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The difference is that when you go get a mortgage what's actually happening is someone, usually a bank or financial entity of some sort, they're actually giving you money.
This. If you buy a house with a $200,000 mortgage, the bank actually gives you $200,000, which you then transfer to the seller in order to purchase the property. You then owe the bank that $200,000 back, with interest, to be paid back over a time period agreed upon at the time the loan was made. Renege on your promise, and the bank can foreclose on your home to regain its money.
Borrowing money which then has to be paid back later is a debt.
What the OP has is a recurring financial obligation, not a debt. Rent is more akin to a utility bill than a mortgage. There's no loan involved; you're paying for usage, and if you don't pay, that usage is discontinued. Paying to use something, whether it's a living space or water, isn't debt.
Debt is a condition where your assets are greater than your liabilities.
Let's say you have a car loan, but the car is worth more than you owe on it. The car is worth $8,000, and you have a $6,000 outstanding balance. The equity is $2,000. You are not "in debt," as the asset is greater than the liability on the other end. Flip that around - you owe $8,000 and the car is worth $6,000, then you have debt - negative equity.
Any type of unsecured debt is true debt because there is no collateral securitized by that loan.
Renting is not a debt as long as it is current. There is nothing owned or purchased. Same with a monthly cell phone bill, utilities, property taxes, etc., as long as they are kept current.
I actually don't consider my mortgage payment to be the same sort of debt. I'm debt free...except my mortgage, which is how I usually state it. My mortgage is actually small enough that I could pay it off in full right now if I took money from my retirement accounts. Heck, I could pay it half off with just the money in my bank account.
But I have to have somewhere to live. My mortgage is less than my neighbors pay for rent. So yes, it is a debt, but it is a debt that SAVES me money. Not just opportunity cost, but actual savings every month. Hard to look at that in the same light as, say, credit card debt.
So no, I'm not debt free, but I'm pretty darn close.
The OP gave a warning/disclaimer right from the beginning about the length of her post. I appreciate that, OP!
You do have a financial obligation to pay your rent for the length of your lease (usually one year, sometimes month-to-month). Some will interpret that as debt, some not. I have no idea how it is classified from a legal point of view, I'm no expert.
In my opinion, if you pay all your rent in advance, or have the money put aside for that purpose in a savings account, you could consider yourself debt free.
Debt is a condition where your assets are greater than your liabilities.
Let's say you have a car loan, but the car is worth more than you owe on it. The car is worth $8,000, and you have a $6,000 outstanding balance. The equity is $2,000. You are not "in debt," as the asset is greater than the liability on the other end. Flip that around - you owe $8,000 and the car is worth $6,000, then you have debt - negative equity.
Any type of unsecured debt is true debt because there is no collateral securitized by that loan.
Renting is not a debt as long as it is current. There is nothing owned or purchased. Same with a monthly cell phone bill, utilities, property taxes, etc., as long as they are kept current.
In your first example, the car loan is still a debt even with positive equity. Only if you actually sell the car would you be debt-free.
Debt-free is not the same thing as positive net worth.
A debt is something that you can pay off to eventually owe zero.
And expense is just that, an expense. Rent, your electric bill, your phone bill, gas, food. It what you pay for to live. Its not debt. It never gets down to zero.
You are most certainly debt free, at least when your credit card is paid off at the end of the month.
As far as that poster saying [[[ You pay rent every month. I don't view that as debt-free, it's akin to having a mortgage. One that you'll never pay off. ]]] she cant be too bright if you think you never pay off a mortgage. I agree with others, she's up to her eyeballs in debt.
In accounting terms, you are debt free. You have no debt. It is pretty clear.
People that own homes outright seem to want to value that when comparing to others (for some reason). How about the person that has a $500k debt on their million dollar house and $5 million in investments? That person is not debt free but his situation is better than someone that owns a $300,000 house outright with no savings/investments. Bottom line, "debt free" is not a measure of anything useful in the context of that website
Correct. This is why you really have to look at a person's entire financial statement to be able to compare. Even then, life situations are still different, so it can still be difficult to compare.
I am one of those odd people who rent, but have retirement savings that are greater than the median priced home in most of America. Other people may own their homes outright but have little saved for retirement. So you have to look at the whole picture.
In any case, it's best not to get into these comparison games. It sounds like the OP and her husband have a good income and make financially sensible decisions based on what's important to them. That's all that matters.
