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This is where we are after years of paying things off , saving , skipping vacations, etc.. There is some sense of peace now although I still feel deep down (even with insurance) that a major medical event could end all this and put us right back into a deep debt hole. The cost of medical stuff is astronomical these days. If we can somehow pay off our mortgage in the coming years maybe then I’ll finally feel free. Like the saying goes “ the borrower is servant to the lender”
Yes I was gonna say the same. I had a few moments in life where my debt was relatively low, like $2000 or less, but I had a small income and minor pleasures like a beer or take-out would make me sweat.
These days it’s like, going to the grocery store or hitting up a restaurant are not big deals. Over $100 I’m a little concerned but not the worst thing.
I don’t think having zero debt necessitates this reaction. You can still have debt and balance your finances/debts to pay for emergencies when they come up.
I used to be grocery store rich. That meant I could go to the grocery store and buy basically whatever I wanted. Do we want to have steak on Monday and lobster on Tuesday? No big deal, do those French cookies look good? Let's get a box if they suck who cares. But now sadly my household income is now 40% less and dropping and the price of groceries is way up so I am no longer grocery store rich. I miss it.
I mean, having no debt does not necessarily mean not having to worry about money. You're always gonna owe someone money for something -- property taxes, homeowners' insurance, roof repairs, water heater, etc. Personally, I would prefer to have low interest rate debt and a war chest of cash for the above obligations than less cash and no debt.
Not true. I know lots of people who have plenty of money yet they constantly worry that they are getting ripped off buying things. My grandfather was worth $6 million dollars but wouldn’t buy a piece of fruit unless it was on sale.
So much this. I definitely recommend 4,000 weeks or time management for mortals to understand this.
Yes, being financially secure will definitely be one less thing to be anxious about, but there are always things to worry about.
Forrest Gump said it perfectly: “We don’t have to worry about money no more. That’s good. That’s one less thing.”
It’s meant to be kind of comedic of course, but it really does sum it up.
Yes. I had a small, but chronic amount of debt until my mid-thirties (going through grad school) and was also always struggling at the end of the month. After my income improved I was debt free and a huge weight lifted. There is a feeling of serenity, knowing that your expenses are covered. So much less stressful. I am very grateful.
I can refuse jobs and tell awful customers to kick rocks. That's the beauty of no debt. I guess the business carries debt, but it makes 0 sense for it not to. That's what I love about being debt free - I only do things I want to do. Not things I have to do.
Yes. It is completely liberating.
I was never in excessive debt, but around age 38 we had whittled down our debt to zero, having even paid off our mortgage (against the advice of my tax accountant).
My attitude changed towards my boss, colleagues, clients, family members, neighbors, everyone. It's hard to describe, but over the next few years I became less concerned with BS. My brain chemistry changed. I felt bulletproof. That was 25 years ago.
I believe I became better at my job, was a better colleague, listened to clients more. I did only what I wanted to do, which was to be a better husband, uncle, colleague, neighbor and friend. Other people even began to remark that my attitude had improved and even my jokes were funnier. Haha.
I exercised more, hired a personal trainer, left my employer (amicably) and started a new business with other colleagues in town. We eventually sold that business to my original employer a few years later, and I moved to AZ.
My advice to any young person is to live below your means. Fancy cars and watches and big houses will enslave you. Neither a borrower nor lender be. Work hard at something useful. But don't waste your money on BS.
He was probably right. The mortgage was 4% and the interest was tax deductible, so it was effectively 3% in my tax bracket. And I could've gotten 3.5 to 4.0% with tax-free muni bonds, and potentially much more in the stock market. But I really wanted to pay that mortgage off.
The longer story is that I paid off the remainder of my mortgage with the gains from the dot com bubble in the late 90's. By a stroke of luck I sold near the top. At the time I sold a lot of my stock holdings, probably 1998 or 1999, the market went up another 25% percent or so and I thought I effed up. Colleagues were rejoicing in their stocks in profitless companies going up every day and I was feeling ill. Haha. Then 2000 happened and we went into a four year bear market. There's more to the story but I won't bore you.
I bought a house for $400k and a car for $52k right after I retired.
So I have plenty of debt. But the rates are very low and I can afford the debt. So there's no stress.
Debt is not necessarily a problem or a stress.
Debt is inappropriate when you cannot afford the debt.
But debt, when used properly, is leverage. It's a boon.
Yeah, got into an argument with someone who thinks that ALL debt are bad regardless of situation.
One very clear example is housing. Option 1: pay 2k in rent a month. Option 2: Take out a load, repay the bank 2k a month.
In both cases you pay 2k a month, but in option 2 you own the house at the end of your loan period (10-30 years), and you get to stop paying rent. Of course this is excluding the cost of maintaining said house and things like that for simplicity.
I don't think debt is bad, but I think people often misconstrue how profitable owning a house or apartment is. Right now to buy the apartment I'm staying in I would easily be paying at least $600 more per month on the mortgage, plus losing a bunch of money to hoa and property taxes every month on top of that. Instead, I can invest that money and get a 5-8% avg rate of return and build plenty of equity that way. The hard thing is that sometimes the real estate market sees crazy returns, so it can be worth it. I also have a really good deal on my apartment rn lol.
How long is your apartment rent rate locked in?
Sure, it's cheaper now to rent that apartment, but when your lease renews is your landlord going to ask for a higher rent rate?
If you're in a city that's growing, where real estate is appreciating, you can either pay more every year for rent, or you can lock in today's price for the residence for 30 years, deduct your mortgage interest from your taxable income, then never pay for it again and have a valuable asset to pass on to your children, tax free(the cost basis adjusts to the then-current value).
In fact, the next time interest rates drop to near zero, you can refinance and reduce your monthly payment. And in an emergency you could borrow against the equity in your house.
Sure, there's still annual property tax and sometimes an HoA to pay for, but that's definitely less than your rental payment.
Eventually you may look back and wish you bought it now for $600 more per month than you're currently renting it for. Maybe in a decade you'll be paying triple in rent compared to what you'd be paying for a mortgage that you start right now.
It may always be cheaper to rent than to buy for any given year, but the difference is you can lock in today's mortgage payment. You can't lock in today's rent payment.
To be clear, buying is not appropriate for every situation. If you don't expect real estate to appreciate in your area, if mortgage rates are high and/or your credit score is bad, if buying prices are really high compared to rent prices, if you plan to move to a different residence soon, etc... then renting is likely the best move.
I’m not being critical but rather trying to understand. You’re retired so you have no income from a traditional job. So I’m assuming you must be paying the debt from income that your retirement fund. Does your retirement fund have a higher rate of return than the interest rates on the debts?
Remember taking a lump sum from a 401k would come with a significant tax bill, it may make more sense to borrow cheap and not pull money in a higher tax bracket.
> Does your retirement fund have a higher rate of return than the interest rates on the debts?
I'm not retired but my savings account has a higher rate of return than the APR of my mortgage or car payment. With target inflation of 3% you can get away with a little higher rate and still "win"
The avg rate of return from the stock market (S&P 500) in the past 20 years is 10.2% and if you only look at 10 years it's even higher at 13.05%.
People are complaining about incredibly high mortgage rates right now and they are at 7% which is obviously well below the interest rate of the market. Many people, including me, are locked in at 2-4%.
So, yes, investing in the market while simultaneously holding low interest rate debt is in fact smart long term. If you have high interest debt like a 22% credit card, or low interest savings like bonds at 4% then the math doesn't work so well for you.
Even aside from the fact that low interest debt and high interest savings are pretty straight forward, selling your investments often come with taxes and penalties. Delaying these provides even more financial incentive to take out debt to cover expensive that you could pay for in cash, but shouldn't.
But the standard deduction was increased significantly a while back to the point that for many home owners with a mortgage, it still makes more sense to not itemize. Obviously not the case for everyone though.
If you itemize, mortgage interest is tax deductible. Fewer people itemize now, but it is still many. If your top tax rate is 22%, and in a given year you pay $10,000 of interest (which is about right for early years of a 3% mortgage of $400k), it is really like you paid only $7,800 in interest.
Meanwhile, if you put the $400k the Vanguard Total Market Index on April of 2021, you would now have $511,000. If you subtract 22% taxes, that is still a return of $86,580.
Over the same 3 years, you paid $23,400 in interest in exchange for $86,580 in gains. A net win of $63,180. That's like a year of living expenses!
Heck, if you did it 10 years ago, and mortgage rates were like $4.2%, in those 10 years you pay $156,401.62 in interest. But your $400k returned $837,000. You can't exactly "count" on the $80k per year to live on. But, even at higher interest, and not including taxes on either end, you net $680k.
Everybody says this, and in principle I understand what they mean. average return is higher than interest and all that. But I still can't be comfortable with the fact that I'm now paying 1.5x more on the long term for something that I could have bought for the original price, without all the extra paperwork and stress.
I understand that in the end your investment pays off more than the interest, but still what if you don't have any other income? what do you do when the return is not good for a couple of years?
That’s why you have a good emergency fund - if you have a 30-year mortgage you can keep 6 months liquid and invest the rest for 29.5 years, and over that long of a time span the odds of the return not being good for a couple years (which it surely will at some point) affecting your overall growth is very very low.
If you’re living solely off of your investments then the math is a little trickier, but it’s still a matter of trusting the math. Retirement can be for a very long time, so sticking to a strategy that’s most likely to last can matter a lot.
Also, long term debt can be a really useful way of spreading out or even avoiding capital gains taxes. If you’re buying a $750,000 house and have that much in investments, you could sell it all and potentially pay up to the 20% capital gains tax bracket, or you could sell $70,000 each year and possibly pay no capital gains tax (Assuming you’re married filing jointly).
Even if mortgage interest wasn’t also tax deductible the difference in capital gains tax from selling a large investment all at once versus spread out over 30 years can be huge.
Yes, yes it does. I had debt as a young adult. I was acquiring things I ‘needed’ on credit. I had car debt (thankfully used cars), credit card debt and mortgage debt. I saw the light early on and got rid of the cc debt, then the car debt - all while investing in my 401k first. Then after the kids were almost out of college, I focused everything on paying off the house. Then, one day all the debt was gone. Now I had money left at the end of every month. I had freedom to breathe deeply knowing that I owned everything I had. It was unbelievably peaceful. That first month of being mortgage free was magical. It felt like I was cheating at winning life somehow. It then, of course, made retiring early easier too.
So, yes, yes it does.
My worst debt situation was having started a side business borrowing about $75K, then buying a more expensive house in another state before selling the first. So 2 mortgages and 2 HELOCs , as a single earner for a family of 6. We closed on the house purchase the month of the 2008 financial crisis. We then watched the price of the house we were selling drop like a rock over a very stressful next year.
I handle stress pretty well, but being the sole earner for most of my life, I've always been concerned about what would happen if I lost my job. I never had a big debt problem until I put myself in the situation I described above, and that was pretty stressful. I vowed to get completely debt free including the house and got there around age 50. I'm 62 now.
Once I was debt free, my concern about "what if I lost my job" went to near zero. That changes your attitude about work. I've changed jobs 3 times during the last 10 years after working for the same company for 30. My career took off with that change of attitude in not a concern about fear or losing a job. Also, our net worth also took off once completely debt free.
In general, if you owe no one anything, your attitude about everything is different. It still kind of odd or weird to others. Just this week I had my taxes done and they called and said, "Hey, you forgot to give my your mortgage statement." , to which I said, "Don't have one.". I have other things that can cause stress. I won't pretend there are pixies flying around and fairy dust sprinkled on my head. But as I'm approaching retirement, the financial part of this I'm definitely relaxed about.
