Posted on 06/26/2023 6:25:25 PM PDT by ChicagoConservative27
Yeah. You were 22 seconds ahead of me. I must be getting old. LOL
We have 2 cars, nice home on acreage, lots of stuff. NO debts at all.
100% debt free 10 years now, every monday i owe nothing to noone after paying the usual bills
I 100% get the appeal for being debt free. My concern for my situation is my wife and I are in our 50's with her retired and me quasi-retired but in a few years plan to be fully retired. Thus, if we are to live for perhaps 3 decades, I have to contend with tons of inflation. Thus, keeping more of our wealth invested in our Roth accounts and tax-deferred accounts is very attractive to me.
Thus, I've never paid extra on the principal of our mortgage with its low fixed interest rate. When I was working I instead paid extra into our Roth investments.
Then shortly after my wife retired and I quasi-retired, Brandon entered the WH and topped Obama's promise of "under my plan electricity rates would necessarily skyrocket" by making both power rates and natural gas rates go up. So I took out a low interest rate HELOC to add solar to my home and make my home more energy efficient and convert my two natural gas appliances to electric. (Basically, I substituted half of my home's future unknown energy cost inflation with a defined HELOC payment that slowly goes down as the HELOC balance is paid down.) After having solar for a year and studying the data, and since it was time to replace my wife's old crossover van anyway, I replaced it with an EV crossover (low interest rate car payment) and added to my solar. Now I have a low fixed rate HELOC payment and a low fixed rate car payment, but over 80% of our energy is supplied from solar, including charging the EV (for local driving, since on trips we charge away from home). No natural gas bill. Hardly any gasoline at the pump (we drive my ICE pickup every once in a blue moon, but 26K miles per year is in the EV, with about 22K of those miles charged at home). And only 20% of our power is bought from the grid (averaging $75/month). Basically, I don't stress over what next year's energy costs will be like, nor the year after that.
Assuming only a reasonable 3% inflation rate in the energy prices we avoid, when the car payments end (4 year car loan, I started it a year ago this month), the overall energy project will have saved my normal budget/retirement $6,000 - $7,000 more than it cost me (in making HELOC payments and car payment vs energy costs I had budgeted for in year 2019 as the "standard" for energy costs). I'll still have the HELOC balance to pay down, but with no car payment (and no gas at the pump) the HELOC will be paid down faster all while my budget still feels like the energy portion is still year 2019 (what I was paying then for power + natural gas + gas at the pump + $400/month I transferred into a car savings account to repair and replace used ICE cars with future used ICE cars and not make payments).
But the math and project engineering and financial planning to do all of that isn't worth anybody else doing unless you have the same fear of inflation in retirement that I do. And the Dims promise to keep the inflation pain strong, especially energy price inflation.
That mortgage thing is confusing to some. I know a guy that owed on his camper, his boat, his pickup and his house. I said he best get out of debt before he retires. He came back at me a couple weeks later and said he was out of debt, and then he retired.
What he did was refinanced his house to pay off all other debt. He wound up with higher house payments but does not believe his mortgage is debt.
We retired Scott free out of debt and remain so to this day. Any money left over after paying bills is ours to spend as we wish.
Technically yes. A mortgage is debt
Pay off your debts, folks, including your mortgage as fast, as you can.
My wife and I went full gonzo for 5 years, paid off everything including mortgage and put 6 months expenses in a savings account. We also keep 2 months expenses in checking and budget like we are broke.
This was not an easy thing to accomplish and quite exhausting but now that we have achieved this we have discovered that we really don’t need all the crap most people think they need to be happy. All that pain we endured while on our mission to become debt free has become habit. We are not going back there (the debt hole), ever. It was a great teacher and if it had been easy I think we would struggle to remain debt free but we have no interest to ever again become a slave to a bank. Debt free is a great way to live.
I have been studying personal finance for a few years. Not an expert or anything like that but I do know a few things and have about 35 books on my shelf on this topic (getting out of debt, entry level investing, living below your means, making lifestyle changes to reduce spending, saving for the future, budgeting). You get the idea.
For the person who is close to retirement and still has debt, the best basic book to at least get an idea of how to get out of debt and what it is like to be debt free is Dave Ramsey Total Money Makeover. A lot of people who really don’t know a thing about him throw rocks his way but it is a good place to start.
People who think the Bible is simply a good read or classic don’t really understand this. But Dave Ramsey quotes Proverbs 22:7 all the time. I personally take the words of the Bible seriously and know this Scripture well and really dreamed for the day we would be debt free.
When that fateful time came and we made the last payment on our last debt and were truly debt free, it wasn’t like confettee or party time but these chains we didn’t know bound us fell off and at that point we knew that for years we had been a slave to the banks. That is no longer true.
For once, it’s nice to be below average.
The article asks, “What would you do to be completely debt-free?”
Are any of the options; don’t get a new car every 2 years, don’t go out to eat every night, don’t buy designer clothes, etc.
and always remember that when you stop paying your property tax that the government will come and take your house and sell it to someone else. It is all legal you know.
Same here starting in 1999. Don't owe nuthin' to nobody.
Concur. Theft by government is everywhere.
Everytime I get out of debt a new dental issue pops up with some one in my family. Dental insurance is a joke and the cost of dentistry is a financial killer.
I take a few minor exceptions to what he teaches, yet tell people who come through my financial small group that if they don't like what I promote and instead go with Ramsey's teachings, they'll be fine. Of course, in the group I don't mention solar or the EV since that won't work for most people. Plus, the solar and EV are more of a full-fledged self-reliance on energy concept (thus more fitting for a conservative political forum on how to be independent of government control).
