Until 10 or 11 years ago I lived Debt Free, I would buy a second hand car (Cash) and then put away $300 or $400 per month for 3 to 4 years and buy another second hand car. I also saved 50% or more each week toward my 401 k and then my IRA ($166 per month...IRA's had a Max of $2000 per year then) and for regular savings I even bought a house $12,000 fix-er-upper and lived in that for 4 years while I fixed it up. I did well then but I got a new job at 2 and a half times the pay than the jobI had for 6 years. Now I had lots of money and my head got kinda big. I got some credit cards (6) , a brand new house, a new pickup, a bass boat (that I used about 3 times) more and more junk,
Before I knew it I had around $90,000 in credit card balances, car payment, house payments ect.ect ect. So in less than a year I went from no debts to well over $290,000..... but not to worry cause I could make all the min payments and still had some money left over .... just enough for food and gas and maybe a movie every two months or so lol.

Then.... I lost my job and I could not find another job for 14 months, when I did find a job it was for a hell of a lot less than I was making at my old job. During those 14 months I lost my job, my house, my car... used my 401k and IRA to pay some of my bills but even then I owed $45,000. I thought about going Bankrupt but could not force myself to do it. I had put myself in debt and going bankrupt seemed like blameing others for my lot in life. In the end I lost the new job (about a year later) and was forced to go bankrupt anyway.

Now, I am back living debt free, I have a debit card for use as a credit card and I own my Car, some land and working on building my own Log Home as soon as I can afford the School... but not until I can pay cash :)

As for buying the new car (even new to you) If your lucky, and can take care of the cars you have you can keep the car you have for 3 or 4 years after you pay it off. Keep paying yourself $400 per month (or whatever you need to buy another car cash in that time) , I would suggest setting up a savings account that take out the money each month automaticly so that you never even see the money. Make a budget of your household bills, what you spend on food, gas, car insurance ect and anything you have left over put it into savings (keep a little out for some fun of course)

CUT UP YOUR CREDIT CARDS, PAY THE MIN ON ALL THE CARDS BUT THE ONE WITH THE LARGEST INTEREST RATE. PAY EVERYTHING YOU CAN UNTIL YOU GET IT PAID OFF AND THE USE THE AMOUNT YOU PAID AND START PAYING OFF THE NEXT CARD.

Why forgo spending to be debt free? Thank about it. When you buy with credit you pay more for everything you buy. A car can cost at least 25% more if you pay on the installment plan. A house can cost up to 5 times as much as if you paid cash. If you put gas in your car and pay with cash you pay nothing more but if you pay with a credit card and pay only the Min payment you could pay for that gas for many years.

Of course when it comes to saving for a house almost everyone has the same problem... how can you afford to pay for your rent and save enough to buy your house with cash? One way might be to build your own log home for a lot less than you could ever buy the same house.

Wow I am talking too much. I am sure others have ideals both pro and con and can help you with your questions

good luck

For what it's worth, we don't borrow money.

We rent a house, save up and buy used cars with cash, and don't owe anyone any money.

We are saving up cash to buy land, then we will buy materials to build a home with cash. It's very simple - if we can't pay for it we can't afford it.

This is difficult to explain at times, as it's a totally different paradigm, and some people think we are crazy or can't do math or both.

Not borrowing money flies in the face of conventional wisdom, but conventional wisdom is what got us broke and working for the bank in the first place. On the other hand, not borrowing money has brought us a measure of financial prosperity.

Your mileage may vary. If you like the results you are getting, keep doing what you're doing.

I have to agree with Rumble. The American mindset seems to be that you are expected to live in debt. Heck, I've even seen commercials that make humor of this typical lifestyle. People whom I've told my plans of living a debt free life seem almost annoyed that I would even attempt such a thing, almost like I'm cheating the "system" and it's not fair to them that I can do this while they are stuck under their mortgages and loans.

My last loan will be paid off this August. I have no intention of getting another. I've been liquidating all that crap I really don't need, and looking forward to living a simpler (and less stressful) life. I don't need high-speed internet, on-demand movies, an SUV with heated leather seats and GPS navigation, satellite radio, or any of the thousands of other things that just nickle and dime you to death. (not that I had many of those listed anyways) I've even considering going "non-electric". Boy, that kind of talk really makes people pull their noses up at you, here in the NYC to DC corridor.

I use a credit card, but I only buy what I can pay for that month. I never pay interest, in fact, they usually are paying me!! (about $500 in merchandise in the past 1 1/2 years)

So if someone tells you it's bad not to carry some debt, it's likely that it's someone who profits from it. What can be better than having the piece of mind that you owe nothing to anyone?

