Will you ever be debt free? If so when? How? Why? I think there is a stage in everyone’s life in the US that being in debt is normal. When? When you buy a home. In your 20s and maybe 30s, you could be debt free if you rented and paid off your student, car, CC debts. But then if you buy into that “American Dream” of homeownership, you’ll go into debt.
Let’s be honest, how many people would have the patience to wait 15 years to save up money on top of paying rent to pay 100% cash for a home? There’s a reason why mortgages are 15 or 30 years on average. Because it’s a large lump sum. And to save that on top of paying rent, makes it a substantial purchase.
I would have to say impossible where I live and 1 bd condo runs minimum $300-$350k. How many years would it take to save that on top of renting? Unless you are able to live rent free somewhere else? Maybe with your parents or other family. But is it really fair to be living rent free and not contributing anything to them?
So will we ever be debt free? For myself personally I don’t see that happening anytime soon. My DH and I acknowledge that real estate is not the path to wealth for ourselves. But we still enjoy homeownership and are more likely to buy and live than rent long term. Thus we’ll likely save and pay off our home slowly.
I guess being 30, I find it hard to really see where extra cash to pay off our mortgage will come from. We have student loans, savings for a new car, college, baby stuff to worry about before paying off our mortgage can even top the savings list. It seems like such a long road, and yet if we continue to pay on our mortgage, in say 25 years we’d still have a paid for home without changing anything.
While that’s not super fast, some people would say that it’s the proper way to do things. That we are doing all the “right” savings and preventing debt, while mitigating risk by having emergency funds, etc. It’s just a slow and boring road to walk down.
How long until you are debt free? Is it something you strive for or something you think will just happen? I think it’s something that will just happen for us, because it seems so far away that it’s really hard to focus on.
13 responses so far ↓
1 Kerry // Dec 28, 2009 at 10:17 am
I think it’s very obtainable, if you start out with that mindset. However, most people grow up thinking of debt as normal and healthy. Like yourself, they borrow money for education, for transportation…and so it goes.
It’s possible to be educated without loans. Not easy, but not impossible. It’s possible to have an automobile without a loan, and it IS possible to save for a home. Not easy, not even desirable for most, but possible. It means that you live WAY below your means…in a smaller apartment than you can afford, making sacrifices on pretty much everything, not something most Americans are willing to do, or heck, even willing to consider.
There are families I know of online who are doing this right now. Being debt free was important enough to them that they made it happen.
Once you are in it, I don’t think there is an easy way out.
2 savvy // Dec 28, 2009 at 10:34 am
We plan to have the mortgage paid off in 18 years, just before we retire. I think it’s quite doable to live debt-free. Most people just can’t fathom it because seems to be a way of life. In my grandparents’ time, it was shameful to have debt. Now it’s not.
3 Kristy // Dec 28, 2009 at 10:54 am
We plan on being debt free in 22 years…that’s when the mortgage will be paid off. It seems like a long way off, but I will only be 52 and I can’t wait. If we can pay it off sooner we will, but we are also saving alot for retirement.
4 Meg // Dec 28, 2009 at 12:47 pm
Well, if all goes as planned and we don’t lose any of our income or have any big unexpected expenses *KNOCK ON WOOD* we should be out of credit card debt a year from now, out of the 2nd mortgage in 3 years, and out of the 1st mortgage in hopefully just a few years after that, but almost definitely by 2020 — not too bad since we’ve only had the house about 5 years or so and we didn’t stop our stupid spending spree until two years ago January. That’s when we added up all the debts (YIKES!) and started tracking our account balances.
If we up our income, that’ll be even faster, but there are a lot of variables. Right now we’re still saving some money for a larger emergency fund. When we’re satisfied with that, we might start putting more towards retirement, or we might go ahead and do a few things that we’ve been planning like some travel.
It’ll be nice to be debt free before we’re 40, if we can get there. We have a lot of catching up to do with retirement, but so long as we keep up our current pace that really shouldn’t be a problem.
In a way, going so far in debt helped us get ahead of our friends and family *mentally* which should help us get ahead financially (not that it’s a competition, of course, but it’s good to see the silver lining on this big cloud of ours).
5 Thinkingaboutit // Dec 28, 2009 at 7:09 pm
Never had any debt until age 35, at which point bought a house on 30 year mortgage. Will probably not pay off early in order to be debt free.
6 The Lost Goat // Dec 28, 2009 at 10:41 pm
I don’t own a house. I am lucky enough to live on the family farm, in my own little (a bit less than 900 square feet) house that my great grandfather built (great except for the complete lack of closets). But I used to live in the big city (Dallas), and I spent money like a big-firm associate while living on a clerk salary, and then the big-firm job didn’t pan out. Oh, and I financed law school too. So I started out in A LOT of debt.
I’ve got about 4 years of super-frugal living left to be debt free; I’ve spent 4 years already. I hate that debt ties you down to a job and a lifestyle that you might or might not really like. I hate that if I am so much as one day late on any payment, my interest rates will all go through the roof, so I feel like I always have to check and double-check that payments have been made.