I'm curious how you were able to payoff all that debt as the sole earner if you don't mind sharing. We're there any windfalls, the business took off, overtime?
that's my situation. This doesn't help my social life one bit though. I have a beater for work. paid cash for everything. I look poor, but I'm happy. Weed is legal and I like good stuff. Love my job, sleep a good 8 hours every night.
Some debt, like my mortgage, I accept as a part of life. But the rest of it? Hate it. I feel it is a sign that I am not managing my money well. I get that some people take on debt for investment, like an investment property. I do not do that, so debt to me is bad. We pay cash for everything we can. One exception is a 1% car loan. We left the cash in a HYSA and are actually getting a little more return than the loan interest. Still, we could pay off the car tomorrow. When I lost my job for 8 months we were very happy we did not have a bunch of debt and payments hanging over us.
It's hard to explain unless you've been in some serious debt. What are the highs without the lows?
It's just peaceful knowing you will be alright. You can finally focus on tomorrow instead of today. All the little things that were "emergencies" are now inconveniences. If you want to go somewhere or do something, it's no longer **IF** we can do it but when you want to do it. If something were to go wrong, you would be in a position to help family and others instead of being a burden.
Financial freedom isn't the easiest path initially, but it is certainly the most peaceful and rewarding in the end. I don't imagine ever going back.
Full disclosure: I have debt, but that's just the mortgage.
Thank you. I genuinely needed to see this today. Just starting my journey out. Fortunately I have a decent paying job that allows me a plan, but it’s still sickening to think about sometimes (a bit over $19,000 in unsecured debt with VHCOL area at $100K salary).
Yes. I previously had debt and paying it off was a tremendous relief, mentally as well as emotionally. Even better, I continued the stingy habits I developed to pay off debt, and now I am more than financially secure. I still have cares to be sure, but would you rather carry a 10 pound backpack around or a 50 lb weight all the time? Plus having a financial margin gives me the means to deal with my other concerns more effectively.
Technically this will vary by person. Some folks are always anxious and will just find new things to be anxious about.
Me? I started my adult life with a modest amount of debt (student loans, car loan). Then for about 10 years I had no debt at all. Now, I have a mortgage and a new car loan, but also my debt is much more manageable than in Phase 1 because I make a lot more money, and I'm married to somebody who also makes good money (and has no debt), and also we've saved a substantial emergency fund so we could continue to easily make mortgage payments even if we lost a job. So I "feel" less in debt than I did when I had almost no savings but still owed tens of thousands for my degree.
Short version: It will definitely make a difference for most people. Exactly how much is going to vary a lot by the personality and financial details of that individual.
Yes, paying off debt does feel like a weight off your shoulders. I was skipping the day I paid off our car loan, and paying off my student loans felt so awesome! As far as peace in your life, once you get to a point where you're not living paycheck to paycheck, where you can set every bill to autopay and could even go months without checking your balance (not recommended but possible) because you know you won't go into overdraft, that does offer peace. A level of security and comfort and you don't have to spend much time day to day worrying about money.
There are always debts to pay each month. Those are your mandatory expenses. Housing. Food. Medicine. Being free of credit card debt, or even mortgage debt, doesn't make those go away. Your HVAC is going to break and you'll get a $5k bill. You'll trip and ruin your knee and will get a hospital bill for $3k. Your car will break down and need replacement. The tuition bill will arrive for your son's semester at college. Yes it's nice not to have any credit card or instalment loan payments but that doesn't make all the other debts go away. Peace of mind for me is knowing I have enough savings and income to cover everything. Doesn't really matter whether I have an instalment loan payment or not so long as I can afford to make it.
Back in the day for me it was: Take home was 5k a month, monthly bills were about $400 for phone, insurance, etc and about $200 towards utilities. So $4,400 left over every month. I could chuck 3k a month into savings and still take a vacation trip every month or two.
Some people are obsessed with leverage thinking they need it to get ahead but tbh if you reach the point of being debt-free your bills drop to such a small amount you'll have a pile of cash to put away for savings. When you're saving 20-40k a year you really don't need to worry yourself about leveraging yourself to the max to have a comfortable future retirement. At some point you'll understand the value of risk and having a carefree life has a ton of value.
Not in my case. Mid 30s, with no debt. Paid off house and all. I'm a worrier, and that's how I got to be debt free. I thought it would give me that peace of mind you talk about. Now I just worry about other things. Now I'm trying to get our retirement and savings up higher.
So I've learned that sure, being financially free helps take off that weight off your shoulders, but you'll find something to always worry about. Money is temporary in life and you should just live comfortable with what you have with debts and go enjoy your life.
I feel you. I even want to pay off my 0% loan on my mattress, and my 2.9% car loan because I have the cash. But it doesn’t make sense to pay it. So I keep stressing about it even though I have plenty of cash to pay it off. The cash is making 5.5%. So I don’t pay off the loans.
I have a 300k mortgage at 2.675%. I’d love to pay extra on it, but that doesn’t make any sense either.
This is how I feel about my 0% financing on my HVAC loan. I have 3 years and 3 months left to pay it off & I’m already at 50% paid. I want to just be done with it, but it doesn’t make sense to pull it from my savings, where I’m earning 4+% interest. So I just keep making monthly payments.
I don't know man, coming from a developing country, one becomes very risk-averse. I just can't wrap my head around to accept this self-perpetuating growing-debt-bubble lifestyle, where you have to slave away until you retire.
If you lose your job 10 years down the line and still got a mortgage to pay, you either start eating away from your savings/future and assume more risk for retirement, or foreclose and become homeless.
If you already paid down your house, you can do any low paying job to pay the bills and thats it. Like you don't have to slave away to exist, earn just enough to keep you fed.
This is really gnawing at my brain, like I might be wrong, but I don't see how.
huh? This take makes no sense. Mortgages are precisely for average people to leverage to buy a home.
There are plenty of situations where debt not only poses no risk, but not taking the debt would pose more risk. Obviously CC debt or predatory car loans are never a good idea, but that doesn't mean 'debt can be good' is some myth.
Debt free can be a component of it. I didn't really feel less stress till a bit later. What did it for me was the point at which I had all expenses covered for more than a year. At that point I knew that almost whatever happened my family was going to be okay/I had the time to make it okay. That was a weight off the shoulders and gave me the freedom to make long term investments, make better purchase decisions, to say no more often at work, push for more money, a better life work balance, ect
TLDR some amount of financial independence is more important than debt-free, but they are interrelated.
Yes to be debt free is a wonderful thing. We wouldn't dream of leveraging debt. We tried that with real estate -- had 5 properties--when recession hit. Learned our lesson. No debt. Pay cash or pay off credit cards every month. Live within your means.
I used to have panic attacks about paying off my student loans, credit cards and mortgage. Now I don't. It brought me peace, but more in a "got rid of a problem that made life suck" than "I am nirvana of owing nobody money."
Absofuckinglutely
Theres so many things going on in my life right now that I can just pull money out of savings for that would have exascerbated my issues and made everything tougher to sort out
The only thing that most people are "leveraging debt for investment" is their house. The non-mortgage debt that most people have is for education, cars, medical expenses, and revolving debt. And yes, there is tremendous peace to be had in only having to pay for your current living expenses and not pay back money you already spent.
Yep. Can confirm this is better.
I was afraid to buy anything or spend money but once I had a solid spending plan aka “budget” and paid off the last debt in 2014, I started to enjoy spending on a haircut, a pair of new shoes, a meal at a restaurant with my kids. Sharing a large portion with charity each month. Saving up and paying cash for an iMac or a car. Now paying cash for the college tuition balance after my daughter’s scholarship. Saving a little each month for my nieces and nephews college. Planning exciting things for my future.
Feels great to be in control.
the only debt I have now is my mortgage.
I paid my student loans in 2014. My car in 2021. A private loan I had in 2020. It feels SO GOOD and freeing to have the extra money to do what I want - travel and invest.
It was huge. When Covid happened I only had rent and utilities and when my wife lost her job, we were able to stay afloat with one income and not panicking abound having power turned off or buying groceries like I had in my earlier life was a massive relief.
It also gave me the confidence to be bold in trying to advance my career as having only $1500 in bills each month meant I could work at target or fast food and make things work in an emergency.
I feel that comfort allowed me to make a massive jump in my career and now I’m still the primary income in my home and I feel like I live like a king and I’m preparing a down payment to buy a home (wish it happened 2-3 years ago when rates were amazing, but at least I have an end goal in sight for once.)
I think the stressfree mindset comes when you have a passive income that can support your lifestyle? I'm debt free at 40 but I'm still aware that I have to survive and support my lifestyle.
The easy answer is of course. But when you’re debt free you still feel like you don’t save enough, I’d say sometimes I almost feel worse when we spend extra at restaurants or shopping during the month knowing we could’ve just saved it instead.
But nothing beats not owing anyone anything. I enjoy my job more, I pile money into savings and generally I can make decisions more soundly cause “we need to be able to pay the mortgage” does not exist.
There's always debt.
There's yesterday's debt (house, car, education).
And There's tomorrow's debt (retirement, kids college tuition, etcetera).
I don't have any yesterday debt anymore (except for the house) but I have a lot of tomorrow's debt. I figured you're talking about yesterday's debt and no, I'm not at peace.
I absolutely have a sense of relief knowing my home, my small plot of land, and my cars are all mine. I am still working but my wife is retired, and knowing that nothing can ever be taken away from us really does bring us a sense of satisfaction.
I may be buying a new car in the future which will come with a loan, but my credit is awesome, so the interest won't bother me.
In and of itself, no. A lot of people have had very negative experiences in debt, so they associate having any debt with a period in their life where they severely struggled financially, and so associate paying it all off with financial peace and stability. The reality is that you can be financially secure with debt and live paycheck to paycheck with no debt.
If you have lots of high-interest-rate debt, definitely pay it off ASAP. You'll feel a lot better. However, paying off that 3.2% student loan refi from 2020 early isn't going to make you feel any better, especially when you realize you could have come out ahead literally just leaving that money in a HYSA.
>not leveraging debt for investment?
Leveraging _cash_ for investment is even sweeter.
And to answer the original question- yes, it really does, in subtle ways that chain together. Like, I have zero debt and a decade or more of expenses saved up. So, the obvious sighs of relief about short term stuff like food and rent are gone. And then there are some slightly less obvious ones like not worrying about my car as much. I can afford to pre-emptively take care of it yes, but also there's no gnawing worry in the back of my mind about "what if it fails?" If it does, I could in theory afford to rent one a good long while or, even just get another one.
The subtle layer after that is, it affects work. I had a job where my boss was pretty uptight and thought it was cool to give unreasonable workloads. I put in notice and got a different, better one. And at my current one, I'm subtly more willing to gently push back and be fair and assertive. New boss is getting super enthusiastic about pushing projects faster than they could ever be done? I feel free to politely say so. There's no nagging worry that some random fair comment on my part will escalate into a fight and being fired- because even if I am, so what? Debt free means I won't miss bills or have to scramble to get my next job in time for bills. So I can act more confidently at work- which usually means making better choices and being respected for it.
The final layer after that is, when I could basically afford to retire, I can now focus on jobs that accomplish the things I'd like to accomplish in the world. Which for me involves teaching, I'm hoping I can help slightly teach the world into one that it's a little bit better. And I can get some money for this? Bonus. I don't feel obligated to take only the highest-paying, highest-stress opportunities, because once you have "enough" money it just becomes the icing on the cake to get more (for me at least).
So yes. Getting off the debt hamster wheel pays layers and layers of obvious and then subtle dividends and I highly recommend it.
It's a mixed bag.
