Once You’re Out of Debt, Stop Borrowing Money

| November 27, 2012 | 16 Comments

Growing up, my dad taught me through action that you don’t borrow money to buy things. He taught me that you only buy when:

  • you have the money saved.
  • you’ve thought about it in advance.
  • you’ve discussed it with your spouse (if you have one).

Even though I learned that from him, I borrowed money in my early adult life to help pay for college and to buy myself a shiny new car after college.

The thing was, I was young and stupid. I can look back, shrug it off as idiocy and move on with my life. What I should have done is worked a little harder, saved my money instead of buying stupid crap with it and FIXED my car when it broke down in southern California instead of giving it away and upgrading out of my league on credit. But like I said, the past is the past and it’s over. I learned my lesson the hard way.

After some quick Google searching, I can’t find any credible statistics on young adult debt, but it sure looks and feels like it’s out of control. Most of my friends and co-workers have debt. I’d guess that 75% of the young adults I know have debt. Is that scary? Regular people might not think so, but I think so. The real scary thing is that 90% of those I know in debt don’t seem to be concerned about it. They go about their lives buying expensive gifts for Christmas, going on fancy vacations and going shopping for Black Friday or Cyber Monday. What the ….?

But there is a small percentage of us young adults in our twenties and thirties who aren’t going to live like that for the rest of our lives. We’ve decided that debt will kill us. It traps us in financial bondage and holds us to a job we don’t like, a house we don’t want to live in anymore and a stress level that we can’t escape. I decided that I wasn’t living like that anymore several years ago and it was one of the best decisions I’ve ever made. When things are going well is exactly the time that you need to kill your debt.

Now to the sensitive topic of the future. If you’ve managed to kill your debt, what’s next? Are you committed to never borrowing again or are you setting yourself up to get back into slavery again? Aw, the two biggest questions are likely:

  • What about buying cars?
  • What about my buying a house?

Cars should be purchased with cash. Anyone who has any money can tell you that. It’s not really even up for debate. You just buy them with cash. Houses, on the other hand, can rarely be afforded in cash. That makes a lot of sense. I don’t believe home debt is a terrible thing as long as your financially ready to buy and put a good chunk down to avoid PMI and offset the risk of becoming upside down.

But as for me? I’m more and more committed to waiting to buy my first home until I do have the cash. It just feels right for me. I look ahead to borrowing 80-90 or 100 grand (yes I’m thinking modest), and it scares the living daylights out of me. I’ve been there, granted I was only under $25,000 of debt, but it felt like $100,000. It had a crushing weight. Why would I want to go back underneath that crap? I don’t.

To all of you who are out of debt, you worked so hard. Don’t entertain the idea of getting back into that mess. Run away as fast as you can from any pressure to borrow money. Doing just that has gotten me to a place where:

  • I own my car (with 61,000 miles on it and in great condition)
  • I have 3 years of living expenses in cash and liquid investments
  • I don’t owe anyone a dime
  • I am not under any contracts of any sort and am free to cut any of my expenses at any time
  • I don’t have financial stress

Gone are the days where I worry about how my rent is going to get paid. I have friends who have to worry about that. Gone are the days when I worry about becoming suddenly unemployed. I have co-workers who have to worry about that. Gone are the days when I’m trapped where I am. I’m not trapped and don’t plan to ever be. It’s no fun living that way.

And besides getting out of debt and staying out of debt, I have two other recommendations along the same lines:

  • Keep learning and pushing yourself mentally and never stop
  • Set big goals for your future and work diligently towards them until you achieve them

I’m out of debt. I’m not a slave to my debt or my job anymore nor will I ever be again. Now, I’m off to work on bigger and better things. Forward I go, not backward. Debt is a thing of the past, something I’m not revisiting.

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Category: Getting Ahead

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  1. I don’t think people in debt should stop living their life. Buying Christmas gifts and going shopping is okay. I have student debt and enjoying my life is more important than putting an extra $25 toward my loan.

    I’m paying off my loan a lot faster than most people would, so I don’t see the value in freaking out about it.

    I am also maybe weird, but I don’t think debt is always a bad thing. It can help you get ahead. I’m not talking $20K of consumer debt on a credit card, but mortgages, etc.