I had to work in the automotive industry for 28 yrs and was disabled because of it. I received a settlement on my workmans comp and paid off all my debts but my home. My wife and I then went out and bought a 36 foot motorhome and we will live in it while we build our log home. We haad to work hard at not spending more than what was needed, but in the long run it has been worth it. I lay my head on the pillow at night and sleep the sleep of babies. No worrys about who I owe and how am I going to pay them. To me and my wife, debt free is a way of life now and I still raise the value of my home 16,000 in two years, while only investing about 4,000. So if you really don't like to pay others, then debt free is the only alternative

Well said!

It's been several years since we've been debt free. We now take all the money that we were paying (about $4000/mth) - mortgage, credit cards, bank loans, etc, etc. and save them money as 80% into mutual funds for longer investing and 20% into short term investments to "svae" up the money for times when we need a car, furniture, vacation, etc.

It's really nice to see a balance of over $100,000 in just a few short years.

I've been debt free for the past 2 years. I cut up all my crfedit cards after my divorce 7 years ago (most of that debt was hers any way) 2 years ago I paid off my truck loan and have been living debt free ever since. I use my Debit/Visa card for all my purchases. In short if I don't have the cash in the bank to buy something then I can't have it now. So If I really need something then I need to save up for it. Isn't that what people used to do before the invention of those costly little plastic cards?

When I tell people that I'm Debt Free they just look at me funny, the look on their face is something like confusion. It's like their brain can't compute the possibility of being debt free and sort of shuts down for a second hoping that the notion will go awy after it reboots. People today are programed from birth that they should and must carry debt. It's the new American Way Of Life. Well I prefer the old American Way Of Life that is to use my own two hands to carve out my place in the world, for example buiulding my own house and not going into debt with a mortgage.

I love the frozen card in the freezer idea. I'm going to have to use that with my emergency cash.

However, even compounding the interest continuously on an 18% loan would only yield an effective rate around 19.7% or so per year. Although I may have misunderstood your statement. If you're talking about the effective rate against the ORIGINAL principal after 10 years of compounding, then yes, it could be absurdly high, but if you're talking about the effective rate against the current principal as compared to the advertised annual rate against the principal, then compounding continously rather than anually only gets your a percentage point or so higher.
J

The good old boys (the privelaged elites) have sold America down the river. There will be a super interstate constructed linking Mexico to the USA, and Canada. As information is made available, by the year 2010, we will merge Canada, Mexico, and America. Get ready all you people with your heads in the sand. Our beloved nation will soon be no more. Buy gold, guns, plenty of ammo, and lots of non perishables. Get out of debt. I believe there will be another civil war. This time to keep our sovereignty. Lots of people have died for our great nation. Will they have done so for nothing? It will soon become very important to be self sufficient and debt free. The livelihood of our country will soon be diluted with turd world rabble. They all will want welfare and social security benefits. Your take home pay will be severely cut. Vote in every election.

Tom
nobleknight
class 01-15-05

I don't think credit cards, in themselves, are bad. It's the lack of wisdom and financial education of the people who abuse them or use them incorrectly is what causes the problems.

Credit cards come in handy for emergencies. True emergencies. They also come in handy to use for hotel, car and airplane reservations. You don't have to actually charge these things to the card, but they want a card number for security. You can pay the bill with cash later, if you prefer.

And, then there's ordering stuff over the internet. Personally, I rarely do that. I'm not completely comfortable with it. (But, I may use them to order a handful of the books listed on LHBA through Amazon.) But, the thing to remember with making purchases, in my opinion, is to pay off the balance fully each month (before the finance charges begin). Don't carry any balances over. In other words, don't buy more than what you can pay for at the end of the month.

I like my no hassle card. I use it every year to take a camping trip/vacation. When I was living with someone, we would take off for 3-4 weeks touring the National Parks of the west, and I loved it. Now that I'm single, I still love it, only now all I do is rent a car and bring along my camping gear.

The only problem is that as a pizza delivery guy, it took me all year to pay for these yearly vacations. As a single guy, I can generally get away with a 3 week camping trip to all the same places I used to go for under a grand and pay it off in only a few months. The secret is to spend more time in one place at least when gas was 3 bucks a gallon.

I like the idea of debt free living, because you'll only have to come up with food which can be very easy to find among the myrid of cornfields and fishing holes, but I'll never give up my credit card.

I am lucky to have a unique situation living at home with mom. All I have to do is keep the house clean and I can live rent free. All my money gets stashed away. Most of the gas pays for itself driving for a living. The only extra cash I run across comes from playing blackjack. Counting Cards is easy, but not a subject for the board. 8-11 times I'll walk out a winner, and it would take a $50,000 loss for me to break even.