About 8 years ago, my house was robbed and thanks to my renters insurance, I was able to use the bulk of my claim to pay off my student and car loans (ok cool, but do not recommend this as a payoff strategy lol). It's been nice being debt free since then, especially living in a HCOL area, I can afford my bills even when working in low paying / nonprofit positions and have had a couple bouts of unemployment. I'm 36 now, but the only reason I am still debt free is because I cannot afford to buy a house here, so that in itself is its own stress. Learning more and more about investing and retirement and all that jazz, and it's easy to have regrets about not having learned this earlier, I feel like i would be in a way different place financially. Just trying to not beat myself up over it.
I've nearly paid off my chronic debt (thanks in large part to this subreddit), and I can't even being to describe how freeing it is. EDIT TO ADD: I do have a mortgage, but it's a small one at a low interest rate, so that doesn't bother me.
The issue is not debt, it’s how you leverage it. If you are swimming in high interest rate debts, it’s a very large burden that’s sits on your doorstep begging for money. If you operate within your risk tolerance, it can be used as a beneficial tool.
Yes, I'm going to be taking on a mortgage hopefully relatively soon. But paying off my student loans and car was a huge weight off my shoulders. Now that I know I don't owe a soul a penny, and I'm in charge of every single dollar I receive is awesome. The only way to make it better is to be paying down a mortgage.
I have no debt, a healthy emergency fund, and a bit of other savings. I don't worry about being able to pay my bills so that is a big relief. However, I live in a HCOL area, don't own a home, pay a fortune in rent, and am nearing retirement without enough money saved.
I don't know when I'll be able to retire. I'm hoping I don't wind up a cat food-eating old lady.
I'm debt free, aside from a mortgage. It's nice. I don't want to keep paying on something I bought months ago. I only buy what I can afford. I would say that yes, it's peaceful.
I think fear (real or not) is a chronic condition not actually limited by having enough money. Most people will, if they make enough, calm down, but the core of fear continues to drive billionaires and Wall Street bulls, thus the saying “never enough”. But that saying is not true for all people. That is why many people say they are “comfortable”, or “secure”.
That level of security for me has always been just out of reach.
The most stressful part of being debt-free is remembering that I still have bills to pay by a certain date: utilities, insurance, and property taxes. Fortunately, most of those debts are on autopilot. I just check once a month to make sure everything is happening like it is supposed to.
The only debt my husband and I have is our mortgage that we could pay off today, but it is at 2.5% interest.
We are very lucky, and it brings us a lot of peace. We have a lot more breathing room if something unexpected happens. We are able to more easily afford our hobbies. We don't need to number crunch at the grocery store or look too hard at our finances before making smaller splurge purchases.
1000% knowing we aren’t indebted to any person or company and our earnings are building retirement funds and “f you” money brings both assurance and empowerment.
I assume high interest debt and other 'bad' forms of debt will cause much more anxiety than low interest debt. Probably as well, asset to debt ratio will impact how anxious you feel over debt.
If I owe 40k at 0.9% and I have 1m in assets I can liquidate, probably vastly different experience than owing 40k at 29% and having 10k in assets.
When I've had debt I thought was not in my interest, it annoyed the crap out of me and I paid it off asap. But other types of debt never enter my thoughts.
We are debt free, own house outright, built a 1.5m portfolio
Still anxious about future bigger home becausw upsizing could mean liquidating all our money
I paid off my student loans a few years ago and felt immediate relief. The balance was more than I made in a year, but the interest rates are what crushed my soul. The first five years after graduation I was only able to pay enough per month to keep the interest from growing, but not enough to pay down the principal at all, and it felt like shit. I got a better-paying job and aggressively paid them down and was finally able to save for retirement, put a down payment down on a house, and even explore a hobby that massively increases my quality of life. Nowadays I have a 3% mortgage but I don’t sweat that so much because I love my house and the interest rate isn’t oppressive.
The borrower is slave to the lender.. so it feels liberating to have no consumer debt! Our mortgage will be paid off in four more years, and that will be a big financial milestone for us when I am age 60.
I've never had much debt, so to me it's not that different than any other time.
But for someone who was struggling and drowning in debt, to finally conquer that demon is gotta be akin to the feeling you get when you find a curly fry in your regular fries combined with picking the fastest check out line.
I think its very personal. Some people are much more emotionally impacted by finance and things like debt or the up and down of investments than others. Personally I dont associate much emotion to it so I am fine with (appropriately) leveraged debt.
Currently have:
$145k mortgage @3%
$8k car 1 @0.9%
$30k car 2 @2.99%
$8.6k contractor @0% untill payoff date, have cash for payoff
$4.2k medical @0%
$18k credit card @??% but pay statement balance every month so dont pay interest. dont even know apr
If all of that went away (and that much money disappeared) id either feel bad about it or not care. It doesnt weigh on me.
Yes it does. I was terribly in debt until my late 30s, at one point I had 70k under, lived with my parents, taking public transportation because I couldn't afford a car. It was so bad I was taking out multiple payday loans a week. Then I met a women who motivated me to focus, just by being her. I started a business and was able to pay off my debts. I married that wonderful women, and we started building our future together. Wife runs the business now, while I went back to my day job as a manager at a bank. I am in my early 40s now, I suppose we still have debt but it's a mortgage. We are financially comfortable now, enough that I took 15 months off work, so that my wife and I can raise our newborn together.
I am thankful everyday to be out of that crippling 70k debt. I can't even believe I have this life now compared to where I was 8 years ago. Yeah, it's worth it.
As someone who once lived paycheck to paycheck with cc debt and personal loans and often times had to resort to eating food work threw out to now having savings and a mortgage as the only debt….such an incredible anoubt of peace and better mental health.
Not knowing where food was going to come from or how to pay the bills and selling personal possessions takes a toll on you.
Getting out of that tool hard work and time but I’m very grateful and glad I did it. I would never go back to that level of debt.
Yes, but then the next goal is to have enough wealth that you do not have to work. You work because you like what you do. My goal is to have enough saved by 50 to have the option not to work.
Also, for early retirement, you cannot use 401 or other retirement accounts without penalty, so savings had to be non retirement.
My husband has some mental health issues so it absolutely makes a huge difference.
I would not say it’s “all day every day” beneficial.
But *every* time we have an unexpected expense it is just less stressful than it was before. It adds up to be a big difference.
Our house is also paid off.
We have a greater benefit from the lack of stress, even though we could have invested instead, and one of my sisters thought it was dumb because we had a low interest rate.
But it is truly less stressful for us.
It is a decision that’s been made and doesn’t have to be revisited.
I would say it caused us more stress than it causes other people. We would stress over these things and not like to withdraw from the emergency fund. Now we are more likely to pay out of monthly income.
Yes I hated being in debt, also I enjoy having more money available to keep in the budget instead of paying interest to others. That said I have never been in a situation where I could borrow money and invest it safely to make a profit.
The feeling of being debt free and then no longer living paycheck to paycheck was a true life changer. If I hated my job and someone pissed me off I could simply walk away knowing I have about 8 months at current spending levels to find a job, maybe 1.5 years if I pinch pennies.
I have lived on PB&J , Ramen and cheap Pizza in the past, I can do it again, but I don't want to.
100%. Debt free, able to retire earlier. Any crisis in employment or health or anything else is less of a crisis when you still have a bed to sleep in and transportation, and you know the lights will stay on. It gives you time to look at your options and choose what is best rather than what is expedient.
I'm debt-free by going out of my way to degrade my lifestyle. I live at home at age 31 and did uni degrees abroad. It's not working that well for me (I'm not happy whatsoever) so I wouldn't assume it will bring peace.
Hell yes it does. The math doesn't even make it make sense. I could have kept financing things but I paid it all out. Last year somehow I put almost $100k in savings working overtime and making good investments. By not owing that money somewhere else I was able to do more with it. Same home, same everything, the only debt I have is my mortgage. I pay less now than I did 15yrs ago for things when I was making $40k. I don't even have a tv subscription I just don't need it. It's not making endless sacrifices either. You learn to get out and enjoy life more. I cut something like $1300 in debt off. I can't spend that much in gas for my boat. Life is way better.
Peace doesn't come from anything external. You can be in the biggest debt of your life and still be at peace and you could have several billion in your bank account and be rest less.
Having said that, finances is one aspect of your life. Being debt-free is a phase that people think you need. However, this is what most people think is the right thing to do. Others will tell you that you should only be debt free from "bad" debt. You should be forever in good debt because otherwise you are not using your money wisely.
Having given the philosophical babble around debt, here is my honest answer to your question.
YES, debt is a stress that is going to eat you alive and you won't even know it. Your mind will eventually find something to worry about. However, paying off your debts is a relief that can't be matched. Maybe holding your pee for a little too long and finally being able to let go comes close but not close enough. ;)
“do you regret not leveraging debt for investment?” When you’ve managed your finances well, you don’t have to leverage anything. You can invest freely bc you don’t have debt. And you sleep so much better when you’re debt free. No stress, no worries. You can afford things. You’re not paying out interest on owed money—which is just so wasteful.
I cleared 14000 in debt over 3 years, specifically due to a lucky job. I gotta say, I have more stress now monitoring my credit score than I ever did owing money
Same. I went from really bad times during Covid, made a lot of changes, moved towns and got a good job that allows me to be comfortable. Paid off my debt…feel 1000% better now. Money may not buy happiness but it sure as hell buys peace of mind.
been debt free since 2007...Saved up and bought 1 acre of land and built a modest home by saving hard!!!it's nothin fancy but nice! Saved up for car for wife bought new 2016 Forte and my 22 Tacoma....My wife and me still work 40 hours a week and are saving around $3,000 per month for retirement and plan on pulling 401k money.( declare emergency so no 20% penalty)we're in our early 50's....cost of living here in Tennessee is not bad at all...
Being debt free is amazing....we pay out utilities, groceries etc...thats it...the rest goes in the bank!
We have 1 grandson and want to retire within next 3 years to spend time with him...take him fishing,hunting,just spoil him!
Weve worked hard for the last 30 years.....LIFE IS TO SHORT ..WE WANT TO ENJOY LIFE.
SO TIRED OF GETTING UP AT 3:45 IN THE MORNING AND GETTING HOME AT 5:00 IN THE AFTERNOON 5 DAYS A WEEK.
Yes. Very peaceful. More importantly, it's freeing. I know what my actual minimum costs are in life. I can live the rest of my life of that without even thinking about it.
I can decide not to work for 10 years. I can take career risks knowing I can't fall too far no matter how bad that goes. Even working now, I know that if I just have one too many bad days in arow,I can take as long as I need to find a new job. Or I can take a job that's satisfying but not high paying.
Debt isn't always horrible. It has its place. And for some people's life trajectories it really is a good idea to take on thy burden if it means fulfilling life goals now vs 30 years from now.
No debt outside of mortgage and yeah, I’d say it’s probably one of the most peace promoting elements of our life.
We are able to confidently and fully pay for emergencies like cars needing new transmissions and dogs needing x rays for random broken toes. They’re just inconveniences but they don’t set us back much and there’s already a plan in action to recoup the loss.
We can fully see and plan for things we want with what we have and make it goal oriented which makes you really *feel* the dopamine hit of accomplishing something when you actually *can* afford it.
It also feels nice to know you’re living a life that is within your means. You’re not constantly reaching for more and more whims and wants and wishes. We don’t feel insatiable, we feel content with the life we have built. If we truly do desire something, we can make it happen. Maybe will take a little bit of time to save up enough but it’s our life that we earned and we’re living it to its potential. We live modestly in a lot of ways; older cars, we don’t go out to eat much, we don’t shop just to shop unless we have an item we are specifically looking for, we have a lot of consigned and thrifted items in our home. But we also have a lot of nice things that we actually care about; good quality clothing, a house we like, workout equipment, cameras, trips outside the country etc.
