until you have $12K you are at no risk of losing your investment if you lose that job.

Not criticizing you, just pointing out that there is are alternatives to debt such as car payments.

As for yearly repairs, I have an older vehicle and in the last year had to pay about $500 for repairs and maintenance (oil changes, tires) when some original hoses cracked and the water pump needed replaced. That's a whole lot better that $350 x 12 monthly car payments. I anticipate these kinds of costs and have ample savings to cover "emergencies".

I would not have such a great cushion if I had a lot of different debt payments to cover every month.