    • Thanks for the comment, Daisy. I agree that if you’re thinking about it in terms of increasing your net worth, sure, debt can help you get ahead. Regarding stress and limiting your options, debt does damage in my experience. It has a lot to do with what you value more from the two of those and options and low stress living are high on my priority list.

  2. Michelle says:

    I agree with Daisy. I don’t always think debt is bad, especially if you have a low interest rate. However, credit card debt for things such as clothing and going out to eat is not good.

    • Well, we’re all entitled to our opinions and I respect both of yours. I would like to hear some ways that debt contributes to lower stress, flexibility and setting you up to do what you love everyday. I do however see how debt can help you buy a house when otherwise you couldn’t and increase your net worth. Leverage can help you get wealthy, yes. But does it help you live a lower stress life in which you are able to pursue your passions, even if risky?

  3. I agree the the debt levels considered normal by 20 and 30 year Oldsmobile is a bit high but I didn’t mind taking out a mortgage for my house. Congrats on waiting it out and paying with cash though. If that is what you want more power to you!

    • Thanks for the congrats. It will only be a congrats once I make it to being able to pay cash for a house. For now, I’m just waiting it out and it’s taking a lot of patience. I have no issue with you taking out a mortgage and I see it as being an okay decision. I’m just scared of doing it. Perhaps because I am a single income earner and hate the stress that comes with owing money.

  4. Smart article, Craig! I agree with you – debt is not something to be playful with and unlike Daisy said above- I don’t think it really matters what the interest rate is. I’ve played that game- “Oh, I can get 0% on this Home Depot card for a full year versus what I could invest that money for … ” blah… it doesn’t work. The credit card companies know human nature and that’s why they make so much money.

    I’ve been battling this thought though for a little while – I need a new car. Mine has 200,000 miles and starting to freak out on me. I have enough to pay cash – but I also could use that money to finish paying off all my credit card debt. Thoughts?

    • Hi Brandon, Thanks for stopping by. It’s great to have someone cheering for my home team over here this morning! Regarding the car, heck if it is still running, I would definitely pay off your credit card debt with the cash. Keep piling it up after you pay those cards off and then buy the car with cash. It’s what I would do and I believe it will be best for your financial picture in the long run. Think it can last a few more months?

  5. You’ve come a long way! I agree about the car thing. My car at least has been paid for for years (even though I bought it new at the time and financed it), but will try to keep it running as long as possible. I like what you said here, “Keep learning and pushing yourself mentally and never stop.” I think there is always something you can do to stretch yourself in the financial realm, and I plan to keep doing that!

    • You sound like you went through a similar car experience to me. I bought above my means, learned my lesson and kicked and screamed my way to pay it off. After the fact, it’s nice to have a nice, paid for car, but it sure was miserable getting through it.

      Yes, keeping on pushing forward is important, I believe. We can’t settle for what we have now or what we’re doing now. We need to look at what’s possible and work towards it.

  6. krantcents says:

    Most people slip into debt slowly! It starts with spending too much and you slowly get used to an inflated lifestyle and it is easier to make payments. It is not not that different from being overweight. You don’t sit down and gain 300 pounds overnight, it starts one day at a time and suddenly years later you are overweight. I handle debt differently! I will only take on debt if it will make money for me. For example a mortgage or occasionally a car (1.99%) loan.

    • Yes, debt is easy to get into and can often happen without trying and over a long period of time. Getting out, unfortunately, can take even longer than getting in and it’s much more painful.

  7. I’m on your side Kraig. Debt can kill…can you handle debt responsibly? Maybe…but you’ll likely still have to hand your friends the keys to your car after a ‘fun night’ of debting on the town every now and then. I’m a debt abstainer, though I may indulge a drink for a future mortgage. I like your plan to buy a home with cash–rock it!

    • I like your analogy of indulging in a drink for a future mortgage. That’s the only thing I would consider using debt for, but like I’ve mentioned, I’m hoping I can pull off not having to do that either.

  8. sophia says:

    Kraig,
    You are one of the first young adults that I knew of that agrees with me and my husbands philopsophy in life (this is a newly inherited philosophy). I too have student loan debt, credit card debt and medical bill debts, that I really need to come out of. I’m 27 and I really want to buy a house and live this life of indulging in my wants without realizing what I really need is a sense of peace. Not false securities and wishful one day thinking. I’m glad I found your website, keep inspiring Kraig!

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