Life after debt?

[Ultralight]

I am curious about those of you who were at one time in considerable debt but have since paid it off. What are the biggest or most notable differences between your life before debt and your life after debt?

When you were still in debt did you have a vision or plan for your life after debt? How close is the reality to what your vision/plan was?

[SteveinMN]

We are not debt-free, with two mortgages (different properties) on our balance sheet. However, both of us in previous lives were at the point where we had to scrounge around the couch for any discretionary income. Those situations were accomplished largely by spending money "the way everyone else does".

I think the biggest difference in our lives (for both of us) is a tendency to not want to waste money. n.b., that does not mean pinching pennies until Lincoln screams. Well, at least not for us. It's just that we do evaluate what we're spending our money on, especially the big-ticket items, and try to honor our priorities in that.

Neither one of us drives a coughing, wheezing wreck; we bought both of our cars new (though hers was a floor demo) with the stuff we wanted on them and we'll drive 'em till they can no longer be replaced economically (a combined 23 years to date). It's entirely possible one of the cars won't be replaced when it breathes its last. We're planning a cruise next year and it's not going to be inexpensive even with an inside stateroom and a distinct lack on spending on board (compared to other passengers; that's just us), but DW really wants to go and she's willing to work another month or two past her retirement date to pay for it.

Kind of the YMOYL message, arrived at without having read the book.

[Ultralight]

We are not debt-free, with two mortgages (different properties) on our balance sheet. However, both of us in previous lives were at the point where we had to scrounge around the couch for any discretionary income.

I think the biggest difference in our lives (for both of us) is a tendency to not want to waste money. n.b., that does not mean pinching pennies until Lincoln screams. Well, at least not for us. It's just that we do evaluate what we're spending our money on, especially the big-ticket items, and try to honor our priorities in that.

Neither one of us drives a coughing, wheezing wreck; we bought both of our cars new (though hers was a floor demo) with the stuff we wanted on them and we'll drive 'em till they can no longer be replaced economically (a combined 23 years to date). It's entirely possible one of the cars won't be replaced when it breathes its last. We're planning a cruise next year and it's not going to be inexpensive even with an inside stateroom and a distinct lack on spending on board (compared to other passengers; that's just us), but DW really wants to go and she's willing to work another month or two past her retirement date to pay for it.

Kind of the YMOYL message, arrived at without having read the book.

Sounds like you have some rather noticeable differences between your life now and your life then! Nice! :)

[Ultralight]

Once in a while I think to myself: If I do my ten years and the Public Service Loan Forgiveness program works for me, what will I do if my student loan debt flips to $0.00?

So I ask myself: What will my life after debt be like?

[Ultralight]

I guess I know there are a handful of things I would really like to do if the PSLF program forgives my loans.

I have a few pipe dreams, like buying a campervan or a little tear drop camper and traveling all over the US and Canada. Or take two months and bum around Eastern and Western Europe.

These types of things would take some considerable savings. And who knows if I could save that much or if I would be in any kind of position to do these pipe dreams anyway.

I would like to get a job where I could be a bit more physically active and where I could dress casually or even wear a uniform.

Of course, I would like to finally get down to 100 possessions. This has been a long term goal of mine. And I have never gotten there.

As you can tell, my ideas for life after debt are very, very nebulous... so vague...

[Teacher Terry]

Steve, I laughed out loud. We always drive our cars until too expensive to repair. We don’t drive nearly as much now so our cars will probably last 20 years each. We buy 3-4 yo cars from the dealer pre-certified so everything is fixed. When young we were frugal by necessity. No other debt than a small mortgage. Old cars that my ex fixed himself. The lifestyle inflation we have now is on purpose so we can enjoy ourselves. That’s money spent on travel, eating out and other experiences. Steve, we have found good deals on repositioning cruises because they don’t want to take the ship empty. We can usually book a Royal Caribbean 8 day cruise for 500 each. They are usually booked a year in advance or a month before leaving. In both cases the timing determines the price. Sometimes it is cheaper to fly through the cruise line and sometimes not. We do pay for ship excursions. We don’t buy stuff onboard either. They try to upsell restaurants and the food in the dining room is excellent. They also want to take your picture all the time and sell you them. Ugh! We never had big debt of any kind.

[lmerullo]

We are currently debt free. Paid the house off about seven years ago. Then five years ago I was laid off my long term job - suddenly. (As in, I walked out that day having no previous warning. My walk saved others for eight more months.). Then, during my retirement, we bought two motorcycles (one for cash), and a new car. Back into debt! Paid all that off, and hubs had a near death medical experience - huge debt! I got a job. Insurance decided to pay most of the medical, I'm still working.