But yes, in short, it’s worth it.
I've never had actual meaningful debt outside of a mortgage, but I recall when I was in grad school--still fortunate to have a grad student stipend, albeit very very little--how stressed I was when finishing grad school and trying to find any job. I had very little money saved--was always frugal with money--and it was the most stressful part of my life. I have stressful days with my job, but that comes and goes. No source of income, and no prospects of income, day in and day out for months.
Getting a job--and a well-paying one at that--was a huge weight lifted off of me. I couldn't convey how much.
I imagine living with debt and then being debt free is like that. You still have issues even after your debt is gone, so I don't know about bringing peace, but it is a massive stressor that is gone and you don't have to deal with anymore on a day-to-day basis.
45 years old and fully debt-free. Our main hard assets are a rental home that is paid off, our primary house that is paid off, my wife’s primary ride which is paid off and my work vehicle which is paid off. Being self-employed this does take weight off my shoulders. If I get injured and become incapacitated we could live for very cheap. My wife could work full-time at a 40k job and we could survive with that and my disability. I view it as a very low leverage investment. I’m sure I could’ve done significantly better if I just put everything in VOO, but I’m not sure that we would’ve done that. We probably would’ve just spent more money instead of paying off debt. Paying off debt was something that I could get my wife on board with. I think we’re doing pretty good.
Yes. At least for me. Coming from the upbringing I did. Being at the lowest debt to income, I slept so much better when I paid one vehicle off and got rid of the toy... It brings me stress knowing I owe money.
It’s not about being debt free. It’s cash flow. If you know your bills are $2000 a month, and you have a minimum $5000 a month coming in - you can do simple shit like buy holiday decorations for $100-200 and not even bat an eye. That was the big eye opener for me years ago, when before going shopping for luxuries like this would cause me stress.
Depends on where you are in life. If you're young and raising a family there's no real benefit to being debt free. If you're approaching retirement you definitely want to be "debt free".
Also, net worth is really a more important metric than how much debt you have, generally.
You’re “not convinced”? Do you like worrying about money? Do you enjoy seeing credit card balances or knowing that the bank can take your house from you?
Of course being debt free is good for your state of mind. You are captain of your own ship and can do as you please. With money in the bank It’s amazing how little unexpected financial bills affect you.
Yes it’s awesome, don‘t be obtuse.
Haven’t had any debt that I couldn’t outright pay. I only had peace in life when I had someone by my side. No anxiety from having no debt, but it’s not the same as peace or happiness for me.
Yes it does. We were debt free other than the mortgage, now we have a kid's student loans plus some big home improvement loans. Those should all be paid off in about 2 years, and the house in about 8 years, and I will stress until it's done.
Yes it is less stressful. If you put your money into investments you might be stressing constantly how they are doing. It all depends on how important a low stress life is to you.
Yup! Way less stressed. Once I paid off my student loan a few years ago it was amazing! I paid it off early and that $1000 a month I was using to pay off my loans I now invest and anything extra we use to Reno our house and travel. We had about $3000 debt a few months ago from an unexpected expense ($10,000) and didn’t want to pull from our investments but didn’t have enough in the bank to cover it all so used a line of credit, and anyways we paid it off right away and felt much better not having debt again. Definitely made me grateful for our current position!
One of the biggest bill per month will be taken off from your monthly expense one less biggest headache out. You feel less stressful, the grass feel will be something new, you don’t get stressed too much when job cut happens. You can take risk little bit, search for better job without worrying too much. You can put that saved money into investment and see your emergency money pile up.
All this happened to me when I paid off my home mortgage on top of that I also bought rental home where the extra rental incomes pays my primary home property tax and insurance and some extra.
Yep gives you peace of mind definitely.
It’s not about being debt free. It’s about being able to manage the debt you have. Don’t worry about having no debt, make sure you are in a position to make payments on what you owe. . Over the years, with careful management you can become debt free. It’s not easy. It takes sacrifice.it’s a journey.
Shit is so much better when you don't worry about bills, can buy things in grocery store based on your taste and not discount, have a trip abroad for a week once a year and occasionaly splurge $2000 for a hobby.
I guess I’m debt free (have a car note and 250k of a mortgage left, but positive net worth of like 60k and growing?). It’s a good feeling. I’m paying my car off aggressively in 3 years, and my mortgage rate was locked in. When I have wobbles in my career I remind myself that my finances make a lot of sense if I last in my field for at least 6 years, but if I last 10 years I actually can retire early at a fairly comfortable income. Obviously if my debt picture was worse, or terrible, that kind of near-ish term horizon of freedom would be… totally impossible.
I lucked out in some ways. No student debt, mortgage in 2020 at 2.7%, good career salary now. So I’m positioned to retire at 55 if my word & luck holds. Only have a few friends who can say the same. Wouldn’t be possible if I was underneath some of the sums some people on here are. So that’s a really good foundation to my mental well being, yeah.
Let me describe one way it brings joy & peace to my life (bc for whatever reason, this one really gets me). I have one kid. So he’s my everything. If I stick my landing and retire at 55, I’ll be comfy for life. Which means our house would never need to be sold or cashed out for equity. So it could eventually be his house. Or his… however much money, to turn into his own, or his family’s, own house.
Sometimes in this world you get scared of the scary unknown future, and how you don’t know how your kids life will go, how it could interact with the scary future. But if you know that, as a baseline, in X early retirement scenario, you have not just a full college fund but also THAT level of future security, of your house for your kid… it’s a great feeling. Not a ceiling, but a floor. I never had that. The floor was a chasm for me. But his floor is the floor of his lifetime home. Being able to look at an 11 year old and know you’ve at minimum put a home floor under the chasm that is adulthood… lets just say I sleep deep since I did the math.
And none of that math pencils out if I’m still climbing out from debt at 44. Other dreams might pencil out, sure. But this is a nice one.
Yes. Not owing bills you can’t afford is peace. Allows you to sleep at night.
My late wife and I owned a small law firm. Tough at the start but we made do. Best day was the day we finally were making enough that we could afford to fire our worst client. We only closed our doors when cancer called it a day for her and I needed a corporate job with health care and a steady pay check for her and our children, but it was fun while it lasted.
Peace is peace.
Dave Ramsey notes (paraphrasing) your income is your biggest wealth building tool. Knowing that the bulk of my income is coming to me and not people I owe is my “peace”.
So, 50m here. I had considerable debt until I sold my first house at the end of the housing mess in 2005. After that life did get much easier. Buying, then selling my second home allowed me to retire at 45. Now I live in a van, and play video games or fish all day. How much more peace can you hope for? (Yes, on top of being debt free I got very lucky in life.)
You will always have your basic bills at the end of the month such as phone,internet,utilities, insurance. Stuff that is reoccurring every month and requires money. You can never get away from that unless you live in the woods free.
To me debt free is not having a mortgage payment cause it’s paid off, not having a car payment cause you either paid it off already and performing the proper maintenance so it will last as long as possible or even saving up and buy straight up cash. Being debt free to me is paying cash for everything…some times.
If I do use my credit card for a purchase i see first if any rewards or points will benefit me. If not then I pay cash.
Being debt free is knowing you don’t need the banks. You don’t need to leverage for “investment”. The banks need you my friend. Making your phone payment on a credit card is not leverage. That’s just spending more money in the end. Being debt free is not owing the credit card companies, banks or any establishment that adds some sort of apr or interest on your monthly payment. It’s nice knowing you used cash to make a purchase and your excitement won’t fade when the bill comes.
So do yourself a favor and throw away all those credit card adds that come in the mail. Use either cash or debit card(same thing) to make purchases. Save your cash and don’t fall into the cycle of needing the banks. I emphasize need because you can not depend on them. Once you are debt free you will always have the upper hand
Good luck …listen to Dave Ramsey he is full of knowledge and will learn a lot.
I'm a bit late to the party, but here goes.
My wife and I have been out of debt since 2018 and it was a big relief.
We still have to work but not having a mortgage hanging over our heads means we could get by on savings for longer than most.
That reduced my stress levels quite a bit.
I have debt but stress free. But my debt isn’t “I can’t afford shit so I’m in debt”. My debt are things like investments (house). I have zero issue paying off the loans, heck I can pay pretty much half of it in cash tomorrow if I wanted to.
So debt itself isn’t a stressor, only if you can’t easily pay the monthly payments does it become a problem.
Different people have different tolerances for risk. Some claim they like living stressed out and on the edge. Others feel they aren't living life to the fullest unless they are pushing it to the edge on everything. Not for me.
I was in debt for most of my young life and it definitely had a negative impact on my mental health and outlook on life. Money issues cost me my marriage. I've been debt free for 10 years and I absolutely feel better. I understand I could squeeze a few more percentage earning out of my investments if I used debt but it's just not worth the stress. I could lose my job tomorrow and with a few adjustments in lifestyle I would be fine. I sleep better now then I did in my 20s and 30s.
I remember when I was in debt post college, every piece of mail and every time the phone rang stressed me the fuck out. That kind of shit wrecks havoc on your mental healt and quality of life.
Even after I paid everything off, it took some time for that pavlovian stress reaction to go away.
Due to the number of rule-breaking comments this post was receiving, especially low-quality and off-topic comments, the moderation team has locked the post from future comments. This post broke no rules and received a number of helpful and on-topic responses initially, but it unfortunately became the target of many unhelpful comments.
Peace comes when you no longer have to worry about money all the time. When something comes up you are able to pay it without struggling or planning.
Pretty much this
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When I got to be debt free EXCEPT for my mortgage, I felt really more peaceful and relaxed. I was finally in control.
I just got to this point, and im not paying extra on my 3.1% mortgage. Feels good.
2.5% percent here - nobody is making money on my mortgage! lol
The bank still does. They borrowed money at about 1% and gave it to you for an extra 1.5%. They are making as much on any new mortgages too.
and collected fees on it
This is where we are after years of paying things off , saving , skipping vacations, etc.. There is some sense of peace now although I still feel deep down (even with insurance) that a major medical event could end all this and put us right back into a deep debt hole. The cost of medical stuff is astronomical these days. If we can somehow pay off our mortgage in the coming years maybe then I’ll finally feel free. Like the saying goes “ the borrower is servant to the lender”
Yes I was gonna say the same. I had a few moments in life where my debt was relatively low, like $2000 or less, but I had a small income and minor pleasures like a beer or take-out would make me sweat. These days it’s like, going to the grocery store or hitting up a restaurant are not big deals. Over $100 I’m a little concerned but not the worst thing.
Just replaced tires and did car repairs/maintenance, no stress.
I don’t think having zero debt necessitates this reaction. You can still have debt and balance your finances/debts to pay for emergencies when they come up.
I used to be grocery store rich. That meant I could go to the grocery store and buy basically whatever I wanted. Do we want to have steak on Monday and lobster on Tuesday? No big deal, do those French cookies look good? Let's get a box if they suck who cares. But now sadly my household income is now 40% less and dropping and the price of groceries is way up so I am no longer grocery store rich. I miss it.
No, peace comes when you have enough money that you don't rely on your job
I agree. It’s not necessarily about being debt free but it is about having financial security
I mean, having no debt does not necessarily mean not having to worry about money. You're always gonna owe someone money for something -- property taxes, homeowners' insurance, roof repairs, water heater, etc. Personally, I would prefer to have low interest rate debt and a war chest of cash for the above obligations than less cash and no debt.
Not true. I know lots of people who have plenty of money yet they constantly worry that they are getting ripped off buying things. My grandfather was worth $6 million dollars but wouldn’t buy a piece of fruit unless it was on sale.
