This post is from staff writer Suba Iyer.
“Modern man drives a mortgaged car over a bond-financed highway on credit-card gas.” ~Earl Wilson
So far, we have lived debt free. We used to live paycheck to paycheck because our spending was out of control, but luckily we never got into debt. Once we got our act together, not having any debt was tremendously helpful in quickly building our net worth up.
A couple of weeks ago, a conversation with a fellow blogger sparked an interesting topic. In his opinion, it is impossible to live debt free before anyone turns 50. He added that, our society is credit based, and thus it is simply not possible for normal people. Some people do it, but they either have to be extreme frugalists who live like hermits or trust fund babies who had everything given to them.
I am not so sure. Is it really impossible for people who make an average living to live without any debt?
Cultivating a debt free mind set
Everywhere we turn, be it the news, the radio, the internet or friends and acquaintances, everyone will emphasize the fact that our nation has embraced debt. We are comfortable carrying debt as long as we are making payments. It is difficult to break out of that mind set and choose to be debt free. We have to break free of the ingrained tendency to think that debt will fix all problems. There was a time in America when everyone got by with what they made and lived debt free.
Credit cards, layaway programs and easy access to credit have all made it extremely easy to get into debt. We have to think long term and decide that enough is enough. Debt is not a solution; it is a hurdle to freedom. The only thing that saved us from going into debt even when we were living from paycheck to paycheck is our hatred of debt. So having that mind set itself is winning half the battle.
It is possible to live debt free. But we have to choose to do so.
Developing a debt-free strategy
Once the main obstacle of cultivating the debt-free mind set is crossed, the implementation is comparatively easier.
- Setting priorities: The main priority in this case is to be debt free without living like a pauper. To achieve this, we have to prioritize our spending. What is more important to you? A flat screen TV now or a mortgage free house later? A fancy dinner out every day or a great memorable vacation later?
- Breaking bad financial habits: Habits define us. We do a lot of things out of habit instead of making a conscious decision to do so. We might not even realize that we are burning money on something we don’t enjoy because we do it over and over again. Analyze your spending habits and see if they align with your priorities. If not, it’s time to break bad financial habits and introduce some good ones.
- Understanding financial weakness: All of us have our weaknesses. Ours is eating out. We are currently going cash only for just our food expenses, because we found that even though we are disciplined in other areas of credit card use, we tend to spend 25-40 percent more on food when we use credit cards versus cash. Cash makes us think twice about eating out or buying more than we need.
Understanding the challenges and rewards
It takes a lot of courage to be debt free because it is a lonely place. People will question your every decision; they will criticize your way of living and dismiss it as foolishness or assume you are swimming in money. Choosing to live debt free means you will have to think long term and master delayed gratification. It takes a strong resolution to ignore all the negative influences and keep plowing ahead with the reward in mind: freedom.
Is it possible to live debt free in America? Absolutely!
Will we stay debt free? Refining the relationship with debt
As I mentioned above, we are currently debt free. Will we remain debt free forever? I cannot say for sure. We are planning to take a mortgage sometime in the future. What changed? We no longer hate debt. I don’t believe there is good debt and bad debt, but I believe in my math. Even though we have close to enough to buy a house outright, it make more sense for us to keep that money in investments as the mortgage rate is a lot lower than what that money is currently making.
Now I understand some people prefer to be debt free, period. It gives tremendous peace of mind. We choose to arrange our money by making it work for us with the maximum potential. That will be our first step in debt, if we feel uncomfortable; we could always pay it off. We feel this is the best path to build our wealth. Other than the mortgage we plan to always remain debt free.