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I have no intention on being debt free until my 60s. To me people who want to be without debt are scared of taking on smart risks and are passing on the potential to increase their net wealth and cash flow. Go read up on how to wisely use leverage and stop dreaming of a small life with small goals. Stop using debt to consume and start using debt to control income producing assets.
OK I see where you are coming from. Lets say that a business wants to move forward. Chances are they may need to go into debt to purchase an asset, lets say like a Locksmith company buying an service Van because business is increasing. The Van is used to get the Locksmith from job to job. The cost of that debt is paid for by the business and chances are the company can absorb the cost of opperating the van because they will have increased their ability to bring in more work.
The only way that debt is better than no debt is when the opportunity pays more than it cost. still that is a business opportunity and not personal living. I can't see anywhere that having personal debt is better and investments should be kept seperate from your personal living expenses. Using the example of the Locksmith company, the owner of the company should be paying themselves a salary or some sort of income the same as other employees. At the end of the fiscal year would determine the profit or loss for the enterprise. The debt would be business debt as well, even if the locksmith is a sole proprietor.
The point that is being brought up within this post is living debt free all investments aside.
I went the increase income route via some hardship. First a tour in Kuwait, then a tour in Kabul. No I didn't like it one bit, but I am debt free. It was hard for me and even harder for my family. After all of this you can bet I will never again owe anyone any amount of debt. Many of my wife's family who earn a fraction of what we do have nicer cars but they are very much trapped; slaves to the finance companies.
Money affords you choices in life, debt is just the opposite
1) The only rationale debt to take on is a fixed, 30 year mortgage at a decent rate with 20% down. Otherwise you are rolling the dice and can not afford the purchase. (Ideally, plan to pay it off well in advance of it's termination date. You "earn" the interest rate of your mortgage on your money every time you make an advance payment). Cars, household goods, etc. - pay cash.
2) Using credit cards for anything other than planned monthly payoff/convenience/points is simply stupid. If you can't afford to pay it off every month --- you can't afford to buy it. If you can't pay cash, you have no business buying it. It is that simple.
3) Live below your income.
It is that simple, folks. Do not have children unless you are financially prepared to give them a solid launch into their future.
Last edited by Pilgrim21784; 02-24-2011 at 11:24 AM..
OK I see where you are coming from. Lets say that a business wants to move forward. Chances are they may need to go into debt to purchase an asset, lets say like a Locksmith company buying an service Van because business is increasing. The Van is used to get the Locksmith from job to job. The cost of that debt is paid for by the business and chances are the company can absorb the cost of opperating the van because they will have increased their ability to bring in more work.
The only way that debt is better than no debt is when the opportunity pays more than it cost. still that is a business opportunity and not personal living. I can't see anywhere that having personal debt is better and investments should be kept seperate from your personal living expenses. Using the example of the Locksmith company, the owner of the company should be paying themselves a salary or some sort of income the same as other employees. At the end of the fiscal year would determine the profit or loss for the enterprise. The debt would be business debt as well, even if the locksmith is a sole proprietor.
The point that is being brought up within this post is living debt free all investments aside.
Sure if you want to discuss personal versus investment then its a different concept.
But the point is simply this, which would you rather have?
A. Assets producing no cash flow with a current value of $200,000 and no debt.
B. Assets producing positive and growing cash flow with a current value of $1 million and $600,000 of debt.
People too often make the mistake of assuming that they can become debt-free merely by increasing their income. If you can't restrain your spending at your present income, you likely will not be able to even if your income increases. So, the road to being debt-free, as unpleasant as it can sound to people (especially young people), is to not spend money unnecessarily to begin with. Simply stated, live below your means. Rule no. 2, which is widely ignored today, is never borrow money for short-term consumption. If you can't pay cash for your recreation, your vacation, your fun toys at home, etc., etc., then don't buy them until you can. Same goes with depreciating assets. For example, about the only time I ever borrowed money for a car is when I could borrow it at 0% interest. Even then, I could have bought the car I wanted for cash, but I left that money in the bank earning interest.
Finally, and this is a sore point that many people refuse to acknowledge or discuss: The singularly most financially expensive thing most people can do is to have children. If you want debt-free financial independence, you may have to seriously consider if you have children at all, when you have them if you do, and how many you have. Whatever wonderful joys children may bring, they also bring a massive financial burden that must be borne if parents are to be considered even remotely responsible. People who are unwilling to accept that responsibility really need to consider, before the fact, whether they should be parents at all.
PS--Even ordinary middle-class people can be debt-free if that is their goal and they work toward it. I am, and have been for years now.
This here is really good advice for the most part. Tried to rep this person, but was told I had to spread it around more first. lol
Debt free? Yes I have done it. It's the living within your means thing. It isn't fun at times, but it really does work.
As far as children, I think that unless you are very wealthy don't have a lot of them. Most people with six or seven of them cannot be debt free with money left over for retirement.
I was in a very similar case a few years ago, I had graduated with my Masters, and had 24.5K loans from my Masters, 14K from undergrad, 12K from a new car (I bought a another used car), and a little bit on a credit card balance transfer offer. Now I only have $4200 left on student loans. I did this mostly by keeping my expenses down. The income I got from my job was pretty good, the payments on my loan were doable, but I still refinanced it from 6.75% to 3.75%. I aggressively paid of the $16500 I owed on my Stafford loan since it was the highest rate, 6.8%, it wasn't the lowest balance, but it was highest rate, paying extra interest never made sense to me.
I did a few unconventional things, I paid off my car loan early by taking a balance transfer offer from an Amex card since they had no fees and it was 0%, then I paid off the card 4 months later. I also took a job on the side that allowed me to earn an extra $200-$300/mo, I no longer do that, I changed jobs in 2010 as soon as the economy improved and got an 11% raise that way.
To tell the truth the loan I have left is low priority because the interest is down to 1.65% now, I still pay about $100/mo to it, but I'm not going to just get rid of it. I have more money than that in savings and bonds I could sell and pay if off, but it doesn't make sense for me right now.
I'm sure people would be critical of me for doing unconventional moves, but it was cheaper for me than to pay extra interest on student loans, and it worked out fine because I'm disciplined enough to do it.
Yes, it is possible to become debt-free, just be aware of the trap of insane property taxes once you pay real estate off, and know that unless in the "underground economy" every move you make should be to minimize the tax burden. Of course, stay in the underground economy as much as possible and you'll won't lose 1/3 of every transaction to the various levels of government.
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