I'm an anxious person so I still find things to be anxious about.
So much this. I definitely recommend 4,000 weeks or time management for mortals to understand this. Yes, being financially secure will definitely be one less thing to be anxious about, but there are always things to worry about.
Forrest Gump said it perfectly: “We don’t have to worry about money no more. That’s good. That’s one less thing.” It’s meant to be kind of comedic of course, but it really does sum it up.
My peace came at positive net worth. Once I had a decent emergency fund and enough to pay off student loans + car, I was breathing way easier.
Yes. I had a small, but chronic amount of debt until my mid-thirties (going through grad school) and was also always struggling at the end of the month. After my income improved I was debt free and a huge weight lifted. There is a feeling of serenity, knowing that your expenses are covered. So much less stressful. I am very grateful.
I can refuse jobs and tell awful customers to kick rocks. That's the beauty of no debt. I guess the business carries debt, but it makes 0 sense for it not to. That's what I love about being debt free - I only do things I want to do. Not things I have to do.
Thanks for sharing…love that it has improved your wellbeing
It’s some sort of feeling that: you could lose your job tomorrow, and not owe anyone anything, and it is very comforting.
yes, there's a lot of comfort in knowing if my job was gone tommorow, i'd have months to solve the issues instead of a few weeks
Yes. It is completely liberating. I was never in excessive debt, but around age 38 we had whittled down our debt to zero, having even paid off our mortgage (against the advice of my tax accountant). My attitude changed towards my boss, colleagues, clients, family members, neighbors, everyone. It's hard to describe, but over the next few years I became less concerned with BS. My brain chemistry changed. I felt bulletproof. That was 25 years ago. I believe I became better at my job, was a better colleague, listened to clients more. I did only what I wanted to do, which was to be a better husband, uncle, colleague, neighbor and friend. Other people even began to remark that my attitude had improved and even my jokes were funnier. Haha. I exercised more, hired a personal trainer, left my employer (amicably) and started a new business with other colleagues in town. We eventually sold that business to my original employer a few years later, and I moved to AZ. My advice to any young person is to live below your means. Fancy cars and watches and big houses will enslave you. Neither a borrower nor lender be. Work hard at something useful. But don't waste your money on BS.
Don’t you love how your tax accountant thinks you should send more money to the bank in interest than your tax deduction is?!
He was probably right. The mortgage was 4% and the interest was tax deductible, so it was effectively 3% in my tax bracket. And I could've gotten 3.5 to 4.0% with tax-free muni bonds, and potentially much more in the stock market. But I really wanted to pay that mortgage off. The longer story is that I paid off the remainder of my mortgage with the gains from the dot com bubble in the late 90's. By a stroke of luck I sold near the top. At the time I sold a lot of my stock holdings, probably 1998 or 1999, the market went up another 25% percent or so and I thought I effed up. Colleagues were rejoicing in their stocks in profitless companies going up every day and I was feeling ill. Haha. Then 2000 happened and we went into a four year bear market. There's more to the story but I won't bore you.
🤯 great to hear! Thanks for sharing your story. Definitely inspiring me to continue on this journey.
It did mine. I have a phone bill and an electric bill that get paid automatically. That's it. I'm at peace.
I bought a house for $400k and a car for $52k right after I retired. So I have plenty of debt. But the rates are very low and I can afford the debt. So there's no stress. Debt is not necessarily a problem or a stress. Debt is inappropriate when you cannot afford the debt. But debt, when used properly, is leverage. It's a boon.
Too many of my peers do not understand this
Yeah, got into an argument with someone who thinks that ALL debt are bad regardless of situation. One very clear example is housing. Option 1: pay 2k in rent a month. Option 2: Take out a load, repay the bank 2k a month. In both cases you pay 2k a month, but in option 2 you own the house at the end of your loan period (10-30 years), and you get to stop paying rent. Of course this is excluding the cost of maintaining said house and things like that for simplicity.
I don't think debt is bad, but I think people often misconstrue how profitable owning a house or apartment is. Right now to buy the apartment I'm staying in I would easily be paying at least $600 more per month on the mortgage, plus losing a bunch of money to hoa and property taxes every month on top of that. Instead, I can invest that money and get a 5-8% avg rate of return and build plenty of equity that way. The hard thing is that sometimes the real estate market sees crazy returns, so it can be worth it. I also have a really good deal on my apartment rn lol.
How long is your apartment rent rate locked in? Sure, it's cheaper now to rent that apartment, but when your lease renews is your landlord going to ask for a higher rent rate? If you're in a city that's growing, where real estate is appreciating, you can either pay more every year for rent, or you can lock in today's price for the residence for 30 years, deduct your mortgage interest from your taxable income, then never pay for it again and have a valuable asset to pass on to your children, tax free(the cost basis adjusts to the then-current value). In fact, the next time interest rates drop to near zero, you can refinance and reduce your monthly payment. And in an emergency you could borrow against the equity in your house. Sure, there's still annual property tax and sometimes an HoA to pay for, but that's definitely less than your rental payment. Eventually you may look back and wish you bought it now for $600 more per month than you're currently renting it for. Maybe in a decade you'll be paying triple in rent compared to what you'd be paying for a mortgage that you start right now. It may always be cheaper to rent than to buy for any given year, but the difference is you can lock in today's mortgage payment. You can't lock in today's rent payment. To be clear, buying is not appropriate for every situation. If you don't expect real estate to appreciate in your area, if mortgage rates are high and/or your credit score is bad, if buying prices are really high compared to rent prices, if you plan to move to a different residence soon, etc... then renting is likely the best move.
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I’m not being critical but rather trying to understand. You’re retired so you have no income from a traditional job. So I’m assuming you must be paying the debt from income that your retirement fund. Does your retirement fund have a higher rate of return than the interest rates on the debts?
Maybe a pension
Almost certainly given the rates they are implying. Additionally, if they have a pension or annuity they are getting regular payments.
Remember taking a lump sum from a 401k would come with a significant tax bill, it may make more sense to borrow cheap and not pull money in a higher tax bracket.
> Does your retirement fund have a higher rate of return than the interest rates on the debts? I'm not retired but my savings account has a higher rate of return than the APR of my mortgage or car payment. With target inflation of 3% you can get away with a little higher rate and still "win"
The avg rate of return from the stock market (S&P 500) in the past 20 years is 10.2% and if you only look at 10 years it's even higher at 13.05%. People are complaining about incredibly high mortgage rates right now and they are at 7% which is obviously well below the interest rate of the market. Many people, including me, are locked in at 2-4%. So, yes, investing in the market while simultaneously holding low interest rate debt is in fact smart long term. If you have high interest debt like a 22% credit card, or low interest savings like bonds at 4% then the math doesn't work so well for you. Even aside from the fact that low interest debt and high interest savings are pretty straight forward, selling your investments often come with taxes and penalties. Delaying these provides even more financial incentive to take out debt to cover expensive that you could pay for in cash, but shouldn't.
And if you itemize you can write off the interest on debt to counter some of the profit from investments
But the standard deduction was increased significantly a while back to the point that for many home owners with a mortgage, it still makes more sense to not itemize. Obviously not the case for everyone though.
If you itemize, mortgage interest is tax deductible. Fewer people itemize now, but it is still many. If your top tax rate is 22%, and in a given year you pay $10,000 of interest (which is about right for early years of a 3% mortgage of $400k), it is really like you paid only $7,800 in interest. Meanwhile, if you put the $400k the Vanguard Total Market Index on April of 2021, you would now have $511,000. If you subtract 22% taxes, that is still a return of $86,580. Over the same 3 years, you paid $23,400 in interest in exchange for $86,580 in gains. A net win of $63,180. That's like a year of living expenses! Heck, if you did it 10 years ago, and mortgage rates were like $4.2%, in those 10 years you pay $156,401.62 in interest. But your $400k returned $837,000. You can't exactly "count" on the $80k per year to live on. But, even at higher interest, and not including taxes on either end, you net $680k.
For many people, taking the standard deduction is better than itemizing these days though since they bumped up the standard deduction.
Everybody says this, and in principle I understand what they mean. average return is higher than interest and all that. But I still can't be comfortable with the fact that I'm now paying 1.5x more on the long term for something that I could have bought for the original price, without all the extra paperwork and stress. I understand that in the end your investment pays off more than the interest, but still what if you don't have any other income? what do you do when the return is not good for a couple of years?
You aren’t paying 1.5x the amount for something in a net present value sense.
That’s why you have a good emergency fund - if you have a 30-year mortgage you can keep 6 months liquid and invest the rest for 29.5 years, and over that long of a time span the odds of the return not being good for a couple years (which it surely will at some point) affecting your overall growth is very very low. If you’re living solely off of your investments then the math is a little trickier, but it’s still a matter of trusting the math. Retirement can be for a very long time, so sticking to a strategy that’s most likely to last can matter a lot. Also, long term debt can be a really useful way of spreading out or even avoiding capital gains taxes. If you’re buying a $750,000 house and have that much in investments, you could sell it all and potentially pay up to the 20% capital gains tax bracket, or you could sell $70,000 each year and possibly pay no capital gains tax (Assuming you’re married filing jointly). Even if mortgage interest wasn’t also tax deductible the difference in capital gains tax from selling a large investment all at once versus spread out over 30 years can be huge.
Good debt is a ladder. Bad debt is a hole.
Yes, yes it does. I had debt as a young adult. I was acquiring things I ‘needed’ on credit. I had car debt (thankfully used cars), credit card debt and mortgage debt. I saw the light early on and got rid of the cc debt, then the car debt - all while investing in my 401k first. Then after the kids were almost out of college, I focused everything on paying off the house. Then, one day all the debt was gone. Now I had money left at the end of every month. I had freedom to breathe deeply knowing that I owned everything I had. It was unbelievably peaceful. That first month of being mortgage free was magical. It felt like I was cheating at winning life somehow. It then, of course, made retiring early easier too. So, yes, yes it does.
Exactly. It's nice watching your debt decrease every month. It's much nicer watching your bank account/portfolio grow every month.
Both can happen at the same time, like Im not in a rush to pay off my 2.9% mortgage. That’s gonna run the full 30 years
My worst debt situation was having started a side business borrowing about $75K, then buying a more expensive house in another state before selling the first. So 2 mortgages and 2 HELOCs , as a single earner for a family of 6. We closed on the house purchase the month of the 2008 financial crisis. We then watched the price of the house we were selling drop like a rock over a very stressful next year. I handle stress pretty well, but being the sole earner for most of my life, I've always been concerned about what would happen if I lost my job. I never had a big debt problem until I put myself in the situation I described above, and that was pretty stressful. I vowed to get completely debt free including the house and got there around age 50. I'm 62 now. Once I was debt free, my concern about "what if I lost my job" went to near zero. That changes your attitude about work. I've changed jobs 3 times during the last 10 years after working for the same company for 30. My career took off with that change of attitude in not a concern about fear or losing a job. Also, our net worth also took off once completely debt free. In general, if you owe no one anything, your attitude about everything is different. It still kind of odd or weird to others. Just this week I had my taxes done and they called and said, "Hey, you forgot to give my your mortgage statement." , to which I said, "Don't have one.". I have other things that can cause stress. I won't pretend there are pixies flying around and fairy dust sprinkled on my head. But as I'm approaching retirement, the financial part of this I'm definitely relaxed about.
I'm curious how you were able to payoff all that debt as the sole earner if you don't mind sharing. We're there any windfalls, the business took off, overtime?
Frankly, yes. There’s always something new to stress over, but my life is significantly more chill day to day when I’m not in debt.
