Looking about two years out to finish up student loans and car loans for me and my wife. We still rent, so at some point there will be a mortgage. Thankfully we pay next to nothing in rent so we've been saving for a house down payment, putting 25%+ towards retirement, paying everything else down, and still able to hunt our asses off.
Sound Off - 100% Debt Free
- Thread starter Gunner46
- Start date
brnsvllyjohn
Active member
Retired 15 years ago and have been debt free for 12 years. No mortgage or any other loans. We pay for everything we buy with a check. It is easier to save to buy a truck or car with no debt.
My wife refuses to buy a new car. I have a 2017 truck that I doubt I will ever need to replace.
That is how I can now buy a pair of NLs for myself.
My wife refuses to buy a new car. I have a 2017 truck that I doubt I will ever need to replace.
That is how I can now buy a pair of NLs for myself.
Pucky Freak
Well-known member
My first house in 2014 was 20% down, sold in 2017 and used the equity for a 20% down payment on a much better property, which I now own outright.
Let’s say I bought a house 0% down in 2013, 30-yr at 3.5% and “invested the rest” per conventional wisdom. I would have paid an extra 75k in interest and 15k in PMI. However, S&P500 avg annual return over that span was 13%. I’ll be curious to crunch the #’s to see how money ahead I would be if I had taken that route.
FairWeather
Well-known member
I doubt I’ll be debt free from my house before I end up selling it, but at least it’s locked in at 2.25%, and it’s estimated value has increased by nearly 1/3 since we bought it. My mortgage is about $1200 less/mo than the average rent for a similar property in the area.
Given these circumstances, I don’t really think of it as debt in the burdensome sense of the word.
Given these circumstances, I don’t really think of it as debt in the burdensome sense of the word.
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npaden
Well-known member
Hard to know that it was going to have a 13% return over those 10 years in advance.
Would need to know the monthly extra payments to do the real math, but just a back of the napkin would be that you missed out on roughly 10% annual return over that time frame. 13% / 3.5% x $75,000 = $278,571. Not sure when you would have hit MIP so take all of that out and if my back of the napkin math is right that would put you $263,000 ahead. You would still have 20 years to pay on that 3.5% mortgage but you would have a enough to pay it off and then some.
The difference would just continue to get bigger as you would be able to continue to earn more than 3.5% that you would be paying on your mortgage for quite a while with the funds accumulated.
I wouldn’t assume every 10 years is going to have the same result, but an 8 or 9% return is not far out of expectations.
npaden
Well-known member
With that said everyone’s risk tolerance is different and many people move in and out of the market at the worst possible times. There has been lots of volatility in the market over those years and all it would have taken would have been to pull out of the market a month after COVID hit and then stay out until it ran back up then get in finally only to see it turn back down to pretty much lose 100% of your returns for that decade and maybe even some principal.
I’m one of those guys that just leaves my money in the market and looks at down turns as buying opportunities but some aren’t that risk tolerant.
For many having a fully paid mortgage is worth the peace of mind.
I’m one of those guys that just leaves my money in the market and looks at down turns as buying opportunities but some aren’t that risk tolerant.
For many having a fully paid mortgage is worth the peace of mind.
Redmt
Well-known member
That is the scary truth. We couldn't afford what we already own. Buying the wife's new car put a dent in the savings. I'm glad what we have is ours. We're getting ready to drop "homeowners " insurance and move to a straight liability policy.
Scott85
Well-known member
- Joined
- Nov 22, 2018
- Messages
- 3,005
I’ll be debt free by the end of the week. It will be nice to retire from the military with 0 debt.
I didn’t read that very closely the first time.
I would never be in the camp if no money down. I’d always be in the 20% down camp if you can do it. If 10% is the only way to get into the real estate market I think that’s fine too, cause getting in is important too.
I think net net seeking the pretty strict no debt as soon as possible versus debt and safe investing are both great sound approaches to personal finance.
I think the thing with the “conventional wisdoms” of either approach is that on average nobody is following either of the conventional wisdoms. For either to work requires discipline, patience and sacrifice. Maintaining the debt is bad if you don’t have an emergency fund and aren’t actually investing the money you have in excess. Paying down the debt doesn’t work either if you’re not actually paying it down or have the emergency savings when things go south.
