Down and Dirty About Debt

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Here’s the thing about all debt other than a mortgage: our society leads us to believe that it is necessary and normal. That is simply untrue. It is possible to live debt-free, and it is as wonderful as it sounds. Being debt-free opens up endless possibilities for financial potential and growth. And let me reiterate that I work in a nonprofit and my husband is in the early stages of growing a business. We do not make a lot of money by most standards, but we have managed to eliminate our debt and live with a little financial patience, which is creating a positive domino effect for the future of our finances. No debt means we’ve been able to put the money we were paying towards our loans into an emergency fund. Now that we have 3-6 months of expenses in savings, we are free to start putting that amount of money towards a down payment for a home without any little surprise forcing us back into debt. Once we are able to buy a home, the amount we’ve been paying towards rent will go towards our mortgage then the extra money that we were saving for a down payment will go into retirement savings and putting extra money toward our mortgage. This puts on track to have our home paid off shortly into our thirties while we grow a nice retirement fund for the future. Are you getting the picture? A little delayed gratification goes a long way! If we were to continue growing our debt by spending beyond our means and paying the minimum payments, which basically get you nowhere in actually paying the debt off, the dominoes would be falling in the opposite direction: a lifetime of limitations and financial struggle.

Here are some harsh realities about debt:

  1. Living within your means = not having debt

    Maybe you haven’t intentionally declared that you want to live within your means, but I think we can all agree that living beyond your means is a recipe for disaster. Living within your means literally means not spending more money than you earn…and if you don’t spend more money than you earn, you will have no debt. Plain and simple. If you have to take a loan out to buy a car, that is not living within your means. If you have to charge a vacation to your credit card because you don’t have the cash, that is not living within your means.

  2. Having an emergency fund is necessary for staying out of debt

    I know it’s hard to imagine saving up 3-6 months of expenses (usually around $10,000-$15,000) just to let it sit in your savings account. But there is a thing called Murphy’s Law that ensures us that anything that can go wrong, will go wrong. If you are not prepared for a disaster, it will probably happen. If you have a hefty cushion of savings to cover unexpected expenses, you don’t have to worry about a disaster, and you don’t have to bust out your credit card or apply for financing just to get by.

  3. Just because you can pay the monthly payments does not mean you can “afford” something

    “Well, the payments are only $100 a month, and we can definitely afford that, so it’s no big deal.” Buying a luxury item just because you can physically pay for the monthly payments does not mean that you can afford it, and it definitely doesn’t mean you are living within your means. You do not need that $10,000 jet ski, and you definitely cannot “afford” it if you can only make the payments by paying it off over the next decade, costing you ridiculous amounts of interest.

  4. Debt is a socially acceptable form of slavery

    To quote a best-selling little book called the Bible, “The rich rules over the poor, and the borrower becomes the lender’s slave (Proverbs 22:7).” When you are obligated to pay a certain amount of money to a lender every month for something that has already lost its value, you are enslaved to those payments. If you buy a new car then start to feel a little suffocated by the giant monthly payments and want to get out of their vicious grip, you can’t simply decide to sell the car a few months later and expect to get what you paid for it originally. You are imprisoned to those payments until they’re gone. And just like a slavedriver, they will hold you back from financial freedom. Once you get in, there’s no easy way to get out.