Author Topic: I'm Debt Freeeeee, well not really  (Read 5133 times)

Offline msparks

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I'm Debt Freeeeee, well not really
« on: November 28, 2016, 10:33:33 AM »

Checking to see how many are working on becoming debt free?

Is there a certain program you are following or are you doing it on your own?

Have you been debt free in the past and then fallen off the wagon?


Reason I'm asking I'm thinking of offering debt management classes in the near future wondering if there is much interest and wondering if I should use someone's program (Dave Ramsey, Financial Fitness etc..) or come up with my own.


Offline Beetlebum

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Re: I'm Debt Freeeeee, well not really
« Reply #1 on: November 28, 2016, 11:35:07 AM »
I (& wife) have been debt free for a couple years now (mortgage on home that is now a rental excluded). The process involved selling 2 new "fun" cars for 1 functional car, and using a Dave Ramsey style envelope system & snowball dept payment all while getting caught with a new-car's-worth of legal bills and a financially backward career change. Obviously the process was worth it and helped with the career change.

The envelope system was really good for us and helped change my wife's money habits (or maybe create some habits). We no longer use an envelope system and do use credit cards regularly with success. We are back to 2 cars now which are admittedly luxury items in many aspects.

I can't imagine having a car payment again. Talking with my parents over the holiday, my mouth was agape as they mentioned their new $800 /mo car payment and open application to refinance the house all while being a few years from retirement.

Offline Tyler Durden

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Re: I'm Debt Freeeeee, well not really
« Reply #2 on: December 06, 2016, 06:01:18 AM »
We're close.  Been struggling with debt for a long time and it's been a very tough road.  We find that even with debt almost paid off and more income coming in, we're still almost paycheck to paycheck.  I shouldn't even say "we" because I've been the one who has been doing it, and fighting my wife all of the way.  The first step on the long road started in 2009 when I head a "head in the hands" moment and decided enough is enough. 

Step 1 was cut up the credit cards. 

Step 2 was controversial; take all possible means of purchase away from my wife.  I hid the checkbook, debit card, and any little cash we had.  This caused some strife, but it was necessary.  Every once in awhile she would find my hiding spot and I'd pay for it but, for the most part, it worked.

Step 3 was the Ramsey style debt snowball and cash budget.

It worked, and was working and then I got an inheritance check a year ago.  Paid off almost everything.  Wife's vehicle, 12k in credit card debt, and a loan from my mother in law.  Rest of it went in the savings account and 7k toward a 99 F350.  The last debt I have is a loan from my mom and we're planning on paying that off in March with tax return and then we'll be almost debt free.  (The loans from family were due to a short sale on our house in MN in which we had to pay off 35k cash to the secondary lender). I say almost because we still have a CC for online purchases, but the wife has been using it a bit much.  Also, she opened a PayPal account which I pay off every time it comes, but that eats into money we could be saving.  Maybe need to end the CC.

She is trying hard to get us back underwater but I'm fighting the good fight and winning thus far.

Debt is cancer and had it not been an issue I'd probably be living in an almost-paid-for house and working a regular job, instead of renting and working the 24/7/365, on call, traveling, railroad lifestyle.

Offline Stwood

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Re: I'm Debt Freeeeee, well not really
« Reply #3 on: December 06, 2016, 09:58:10 AM »
Was heavy with business debt in 2010 and had a failing business due to the housing industry failing. So left self employment  and back to work for an old employer.
I went with TCA and they handled my debt payments, reducing interest rates and setting payment amounts.
I just had to make sure there was money in the account for them to withdraw every month.
House and property was paid for in 2004 so no worries there.

We finally made that last payment the first of the year, and retired in March.
Have one CC card I use occasionally and the amount is low so no worries there. That's the only debt we have, a couple grand.
Haven't had a vehicle payment in years, and not planning on having one.
We are working hard on the self sustaining mode, and getting there.

Offline mountainmoma

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Re: I'm Debt Freeeeee, well not really
« Reply #4 on: December 06, 2016, 11:29:28 AM »
We're close.  Been struggling with debt for a long time and it's been a very tough road.  We find that even with debt almost paid off and more income coming in, we're still almost paycheck to paycheck.  I shouldn't even say "we" because I've been the one who has been doing it, and fighting my wife all of the way.  The first step on the long road started in 2009 when I head a "head in the hands" moment and decided enough is enough. 