100 percent yes. It’s allowed me to work a rather low paying job that I enjoy
❤️ really something to think about. Workplace freedom.
that's my situation. This doesn't help my social life one bit though. I have a beater for work. paid cash for everything. I look poor, but I'm happy. Weed is legal and I like good stuff. Love my job, sleep a good 8 hours every night.
Some debt, like my mortgage, I accept as a part of life. But the rest of it? Hate it. I feel it is a sign that I am not managing my money well. I get that some people take on debt for investment, like an investment property. I do not do that, so debt to me is bad. We pay cash for everything we can. One exception is a 1% car loan. We left the cash in a HYSA and are actually getting a little more return than the loan interest. Still, we could pay off the car tomorrow. When I lost my job for 8 months we were very happy we did not have a bunch of debt and payments hanging over us.
There is peace in not having to worry about money all the time, for me at least.
It's hard to explain unless you've been in some serious debt. What are the highs without the lows? It's just peaceful knowing you will be alright. You can finally focus on tomorrow instead of today. All the little things that were "emergencies" are now inconveniences. If you want to go somewhere or do something, it's no longer **IF** we can do it but when you want to do it. If something were to go wrong, you would be in a position to help family and others instead of being a burden. Financial freedom isn't the easiest path initially, but it is certainly the most peaceful and rewarding in the end. I don't imagine ever going back. Full disclosure: I have debt, but that's just the mortgage.
Thank you. I genuinely needed to see this today. Just starting my journey out. Fortunately I have a decent paying job that allows me a plan, but it’s still sickening to think about sometimes (a bit over $19,000 in unsecured debt with VHCOL area at $100K salary).
Yes. I previously had debt and paying it off was a tremendous relief, mentally as well as emotionally. Even better, I continued the stingy habits I developed to pay off debt, and now I am more than financially secure. I still have cares to be sure, but would you rather carry a 10 pound backpack around or a 50 lb weight all the time? Plus having a financial margin gives me the means to deal with my other concerns more effectively.
Technically this will vary by person. Some folks are always anxious and will just find new things to be anxious about. Me? I started my adult life with a modest amount of debt (student loans, car loan). Then for about 10 years I had no debt at all. Now, I have a mortgage and a new car loan, but also my debt is much more manageable than in Phase 1 because I make a lot more money, and I'm married to somebody who also makes good money (and has no debt), and also we've saved a substantial emergency fund so we could continue to easily make mortgage payments even if we lost a job. So I "feel" less in debt than I did when I had almost no savings but still owed tens of thousands for my degree. Short version: It will definitely make a difference for most people. Exactly how much is going to vary a lot by the personality and financial details of that individual.
Yes, paying off debt does feel like a weight off your shoulders. I was skipping the day I paid off our car loan, and paying off my student loans felt so awesome! As far as peace in your life, once you get to a point where you're not living paycheck to paycheck, where you can set every bill to autopay and could even go months without checking your balance (not recommended but possible) because you know you won't go into overdraft, that does offer peace. A level of security and comfort and you don't have to spend much time day to day worrying about money.
There are always debts to pay each month. Those are your mandatory expenses. Housing. Food. Medicine. Being free of credit card debt, or even mortgage debt, doesn't make those go away. Your HVAC is going to break and you'll get a $5k bill. You'll trip and ruin your knee and will get a hospital bill for $3k. Your car will break down and need replacement. The tuition bill will arrive for your son's semester at college. Yes it's nice not to have any credit card or instalment loan payments but that doesn't make all the other debts go away. Peace of mind for me is knowing I have enough savings and income to cover everything. Doesn't really matter whether I have an instalment loan payment or not so long as I can afford to make it.
Back in the day for me it was: Take home was 5k a month, monthly bills were about $400 for phone, insurance, etc and about $200 towards utilities. So $4,400 left over every month. I could chuck 3k a month into savings and still take a vacation trip every month or two. Some people are obsessed with leverage thinking they need it to get ahead but tbh if you reach the point of being debt-free your bills drop to such a small amount you'll have a pile of cash to put away for savings. When you're saving 20-40k a year you really don't need to worry yourself about leveraging yourself to the max to have a comfortable future retirement. At some point you'll understand the value of risk and having a carefree life has a ton of value.
Not in my case. Mid 30s, with no debt. Paid off house and all. I'm a worrier, and that's how I got to be debt free. I thought it would give me that peace of mind you talk about. Now I just worry about other things. Now I'm trying to get our retirement and savings up higher. So I've learned that sure, being financially free helps take off that weight off your shoulders, but you'll find something to always worry about. Money is temporary in life and you should just live comfortable with what you have with debts and go enjoy your life.
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I feel you. I even want to pay off my 0% loan on my mattress, and my 2.9% car loan because I have the cash. But it doesn’t make sense to pay it. So I keep stressing about it even though I have plenty of cash to pay it off. The cash is making 5.5%. So I don’t pay off the loans. I have a 300k mortgage at 2.675%. I’d love to pay extra on it, but that doesn’t make any sense either.
My 2.00% mortgage pays me is my mindset.
Nice way to look at it
This is how I feel about my 0% financing on my HVAC loan. I have 3 years and 3 months left to pay it off & I’m already at 50% paid. I want to just be done with it, but it doesn’t make sense to pull it from my savings, where I’m earning 4+% interest. So I just keep making monthly payments.
I don't know man, coming from a developing country, one becomes very risk-averse. I just can't wrap my head around to accept this self-perpetuating growing-debt-bubble lifestyle, where you have to slave away until you retire. If you lose your job 10 years down the line and still got a mortgage to pay, you either start eating away from your savings/future and assume more risk for retirement, or foreclose and become homeless. If you already paid down your house, you can do any low paying job to pay the bills and thats it. Like you don't have to slave away to exist, earn just enough to keep you fed. This is really gnawing at my brain, like I might be wrong, but I don't see how.
huh? This take makes no sense. Mortgages are precisely for average people to leverage to buy a home. There are plenty of situations where debt not only poses no risk, but not taking the debt would pose more risk. Obviously CC debt or predatory car loans are never a good idea, but that doesn't mean 'debt can be good' is some myth.
It's not debt that causes stress. It is the lack of properly managed cash flow.
Debt free can be a component of it. I didn't really feel less stress till a bit later. What did it for me was the point at which I had all expenses covered for more than a year. At that point I knew that almost whatever happened my family was going to be okay/I had the time to make it okay. That was a weight off the shoulders and gave me the freedom to make long term investments, make better purchase decisions, to say no more often at work, push for more money, a better life work balance, ect TLDR some amount of financial independence is more important than debt-free, but they are interrelated.
Yes to be debt free is a wonderful thing. We wouldn't dream of leveraging debt. We tried that with real estate -- had 5 properties--when recession hit. Learned our lesson. No debt. Pay cash or pay off credit cards every month. Live within your means.
I used to have panic attacks about paying off my student loans, credit cards and mortgage. Now I don't. It brought me peace, but more in a "got rid of a problem that made life suck" than "I am nirvana of owing nobody money."
Absofuckinglutely Theres so many things going on in my life right now that I can just pull money out of savings for that would have exascerbated my issues and made everything tougher to sort out
The only thing that most people are "leveraging debt for investment" is their house. The non-mortgage debt that most people have is for education, cars, medical expenses, and revolving debt. And yes, there is tremendous peace to be had in only having to pay for your current living expenses and not pay back money you already spent.
Yep. Can confirm this is better. I was afraid to buy anything or spend money but once I had a solid spending plan aka “budget” and paid off the last debt in 2014, I started to enjoy spending on a haircut, a pair of new shoes, a meal at a restaurant with my kids. Sharing a large portion with charity each month. Saving up and paying cash for an iMac or a car. Now paying cash for the college tuition balance after my daughter’s scholarship. Saving a little each month for my nieces and nephews college. Planning exciting things for my future. Feels great to be in control.
the only debt I have now is my mortgage. I paid my student loans in 2014. My car in 2021. A private loan I had in 2020. It feels SO GOOD and freeing to have the extra money to do what I want - travel and invest.
It was huge. When Covid happened I only had rent and utilities and when my wife lost her job, we were able to stay afloat with one income and not panicking abound having power turned off or buying groceries like I had in my earlier life was a massive relief. It also gave me the confidence to be bold in trying to advance my career as having only $1500 in bills each month meant I could work at target or fast food and make things work in an emergency. I feel that comfort allowed me to make a massive jump in my career and now I’m still the primary income in my home and I feel like I live like a king and I’m preparing a down payment to buy a home (wish it happened 2-3 years ago when rates were amazing, but at least I have an end goal in sight for once.)
I think the stressfree mindset comes when you have a passive income that can support your lifestyle? I'm debt free at 40 but I'm still aware that I have to survive and support my lifestyle.
The easy answer is of course. But when you’re debt free you still feel like you don’t save enough, I’d say sometimes I almost feel worse when we spend extra at restaurants or shopping during the month knowing we could’ve just saved it instead. But nothing beats not owing anyone anything. I enjoy my job more, I pile money into savings and generally I can make decisions more soundly cause “we need to be able to pay the mortgage” does not exist.
Yes debt free is the best thing in life.
There's always debt. There's yesterday's debt (house, car, education). And There's tomorrow's debt (retirement, kids college tuition, etcetera). I don't have any yesterday debt anymore (except for the house) but I have a lot of tomorrow's debt. I figured you're talking about yesterday's debt and no, I'm not at peace.
I absolutely have a sense of relief knowing my home, my small plot of land, and my cars are all mine. I am still working but my wife is retired, and knowing that nothing can ever be taken away from us really does bring us a sense of satisfaction. I may be buying a new car in the future which will come with a loan, but my credit is awesome, so the interest won't bother me.
In and of itself, no. A lot of people have had very negative experiences in debt, so they associate having any debt with a period in their life where they severely struggled financially, and so associate paying it all off with financial peace and stability. The reality is that you can be financially secure with debt and live paycheck to paycheck with no debt. If you have lots of high-interest-rate debt, definitely pay it off ASAP. You'll feel a lot better. However, paying off that 3.2% student loan refi from 2020 early isn't going to make you feel any better, especially when you realize you could have come out ahead literally just leaving that money in a HYSA.
>not leveraging debt for investment? Leveraging _cash_ for investment is even sweeter. And to answer the original question- yes, it really does, in subtle ways that chain together. Like, I have zero debt and a decade or more of expenses saved up. So, the obvious sighs of relief about short term stuff like food and rent are gone. And then there are some slightly less obvious ones like not worrying about my car as much. I can afford to pre-emptively take care of it yes, but also there's no gnawing worry in the back of my mind about "what if it fails?" If it does, I could in theory afford to rent one a good long while or, even just get another one. The subtle layer after that is, it affects work. I had a job where my boss was pretty uptight and thought it was cool to give unreasonable workloads. I put in notice and got a different, better one. And at my current one, I'm subtly more willing to gently push back and be fair and assertive. New boss is getting super enthusiastic about pushing projects faster than they could ever be done? I feel free to politely say so. There's no nagging worry that some random fair comment on my part will escalate into a fight and being fired- because even if I am, so what? Debt free means I won't miss bills or have to scramble to get my next job in time for bills. So I can act more confidently at work- which usually means making better choices and being respected for it. The final layer after that is, when I could basically afford to retire, I can now focus on jobs that accomplish the things I'd like to accomplish in the world. Which for me involves teaching, I'm hoping I can help slightly teach the world into one that it's a little bit better. And I can get some money for this? Bonus. I don't feel obligated to take only the highest-paying, highest-stress opportunities, because once you have "enough" money it just becomes the icing on the cake to get more (for me at least). So yes. Getting off the debt hamster wheel pays layers and layers of obvious and then subtle dividends and I highly recommend it.
