Doesn't Anyone Here Want to Be Debt Free???

[FrugalFish]

The only debt we have is our mortgage, which is being prepaid at the moment. We are strapping ourselves a little tight right now to make the extra mortgage payments, but in 5 years or so when the mortgage is paid in full, we will have a ridiculous amount of expendable income each month (with 3 fully funded retirement funds already in place)

[FinWhiz]

Oh, wow, have you got connections for a credit card that rebates 20% of purchases?! Heck yeah, I'd put my purchases on a credit card to get $2000 out of every $10000 back! I do it now for 1-3%. Gone are the days when I got 5% back.

If I'm at the store spending $6 for a pack of socks I need, why wouldn't I want to get the 1% (6 cents) back? As certain that you are that you will never get a credit card again I am certain that I can handle my credit card responsibly and that it does not make me overspend. As a matter of fact, I'm probably one of few left who actually will darn a sock.

My policy is to pay credit cards off every month. It works.

Who is this credit card Mafia you speak of?

Have you ever heard of paying cash for a 7 dollar package of socks?

[FinWhiz]

LOL, I wonder how many people here are really in debt? I don't think as many lemmings as you think. Most people who are here are financially responsible.

I would love to read posts from those people...where are they? All I have been seeing so far is how wonderful being in debt and having a high debt score is.

[FinWhiz]

Assuming that you work for a living and are not to the manor born, suppose something happens to you (termination, disability, etc.) that reduces or eliminates your earnings?

I worked as a bill collector for many years, safari, and I wish I had a nickel for debtor who was riding high with the same outlook as yours, only to see their house of cards collapse.

FinWiz is absoultely right,and to all form members, I cannot promote the book American Theocracy enough. The last third of the book about public and private debt is especially sobering.

Why thank you. Another good book is "Maxed Out"..and the DVD of the same name, or anything by Dave Ramsey.
In my line of work I see nothing but tearful debtors who have ruined their lives chasing "credit card perks" and said, "Oh I THOUGHT I could pay it off every month, but such and such happened". it is sad the amount of people who think credit cards or any debt is a necessity.
American Theocracy is an excellent read, by the way.

[FinWhiz]

The only debt we have is our mortgage, which is being prepaid at the moment. We are strapping ourselves a little tight right now to make the extra mortgage payments, but in 5 years or so when the mortgage is paid in full, we will have a ridiculous amount of expendable income each month (with 3 fully funded retirement funds already in place)

That is excellent! There is nothiong better than owing No One.

[Diolla]

I have been debt free for almost a year now (except my mortgage which is less than $27,000) I wasn't going to respond to this post because I can recognize a Ramsey disciple a mile off and have had my fill of them.

Most of the people I counsel didn't get into trouble because they were living high on the hog. Many have low paying jobs and although they could be a little more frugal they are not running up debt because they love making payments but because of life hitting them square in the face. Medical bills when they were uninsured, cars breaking down, sewers backing up, a divorce where they are left with nothing but a big house they can't afford to heat or maintain.

Just for the record there is no such thing as a zero FICO score and there is no credit card mafia. Although there are alot of problems with the FICO score it is not evil just flawed. As the Maxed Out author said it fails to take in one important thing about your ability to pay off a loan, your income.

Credit cards are not evil but they are dangerous in the hands of people trying to get by day to day. When you are on the edge you can't afford to defer payment (which is how alot of people use credit cards) because the money to pay them off won't be there when the bill comes due and you get stuck in the minimum payment trap.

If you want to talk to alot of Dave Ramsey followers then I suggest you try Living Like No One Else - There's hope in your financial life! at Living Like No One Else the owner of the board won't allow you to disagree with Dave. Unfortunately I disagree with him quite regularly and I don't like his vague half truths or the way he takes advantage of people who don't know any better.

Anyway, that's my 0.02.