One of the things I do differently is talk a little about investing while talking about budgeting. I tell people over and over not to invest until they've paid off most or all of their debts (with exception to the mortgage), so in that sense I'm almost like Ramsey's baby step 2. But I bring up investing every now and then during the budgeting and debt talk phase as a teaser to encourage people to make a budget and hurry up and get out of debt. (Do you want to start investing sooner and start those compound returns sooner? So let's get busy on that budget and paying down debts.) IMHO, Ramsey makes baby steps 1, 2, and 3 boring for many weeks, where I sprinkle in a little investing talk to keep the discussion alive and keep them motivated.
Another thing I do differently is I often promote starting Roth IRA's when high percentage debts are paid off, but not necessarily all debts are paid off. I do that to get the clock rolling on the Roth IRA's 5-year start rule. Later people seem to be more motivated to invest in their Roth IRA if they know they can take money out without penalty (5-year rule is satisfied, Order of Distribution rules for Roth IRA's allows for contributions to be withdrawn penalty free if the Roth IRA was started at least five years ago, even if you're not 59.5 years old yet).
Another thing I promote differently from Ramsey is a healthy fear of inflation, which leads to promoting a broadly diversified portfolio spread out across many mutual funds and many asset classes. And if you're retired or near retirement, still keep 70% in equity funds. Usually at that point Ramsey doesn't get into detail and he says to "sign up with one of my investor pro's in your area". But the few times he does talk in some detail, he promotes 50% equity/50% bonds for retirement. The problem with the 50/50 design is that it barely keeps up with normal inflation (assuming withdrawing 4% annually to live on). It certainly doesn't keep up with the kind of inflation we've had for the past 15 years (especially not the past 2 years). So for the past 6 or 7 years I've pushed a 75%/25% portfolio spread out over 40+ mutual funds (30+ in equity funds and 10+ in bonds/treasuries/money market funds). In a market downturn your overall balance will be low (say in Oct 2007 you have a million, then in March 2009 it was about $700,000), but some of your funds will be up and good for the annual 4% withdrawal (or 1% quarterly, or 1/3rd of 1% monthly). I made software to download decades worth of daily NAV prices of various mutual funds into a SQL Server database on my personal laptop, then made other software to generate reports and graphs over different timeframes (i.e. what if you retired in January 2000 right before the dot com crash?) to show how even a 75/25 portfolio would always have something that's up to withdraw from (sell high), while also on the bull market years build up the wealth to keep up with inflation (except perhaps crazy Bidenflation).
Another thing I do differently from Ramsey is baby step 5: kids' college. What I don't like about a College 529 account is it limits you to college (or vocational training) if you want to make penalty free withdrawals. What if your kids don't go to college? Or what if you put in enough for a bachelor's degree and your kid instead goes into plumbing (and probably makes better money than most bachelor degree holders)? So I promote using Roth IRA's and Roth 401K's for both retirement and college. Most people won't max out contributions in both their Roth IRA's and Roth 401K's anyway. So put both your kids' college investments and your retirement investments into your Roth IRA's, and if that's more than the maximum contributions allow put the excess into your Roth 401K's (of course after already putting into your Roth 401K whatever you need to get the full company match). That way, if you don't need as much for college as you thought you did, you have more for retirement growing tax free. Maybe even take an early retirement: since you can withdraw the contributions portion penalty free regardless of age, if you're wealthy enough you can retire at say, age 53, live for a couple of years on Roth IRA withdrawals that are just contribution portions, transfer your old Roth 401K to your Roth IRA and all of that money counts as "contributions" you can withdraw penalty free, then at age 55 work again for a few months at a place with a 401K and transfer your old 401K to your new work's 401K, then retire and withdraw penalty free from your 401K/Roth 401K under the Age 55 rule. At age 59.5 all of your 401K/Roth 401K/Roth IRA money is available penalty free for withdrawals (unless you did conversions from traditional 401K or traditional IRA money, which starts a new 5-year clock with each year you converted, but that's a side topic).
For the folks who insist on having their mortgage paid off at the earliest possible time, if the interest rate is a fixed low rate (obviously not a new mortgage), I encourage investing extra instead of paying down extra on the principal. The investment account will grow faster than the mortgage would be paid down. And when the investment account balance equals the mortgage balance (plus some extra for capital gains tax unless it's in a Roth account), use the investment money to pay off the mortgage. For the folks who are okay with a mortgage debt in retirement (like me), that's fine as long as your retirement investments are enough to live on plus the mortgage balance. In other words, if I was to withdraw from my investments today enough to pay off the balance, what's left of my investments need to be enough to live on for the annual 4% withdrawal. So if anyone is going to be like me instead of you and have a mortgage debt, that's fine, they just can't count themselves as wealthy enough to retire unless the investment balance is also enough to pay off the mortgage at any point they have the need to be debt free (i.e. if I one day get tired of the bank's rules of my house and want to separate myself from the bank by paying off the mortgage that day). But until one reaches that kind of bad relationship with the mortgage/bank, by not paying off the mortgage early it leaves you more money invested to fight a very real monster: inflation.
The best message I took from Dave Ramsey was:
“If you live like no one else today, you will live like no one else tomorrow”.
My wife bought a house below our means. Didn’t take any vacations for 20 years. Paid cash for cars after saving up for years. Made our kids work to pay for their wants. We paid for their needs.
Same here we have no debt except our mortgage which we’re going to pay off soon when we sell the house and pay cash for a new house.
“Average American has over $54,000 worth of debt”
Good grief! I get agita just thinking about it.
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