First of all, rent, because a mortgage is a big debt. I don’t know if most people qualify renting a home as debt, but I’m going to say that renting is not debt. I can walk away from a rental home with no future obligation (except canceling the lease) and other than the obvious problem of needing a place to live it’s not necessary that I pay THAT rent next month. I have to admit that as we prepare for our move – having sold our house and having rented a house in Florida – I feel a tremendous sense of relief now that we have no debt.
Saying that I have no debt would not have been possible without these four other basic financial planning steps:
- Despite what Bubelah might say – because she detests the frugality mindset as the cheap mindset – we are frugal people.
- We do not incur debt for anything, worthwhile or not.
- We spend money when necessary.
- We watch our money.
We don’t clip coupons. We don’t darn socks. We do air dry clothes, and we do buy store brand goods (i.e. store brand sugar versus name brand). We’ve never thought of ourselves as penny-pinching people, but we do reuse ziplocs and we do make careful use of bits and pieces around the house. It’s never been a conscious effort to squeeze every last penny out of our lives. We simply looked for good spending habits and stuck to them. We shopped at Marshall’s instead of Saks, and bought generic items instead of name brand.
A simple rule, which I know is hard for so many people: do not go into debt. Incur debt for nothing. Nothing. Nothing. I’d repeat it again but you’d quit reading. Not for a car, not for a college education (if you can afford a less expensive one, that is), not for home improvements – never. Don’t ever think that THIS time you can get away with a few dollars of debt. Other than a mortgage (and that’s debatable) if you avoid debt you’ll always be better off. There are a few times when it’s more understandable (for medical expenses, or for an education), but by and large you’ll seldom be sorry if you steer clear of debt.
If you need to spend money, spend. When we first married, cleaning our townhouse took forever. We were both working, and cleaning the house took what little free time we had on the weekends away from us. We paid to have someone clean the house, and it was worth it. It freed up time for us to do more productive activities, ranging from having more time to cook to having more time to interact with other people. We’ve also spent money here and there on other services and goods to free up time. You can generate more money; you can’t generate more time.
We watch our money. Early on in our marriage we turned money management over to Bubelah, who had never had budgeting responsibility for a household before. I had (although only as a bachelor), but we thought it was important for both of us to have a full picture of the inflow and outflow of cash. Since we’ve been married, both of us have had a good understanding of where our money is (brokerages, retirement accounts, checking, savings, etc.) and a good understanding of where it’s going (bills). I don’t think anyone can be on the road to riches if they don’t understand where the money’s coming from, and where it’s going to.
How to have no debt? First of all, incur none. It’s easier said than done, I know, and many people don’t hear that advice until it’s too late. Some debt may be reasonable – for investing in real estate, for a college education, for purchasing a home. You can argue each, although I can just as quickly argue against each. But being debt free is one of the foundations of wealth, and if you can’t focus intently on that goal first, it may be a long time until you achieve financial freedom.