Step 1 was cut up the credit cards. 

Step 2 was controversial; take all possible means of purchase away from my wife.  I hid the checkbook, debit card, and any little cash we had.  This caused some strife, but it was necessary.  Every once in awhile she would find my hiding spot and I'd pay for it but, for the most part, it worked.

Step 3 was the Ramsey style debt snowball and cash budget.

It worked, and was working and then I got an inheritance check a year ago.  Paid off almost everything.  Wife's vehicle, 12k in credit card debt, and a loan from my mother in law.  Rest of it went in the savings account and 7k toward a 99 F350.  The last debt I have is a loan from my mom and we're planning on paying that off in March with tax return and then we'll be almost debt free.  (The loans from family were due to a short sale on our house in MN in which we had to pay off 35k cash to the secondary lender). I say almost because we still have a CC for online purchases, but the wife has been using it a bit much.  Also, she opened a PayPal account which I pay off every time it comes, but that eats into money we could be saving.  Maybe need to end the CC.

She is trying hard to get us back underwater but I'm fighting the good fight and winning thus far.

Debt is cancer and had it not been an issue I'd probably be living in an almost-paid-for house and working a regular job, instead of renting and working the 24/7/365, on call, traveling, railroad lifestyle.

While you are right overall about the debt, you guys somehow have to get on the same side. After all this time, isnt there some payoff that she can see ? In other words, you were austere to pay off the debt, but now that the debt is paid, you both need to agree on how to spend current incomes. Even if it isnt all your way, you might want to save and she might want to spend, but as long as new debt isnt being made, her viewpoint is a valid as yours. If you 2 cant agree on a compromise budget, you might want to go to a budget class or counseler. I say this as you wrote that her spending is eating in to savings. She must not agree that you need to save that much vs current needs. SO, she should see a larger spending budget now that so much debt has been paid off. And, besides the crrect way for a married couple to work together, if you dont, it is going to be realy expensive on your budget if she leaves.

Offline mountainmoma

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Re: I'm Debt Freeeeee, well not really
« Reply #5 on: December 06, 2016, 11:46:36 AM »
I use an envelope system. Physical and virtual. Having a budget is key. Planning for expenses is key. Sometimes budgets seem to break because people do not set aside for things that have to happen. Birthday gifts for kids school friends, christmas comes every year at the same time, etc... realistically plan for these so that the budget is real

I became debt free about this time last year, including the mortgage, and home equity line, although taxes are so outrageous that 1/3 of my meager income goes to property tax/home insurance. Mortgage was paid off 3 years ago, home equity line last year before end of child support payments.

I am old enough that it should be paid off, you figure that I bought my first house at 25years old. The key was when I bought the second house, I took out a shorter term mortgage, I figured it wasnt getting ahead to re-start the clock at 30 years again. SO, that would be my biggest take away, put equity gain into the replacement house and get a loan that doesnt move your payoff date later than you started out. SO, get a 25 year loan, a 20 year loan, a 15 year loan on the next house.

Second key thing was to not buy ANYTHING with the 2nd mortgage (line of credit) that wasnt absolutely needed for the house. So, not for a car, not for a vacation, not for the kids schooling. None of that on a second loan. many, many families I have seen put all of that on 2nd loan or credit cards.

In my case, I could not stick to this. Twice I had to put home equity money on lawyers for family court -- so see my comment above, this is more expensive than compromise. And, it severely affected ,our childrens' life, that so much of child support had to go to pay off money to get child support, but I can do the math, and took the balance and divided it by the time until they were 18, and we paid that every month. My son grew up with alot of peanut butter, etc... 

I also had put a new roof on this equity line. It is false economy to let a house totally fall apart.

Offline Beetlebum

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Re: I'm Debt Freeeeee, well not really
« Reply #6 on: December 06, 2016, 11:56:09 AM »
Step 2 was controversial; take all possible means of purchase away from my wife.  I hid the checkbook, debit card, and any little cash we had.  This caused some strife, but it was necessary.  Every once in awhile she would find my hiding spot and I'd pay for it but, for the most part, it worked.