That's the long version of - debt free might be temporary. Retirement might be temporary. Ones concept of "enough" might change. We are building a bigger cushion of cash with me working, so as to give us more peace of mind that we can weather the financial storms when we can't get jobs in later years

As always, ymmv.

[razz]

UL, DH and I had the usual debt for a mortgage, some car payments paid off ASAP, kids schooling etc but we were both thrifty in our goals and spending. Years later and debt-free, I have taken occasional trips that are a little pricier than earlier years paying the single supplement. Other than that, my clothes last forever, my home is easy to maintain, my diet is still simple, my car will go until maintenance is too pricey (maybe the next will be a self-drive model :D), my recreation is similar to years ago. Basically I was content before, I am content now and still thrifty living within a simple budget.

[jp1]

I have never had significant debt, but SO has, mainly credit card debt. (for 15 years we have kept completely separate finances and have no intention of merging. I don't want to be the debbie downer who tells him he shouldn't spend X. If he needs to work until he's 80 to pay for the nice clothes he likes that's his choice.) I'll be retired (and wearing my schlubby gray t-shirts like minimal dude every day) long before then. He's always put a decent chunk into his 401k, but recently he stopped having any credit card debt and actually had money just sitting in the bank and asked "what do I do with it?" With my help he's now got a Roth IRA and a plan towards funding it.

For me the biggest thing about having a decent positive balance sheet is just knowing that I could quit my moderately soul sucking mega corp job tomorrow if I wanted to. I'm not sure SO has been debt free long enough to have figured out what it means to him but I'll ask and report back if he offers up any profound insights.

[dmc]

I remember it was nice when I paid off the mortgage, we just increased our savings though, so not much difference. We did take out a car loan recently due to the low rates at the time. Which I still debate about just going ahead and paying off. But it’s 1.9% and our money market account is paying 2.4%.

Since my goal had been financial independence for quite some time I didn’t think to just go out and spend the extra funds we had available. Now we did have good incomes so we really didn’t do without much either. But buying a classic car or land that actually appreciates was where we put some of our play money.

[Gardnr]

Oh we were living the American dream in the 80s. Taught well by DH's parents. Cars, house, lots of credit card debt. (Do you remember interest rates back then?_:0! Until we crashed and nearly had to declare bankruptcy. I got mad and said "no way, I can't do that". So we stressed and slogged our way through it. I took a ton of surgery call to pay it down. Stress, stress, stress. No going out. No vacations. Nothing extra. We both went to college for a long time. Paid cash along the way (did I say I took extra call?)

Life was all stress and no fun at all. By 1994 (when my Dad died and I realized how truly short life can be), we had dug out of all consumer debt and "only" had mortgage and 2 car payments. No, we really hadn't yet learned to save and pay cash.

Then I "met" YMOYL in 1999. i did the homework and DH said he would "go along" but hates to read. We committed to save and pay cash for what we wanted.

Forward to 2010. 2 homes owned/paid off. All debt repayment $ going to savings and retirement. Build our 18month emergency fund. Vacation? Sure, pay cash. New car in 2016? Yup, wrote a check. I love my C300 and not a moment of buyer's remorse.

Life is relaxed. The BIGGEST difference. One of us could quit our job tomorrow-no problem. We could both quit if we really wanted to. We would need to increase our frugality but it's totally doable. So work is somehow more enjoyable and that is so awesome! It's easier to get up and go because we don't have to. Does that make sense? We can take an impromptu trip with ease. (we went to our college bowl game last year-dropped a small fortune and enjoyed every minute of the 60 hours we were gone).

Oddly, we wanted everything in the 80s (you know, that damn Jones thing). Now that we can have it, we don't want it.

Yes, life is most definitely different. The 80s and 90s were painful and stressful. The 2010s are fun and relaxed with no needs or wants.

Someone here years ago said, "Now that I can afford broccoli, I'd rather grow it". That line has always stuck with me.

[iris lilies]

Gardnr that is a GREAT story! Just what UL is looking for, no doubt.

We never had debt as a married couple, owned our house free and clear, but in order to do that we lived in a partially finished rennovated Victorian house. We had no electricity in about half of the rooms when we moved in, for instance. We had subflooring for 10 years. I lived with plaster dust flying around for several years and every day took dishes off the shelf, wiped off the plaster dust, and used the dish. House started in 1989, finished in 2011. It was our 5 year project that took 20 years.

DH stopped paid work for 6 months to make our house minimally habitable to move in. Back in those days our city didnt require an occupancy permit for our neighborhood because we had lobbied the Aldermanic Board for an exemption. A lot of people in our neighborhood were classic Urban Pioneers who take a 100 year old house and renovate it, and living in it while renovating made it affordable. That also slowed down renovation, haha.