I think both approaches are quite sound though if you can stick to their principles
tkhuntsman
Well-known member
My wife and I have been completely debt free since 2021. It's not awfulFor the second time in my life I'm once again 100% debt free from the Ex, my bookie, the credit cards, the wheels.....EVERYONE !
Yes, I pulled some extreme overtime (13 months). Yes, I did not communicate well with friends & family. YES, my a$$ is tired!
SOOO, starting next week I am going to start taking VaCa days for the next couple/three months and letting all those other numb nuts put in 'their' time while I go trout fishing and chasing a Big A$$ Ohio whitetail !
Any one else out there in the same financial position ?
Pucky Freak
Well-known member
Nail on the head right there. For every 20 people I know who claim to keep the loan and invest the difference, maybe 1 or 2 actually do it.
I ran my numbers and got $211,000 investment balance after 10 years; including home equity, net worth was + $60K over the pay-off-early route.
Extrapolating out to 30 years, had I continued investing the difference with an annual 13% return, investment balance was $3,765,000 after subtracting the extra taxes and mortgage interest paid. Investing for 20 years at a higher monthly contribution with no mortgage, investment balance was $2,060,000, or 1.7M less.
Not an insignificant amount. As stated by others, 13% is unusually high, but crank down the return rate and the gains are still north of 1M.
The nice part of this whole comparison is we get to pick our incentive. 1M is nice. Having no debt and no mortgage payment for 21 more years is nice too.
shrapnel
Well-known member
- Joined
- Aug 27, 2015
- Messages
- 2,581
Comparing to what you could have done after the fact, only works when there is no catastrophic loss. When you consider the crash of 2008, you do have to realize the 10’s of thousands of homeowners that lost their homes. Before 2008, you couldn’t have guessed the collapse and few did.
We bought a house in Mesa, Arizona in 2011, after the crash. The whole Phoenix area was still trying to recover from 2008. We looked at dozens of homes for sale and there were people still living in their homes with their mortgages being up for open sale on bank repossessions. Short sales were everywhere and auctions were a daily happening.
Asking all those people about debt and you would find, they were lured into that predicament by a “buy now, pay later” mentality and fell victim to an American tragedy of an appealing prospect of debt and no understanding of how or when to pay it off.
All debt isn’t bad, but discipline to pay it down and manage income vs outgo is a simple recipe for success. Even then, many are blinded by the desire to have nice things before they are ready to pay for it and I would bet that the debt load on the average American citizen would be astounding…
Hem
Well-known member
Seems to be varying interpretations of " debt free" here.
Addicting
Well-known member
You all are smarter than me as far as generating wealth. At a 2.25% mortgage I have eagerly been paying it off as fast as I can. When I ran the numbers and saw how I could cut it down from a 16 year to a 10.6 year pay off, I was all in.
6 years of not having a mortgage seemed like a great option. It was set to save me around 30k when we refinanced.
i wouldn't say smarter. that's a smart approach.
i kinda take a hybrid approach to our finances a la dave ramsey and conventional wisdoms of maintaining some debt and investing.
i think the number one non negotiable everyone should strive for is to be mortgage free by retirement. my hope in not paying off my current one early is with that lots and lots of savings on the side (aided by a low interest rate and 20% down making for a very manageable monthly mortgage) then that aggressive savings coupled with some in lower risk investing in 6 or 7 years i'll have someone else paying off this mortgage while we get into another house at 20% down with a manageable mortgage. with hopefully enough coming off the top of that rent to fund the maintenance of it and maybe even a little on top of that to save and invest (also aided by a low mortgage from 20% down and a low rate).
it's a great plan, right? but like @shrapnel alluded to, everyone has a plan till they get punched in the face. i try to keep dave ramsey in mind so that when we do get punched in the face while working towards that plan (or maybe we don't
), we'll have no issues keeping our current house and getting back in the saddle and working towards the plan.
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bowhuntmontana
Well-known member
100% debt free as of October. Only had a mortgage for the past few years, but that SOB is paid off. Beginning to feel that freedom more and more.
Redmt
Well-known member
That would scare the hell out of me at my age. I hear some of the younger guys talk about their payments. 5-600 car payments, 3-4-5000 house payments and so on. Where the hell does that come from ?
