In writing this column, one of the things that I see frequently in the comment trail is an argument about what counts as being debt free. Some people argue that debt free means freedom from consumer debt such as credit cards and car loans. Keeping a mortgage, whether for a personal home or a rental property is okay. Others argue that debt free means that you have absolutely no debt, including mortgages. Is one viewpoint more valid than the other?
Part of what feeds this argument is that even the “experts” have differing definitions of being debt free. Dave Ramsey will let people call into his show and scream about being debt free even if they still have a mortgage. Yes, he wants you to get that paid off, too, but he considers you debt free once your consumer debt is gone. Suze Orman also generally allows callers to consider themselves debt free as long as the only debt is a mortgage. The idea is that a mortgage is both good debt (debt on a generally appreciating asset) and so large that many people will take most of their working lives to get rid of it. These experts seem to look at it more like an unavoidable monthly expense like the power bill rather than debt. After all, if you rent you’ll have to pay something monthly so why not just treat the mortgage like rent? Others argue that debt is debt and you cannot truly be debt free until you owe nothing. They make no distinction between “good” debt and “bad” debt. Some people go even further and argue that using credit cards, even if you pay them off in full each month, means that you have debt because you are technically borrowing money.
I can see both sides of the argument. Personally, I don’t owe anything to anyone. I have no consumer debt, no mortgage, no secured loans and no student loans. I am truly debt free by any definition of the phrase. I believe that being completely debt free is a great goal and one that people should shoot for. It just makes life so much easier. However, I don’t get upset when someone who still has a mortgage or uses credit cards but pays them off each month declares themselves debt free. Consumer debt is so destructive that to be free of that type of debt is already to live a markedly better life than someone who is mired in it. If
someone can make it to that point, I say, “Hooray!”
I can also see the point that to live anywhere you have to pay something each month unless and until you can own a home free and clear forever. If you choose to rent your whole life, you’ll always have a monthly payment, even if you’re not technically “in debt.” Why treat someone with a mortgage differently than the lifetime renter? If the person with the mortgage can comfortably afford the payment while achieving other savings goals, is working on paying off the mortgage and plans to own that home free and clear at some point, I have no problem with them screaming about being debt free.
When I had my small mortgage for five years, I still considered myself debt free because it was the only thing I owed and it was a lot less than I had (or would have still) been paying in rent. I was aggressively paying it off and I could easily afford all my other savings goals, so it wasn’t hurting me. Now that it’s gone I can definitely save a lot more, but the time I had it didn’t derail me any more than paying rent did.
I think insisting that someone be rid of their mortgage before declaring themselves debt free is off-putting to many. Mortgages can be so large and intimidating to pay off early that many people just figure they’ll never get there. They may adopt the mindset that, since they can never be truly debt free, it’s not worth the effort to shed other debt. However, if they can get excited about being debt free, even if they still have the mortgage, it can motivate them to get rid of all the bad debt. Maybe then, buoyed by their success, they’ll attack that mortgage.
What do you think? Do you think you’re only debt free once your mortgage is gone, or do you consider yourself debt free if your only debt is a mortgage? Does “borrowing” money on a credit card that you pay off every month count as debt? Does it upset you when people declare themselves to be debt free yet still carry a mortgage, or do you cheer them on? Why do you feel this way?