How Did You Become Debt Free?

[glamatomic]

Gina- I agree that some areas of St. Louis County are *horrible*- there are parts of it that my DH & I wouldn't touch with a barge pole, but that's like anywhere else. Everywhere has good parts and bad parts.

Thankfully, we were still able to afford a reasonably good part of the county- not the best by any means, but a safe, solid area all the same

For DH & I though, it was more important that we be debt free than live somewhere ritzy like Ladue or Clayton. We prefer the security of knowing that we own our home outright above anything else. Thankfully, with the housing prices at near rock bottom almost everywhere in the county, we were still able to afford something decent in an adequate location.

[DRILLINDK]

I live in U City and find that prices are pretty reasonable in the county. Clayton home prices really have been hit like the rest of the STL area.

[MiikeB]

I was really good at saving, didnt have any debt until I was 20 and met my fiance.

Fiance is not frugal but also not demanding of nice things and ignorant to the finances since I handled it all.

I racked up some debt trying to provide the best I knew how. Something like "thats a nice TV I would love to have one" in my mind would make me want to find a way to get it for him but in reality all he meant was "that is really nice, maybe some day."

I was about 30k in debt before I finally figured this out and let him know we needed to slow down. It is nothing that overly worried me but I did want the debt to go away. I was putting $1500 towards it and not adding but I realized if I had slowed down, I could be doing $1500 more worth of stuff a month instead of using it to pay down debt.

I am an instant gratification kind of person too, so taking almost 2 years to pay down the debt did not sit well with me. I was becoming inpatient.

So now I am contracting overseas in Afghanistan. Should be debt free by the end of the year then spending all of next year saving up for a huge house down payment and money for furnishings etc.

[Ramose]

It sounds obvious, and easier said than done, but the best way to be debt free is don't go into debt to begin with!

I went to a state college, which my parents could afford to pay for. I hear so many stories now about graduates with huge student loans.

Some people don't have this luxury. Just a thought.

[BuckyBadger]

I agree that we should do what is best for us individually.

But people who choose to have a mortgage aren't second class citizens (as this thread and the other parallel thread seems to be making them out to be).

From a purely financial point of view, holding a mortgage is often the correct thing to do -- meaning that I will have more money in 30 years than someone in my exact position who paid off the mortgage instead of investing.

I never tell anyone that they are short sighted and emotional when they say that they paid off a low-rate mortgage early. Yet people like myself get the implication that we just aren't smart enough or dedicated enough to pay off a mortgage.

If I stopped all my investing, I could pay off my mortgage in 6 years.

I guess maybe I'm being sensitive and I should just stay out of these threads, but it just gets tiring to be told that I'm not allowed to be proud of my situation because I have a mortgage. No one tell you guys you're dumb for paying off your mortgage early, so why is it necessary to imply that we are dumb for choosing to invest instead?

[Wino]

So, Bucky, not to belittle what you're doing because I fully understand your point, have you worked out the amount you're earning compared to the amount you're spending on the interest? I only ask this because once you pay off the mortgage, you will have quite a bit more you can put into savings. Therefore, your method has a horizon after which the amount that we can invest is greater than the amount you can invest, all other things being equal. At that point your investment income has to exceed our additional savings investment amount.

Note that my paragraph above doesn't say which way is better. I'm working on a spreadsheet now to answer exactly the question I just posed:

What if I paid off my house, and then invested my additional income rather than paying for my mortgage as written and investing less per month, but got the compounding of my investments?

Also, what is to stop me from getting a second home and renting it, paying off that mortgage, as well? And then doing it a third time? Would my rental income on a paid-for house offset your compounded interest? Am I not manually compounding my interest by using that rental income to purchase yet another rental property? If one includes appreciation in the equation, then the answer becomes even more cloudy. If you have a million in your accounts, and I have a million in equity, are you better off than me?

Again, your way might be better. With 3% and 4% loans available out there, your way is definitely a possibility to come out ahead by keeping a mortgage. I'll post my spreadsheet after I finish it.

[Blessed]

I agree that we should do what is best for us individually.

But people who choose to have a mortgage aren't second class citizens (as this thread and the other parallel thread seems to be making them out to be).

From a purely financial point of view, holding a mortgage is often the correct thing to do -- meaning that I will have more money in 30 years than someone in my exact position who paid off the mortgage instead of investing.

I never tell anyone that they are short sighted and emotional when they say that they paid off a low-rate mortgage early. Yet people like myself get the implication that we just aren't smart enough or dedicated enough to pay off a mortgage.

If I stopped all my investing, I could pay off my mortgage in 6 years.

I guess maybe I'm being sensitive and I should just stay out of these threads, but it just gets tiring to be told that I'm not allowed to be proud of my situation because I have a mortgage. No one tell you guys you're dumb for paying off your mortgage early, so why is it necessary to imply that we are dumb for choosing to invest instead?

I'm sorry Bucky if you feel that way. I didn't see anything belittling in the other threads but admit I don't read word for word.

All cases are different and markets change. You know your financial picture better than anyone else just as I know mine best. I know a few multi millionaires that were mortgage free before being wealthy. I know some very wealthy folks with monster mortgages. For us personally paying of our first mortgage in 7 years gave us $ to buy more land in cash over the next few to add to our mini farm. That gave us the ability to sell and buy another debt free home from someone needing out "now" . It worked for us personally. It allowed us to save a high % of our income. I also think a lot of the choice to do as you are or being 100% debt free has to do with our personal comfort level. I personally have a comfort issue with owing. Personal finance is mathematics yes but it also has a lot to do with personal feeling and comfort levels. Seriously all we need to worry about it what work for each of us as individuals and our situation.