Unfortunately, my sister and nephews, and I don't get along. This is leading towards selling my share of the estate to my sister when the approaching time comes and putting it into a life time annuity. The taxes here are unbelievable and I can do without that bill, when I can move out to a rual area and pay $50.00 a year saving my share of 8 grand.

An Annuity may not be the highest returning investment, but with 100K you can recieve 600 bucks a month for the rest of your life, based on MY age. It's more of a way to protect the money than a way to invest it.

Good Luck!

William

There are some interesting points of view. I also believe in a debt free
life. However, to an extent I do not see a problem in taking out a loan
for ones primary housing. Why? like many places around the country
the Utah housing market is grow so fast, it is extremely difficult to keep
up with the inflating prices of homes.

I purchased my home 5 years ago, for next to nothing. It has probably doubled in value in the past 5 years. Therefore, the interest I have paid
is still less than the appreciated value.

Having said this, I will argue with my accountant who tells me to keep
balance "for tax purposes". No debt is my goal. Taking a practical approach, controling your spending, not caring what your neighbor has
can go along way.

Totally agree, Tom Nobelnight...We just wonder how much time we have to get out of debt completely before everything crashes. Too bad you don't live closer! We'd love neighbors like you.

Regardless, in our situation, our log home will require a mortgage. Though when all is said and done, we hope to be able to pay it down to under $50,000 (depending on what our current home sells for) as soon as the house is completed and paperwork is finalized. It'll be worth a good $4-600,000 or so. Not too shabby for us youngins. If the economy is still doable after two years, then we'll sell it and actually be debt free WITH a house and extra funds.

Our problem (PLEASE FEEL FREE TO MAKE A SUGGESTION): Medical coverage and costs. We pay nearly $800/month for the kids and I to be insured (Britt's employer pays for his) and it really almost doesn't seem worth it, although medical bills here are astronomical. Between the bills and the insurance charges, we pay 1/3 of our income towards healthcare. We do not qualify for medicaid (and wouldn't want to use it on principle --legalized plunder that it is). I don't know if we can simply drop the insurance coverage, though I've been contemplating it, because I have complicated pregnancies and our youngest daughter needs surgery for a condition that runs in the family and may affect future children. We have to fly out-of-state for care for both conditions. Worthwile, definately, but costly nonetheless. Insurance does NOT cover our airfare or travel expenses, though they do count as tax deductions. Lately we've been struggling under the mounting bills and I've been looking for alternatives. Anyone know if there is a type of coverage out there that would kick in at say $10,000 for the family (estimating with the $800/month we pay just for coverage anyway) without costing more than it is worth? We'd probably be better off waiting till after the surgery and my delivery before making a change (we'll meet our deductible this month), but maybe it isn't worthwhile afterall??? Any thoughts? I'd love some help on this one, and I'm surrounded by people who are too conventional to be of much help.

BTW, you'll almost ALWAYS save (It probably is always) if you buy a used car AND pay to get it fixed than if you get a new car that STILL needs fixing even under warranty. Calculate out how much you'd pay in two years, and ask a random mechanic what the norm is for car repairs needed on a two year basis. It doesn't even compare. Study out what cars last longest and need the least repairs in general (or ask someone who knows) and get something that will last and be a good investment. Wanting a warranty is a stupid reason to get a new car --it costs you more.

Edited to add per my husband's request: He works for a tyrant. Not just someone who is a pain to work for, but a tyrant. LOL Any good jobs out there?

Well since its snowing like crazy here today I can't peel logs so I'll give my input on this subject. A friend and me were talking about this the other day. Just like everything else you buy healthcare costs are negotiable. He had a surgery last year where hospital #1 advised it was going to charge 14k of which he had to pay 20% deductible. So he went to hospital #2 and they told him 10k with him paying 20%, saving him $800 in deductible. So he went back to hospital #1 and told them so they offered to do it for $12k and his deductible would be written off so he wouldn't need a penny. He got that in writting so they could never send it to collection. Had the surgery done didn't pay a dime!

So if you know you have to attend a doctors office or any other medical office try and negotiate your costs. Just like every other industry there are plenty of other doctors and medical centers (in most areas but not all). I know there are situations where there is a "top" specialist that you want to use and those situations are different but for most procedures and visits it can work to your favor. Most people don't just buy a new car at the first dealership, they shop around. Same goes for medical treatment.

Insurance and Oil are the two industries that are in bed with the government and we are never going to get them out.

Here is a good place to compare health plans:

https://www.ehealthinsurance.com

8)

Can give a hearty endorsement to Crown Financial.
Excellent program to get people out of, and keeping
people out of debt.

-Rick

Very good article about debt free living...except his money making mashine on the end of article.