Hello, THANK YOU very very much for all the replies help give me advice. Thank you so much.
I have three questions, if any posters/anyone can help give me insight/advice on this please. Thank you very much in advance. I'm sorry for the LONGGG post ahead..
One of the reason why we want to save up as much as we can. Because I want my husband to use his hard work money to buy a condo/townhouse for his mom in her old age, my MIL thinking relocate to Georgia (where her sister is, and ofcourse the COL in the South is alot less expensive than California).
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We personally don't want to buy a house in the HCOL state California. We prefers saving in liquid 'Cash' form.
We just prefers have cash in our saving accounts, the more the better. And retirement savings in our 401k and IRA.. Some people prefers a house as their asset. We prefers 'cash' liquid as our asset. We keep build on our 401k/IRA retirement savings because to us it is very important to have these money in our old age.
I want us to keep saving, as much as we can.. I told my husband I have a goal and I want him to fulfill for me (this is my goal, this is what I want). I want him to use his hard work money to buy a condo/townhouse for his mom (my mother in-law).
And I'm glad to be the motivation for him to buy it. If not do it for himself, then do it for his mom. His dad deceased, and he is the only son (his mom only has him and his older sister).
Perhaps it filial piety (in my Chinese culture, filial piety is very important), but I want him to buy his mom a condo/townhouse when she retired (which in few years she will retired).
Sure, she have her own comfy apartment, she one person by herself and live in a big comfy apartment.. BUT don't want to see her live in rent apartment for the rest of her life. In her aging age, I want her to have a house. I want to her enjoy her aging age rent free.
My MIL she have relatives/family members in the South. Her side of the family--her sister in Georgia..
Every year she fly to Georgia for family gatering time, spend the Christmas holiday there.. She thinking of relocate to Georgia when she retired live there in her retirement age. (Beside she near her sister, the COL in Georgia, and the house prices in Georgia is alot less expensive than California).
We support her decission. If she relocate then we will probably relocate with her there. We will rent somewhere nearby her so we can take care of her in her old age.
I tell my MIL we saving up and will buy her a condo near where her sister is, so she be near her side of the family and has her sister near her.. Condo/townhouse, a small house, whatever she chose. House wise (everything house related) we will pay it all for her. As for her personal expenses, she has her retirement money.
We rent somewhere close, so we can be near her just in case if she need us. I totally don't mind to live like 4-5 minutes driving from my MIL. I mean I'm not living in the same house with her. She has her own place, I have mine; I just live near her.. Yes, I know my MIL has her sister and her side of the family there, but I'm sure she still want her only son close by.
We do have reasons to save up 'Cash' liquid in our saving accounts.
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My husband he Debt-free (we both are). So there no debt for us to worry about. His 401k and IRA retirement, he max out it out every year. So retirement savings is not a problem. He does have more than decent amount of savings for retirement.
My husband he work a dangerous job (daily dealing with 60,000 gallons of Fuel which is flammable. And Hydrofluoric Acid which is corrosive). The nature of his job is dangerous.. Not everyone qualify, and not everyone want or willing to work the job he work, especially with nature of his job.. On the good side is he does get pay decent. At the age 23 (he 31 now), he already make 100K a year.
I want to ask posters insight on this, do you see the point of have two saving accounts? I ask because my husband has two saving accounts (he has me as Joint on both). I'm thinking of perhaps he should close one and just put all the money together in one saving account instead of two.
He has six-figures in his savings. (the cash in his savings is what we will use to pay for the condo/townhouse for his mom). Or if she wants to rent a house near where her sister is, we be more than happy to pay Rent monthly for her.
Do you see the point of have two saving accounts? One should be good enough right?
oh, and my other question. I know yearly my husband max out his retirement savings. I know the 401k and IRA are SEPARATE from Social Security taxes right?
I ask this because I see my husband paychecks (he gets pay weekly), and in his paychecks it automatically deduct for Social Security tax.
So when he retire, he can collect both--simultaneously both his Social Security retirement (the Social Security tax that deduct from his paychecks), and his 401k and IRA right?
The IRA and 401k is his, he max it out every year. That is SEPARATE from the Social Security tax that deduct from his paycheck, so he should get BOTH simultaneously when he retire right? I'm a bit confuse on this, can you explain it to me? Thank you Sir.