In my case, I gave the budget to my wife. That forced her to do the math and recognize when we were falling short and how. Between that and the envelopes (when the cash is gone its gone), it clicked for her. Although she jokes about it, I don't think she's done any "retail therapy" since about 2012.

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Re: I'm Debt Freeeeee, well not really
« Reply #7 on: December 06, 2016, 12:41:26 PM »
I took all credit cards away from my wife except for a super low balance one ($300) that I'm allowing her to use to re-establish her credit score.


We started out about $60,000 in the hole 3 years ago. Come next April, we'll be back to 0.

Won't be TOTALLY debt free (will still have mortgage payments, and she did purchase a used car that she is still paying off), but will be mostly bad debt free.

Offline Tyler Durden

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Re: I'm Debt Freeeeee, well not really
« Reply #8 on: December 07, 2016, 08:45:05 AM »
While you are right overall about the debt, you guys somehow have to get on the same side. After all this time, isnt there some payoff that she can see ? In other words, you were austere to pay off the debt, but now that the debt is paid, you both need to agree on how to spend current incomes. Even if it isnt all your way, you might want to save and she might want to spend, but as long as new debt isnt being made, her viewpoint is a valid as yours. If you 2 cant agree on a compromise budget, you might want to go to a budget class or counseler. I say this as you wrote that her spending is eating in to savings. She must not agree that you need to save that much vs current needs. SO, she should see a larger spending budget now that so much debt has been paid off. And, besides the crrect way for a married couple to work together, if you dont, it is going to be realy expensive on your budget if she leaves.

I don't know if she sees any benefit to being debt free because I've always taken care of the finances.  I've offered to show her how I do it so she can understand but she's really not that interested. 

We come from opposite schools of thought on the subject.  If one was to observe her immediate family, they would see that I'm like her mom when it comes to finances and she's like her dad and sister.  Her parents are divorced, mom makes good money and manages it well.  Her dad? Oh boy.  He spends money like it's infinite.  He inherited seven figures from his parents when they both died and, as far as we know, three years later, it's gone with little to show for it.  Her sister is 31 and has gotten annuity payments (for an accident that happened to her when she was little) since she was 18.  She blew all of it on clothes and partying.  Nothing left.  She also declared bankruptcy at least once. 

My wife is not hostile to my financial planning, but indifferent.  If we were to lose our retirement, savings, and run our non-housing debt back up to 60k, I don't think it would bother her at all.  She sees my buying of stocks and PM's as no different than her buying clothes and makeup. Her spending isn't eating into our established savings, but money that could go there.  I'm trying to get six months worth of living expenses saved up, plus a down payment for a house.  We could easily be putting away 3k per month for that.  Instead we're putting away $500-$1000 per month.  I'd think she would see a benefit as I was laid off for six weeks earlier this year (we had no idea it would only last six weeks) and We didn't really notice.  I had about four months worth of expenses saved up but with her working and my unemployment checks I figured we could have lasted almost two years like that.  When I was back to work we had only used up 1k of our savings.  Four years ago six weeks of no work would have set us back immensely.

I agree with everything you said but there are a lot of issues going on that run deeper than just money.

That being said, if you go ahead with your classes msparks, you probably should spend one session on married people money issues.  When I think about it, most married couples I know are not on the same page with finances.

Offline David in MN

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Re: I'm Debt Freeeeee, well not really
« Reply #9 on: December 07, 2016, 09:46:16 AM »
It's funny. I have the opposite problem. Both the Mrs. and myself are super debt-phobic. We had no school debt, never had any credit card debt, paid cash for our cars, overpay the mortgage. We embraced "living below our means" which means we don't vacation often (better one trip to France than 25 weekends upstate), rarely eat out, and don't buy toys. We bought half the house we could afford.

But then you sit down with a financial planner who gets apoplectic that you've paid massive chunks of the mortgage at 4.XX% with money from your brokerage that was appreciating around 20% annually. Essentially we lose money by paying it down. The two of us (both trained engineers) both think that paying down the debt in bulk and refying to pay off the house sooner AND saving $300/month makes more sense because it makes us more liquid going forward and unbridles a big chunk of that fearful debt.