- To good to be true...probably it is !
The good thing in this article is about geting debt free...

http://www.totse.com/en/ego/making_money/debtfree.html

I did search on Google for "mortgage free" and Debt free" - a lots of good info out there !!!
Try it !

I have taught Dave's class several times at my church. I'm a firm believer in FPU !!! I'm putting way money now so I can buy some land. My goal is to own my log home (when I get to build) mortgage free!!!
There will be such peace in that.

Lisa

I am not quite ready to build log home yet. I decided to buy cheap condo, sell a house where I live now, live in condo for a few years while looking for inexpencive land, save money, buy tools and materials, and get ready to build a home.

Now I am looking for advices, suggestions and warnings about buying a condo.
Thanks !

I am with Jason on this one, GT.
No to condo.

IMO I would look for land, buy and live there..either in a travel trailer/motorhome or build a temporary living space.

Living on your land before building and during is a huge advantage in so many ways. You really get a feel for your property, where the sun hits (different in winter to summer), where water lays, wind currents, and most importantly where you actually put your home. Plus you are not driving back and forth from your living home to your land site when you start building. With the price of gas and all the time you lose traveling to and fro, it makes things abit more challenging.

Good luck GT in your next venture!

Kola

You could just rent a cheap place.
That way you're not paying condo fee's & such, & have to worry about trying to sell it later.

The fees when up 3 times in 2 years. Then, the insurance company (the associations, not mine) threatened to drop all coverage on the units until the wiring was upgraded. This was 2 months before we sold. It was completed the day we moved out, never even got to plug an applicance in. Still got stuck with the almost $900 bill though.

The only good thing was the market was still on the upswing and made some money. I wouldn't take that chance today, not in the US, and not in Canada, as our bubble may burst as well soon.

The financial planners say you might not want to live debt free because it can lead to financial independence faster in some cases.

Similar to what KateHunter mentioned about investing instead of paying off the mortgage...

Using that example there are a couple things to think about. First you can make, in the long term, about 10% on the stock market. Your mortgage interest rate should be more like 6.5%. So if you've got 50k left on your mortgage, and you happen to have 50k in cash, you should invest that 50k instead of paying off your mortgage. This gives you a net gain and will give you more money than if you just pay off your mortgage.

Add to that the fact that mortgage interest is a tax deduction and that net gain can get pretty big.

Debt in and of itself is not necessarily a horrible thing. The trick is to understand how bad a particular debt is, what your cashflow is like, what your investment portfolio looks like, what your future plans are, and come up with a strategy from there.

If you are paying 6.5% on a mortgage where the interset is tax-deductable, that's MUCH better than paying 18% on a credit card.

Also, sometimes you need investment capital to be able to move on a partiular oppertunity. If you've got no cash, and your projected return is higher than your interest, then that debt is good debt.

Obviously all investment is risky, so if you want to be 100% conservative, you should get rid of all debt.

Personally I live MOSTLY debt free. But from time to time I do carry some low-interest tax-deductable debt which allows me the investment capital I need to capitalize on investment oppertunities.

Thanks. I think it's genius too. I can't take credit for it though. I saw it first on a money/frugality website, thesimpledollar.com

Not all his posts are relevant or interesting, but there are some gems such as this one. Check it out if you feel so inclined.

My wife expects to get at least 40% off at the register when she shops. It takes some planning. As soon as the weekly ads come out, she goes to this site ( http://www.thecouponclippers.com/ ) and orders coupons that match the ads. I am amazed at how much we get for how little. The key to really making it work for us has been, building a stock pile, and getting to the point where we only by what is on sale. Not including produce of course.

Simple Minds Wife here -

I used to think the same thing about coupons. However in doing a little research I've really made them work for us. I use a lot of coupons for Health/beauty aids. For instance, in the last month I got these things *free* by combining shopping/coupons: 3 toothbrushes, three tubes of toothpaste, 2 containers of TUMS, 2 bottles of body wash, 2 bottles of shampoo/conditioner....I know I'm forgetting some stuff.

As for groceries, I use coupons for cheese, yogurt, canned beans, canned veggies, canned fruit, tomato products (paste, sauce, chopped, etc...) salad dressing, bags of salad, boxes of cereal, tea & coffee, bottled water, peanut butter - again I'm sure I'm forgetting plenty.

I agree that growing your own food is ideal, but we also don't have the land to do so right now. So I make do with what I have available. We shop the Farmer's Market and buy grocery produce that is in season = cheaper.

There are some things that we find important enough to not compromise on. One is milk. We have organic, hormone free milk delivered each week. Is this cheap? No way - however, I save in other ways so this milk doesn't necessarily kill our budget.

I try to find a balance to keep our grocery bill down at the same time eating real, whole foods as much as possible.

Back to Simple Mind, now.