He has me as the Primary beneficiary on both his 401k and IRA. And I do understand how 401k/IRA works, I just a bit confuse about the Social Security tax. He should be able to get BOTH when he retired right? I mean it his hard work money, it just it deducted out of his paychecks.
oh, and one last question, if you can give me advice on this. What should I say next time if my husband ask me if I'm okay with him work holidays. He always ask me if I'm okay with him work overtime or holidays, and I said I'm okay (because of the overtime pays, and the holiday pays). But perhaps next time he ask me if I'm okay with him work holidays, I should just not comment and say it up to him and let him chose?
He work a dangerous job (but I know somebody has to do the damn job). On the bright side his pays is decent. And the company he work for do treats him well. The upper scale pay in his job is $30 an hour (ofcourse California HCOL is a part of this hourly pay),
but due to he has years of experience (he got experience in his field since 23, he 31 now), due to his experience they pay him $35 an hour.
So his hourly pay is $35 an hour, and he DOES get pay overtime (1.5x more for overtime). So any hours he work after 40 hours, he get pays $52.5 an hour. A week he work 70 hours, so that 30 hours he work overtime over the 40 hours and he get pay $52.5 an hour for overtime.
So a week he make $2,975 a week. ($35 an hour x 40 hours = $1,400 ) + plus (overtime pay $52.5 an hour x 30 hours = $1,575 ) = equal to $2,975 a week.
And there 52 weeks in a year, he make 154K a year. (yes, we live in California so it HCOL. But we both are Debt-free, and we live BELOW our means.. And with his income, it still above average household California income. And it just him--one person salary here, so he doing quite well by himself).
And not mentioned, he gets pay extra on the holidays too. Major holidays like Thanksgiving, Christmas, New Year's Day, Memorial Day, Labor Day, Independence Day. You know the major holidays.. No, Not Valentine's Day, that don't count as a major holiday, lol
When he work on holidays (which he does work on holidays), he get pays 'Double time and a half'. Take for example last Christmas (a major holiday) he work, he gets double and a half.
His hourly pay is $35 an hour. (On holiday, he get double and a half) 2.5x of $35 an hour, so he get pay $87.5 an hour.. And he work 12 hours. That come out $1,050 for that day alone. That is alot of money for one day work alone (ofcourse it holiday pay that it like that).
Giving the holidays pay like that, this is why when he ask me if I'm okay with him work holidays, I said I'm okay. I mean he work one day of holidays, and he gets pay $1,050 for that one day alone, that is alot of money (well to me it is).
Work, yes?--I don't see why my husband shouldn't work holidays considering that pays? And right now we don't have kids yet (I haven't give him his baby wish yet), it just me and him and our little poodle.
And I'm a Stay at home Wife (this is the lifestyle he wants), we are not missing out time with each others. How can a Stay at home wife with no kids yet miss out time with their husband?
.........
Here the thing about my husband. My husband he very important on me and him eating together and go to bed together. When he work nights, he wants me to sleep in the daytime with him.. Eating together is very important to him, go to bed at the same time and wake up at the same time is also equally very important to him.
He make it clear that he doesn't want me to even work part time, he said why do he wants his 'wife' to work? When he make enough for his wife to stay home. He said and asked that.
Everytime I ask, he said why do he wants his 'wife' to work? When he make enough for his wife to stay home.. He adamant about not want me to work.
I guess to him, he takes pride in provide for me--being the one that brings in the income/money. I guess to him it like that?
He work 70 hours a week (10-12 hours a day).. So a day he gone 12 hours at day at work, and after work he comes straight home; which leave him 12 hours home, eat sleep family time.
I know he very important on when he comes home from work; able to see me first thing, have me sit down on the dinner table eat with him, have me watch News with him, have me go to sleep at the same time with him.. Have me eat with him before he go to work an after he gets home from work. Go to sleep at the same time and wake up at the same time with him.
Which my husband has what he wants, and I'm sure it because this is the lifestyle he wants, therefore he make me a Stay at home Wife (yes, right now it a SAHWife because I haven't give him his baby wish yet, so I'm not a mommy yet).
Married to him as his wife (Perhaps I married a traditional man?)--he make it very clear and adamant he doesn't want me to work, not even part time. He wants me to be a Stay at home Wife SAHW. And when I give him his baby wish, he wants me to continue to stay home, be a SAHM.. (He really want a baby to complete our little family. I just haven't give him a baby yet).