It's rather funny that I could live life trading on a debt based margin account fearlessly as long as I could cover the 25k asset requirement (real easy) but in the real world I'm terrified of any debt regardless of how I leverage it. It's not rational.

At times I wonder if we are both secretly trying to get into such a positive cash flow position that we get to give up the rat race and be Walmart greeters. My wife openly jokes that my future is being paid minimum wage to work at a hardware store just because I like tools and solving people's problems. Not far off the truth.

Offline Tyler Durden

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Re: I'm Debt Freeeeee, well not really
« Reply #10 on: December 08, 2016, 08:19:04 AM »

At times I wonder if we are both secretly trying to get into such a positive cash flow position that we get to give up the rat race and be Walmart greeters. My wife openly jokes that my future is being paid minimum wage to work at a hardware store just because I like tools and solving people's problems. Not far off the truth.

I hear you there.  A paid for house that you want to stay in is a huge goal of mine.  I want my cost of living so low that I could live off of most any job.  I discuss this a lot with buddy of mine who has the same goals.  He says his goal is to be able to work in a tackle shop up in the iron range cutting bait.

Take care of my beloved MN!

Offline mountainmoma

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Re: I'm Debt Freeeeee, well not really
« Reply #11 on: December 08, 2016, 10:10:49 AM »
I hear you there.  A paid for house that you want to stay in is a huge goal of mine.  I want my cost of living so low that I could live off of most any job.  I discuss this a lot with buddy of mine who has the same goals.  He says his goal is to be able to work in a tackle shop up in the iron range cutting bait.

Take care of my beloved MN!

Moving to a low cost of living is key. At least get that house paid off before retirement age, so by 60years old if not sooner ( don't cut it too close). I became disabled well before retirement age, and not having too long before mortgage was paid off was great. Everything that reduces expenses at that point is absolutely needed. Anyway, wether you ever become a Walmart greeter or not, you will stop working at some point. Pensions and Social Security will likely not go away, but they will pay out less than you would like, and less than current projections. Your investments are a gamble of some sort, they may yield alot. or not. or lose it all. So, I agree, work towards that assumption that by 55-65yo you could have a ridiculously low income. If it works out better, you are pleasantly surprised, great.

 If you know you have a roof over your head, a way to eat and stay warm, no stress. So, everything we sensibly talk about here: no debt except for house; do not add to payout time for house, maybe even reduce it if you have the means; work on ways to add resiliency and self sufficiency; put away alittle food or money or fire wood if you can. Knowing that I have a home(excepting prop tax theft), that I have a ton of energy and food independence ( never totally, but that is ok) makes me more secure than if I were to have alot of money in the bank.

Offline xxdabroxx

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Re: I'm Debt Freeeeee, well not really
« Reply #12 on: December 08, 2016, 11:15:24 AM »
I've been debt free for a few years now.  Felt really good to pay off my truck, I don't really plan to purchase another vehicle on credit any time soon.  I haven't had any credit cards since just after college and my only other debts were student loans that were also paid off.  I inherited some money when my grandmother passed and used a good portion of it to purchase my house, a fixer upper for sure but she's paid for and mine.  I've got a lot of work left to do on it but I think I'll be able to make a small profit when it's said and done.  Then I can use that towards a larger property, I want a little more breathing room in the long run. 

For me, paying cash for the house was the only way I was going to be able afford to live without roommates.  I have an OK job at an architectural firm but it pays nowhere near as good as was implied when I was in school.  I probably could've qualified for a loan on a bigger and nicer home but most in my area were going for what seemed to me to be outrageous prices for mediocre construction and poor neighborhoods. 

Nice thing about being debt free is not having to worry so much about your job, if I were to lose mine I could survive for months without much worry on unemployment.  I'd cut the internet and a few other luxury items out but I'd survive just fine, I've already omitted cable tv in an effort to reduce my overhead, don't have a land line phone, living in the foothills fast internet is not cheap though so it is a bit of a trade off.  If I got rid of that I could lower my overhead to about $300 a month (including insurance, etc.), so that plus food and gas makes for pretty cheap living.  Being debt free is definitely worth working towards. 