[MonkeyMama]

I have a mortgage and might have a mortgage for 30 more years. The couple of recent threads are about celebrating 100% debt-free. I didn't comment because I am not 100% debt-free. Period. ??? Likewise, in our culture, I think people are used to being belittled for choosing to be debt-free. So, I say let them have their celebration. It's awesome!!

Statistically, one will generally come out ahead keeping a mortgage and investing. Historically this is true, and maybe even more true with these record low interest rates. Obviously you have to have the discipline to invest the excess. I know too many people who have done very well (but usually these people do so well they do end up paying off their mortgage early with their investments). So it's kind of moot in the end. I don't particularly know anyone who chose to invest and then never paid off their mortgage. ?? They usually have the liquidity/means to pay off well before retirement.

As far as any other debt, we have always avoided debt and I agree that the easiest way to stay out of debt is to not go into debt in the first place. There are ALWAYS other options. We chose inexpensive colleges, worked many jobs, chose inexpensive cars, and primarily buy used goods. Those are the biggies. We moved somewhere significantly cheaper in order to have a more reasonable mortgage. I don't think that everyone who borrowed for a college education or a vehicle is a second-class citizen, by the way. We are just talking about our own personal choices.

P.S. We could always choose to rent or move to be 100% debt free, but these are just not choices we are going to make. For one - these are choices that do not make *any* financial sense. Renting would be more expensive, and moving would come with giving up a lot of financial perks that we have living here. I am sure many people rather pay more for rent than have a mortgage - that is their choice.

[glamatomic]

Bucky- in no way did I mean to belittle people with a mortgage and I'm sorry that you construed it that way.

Everyone has to take their own situation and values and put it into practice in their life. If a mortgage and investments are right for you, then that's great.

However, it's not right for DH and I. As we're still in our 20s, since we have a paid-for house (that we bought near the bottom of the market, at the height of the property boom it was worth almost 3 times the amount we paid for it) we consider *that* in itself to be an investment as if the economy tanks any more or if we're faced with the prospect of no job security, we've still got a roof over our heads.

We will probably start investing our additional earnings now that we own a house- although we're contemplating putting it toward buying a second house in the foreseeable future as either a flip or a rental property.

It's what feels right for us. In no way are you a second class citizen for having a mortgage- if that's what makes monetary sense to you, then go for it

For DH and I, return on investments vs interest on a mortgage plus the insecurity that we'd feel by having a mortgage, wasn't the right path for us. Everyone is different though

[Blessed]

However, it's not right for DH and I. As we're still in our 20s, since we have a paid-for house (that we bought near the bottom of the market, at the height of the property boom it was worth almost 3 times the amount we paid for it) we consider *that* in itself to be an investment as if the economy tanks any more or if we're faced with the prospect of no job security, we've still got a roof over our heads.

You know stating when you may have bought your home ( and the circumstances) I think seriously makes a difference now that I see your statement in print. Dh and I bought our first house in a very affordable market in our early 20's and tripled our $ when we sold it. We bought this one in cash ( in our 40's) from a seller who needed out after the drop so we feel we got bargains both times. When we bought our first one rates were 6.29 for great credit back then.

I also sorry if I typed anything that made anyone feel bad when I started the thread asking who else was 100% debt free. I didn't mean to open a can of worms or hurt feeling. I was just curious and asking a question. Sorry.

[MonkeyMama]

Being able to be 100% mortgage-free and a homeowner in your 20s is also a whole other can of worms. In that case I would absolutely choose to be debt-free as I Would have my whole life to invest that money. (Not sure my "statistics" matter much in that case!) I think more people will find themselves in this situation with lower housing costs and lower interest rates.

Likewise, with these interest rates, one isn't tying up as much income in their mortgage. I laugh sometimes at the comments I get about tying up capital by taking on a 15-year mortgage. Seriously? I tied up far more resources in my first 30-year mortgage over a decade ago. Just to say more people can have their cake and eat it too in this economy. More people will be paying off their mortgages rapidly WHILE investing large sums. At least those who are employed.

[bjl584]

I am not 100% debt free. But the debt that I do have is more than manageable. I choose to invest my extra money rather than pay down my debt aggressively. I feel that I will come out further ahead in the end by following that strategy (sorry Dave Ramsey followers.)

[feh]

I am not 100% debt free. But the debt that I do have is more than manageable. I choose to invest my extra money rather than pay down my debt aggressively. I feel that I will come out further ahead in the end by following that strategy (sorry Dave Ramsey followers.)

Of course, there is a middle ground, where one pays off debt ahead of schedule and saves aggressively. That's the route we took - we paid off our 15 year mortgage in 11 years and saved somewhere around 30% of our income.

[bjl584]

Of course, there is a middle ground, where one pays off debt ahead of schedule and saves aggressively. That's the route we took - we paid off our 15 year mortgage in 11 years and saved somewhere around 30% of our income.

Yes. I do pay extra on my debts, just not a lot extra. I round up most of my payments. (I will pay $300 on a $245 payment for example.)

[Blessed]

Of course, there is a middle ground, where one pays off debt ahead of schedule and saves aggressively. That's the route we took - we paid off our 15 year mortgage in 11 years and saved somewhere around 30% of our income.

I like that middle ground. That is our middle ground also