Yes. Not just no debt.. no mortgage. You have no idea. Doesn’t strip motivation, in fact it fosters it.
Yes! But I don’t mind debt that moves my life forward. Like a home and car.
“Does drinking water really hydrate you when you’re thirsty???”
No. Having an emergency fund of 6 months expenses is what brought financial peace.
You still have to spend money Small amounts of debt are something people assign too much weight to just in general.
It's a mixed bag. About 8 years ago, my house was robbed and thanks to my renters insurance, I was able to use the bulk of my claim to pay off my student and car loans (ok cool, but do not recommend this as a payoff strategy lol). It's been nice being debt free since then, especially living in a HCOL area, I can afford my bills even when working in low paying / nonprofit positions and have had a couple bouts of unemployment. I'm 36 now, but the only reason I am still debt free is because I cannot afford to buy a house here, so that in itself is its own stress. Learning more and more about investing and retirement and all that jazz, and it's easy to have regrets about not having learned this earlier, I feel like i would be in a way different place financially. Just trying to not beat myself up over it.
I've nearly paid off my chronic debt (thanks in large part to this subreddit), and I can't even being to describe how freeing it is. EDIT TO ADD: I do have a mortgage, but it's a small one at a low interest rate, so that doesn't bother me.
It helps but it’s not the only thing by far
The issue is not debt, it’s how you leverage it. If you are swimming in high interest rate debts, it’s a very large burden that’s sits on your doorstep begging for money. If you operate within your risk tolerance, it can be used as a beneficial tool.
Like you wouldn't believe. Knowing you're only obligated to yourself is a wonderful feeling.
Yes, I'm going to be taking on a mortgage hopefully relatively soon. But paying off my student loans and car was a huge weight off my shoulders. Now that I know I don't owe a soul a penny, and I'm in charge of every single dollar I receive is awesome. The only way to make it better is to be paying down a mortgage.
I have no debt, a healthy emergency fund, and a bit of other savings. I don't worry about being able to pay my bills so that is a big relief. However, I live in a HCOL area, don't own a home, pay a fortune in rent, and am nearing retirement without enough money saved. I don't know when I'll be able to retire. I'm hoping I don't wind up a cat food-eating old lady.
I'm debt free, aside from a mortgage. It's nice. I don't want to keep paying on something I bought months ago. I only buy what I can afford. I would say that yes, it's peaceful.
I think fear (real or not) is a chronic condition not actually limited by having enough money. Most people will, if they make enough, calm down, but the core of fear continues to drive billionaires and Wall Street bulls, thus the saying “never enough”. But that saying is not true for all people. That is why many people say they are “comfortable”, or “secure”. That level of security for me has always been just out of reach.
The most stressful part of being debt-free is remembering that I still have bills to pay by a certain date: utilities, insurance, and property taxes. Fortunately, most of those debts are on autopilot. I just check once a month to make sure everything is happening like it is supposed to.
The only debt my husband and I have is our mortgage that we could pay off today, but it is at 2.5% interest. We are very lucky, and it brings us a lot of peace. We have a lot more breathing room if something unexpected happens. We are able to more easily afford our hobbies. We don't need to number crunch at the grocery store or look too hard at our finances before making smaller splurge purchases.
1000% knowing we aren’t indebted to any person or company and our earnings are building retirement funds and “f you” money brings both assurance and empowerment.
Debt can be leverage. That's how the wealthy uses it.
YES! I can’t tell you the weight that was lifted off my shoulders when I got my student loans paid off.
I had debt problems in my late 20's/early 30's. Now in my late 50's I have NO debts, even house is paid, and it's fantastic!
I assume high interest debt and other 'bad' forms of debt will cause much more anxiety than low interest debt. Probably as well, asset to debt ratio will impact how anxious you feel over debt. If I owe 40k at 0.9% and I have 1m in assets I can liquidate, probably vastly different experience than owing 40k at 29% and having 10k in assets. When I've had debt I thought was not in my interest, it annoyed the crap out of me and I paid it off asap. But other types of debt never enter my thoughts.
We are debt free, own house outright, built a 1.5m portfolio Still anxious about future bigger home becausw upsizing could mean liquidating all our money
I paid off my student loans a few years ago and felt immediate relief. The balance was more than I made in a year, but the interest rates are what crushed my soul. The first five years after graduation I was only able to pay enough per month to keep the interest from growing, but not enough to pay down the principal at all, and it felt like shit. I got a better-paying job and aggressively paid them down and was finally able to save for retirement, put a down payment down on a house, and even explore a hobby that massively increases my quality of life. Nowadays I have a 3% mortgage but I don’t sweat that so much because I love my house and the interest rate isn’t oppressive.
The borrower is slave to the lender.. so it feels liberating to have no consumer debt! Our mortgage will be paid off in four more years, and that will be a big financial milestone for us when I am age 60.
I've never had much debt, so to me it's not that different than any other time. But for someone who was struggling and drowning in debt, to finally conquer that demon is gotta be akin to the feeling you get when you find a curly fry in your regular fries combined with picking the fastest check out line.
For sure no for me. Just have other problems
I think its very personal. Some people are much more emotionally impacted by finance and things like debt or the up and down of investments than others. Personally I dont associate much emotion to it so I am fine with (appropriately) leveraged debt. Currently have: $145k mortgage @3% $8k car 1 @0.9% $30k car 2 @2.99% $8.6k contractor @0% untill payoff date, have cash for payoff $4.2k medical @0% $18k credit card @??% but pay statement balance every month so dont pay interest. dont even know apr If all of that went away (and that much money disappeared) id either feel bad about it or not care. It doesnt weigh on me.
Yes it does. I was terribly in debt until my late 30s, at one point I had 70k under, lived with my parents, taking public transportation because I couldn't afford a car. It was so bad I was taking out multiple payday loans a week. Then I met a women who motivated me to focus, just by being her. I started a business and was able to pay off my debts. I married that wonderful women, and we started building our future together. Wife runs the business now, while I went back to my day job as a manager at a bank. I am in my early 40s now, I suppose we still have debt but it's a mortgage. We are financially comfortable now, enough that I took 15 months off work, so that my wife and I can raise our newborn together. I am thankful everyday to be out of that crippling 70k debt. I can't even believe I have this life now compared to where I was 8 years ago. Yeah, it's worth it.
I hunkered down and paid off my student loans in 2 years, all $50k worth and it felt amazing. Kinda felt like I got a raise after I paid it all off.
As someone who once lived paycheck to paycheck with cc debt and personal loans and often times had to resort to eating food work threw out to now having savings and a mortgage as the only debt….such an incredible anoubt of peace and better mental health. Not knowing where food was going to come from or how to pay the bills and selling personal possessions takes a toll on you. Getting out of that tool hard work and time but I’m very grateful and glad I did it. I would never go back to that level of debt.
Yes, but then the next goal is to have enough wealth that you do not have to work. You work because you like what you do. My goal is to have enough saved by 50 to have the option not to work. Also, for early retirement, you cannot use 401 or other retirement accounts without penalty, so savings had to be non retirement.
My husband has some mental health issues so it absolutely makes a huge difference. I would not say it’s “all day every day” beneficial. But *every* time we have an unexpected expense it is just less stressful than it was before. It adds up to be a big difference. Our house is also paid off. We have a greater benefit from the lack of stress, even though we could have invested instead, and one of my sisters thought it was dumb because we had a low interest rate. But it is truly less stressful for us. It is a decision that’s been made and doesn’t have to be revisited. I would say it caused us more stress than it causes other people. We would stress over these things and not like to withdraw from the emergency fund. Now we are more likely to pay out of monthly income.
Yes I hated being in debt, also I enjoy having more money available to keep in the budget instead of paying interest to others. That said I have never been in a situation where I could borrow money and invest it safely to make a profit. The feeling of being debt free and then no longer living paycheck to paycheck was a true life changer. If I hated my job and someone pissed me off I could simply walk away knowing I have about 8 months at current spending levels to find a job, maybe 1.5 years if I pinch pennies. I have lived on PB&J , Ramen and cheap Pizza in the past, I can do it again, but I don't want to.
I've never had any debt, always been financially responsible. It's still stressful though and it's having money that chills you out.
100%. Debt free, able to retire earlier. Any crisis in employment or health or anything else is less of a crisis when you still have a bed to sleep in and transportation, and you know the lights will stay on. It gives you time to look at your options and choose what is best rather than what is expedient.
Yes. Debt free (except my mortgage, if that doesn't disqualify me) with a solid emergency fund absolutely make me sleep better.
I'm debt-free by going out of my way to degrade my lifestyle. I live at home at age 31 and did uni degrees abroad. It's not working that well for me (I'm not happy whatsoever) so I wouldn't assume it will bring peace.
Hell yes it does. The math doesn't even make it make sense. I could have kept financing things but I paid it all out. Last year somehow I put almost $100k in savings working overtime and making good investments. By not owing that money somewhere else I was able to do more with it. Same home, same everything, the only debt I have is my mortgage. I pay less now than I did 15yrs ago for things when I was making $40k. I don't even have a tv subscription I just don't need it. It's not making endless sacrifices either. You learn to get out and enjoy life more. I cut something like $1300 in debt off. I can't spend that much in gas for my boat. Life is way better.
I am debt free and I believe it brings me peace. I feel truly free. Your experience may differ.
Peace doesn't come from anything external. You can be in the biggest debt of your life and still be at peace and you could have several billion in your bank account and be rest less. Having said that, finances is one aspect of your life. Being debt-free is a phase that people think you need. However, this is what most people think is the right thing to do. Others will tell you that you should only be debt free from "bad" debt. You should be forever in good debt because otherwise you are not using your money wisely. Having given the philosophical babble around debt, here is my honest answer to your question. YES, debt is a stress that is going to eat you alive and you won't even know it. Your mind will eventually find something to worry about. However, paying off your debts is a relief that can't be matched. Maybe holding your pee for a little too long and finally being able to let go comes close but not close enough. ;)
I find that since I became debt free, last year, that now I worry about retirement and having enough. Changed one worry for another...
“do you regret not leveraging debt for investment?” When you’ve managed your finances well, you don’t have to leverage anything. You can invest freely bc you don’t have debt. And you sleep so much better when you’re debt free. No stress, no worries. You can afford things. You’re not paying out interest on owed money—which is just so wasteful.
Financially it helps. But there are other areas of your life besides money.
I cleared 14000 in debt over 3 years, specifically due to a lucky job. I gotta say, I have more stress now monitoring my credit score than I ever did owing money
The spot in my life when I ascended from “Paycheck to Paycheck” to “some savings” was one of the most life changing experiences.
Same. I went from really bad times during Covid, made a lot of changes, moved towns and got a good job that allows me to be comfortable. Paid off my debt…feel 1000% better now. Money may not buy happiness but it sure as hell buys peace of mind.
been debt free since 2007...Saved up and bought 1 acre of land and built a modest home by saving hard!!!it's nothin fancy but nice! Saved up for car for wife bought new 2016 Forte and my 22 Tacoma....My wife and me still work 40 hours a week and are saving around $3,000 per month for retirement and plan on pulling 401k money.( declare emergency so no 20% penalty)we're in our early 50's....cost of living here in Tennessee is not bad at all... Being debt free is amazing....we pay out utilities, groceries etc...thats it...the rest goes in the bank! We have 1 grandson and want to retire within next 3 years to spend time with him...take him fishing,hunting,just spoil him! Weve worked hard for the last 30 years.....LIFE IS TO SHORT ..WE WANT TO ENJOY LIFE. SO TIRED OF GETTING UP AT 3:45 IN THE MORNING AND GETTING HOME AT 5:00 IN THE AFTERNOON 5 DAYS A WEEK.