Offline 1022

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Re: I'm Debt Freeeeee, well not really
« Reply #13 on: September 10, 2017, 07:44:27 AM »
I am within 6 months of becoming debt free, in the last 5 years my wife and I have paid off more the 100k of consumer, school debt and debt that I took on from a previous marriage envelop system as well. One thing that helped was credit surfing.

We would float our debt to 0% interest credit cards. So in all that time we have paid very little in interest. We also have a strict budget. We do use our rewards credit card for most of out purchases, but never go over budget with it by using virtual envelopes. We have paid for a few vacations with it, and are on our way to a prepaid vacation in Italy.

By budgeting we have not only paid down our debt we have money put aside for eventualities. Recently I had over $1000 in car repairs. I did not even have to blink an eye as there was more than enough set aside for that to fix the car.

I am also in the process of masters studies. I am lucky, with my job there is so much overtime that I have banked that when it is time to pay for a semester, I just cash in some hours to pay for it.

Budgeting has made it possible for me to get anything I need to be paid for in advance. It has also made me realise the stuff that I don't need.

Offline Cedar

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Re: I'm Debt Freeeeee, well not really
« Reply #14 on: September 10, 2017, 08:34:14 AM »
I have been debt free personally since 2009 when I sold my 40 acre farm, and bought a house on 1/4 acre. I currently own some land, but will be building a small home without going into debt. Frankly, I feel like I cannot afford to go into debt.

My truck is 17 years old, 300k on the engine, I bought it new, which was a great investment, but I am wavering on making repairs (which I recently started doing), or, to give myself some credit history, if I ought to buy a vehicle on a loan and pay it off within a year...sadly, you do have to play the credit game from time to time, but choose to use them by your rules, not theirs. In 2018 I may just buy a newer truck with as little of a loan as I can, make some credit history.

There are drawbacks for being debt free, there are bonuses. This will be the third winter living in a thin walled travel trailer...in my humidity, it sucks. But it is saving me $1,200 in rent/month, plus utilities. Which theoretically will give SP and I $14k more to put into our cottage we plan on building in 2018.

My daughter and i have only gone to one theatre movie together. Ever. But we get creative and go see free stuff, like the street cruise for old cars we found the other day. We had our lawn chairs in the back if  my truck, so we set those  up quickly. We do not eat out alot. When we want sushi, we get the grocery store kind, not the sushi track kind. It is also better for us than fast food.

We shop at Goodwill often. Habitat for humanity I shop at more than the normal stores. We do Gleaners.  We do grocery outlets when we don't get Gleaners foods. I wash clothing in a bucket these days..we don't buy pop unless it is nasty moutain dew for my migraines.

Everything we buy we have to justify the purchase of. Sometimes it is not fun. Sometimes it is... But we...yes, even my seven year old daughter, understand it will keep us debt free. I forgot what the item was I was buying yesterday, but my daughter asks, 'is it something we need?'

It galls me I might have to take out a vehicle loan, but in a sense I also cannot afford not to.

Cedar

Offline mountainmoma

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Re: I'm Debt Freeeeee, well not really
« Reply #15 on: September 10, 2017, 09:47:14 AM »
strategic debt that you take on fr a very good reason can make sense. You drive alot, and are likely going to be using a truck alot to get supplies for the cottage you are going to embark on in the spring. If you find a good one, it is worth it. I would most likely make the same choice in your shoes, with the old truck at 300k and needing repairs. Needed vehicle, and roof replacement were my exceptions to the no debt rule ( besides lawyers....)

I actually put the used truck I bought last spring on home equity, well some of it, first to keep my budget level, but also, as I hadnt borrowed anything in a while, I decided the small amount of interest for a year on such a few thousands to be worth giving the credit score people something to work with, and kept me taking money out of my virtual car repair envelope, which was good as the darned truck just had 1,000 last month repair bill for bearings/spindle/front brakes.... one of many problems with living around here is that hourly billing for everything is absolutely outrageous, including car repair shops !