Is he work long hours ideal? No. But I'm not complaining. He does make decent money.. And here in the HCOL state California; have a DH that work long hours it very common, here every household there got to be one person who work their butt off just so their wife and kids can have a comfy life.
I'm not the only one with DH that work long hours. Plus I know there ladies out there who have DH that travel for work go on business trips for weeks to a month at a time. I know there ladies out there that have DH that in the military, facing deployment for months to a year at the time..
So I'm not complaining, I need to be grateful.. I have my husband home with me everyday, zero travel or deployment. I'm need to be damn grateful of my situation you know? (despite he work long hours).
He home everyday. He work 12 hours and come straight home. Eat is we eat together. He sleep 6-7 hours and that 6-7 hours (regardless day or night) is I sleep with him. That leave us 5 hours of us time together do whatever we wish. I'm very grateful of my situation and for the time I have with my husband.
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My sleep have been follow his sleep. When he sleep, that is when I sleep, lol.. When he work nights, he sleeps in the day, and he wants me to sleep in the day with him.
I know I haven't give him his baby wish yet, no baby yet so why I'm a SAHW. But he adamant wants this lifestyle, like damn adamant wants.. I know this is what he wants, and I don't want to argue with him about this (it not worth it an argument over this), we not starving, and he make a low six-figures income, and he Debt-free (we both are). He not asking much, all he asked for is have have his wife eat with him and go to sleep at the same time with him. This guy pays for my everything, everything, supporting me from a to z here. I'm a SAHW (not working, no income), it not too much for a husband to ask.
okay, I know I'm not bringing in an income, since to he doesn't even want me to work part time. I told him if he needs me to work to help bring in income, he have to tell me so I can know. Everytime I said that to him, he call me silly. He still said he doesn't want me to work. He said why do he wants his 'wife' to work? When he make enough for his wife to stay home.. I don't know how to answer him when he say that, he very adamant on this.
Perhaps I married a traditional man, who take pride in bring in the money. I don't want to debate or argue with him. If this is what he wants, this is what he wants.
I don't mind that he wants me to be a SAHWife/SAHM. Plus I have my own car; the hours he at work, if I want to drive out to places, I go. My car (I bought this car way before I met him), I drive out whereever I want.. And I work before marriage, (a minimum wage job, but I work prior to marriage).
We have our own cars, he has his car, I have mine. I do drive around with my car go whereever I want to go, do whatever (in the 12 hours he at work). Drive to Chinatown, go over to my BFF house (but my BFF best friend she married and has kids, I don't want to bother her), do whatever, there plenty of places to go around here in the very crowded state California, and we live right in the heart of the city too.. I do drive around, just in the daytime. Because when he go to work late at night, no way I'm driving out during that time. This is basic common sense, in the middle of the night/or late at night like at 1AM you a girl don't go out by yourself. I do go in the daytime.
But then when he work nights, he sleep in the day, and I have to sleep with him.
No, we don't miss out time with each others. He not in deployment, he not a businessman that travel for weeks to month at a time. He home everyday, zero travel.
He work 10-12 hours a day, come straight home. That leave him 12 hours at home, eat sleep family time. I need to know that I'm blessed, because I see threads and threads where ladies complains that their DH go on business trips that take weeks and weeks at a time (beside military deployment). So I'm very grateful to have my husband home everyday, zero travel.
Do I want my husband to work holidays? Yes. Am I terrible for want my husband to work holidays? But consider the holiday pays (2.5x more each hour of his normal $35/hour pay)..He work, that more money to save. Those money he can put more in his Savings, or in his retirement.
What would you do?--for the pay of $1,050 a day just to work that one day (holiday pay), let him work on all holidays right? (major holidays ofcourse, it the major holidays when they pay like that).
I feel terrible, am I terrible that I want him to work on holidays just because of that pay? Perhaps next time he ask me if I'm okay with him work holiday(s), I should just not comment and said it up to him and let him chose?
If anyone can help give me insight/advice on this please? Thank you very much.
Last edited by Shanghai30; 02-23-2017 at 10:09 PM..
FDIC only covers up to 250,000 dollars per account in the event of a bank failure so it is ok to have multiple savings accounts.
Yes everyone that pays into social security will get a monthly payment in retirement
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