Living Debt Free as of Today

[OldGuy]

I remember walking through the halls of my college near the cafeteria - there were always credit card vendors giving away big bags of M&Ms if you applied for a card. I obtained my 1st Visa that way. Today....those M&Ms won't cut it - I fall for the big travel points deals though.

That must be how DW got hooked on big bags of M&Ms. if she doesn't stop buying them, I'll get hooked, too.

 

[Kel]

Congrats! We are 100% debt free too. Feels great!

 

[Brett]

I'm also debt free .... feels good

 

[Helaine]

I'm 100% debt free too! It feels very liberating!

 

[joestein]

Yay, today is a big day. We paid off two mortgages and we are now 100% debt free in our early 50s. Also, we are debt free in Northern California! Who else is living debt free or will be soon?

We will be joining that club later this year as we only have a few mortgage payments left. However the former mortgage payments will go directly to our savings.

As for paying cash for cars. Hard to do that when the auto companies offer 0.9% or 1.9% financing. We put $1K down on our 2011 Acura and paid it off in 5 years at $800 a month. $49K total paid over 5 years, only $1K + change more than actual total bill.

I will generally also take advantage of any zero percent interest deals when making large purchases (over $2K).

 

[joestein]

I have never been debt free and never will be. If you have no debt you are living on your money. If you have debt you are living and earning on other peoples money. My fixed rate mortgage is 3.6%, the current rate of return on my investment portfolio is 18.1%. If the rate of investment return falls below my mortgage interest rate then I guess I would start to lose money. While I did lose in some years the net difference in the past 32 years has been about 8.5% positive on average.

Some folks will say that if I had no debt I could invest even more. That is not true. If you have no debt everything you purchase is done with money you could have invested.

Just presenting a different view. Having a large amount of debt scares the heck out of some folks. To me it's just crunching numbers to get a positive result.

On early retirement I'm not a fan. I was forced to retire at 62 from a career and a position that I really enjoyed because of age. I enjoy retirement but if I had a choice I'd still be flying helicopters.

I guess it depends on your appetite for risk and/or debt.

I tend to be debt and risk adverse. I realize I have probably not used our money to the best advantage, but at least I generally sleep well.

 

[joestein]

Typical kid ran up CC debt in college, took me years to pay off. I have never had CC debt again. Pay my CC off each month no matter how high.

I understand that. we had $40K of CC debt when we got married at 24. I thought I would die and engraved on my tombstone...…"Died with 40K of CC debt".

However, paid it off in 3 years or so and then saved for a house for the next 3. and so it goes....

 

[TravelTime]

We will be joining that club later this year as we only have a few mortgage payments left. However the former mortgage payments will go directly to our savings.

As for paying cash for cars. Hard to do that when the auto companies offer 0.9% or 1.9% financing. We put $1K down on our 2011 Acura and paid it off in 5 years at $800 a month. $49K total paid over 5 years, only $1K + change more than actual total bill.

I will generally also take advantage of any zero percent interest deals when making large purchases (over $2K).

I just took advantage of 0% financing on a mattress.

 

[bluehende]

We will be joining that club later this year as we only have a few mortgage payments left. However the former mortgage payments will go directly to our savings.

As for paying cash for cars. Hard to do that when the auto companies offer 0.9% or 1.9% financing. We put $1K down on our 2011 Acura and paid it off in 5 years at $800 a month. $49K total paid over 5 years, only $1K + change more than actual total bill.

I will generally also take advantage of any zero percent interest deals when making large purchases (over $2K).

Many times that reduced financing is in lieu of a cash rebate so make sure to check. We have actually financed 2 of the last 4 cars we have bought. One was 0% with no other offers. That is fairly rare. The other was when we had a rebate if we financed. I found out we only had to finance about 1/3 of the car and keep the loan for 3 months. I almost laughed at them when they brought back the interest rate. 11% when personal unsecured loans were in the 9 range. Running the numbers though gave us 700 bucks net profit so went with it. I think I had 10 reminders to pay that sucker off the day we could.

Debt is a tool. It can be used correctly or incorrectly.

One other thing over the years that shocked me was buying up ( not down ) a mortgage. I am assuming this too was an anomaly but when my son went for a mortgage the offer of cash to pay a higher interest rate was attractive when you run the numbers. He was young so the break even rate was above the cd rate I use in my calculation but way under the average market return. This was during the period of well less than 1% cd rates so pretty hard to overcome that. If I remember right the break even was less than 3%. He took it and placed the cash in the SPY and has done well with it. He did take on some risk, but market risk over a 30yr mortgage is pretty small. Of course when he did it that interest was going to be tax deductible and the earnings would be taxed at capital gains rate. With the tax laws now the break even is probably over 3% now.

