Our Journey To Debt Free

The lights go down. The music starts. My heart begins to race as the anticipation builds. I’ve been waiting for this concert for 12 years. The best selling solo artist of all time and he is back in action. Ah, to celebrate the progress we’ve made. You see, every time we pay concertoff $5,000 of our debt we take a little date night. And over the weekend we took our big date. It was awesome. Finally, the whole process of paying off our debt is getting close to the end. Only two more to go. We are almost there. I can almost taste the finish line.

We started our married life with a few small student loans, some rarely used credit cards and then, after a few years, a little brick house. Once we combined our finances we just took the money we had saved up and paid off the student loans. I’ve never really been a fan of payments and I tend to avoid getting into long term contracts for consumable items if possible. I enjoy the flexibility and simplicity of keeping the income that we make without paying out that money to service debt. But do we really need to be debt free?

Why Be Debt Free?
That is the burning question. Is there really a need to be debt free? Isn’t borrowing money to make money a good thing? Didn’t you learn about leverage in your finance class? So, why spend the effort to get out of debt? It is an interesting thought with a personal answer for everyone. If you suddenly woke up tomorrow debt free, how would it make you feel? Would your life be better or worse if you were debt free? Here are a few of the reasons we have chosen to prioritize getting out of debt:

  • Simplify our finances
  • Increase cash flow
  • Help us relax
  • Give us flexibility with all the money we earn
  • Take advantage of tax savings available to low spenders
  • Freedom to work when and where we want
  • Reduce income needs and income risk
  • Eliminated the outflow going to interest payments
  • Make it easier to give lots of money away

I could make a similar list of why it would be useful to fully leverage and stay in debt for your entire life. Both points can be made using complex math or psychological arguments. But, in the end, it comes down to personal preference and the priorities in your life. The important part is simply figuring out where you want to be and then developing a plan to move in that direction.

Building Our Credit
I think most people are pretty well intentioned when they tell you to build and maintain a positive credit score. It certainly helps to be perceived as a credit worthy risk in our society. As we have moved away from personal relationships, credit modeling equations on a computer screen are actually more important than they used to be. However, the quest to build credit often comes with its own hazards that get more people in trouble than actually helping. The reason I borrowed money was that everyone around me told me it was a good idea. The tricky part is that understanding credit gets a lot less marketing emphasis than obtaining it.

Having a bad credit score or failing to meet your financial obligation is a red flag for almost any lender (and increasingly, employers and lessors). Having no credit score or a good one puts you in a place to make efficient use of debt if you end up needing it. However, very few people told me that, if you plan well, you don’t really need debt to live a happy, healthy, and financially sound life. In fact, just from personal experience and counseling, debt in the U.S. seems to be a burden rather than a blessing for many individuals and families. The final thought is that not destroying your credit is a lot more important than a perfect credit score.

Our Process to Debt Free
our house
The process we are taking to get out of debt is actually pretty simple. The basic idea is to live on a very small percentage of our income and use the rest to focus on funding the largest priority we currently have. Over the last five years our priorities have evolved. We started with traveling the world, then moved to putting a little up for retirement, next to prepping for children and finally to get rid of the nagging debts. The power of focus has allowed us to see progress whenever we are trying to reach our goal.

After all the small debts were knocked out, we decided to go ahead and pay off the house. The first debts were easier and didn’t take very long, however, we knew going in that the house would take several years of focused efforts. One tip we used was to break it down into smaller increments and celebrate each mini-milestone. We decided that for every $5,000 we paid off we would go on a fancy date. That little push makes the long process a little more manageable and also makes the progress a little more tangible.

Living a Debt Free Life
Certainly by this time next year we should be completely debt free, house and all. The idea of not having any kind of car or rent payment will be quite strange actually. I’ve been making some sort of payment for so long that it will be strange to no longer have any. I still like the idea of living off only a small portion of our income so we could use the additional freed up money to travel, buy a different house, do different things for the kids, or just buy fancier groceries. The possibilities are endless. We will enjoy not having any payments!

The great part about living debt free will simply be the margin we have in our cash flow. We will be able to fund our priorities and still maintain plenty of savings. All the money that was being paid in interest will be in our pockets and we will have a very simple account of where our money goes each month. If we ever want to borrow money again in the future we will have that option. But we will also have the ability to save our money for different houses, cars, kids stuff, vacations, or pretty much anything else we choose. I think the greatest part will simply be the feeling of financial peace that accompanies the notion of being completely debt free.

Is the idea of living debt free appealing to you? Would you enjoy it? What would change in your life if you had no payments of any kind? Follow us on our journey to debt free.

4 thoughts on “Our Journey To Debt Free

  1. You won’t regret your journey to being debt free. My wife and I are 43/44. We paid off the house in 2007. I’d like to say it drastically changed our lives. We certainly love being debt free and have no plans to change that. It does allow us to save a good amount. When most of your “spending” is “saving”, that is a good thing. We still work too much and live too little. I was able to quit my high pay/high stress job. I work from home and have medium pay/medium stress. Still not where I want to be.

    Part of me thinks we could make a dramatic shift if we moved to a less expensive house and cut our expenses more. But we have 3 daughters (14,11, 6). They have no interest in down-housing or spending less. We have cut spending, but in many ways we are still far too consumeristic.

    Being debt free does give you options. Many options. It doesn’t make it much easier to choose those options. I am hoping 12 years from now when our last kid is in college we can discover the true meaning of financial independence. Until then, we keep working, keep saving, keep plugging away. Good luck on your adventure to debt freedom.

    • That is awesome. It seems like you guys are just a bit further down the road than we are. We hope to be in a position like you in a few years. I’ll be curious to see how our opinions and values change over the years as our family continues to expand.

  2. Congrats on becoming (very nearly) debt free!!!

    Most of us don’t really think of mortgage debt as debt… well I certainly don’t anyway, so to knock that off so early on in life is a massive achievement, well done sir!

    I’m just about moving house so just putting a noose of £175,000 round my neck (that’s pretty cheap in my area before you have kittens!). Hopefully I’ll be in your position in 4-5 years time though.

    • I realize it is quite cultural. It seems that most Americans (and many westerners) don’t really think of housing debt as ‘real debt’. But in many Asian countries (including the one I lived in) debt of any kind was much less normalized. I’m sure with the philosophies you espouse you will be done with your house in just a few years!