I don’t think that I’m willing to go into more debt to own a house. I might save up and buy myself one someday, but I’d rather invest my money and rent. But I haven’t found a place that I’m even 90% sure that I’ll be living in in five years, much less thirty, so maybe I don’t really understand anyway.
7 LAL // Dec 29, 2009 at 7:57 am
Quick comment to Kerry, we put down $120k on our place. So that would buy a home in MANY areas of the US. NOT where we live.
Thus sure you could. BUT the reality is to save that much you need to be earning a lot and saving A LOT.
You shouldn’t be buying a home with cash PERIOD if you haven’t maximized all retirement options. You’re losing out on a lot of compound interest and investing and savings on taxes.
Debt free doesn’t work if you have no other savings.
8 Bucksome // Dec 29, 2009 at 9:00 am
You should consider mortgage debt different from all other debt and not stress about it.
I’m making the highest income of life now (at the same time my kids are grown) so can now focus on removing all debt (even the mortgage) to be in a good position to retire.
You’ll get there, it just takes time.
9 Meg // Dec 30, 2009 at 2:14 pm
@Bucksome
“You should consider mortgage debt different from all other debt and not stress about it.”
How is mortgage debt so different? It’s still a huge obligation — even bigger than most other debts. And if you don’t pay, you lose your house in addition to screwing up your credit (though it’s losing the home that’s more important to me). That’s something to stress over if you’re stretched thin or could be. And who knows what the future brings!
Sure, you can theoretically sell your house if things get tight, but a lot of people learned this year how hard that can be. I’ve seen “For Sale” signs on the same houses for months in my area.
Mortgage debt and student loan is more *socially acceptable*, but then again debt in general has been pretty socially acceptable in the U.S. at least. That doesn’t mean that it’s not debt, though.
I’m not saying it’s not worth it. Maybe in some cases debt is worth it. That’s a personal decision. But people make a big mistake when they don’t recognize what a huge responsibility it is to say “I’ll pay $X every month for 30 years.” Many people don’t seem to really understand what that means and they buy houses they can’t really afford because when you’re dealing with debt that big it’s easy to forget how much even $1000 is.
10 LAL // Jan 1, 2010 at 3:25 pm
Kerry, I think everything but mortgage debt is really doable. The reason is mathematically while you save for a home, you end up needing to pay rent. If you take the 15 years to save that it takes to pay off a mortgage, then you’ve spent rent for 15 years too! It isn’t a free lunch.
Now if you change the equation to be living rent free, then that’s a different scenario and not reality for most people.
Savvy sounds like a good plan and typical like Kristy below.
Meg that’s an amazing goal debt free by 2020! Wow, keep us updated.
Thinkingaboutit, I think it’s typical to get a mortgage and debt. Good? I don’t think so, but probably necessary. Unless you think you would have come out ahead renting for how many more years until you had saved 100%?
The lostgoat, if you didn’t have a subsidized rental, what would you be doing?
Bucksome, I think mortgage debt is debt still and it’s hard to get out from under. One thing you can do is not get any and rent and save to pay cash. Is it the most efficient way? Probably not unless like the lost goat you have a subsidized rental.
I agree with Meg, mortgages are a huge responsibility. People take it too lightly.
11 Thinkingaboutit // Jan 2, 2010 at 12:10 pm
Yeah, mortgage + other debt is probably typical. My situation was unusual and might never be repeatable. Was service missionary with no rent (but nearly zero income) for several years. Got married, lived on spouse’s small income, had one child, lived in rental 5 years, bought small house (with no money down!) whose note including taxes and insurance was less than we’d paid for a 1BR apt! I consider I lucked out in my circumstances, but also had willingness and knowledge to live fairly simply. This was a bunch of years ago, but even then I was aghast at how much debt the mortgage lenders would have been very happy to help us get into. In the subsequent years, the lenders went bonkers and so did borrowers. Yes, debt to buy a house is pretty much necessary, but I’m sorry we let our house appetites get so honkin’ big in this country.
Anyway, I’m not advocating exactly what I did. The circumstances were just right for me. It would rarely be repeatable. But I do think folks should try to be vigilant for ways to make it without debt. Simpler transportation, simpler homes, simpler dress, simpler entertainment, more frugal educational institutions, even simpler food.
12 JoeP // Jan 4, 2010 at 9:14 am
I think we need to decide what “debt” really is. Does it include mortgage? Car loan? Student loans? I think it is all of these, plus all other loans.
We will be 100% debt free in 8 years. Our next car will be paid for with cash so that we will never have a car loan again. The money normally targeted for the mortgage will be used to save for future (used) car purchases and will be invested for our retirement.
I hate to say “we can’t wait” because I don’t want to rush through 8 years, but at least we can see the light at the end of the tunnel and plan on enjoying being debt free.
13 LAL // Jan 11, 2010 at 9:20 am
Thinkingaboutit, sounds like an unusual situation definitely.
JoeP, sounds like a good plan to be debt free in 8 years. How many years total?
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