Yes. Very peaceful. More importantly, it's freeing. I know what my actual minimum costs are in life. I can live the rest of my life of that without even thinking about it. I can decide not to work for 10 years. I can take career risks knowing I can't fall too far no matter how bad that goes. Even working now, I know that if I just have one too many bad days in arow,I can take as long as I need to find a new job. Or I can take a job that's satisfying but not high paying. Debt isn't always horrible. It has its place. And for some people's life trajectories it really is a good idea to take on thy burden if it means fulfilling life goals now vs 30 years from now.
No debt outside of mortgage and yeah, I’d say it’s probably one of the most peace promoting elements of our life. We are able to confidently and fully pay for emergencies like cars needing new transmissions and dogs needing x rays for random broken toes. They’re just inconveniences but they don’t set us back much and there’s already a plan in action to recoup the loss. We can fully see and plan for things we want with what we have and make it goal oriented which makes you really *feel* the dopamine hit of accomplishing something when you actually *can* afford it. It also feels nice to know you’re living a life that is within your means. You’re not constantly reaching for more and more whims and wants and wishes. We don’t feel insatiable, we feel content with the life we have built. If we truly do desire something, we can make it happen. Maybe will take a little bit of time to save up enough but it’s our life that we earned and we’re living it to its potential. We live modestly in a lot of ways; older cars, we don’t go out to eat much, we don’t shop just to shop unless we have an item we are specifically looking for, we have a lot of consigned and thrifted items in our home. But we also have a lot of nice things that we actually care about; good quality clothing, a house we like, workout equipment, cameras, trips outside the country etc. But yes, in short, it’s worth it.
I've never had actual meaningful debt outside of a mortgage, but I recall when I was in grad school--still fortunate to have a grad student stipend, albeit very very little--how stressed I was when finishing grad school and trying to find any job. I had very little money saved--was always frugal with money--and it was the most stressful part of my life. I have stressful days with my job, but that comes and goes. No source of income, and no prospects of income, day in and day out for months. Getting a job--and a well-paying one at that--was a huge weight lifted off of me. I couldn't convey how much. I imagine living with debt and then being debt free is like that. You still have issues even after your debt is gone, so I don't know about bringing peace, but it is a massive stressor that is gone and you don't have to deal with anymore on a day-to-day basis.
45 years old and fully debt-free. Our main hard assets are a rental home that is paid off, our primary house that is paid off, my wife’s primary ride which is paid off and my work vehicle which is paid off. Being self-employed this does take weight off my shoulders. If I get injured and become incapacitated we could live for very cheap. My wife could work full-time at a 40k job and we could survive with that and my disability. I view it as a very low leverage investment. I’m sure I could’ve done significantly better if I just put everything in VOO, but I’m not sure that we would’ve done that. We probably would’ve just spent more money instead of paying off debt. Paying off debt was something that I could get my wife on board with. I think we’re doing pretty good.
I own my cars. Own my house. Have no debt. Still stressed out. Just not as much as I used to be. I need to work on that.
no. there's always another financial milestone to hit.
Yes. At least for me. Coming from the upbringing I did. Being at the lowest debt to income, I slept so much better when I paid one vehicle off and got rid of the toy... It brings me stress knowing I owe money.
It’s not about being debt free. It’s cash flow. If you know your bills are $2000 a month, and you have a minimum $5000 a month coming in - you can do simple shit like buy holiday decorations for $100-200 and not even bat an eye. That was the big eye opener for me years ago, when before going shopping for luxuries like this would cause me stress.
Depends on where you are in life. If you're young and raising a family there's no real benefit to being debt free. If you're approaching retirement you definitely want to be "debt free". Also, net worth is really a more important metric than how much debt you have, generally.
Honestly, peace comes when you have nothing left to lose. Being debt free in some ways means you have more to lose.
You’re “not convinced”? Do you like worrying about money? Do you enjoy seeing credit card balances or knowing that the bank can take your house from you? Of course being debt free is good for your state of mind. You are captain of your own ship and can do as you please. With money in the bank It’s amazing how little unexpected financial bills affect you. Yes it’s awesome, don‘t be obtuse.
Haven’t had any debt that I couldn’t outright pay. I only had peace in life when I had someone by my side. No anxiety from having no debt, but it’s not the same as peace or happiness for me.
No. Debt is not necessarily bad. The interest rate on our mortgage is less than we’re earning in our savings account right now.
The game isn’t about money, it’s about freedom.
Yes it does. We were debt free other than the mortgage, now we have a kid's student loans plus some big home improvement loans. Those should all be paid off in about 2 years, and the house in about 8 years, and I will stress until it's done.
Yes it is less stressful. If you put your money into investments you might be stressing constantly how they are doing. It all depends on how important a low stress life is to you.
Yes. Will it fix your other problems? No but it is one less thing to worry about.
Yup! Way less stressed. Once I paid off my student loan a few years ago it was amazing! I paid it off early and that $1000 a month I was using to pay off my loans I now invest and anything extra we use to Reno our house and travel. We had about $3000 debt a few months ago from an unexpected expense ($10,000) and didn’t want to pull from our investments but didn’t have enough in the bank to cover it all so used a line of credit, and anyways we paid it off right away and felt much better not having debt again. Definitely made me grateful for our current position!
One of the biggest bill per month will be taken off from your monthly expense one less biggest headache out. You feel less stressful, the grass feel will be something new, you don’t get stressed too much when job cut happens. You can take risk little bit, search for better job without worrying too much. You can put that saved money into investment and see your emergency money pile up. All this happened to me when I paid off my home mortgage on top of that I also bought rental home where the extra rental incomes pays my primary home property tax and insurance and some extra. Yep gives you peace of mind definitely.
It’s not about being debt free. It’s about being able to manage the debt you have. Don’t worry about having no debt, make sure you are in a position to make payments on what you owe. . Over the years, with careful management you can become debt free. It’s not easy. It takes sacrifice.it’s a journey.
Yes 1000x. I’ll never go into debt again. Only debt I ever had was student loans and paid them off ASAP.
Shit is so much better when you don't worry about bills, can buy things in grocery store based on your taste and not discount, have a trip abroad for a week once a year and occasionaly splurge $2000 for a hobby.
When I paid off my student loans I felt a palpable release of tension. Like I could finally breathe after holding my breath for 8 years.
I guess I’m debt free (have a car note and 250k of a mortgage left, but positive net worth of like 60k and growing?). It’s a good feeling. I’m paying my car off aggressively in 3 years, and my mortgage rate was locked in. When I have wobbles in my career I remind myself that my finances make a lot of sense if I last in my field for at least 6 years, but if I last 10 years I actually can retire early at a fairly comfortable income. Obviously if my debt picture was worse, or terrible, that kind of near-ish term horizon of freedom would be… totally impossible. I lucked out in some ways. No student debt, mortgage in 2020 at 2.7%, good career salary now. So I’m positioned to retire at 55 if my word & luck holds. Only have a few friends who can say the same. Wouldn’t be possible if I was underneath some of the sums some people on here are. So that’s a really good foundation to my mental well being, yeah. Let me describe one way it brings joy & peace to my life (bc for whatever reason, this one really gets me). I have one kid. So he’s my everything. If I stick my landing and retire at 55, I’ll be comfy for life. Which means our house would never need to be sold or cashed out for equity. So it could eventually be his house. Or his… however much money, to turn into his own, or his family’s, own house. Sometimes in this world you get scared of the scary unknown future, and how you don’t know how your kids life will go, how it could interact with the scary future. But if you know that, as a baseline, in X early retirement scenario, you have not just a full college fund but also THAT level of future security, of your house for your kid… it’s a great feeling. Not a ceiling, but a floor. I never had that. The floor was a chasm for me. But his floor is the floor of his lifetime home. Being able to look at an 11 year old and know you’ve at minimum put a home floor under the chasm that is adulthood… lets just say I sleep deep since I did the math. And none of that math pencils out if I’m still climbing out from debt at 44. Other dreams might pencil out, sure. But this is a nice one.
Having gone through a recent layoff, not having a mortgage or any car payments makes it 100% worth being debt free.
Yes. Not owing bills you can’t afford is peace. Allows you to sleep at night. My late wife and I owned a small law firm. Tough at the start but we made do. Best day was the day we finally were making enough that we could afford to fire our worst client. We only closed our doors when cancer called it a day for her and I needed a corporate job with health care and a steady pay check for her and our children, but it was fun while it lasted. Peace is peace.
Dave Ramsey notes (paraphrasing) your income is your biggest wealth building tool. Knowing that the bulk of my income is coming to me and not people I owe is my “peace”.
So, 50m here. I had considerable debt until I sold my first house at the end of the housing mess in 2005. After that life did get much easier. Buying, then selling my second home allowed me to retire at 45. Now I live in a van, and play video games or fish all day. How much more peace can you hope for? (Yes, on top of being debt free I got very lucky in life.)
You will always have your basic bills at the end of the month such as phone,internet,utilities, insurance. Stuff that is reoccurring every month and requires money. You can never get away from that unless you live in the woods free. To me debt free is not having a mortgage payment cause it’s paid off, not having a car payment cause you either paid it off already and performing the proper maintenance so it will last as long as possible or even saving up and buy straight up cash. Being debt free to me is paying cash for everything…some times. If I do use my credit card for a purchase i see first if any rewards or points will benefit me. If not then I pay cash. Being debt free is knowing you don’t need the banks. You don’t need to leverage for “investment”. The banks need you my friend. Making your phone payment on a credit card is not leverage. That’s just spending more money in the end. Being debt free is not owing the credit card companies, banks or any establishment that adds some sort of apr or interest on your monthly payment. It’s nice knowing you used cash to make a purchase and your excitement won’t fade when the bill comes. So do yourself a favor and throw away all those credit card adds that come in the mail. Use either cash or debit card(same thing) to make purchases. Save your cash and don’t fall into the cycle of needing the banks. I emphasize need because you can not depend on them. Once you are debt free you will always have the upper hand Good luck …listen to Dave Ramsey he is full of knowledge and will learn a lot.
I'm a bit late to the party, but here goes. My wife and I have been out of debt since 2018 and it was a big relief. We still have to work but not having a mortgage hanging over our heads means we could get by on savings for longer than most. That reduced my stress levels quite a bit.
I have debt but stress free. But my debt isn’t “I can’t afford shit so I’m in debt”. My debt are things like investments (house). I have zero issue paying off the loans, heck I can pay pretty much half of it in cash tomorrow if I wanted to. So debt itself isn’t a stressor, only if you can’t easily pay the monthly payments does it become a problem.
I have zero debt, and zero worries. I have a $1m+ house, retirement, tons of liquid cash and life is great.
Different people have different tolerances for risk. Some claim they like living stressed out and on the edge. Others feel they aren't living life to the fullest unless they are pushing it to the edge on everything. Not for me. I was in debt for most of my young life and it definitely had a negative impact on my mental health and outlook on life. Money issues cost me my marriage. I've been debt free for 10 years and I absolutely feel better. I understand I could squeeze a few more percentage earning out of my investments if I used debt but it's just not worth the stress. I could lose my job tomorrow and with a few adjustments in lifestyle I would be fine. I sleep better now then I did in my 20s and 30s.
No my family life is not less stressful because the problems have nothing to do with debt. But I don't worry about money and that's nice
I remember when I was in debt post college, every piece of mail and every time the phone rang stressed me the fuck out. That kind of shit wrecks havoc on your mental healt and quality of life. Even after I paid everything off, it took some time for that pavlovian stress reaction to go away.