[MonkeyMama]

You must have me confused with someone else. What house of cards are you talking about and which part of my original post gave you an idea that I am riding high? I don't use credit to buy things, but instead I borrow money at 0% and earn guaranteed 5.0-5.5% APY in a high yield online savings account and CD's without any risk whatsoever. I am also saving 35% of every paycheck and maxing out my 401(k). I use debt to my advantage, and I can build wealth faster by borrowing money. I can pay off 2/3 of my mortgage right now from my savings, but I choose not to. My interest rate is 5.375% and it's fixed for 30 years. I will get a better return by investing my money long term instead of paying extra toward the principal. This strategy also helps to lower my tax bill.

Now I'd like to respond to your point about a possible layoff, disability, etc. By not paying extra toward my mortgage, I am better prepared for that scenario. I can easily live a few years off my short term savings without touching my long term investments. I am in a much better position than a person who has been putting every extra penny to pay off their debts, but doesn't have much savings. If that person loses a job or gets stuck with a huge medical bill, he'll have to rack up new debt, which will have much more unfavorable interest rates, when compared to the rate he is paying on his mortgage.

There are a lot of people who cannot manage their debts responsibly, but that doesn't mean that all debts are evil. If someone cannot control their spending habits, then credit cards are not for them, but for others debt can be a valuable financial instrument, if used properly.

Um well said. I could have written both of Safari's posts, but he said it well.

IT is not given that paying off a mortgage is the best way to go. In our case we are far ahead of the game keeping a small mortgage. Our retirement will be bigger than if we paid off our house more speedily. The house will be paid by age 45 anyway. Perhaps sooner. Not feeling the dire financial straits or anything like that. This is particularly because we are young, have many tax-deferred investment options (529 plans and IRAs & 401ks), mortgage interest rate is VERY low, and we have a lot of equity in a high COL area. I would argue that it would be financially dangerous ground to put all our eggs in one basket (our house). Rents are also very high and rising so we are better off having a mortgage than we would be in most any other situation, ourselves. My spouse doesn't work and we plan to retire early. That would be harder if we paid off the mortgage. We'd have to work harder now to pay it off AND work harder after that to catch up our retirement. MAkes little sense really. We're young and prefer to enjoy life now. (& later too).

Admittedly, for many prepaying the mortgage makes more sense. But for many it doesn't. There are a few around here that have the cash (many times over) to pay off their mortgages but don't. They have healthy retirement and emergency savings though, for sure. Which can feel much more comfortable than a paid off house.

We use cards for convenience and cash rewards (& 0% loans to earn interest). Doesn't mean we are "in debt." The money we borrow sits in the bank, FDIC-insured, to be paid back tomorrow if need be. Not exactly sure where the risk is there. Some people can control themselves when it comes to debt. Hard to believe, huh?

[Joan.of.the.Arch]

I tell you that because of using my credit card I buy a $6 pack of socks for effectively $5.94 and your response is to ask me if I have heard of buying a pack of socks with cash for $7? What? Why pay more? Surely that was a typo.

I don't know why anyone would suspect that I am going to get myself in a jam using my credit card to cover the purchases when I will pay the credit card within four weeks. I do not live paycheck to paycheck and overestimate my future earnings. Paying my credit cad bill does not rely on future earnings. I already have the money for anything I put on the card.

I am not going into credit card debt. I use my card in a way that benefits me. I have more money than I need to pay credit card bills. As an example, I put away 4.9 times as much money in retirement accounts every year as I put in my mortgage per year. Then there is the everyday fluid savings. And then there is the everyday money to live off. It is that last category from which I pay my credit card bill.

I understand some people will get in trouble with credit cards. They don't use them in a way that truly benefits themselves. Hey, I'm like that with candy. The H'ween candy I just brought into the house is something I could become irresponsible with at any moment. But for others it is not problem; they will not indulge irresponsibly. My appetite is for that candy, not for spending with credit card beyond my means.

[Ima saver]

Last year I got over $550 cash back for using my credit card. This year, I have gotten two $100 checks and I just got $549 off of my new car from my GM credit card.
It would not matter if My husband got sick or laid off or a big emergency came up, we have a good six figure amount of money in our local savings.(plus more in mutual funds and IRA's)

[sweeps]

We use cards for convenience and cash rewards (& 0% loans to earn interest). Doesn't mean we are "in debt." The money we borrow sits in the bank, FDIC-insured, to be paid back tomorrow if need be. Not exactly sure where the risk is there. Some people can control themselves when it comes to debt. Hard to believe, huh?