 

[Brett]

Many times that reduced financing is in lieu of a cash rebate so make sure to check. We have actually financed 2 of the last 4 cars we have bought. One was 0% with no other offers. That is fairly rare. The other was when we had a rebate if we financed. I found out we only had to finance about 1/3 of the car and keep the loan for 3 months. I almost laughed at them when they brought back the interest rate. 11% when personal unsecured loans were in the 9 range. Running the numbers though gave us 700 bucks net profit so went with it. I think I had 10 reminders to pay that sucker off the day we could.
Debt is a tool. It can be used correctly or incorrectly.
One other thing over the years that shocked me was buying up ( not down ) a mortgage. I am assuming this too was an anomaly but when my son went for a mortgage the offer of cash to pay a higher interest rate was attractive when you run the numbers. He was young so the break even rate was above the cd rate I use in my calculation but way under the average market return. This was during the period of well less than 1% cd rates so pretty hard to overcome that. If I remember right the break even was less than 3%. He took it and placed the cash in the SPY and has done well with it. He did take on some risk, but market risk over a 30yr mortgage is pretty small. Of course when he did it that interest was going to be tax deductible and the earnings would be taxed at capital gains rate. With the tax laws now the break even is probably over 3% now.

I would add if you are evaluating a zero percent offer on an auto loan vs the bottom line cash price get at least three quotes from other auto dealers. Every time I've done this the "0%" loan amount is significantly higher than the cash price. If you don't have the available funds for an outright cash purchase then still get quotes for the exact same make and model car from other dealers -

 

[joestein]

I would add if you are evaluating a zero percent offer on an auto loan vs the bottom line cash price get at least three quotes from other auto dealers. Every time I've done this the "0%" loan amount is significantly higher than the cash price. If you don't have the available funds for an outright cash purchase then still get quotes for the exact same make and model car from other dealers -

From my experience, the price of a car and the method of payment are two separate things. It is up to you to keep it that way. There is no cash price vs finance price. Regardless of how you decide to buy the car, the dealer get paid immediately, the financing is a separate transaction. In many cases, the dealer would prefer you to finance as they can try to get you an above market loan that pay them points or hide additional fees or profits in the monthly payment. My wife's uncle worked in car dealerships all his life. He would call it a whore's business. While it might not be the most PC term, I understand what he meant and I haven't seen anything that shows the industry has changed.

When I buy a car I use Edmunds to get quotes from all the dealers in my area. I ask them to provide me with a total cost including any fees they might include. Once I choose which one make most sense for me, I then discuss how I will pay. Usually the financing offers come directly from the manufacturer so I already know the details and decided in advance if I am interested.

 

[Ken555]

From my experience, the price of a car and the method of payment are two separate things. It is up to you to keep it that way. There is no cash price vs finance price.

Yes, exactly.

When I buy a car I use Edmunds to get quotes from all the dealers in my area. I ask them to provide me with a total cost including any fees they might include. Once I choose which one make most sense for me, I then discuss how I will pay.

I’ve used different tactics over the years to avoid a lengthy “negotiation” process with a dealer. The one I like the most was from an online service that charged a reasonable fee and allowed me to select exactly which make/model and features I wanted, and choose which specific dealers I wanted to be notified of my interest. They had the opportunity to propose any offer and car they wanted, and the best part was all the selected dealers saw every other offer so they could have a small bidding war for my business. I had purposefully left off the local dealer from this list and once I had the best offer I went to the local dealer, showed them the offer and asked them to match it. The first manager said no, then the sales guy went to a different dept manager and got it approved a few days later (I was not in any rush, and headed out of town). This saved me lots of time.

That service was simply an enhanced modern version of the old fax bid process, where you fax a dealer and do not give them your phone number...only your fax number. All bids arrive via fax, etc.

Sadly, the service I used was purchased by a larger car company and is no more...I suspect for obvious reasons.

I doubt I’ll need to use this any time soon. I purchased a used car five years ago, only drive ~6,000 miles per year, and maintain it so I expect it could last another 15-20 years if I wanted it to (doubtful). But, I’m not sure I will ever buy another new car again. Like timeshares, why buy from the developer? Unless the financing is the key decision making factor, it’s rarely best to buy new. Of course there are other issues at play in deciding which car and used or new.


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[susieq]

Yay, today is a big day. We paid off two mortgages and we are now 100% debt free in our early 50s. Also, we are debt free in Northern California! Who else is living debt free or will be soon?

CONGRATS!!!
​

That's our short term plan..............can't come fast enough!!! We're green................

 

[TravelTime]

We should start a debt free thread and celebrate those of us who have accomplished this, as well as those of us aspiring.

 

[Patri]

We should start a debt free thread and celebrate those of us who have accomplished this, as well as those of us aspiring.

This is it.

 

[Joe33426]

We are still paying on our house. If we stay here, we should be paid off in about 6 years. When I did Financial Peace a few years ago, I learned that people living in California and New York weren't supposed to plan on paying off their homes. I said screw that, I don't want to die owing money on my house. So, I paid off the credit cards and medical debt and starting cranking on the house.

When I bought my coop in NY last year during the board interview I think some of the board members couldn't figure out why I wanted to pay cash and not take a loan. The building has a mortgage, so technically I'll NEVER be debt free as long as I own that coop, which has been around since the 70s. Imagine a permanent loan FOREVER. I don't get it, but a lot of things in NYC I don't understand.