Bravo!

[Snodog]

Have you ever heard of paying cash for a 7 dollar package of socks?

Why would you pay $7.00 cash when you can get them for $6.94? It is financially savy to use credit cards to your advantage.

I pay whatever I can using credit cards. My utilities bills, groceries, gas, and just the other week I went to McDonalds and paid for it with my credit card. Been doing it this way for years, and wont change just because someone like Dave Ramsey says you shouldnt use them. We get $500 cash back a year and this is somehow bad? They also help to build my credit score. I love the credit card companies they have been great to me! Did you know with a 0 credit score your car insurance will be more and you may not be able to get that job that you want.

I dont have a spending problem, i'm not in denial and I dont think I deserve a new car every few years. Our cars are a 1999 and a 2003 and they are paid for. Last year when my 1995 Altima needed replaced I could have afforded $30,000 for a nice new car, but instead I bought a 2003 Hyundai Accent for $5900 that gets 37 mpg. We live very below our means. The only debt we have is a $40,000 house mortgage that I could pay off but dont because I'de sooner keep the money in the stock market. And we currently save 45% of our take home for retirement, on just a $70,000 income. Today we live like no one else so that later we can live like no one else.

All that being said, I do think some people who lack discipline and dont pay them off every month should not use credit cards. But for those who use them responsibly you can have your cake and eat it too!

[InDebtInDC]

I want to die with as much debt as possible while laundering money for my heirs

[Broken Arrow]

I want to die with as much debt as possible while laundering money for my heirs

Hahhaa, ok, that gave me a hearty chuckle.

[LivingAlmostLarge]

I don't know, most people on the board. I am in my 20s and I have too much home equity and live in a HCOLA to make paying off my mortgage smart. I need more liquid assets, more retirement. Because of graduate school we started late on retirement. We've ramped it up and started saving big, but we need to catch up in my mind.

So debt? Sure my mortgage is 30 years and I could finish it by 56, but I should have enough to pay it off by 35. Will I? Heck no, too much home equity will misbalance my portfolio.

For me I have to look at the whole picture. What is the point of having a $600k paid for home and $100k retirement, $10k cash? Stupid. One accident and I'd be remortgaging/refinancing my home.

I'd rather have a $600k home, owe $300k and have $500k cash, $500k retirement.

[InDebtInDC]

I don't know, most people on the board. I am in my 20s and I have too much home equity and live in a HCOLA to make paying off my mortgage smart. I need more liquid assets, more retirement. Because of graduate school we started late on retirement. We've ramped it up and started saving big, but we need to catch up in my mind.

So debt? Sure my mortgage is 30 years and I could finish it by 56, but I should have enough to pay it off by 35. Will I? Heck no, too much home equity will misbalance my portfolio.

For me I have to look at the whole picture. What is the point of having a $600k paid for home and $100k retirement, $10k cash? Stupid. One accident and I'd be remortgaging/refinancing my home.

I'd rather have a $600k home, owe $300k and have $500k cash, $500k retirement.

That begs the question: why is home ownership so important?

Personally I don't really care to own one. Miss payments and you lose your entire home, including equity. Repairs, insurance, taxes, HOA fees, PMI, etc., add up to a very high cost of ownership.

I disagree with anybody who thinks that investing in a first home as a mortgage is a good idea. Now if you owned multiple income-producing rental properties or investment properties then that's a different story.

But there's gotta be better way to invest your money than to pay off your first mortgage.


If I had to own a home, I would do exactly what LivingAlmostAtLarge does. Heck, I would mortgage 110% of the home's value if I could.


The rate of return on a first home is nowhere near what the market can offer. If you paid the minimum on a 30-year mortgage and invest the rest in your retirement, when you retire you are probably guaranteed enough money to pay off the house plus more money for retirement.