Anyway, I suppose it was “stressful” to live with ladders and construction equipment in my living room for a decade. I just remember loving to escape to the homes of our friends who had finished houses.

Those years also make me appreciate my living room now. It is beautiful! I have elegant crown molding! I love sitting in that room.

An unfinished Victorian house isnt debt, but it is an asset that is difficult to sell. There were years where we were “upside down” in that we had more $ in our house than we could get out of it. That is part of the risk and adventure of being a pioneer—can you finish the house before you get divorced? Haha.

[rosarugosa]

Life after debt allowed me to retire somewhat early and allowed DH to downshift to part time employment.

[SteveinMN]

Steve, we have found good deals on repositioning cruises because they don’t want to take the ship empty.
Our honeymoon cruise was a repositioning cruise. We loved it! The cabins are low-priced, but you do often end up spending more on airfare because it's not a roundtrip. Last-minute cruises are similar -- the cabin is cheap but sometimes last-minute airfare is not. It's all got to work out to what you are willing to pay.

In next year's case, we're going with friends so the actual cruise has been chosen (and is not a repositioning trip), but we're waiting on booking until it gets closer to the price we want to pay (probably early next year). We have no special needs or interests beyond being with our friends and seeing the sights.

[pinkytoe]

Up to and throughout most of our 30s, DH and I had a sizable mortgage, car loans and credit card debt. Lost our jobs and house in the 80s during that recession and hit rock bottom. Sometime in the 90s, I read the Amy Daczysn books and caught the voluntary simplicity bug. Received a small inheritance and changed our ways. Slowly paid off the remaining debts, lived frugally and saved all the while. Fast forward...sold our last house for 3x what we paid for it and used the profit to buy a house for cash and the rest to savings. Get by with one paid for Honda in excellent shape and continue to live frugally. There is a great feeling of relief/freedom knowing that our house is paid for and that our needs are more than met. And gratitude for finally being in a better place financially.

[Ultralight]

I feel sometimes like I need to imagine, envision, life after debt to keep me on track.

But I also feel like my imaginings and my visions are usually vague or perhaps unrealistic.

How much did you envision of your life after debt while you were digging yourself out?

[pinkytoe]

I don't think I was looking into the far off future when we were trying to get out of debt. I was thinking about next year or at the most 2 or 3 years. It wasn't until I was in my late 40s-early 50s that I realized that I really wanted to retire before I got too old to enjoy all that free time. It is so hard to visualize being old when you are young.

[ToomuchStuff]

My 40th birthday, I payed off the house and the next month was debt free. (owed $300 on the credit card which I pay off monthly)
I do go into debt often, by using that, and do agree I sleep differently when I have no debt then when I do. (worry about the mail/bills delivered to the wrong address, etc) Having no debt allows one to breath easier and you feel less guilty when there is something you want to do. Less stressful.

That said, so what is your plan if the debt isn't forgiven and are you verified in that program?

[San Onofre Guy]

My considerable debt was a $200,000 mortgage and wife’s $60,000 student loan. Both are paid off. It feels really great to pay bills with no worries

[LDAHL]

I think debt is just one part of a more complicated strategic problem of maintaining liquidity, reducing overhead and developing income sources. There are a lot of moving parts. It’s been said here before, but this is one area where our educational system isn’t doing a very good job.

[Teacher Terry]

Yes it makes sense to me when people keep their low interest rate mortgages. When we were young rates were high.

[LDAHL]

Yes it makes sense to me when people keep their low interest rate mortgages. When we were young rates were high.

I’ve seen some pretty impassioned debates on that topic. You need to balance emotional and financial considerations, as well as alternative uses of the funds, risk, projecting future rates, the need for liquid reserves, taxes, etc. People can get positively nasty with each other about it.

You also see some heated discussions about the best Social Security claiming strategy. People get emotionally invested in their decisions.

In my mind, hanging on to a low rate mortgage makes sense because I want a fairly large liquid position in the early, sort of exploratory phase of retirement. I’m not giving up that much in mortgage interest versus what my cash reserves earn, and I want to be prepared to handle surprises. I could wipe out the balance of the mortgage but I want to keep my powder dry for 2-3 years in case my planning proves a bit faulty.

[catherine]

I’ve seen some pretty impassioned debates on that topic. You need to balance emotional and financial considerations, as well as alternative uses of the funds, risk, projecting future rates, the need for liquid reserves, taxes, etc. People can get positively nasty with each other about it.

You also see some heated discussions about the best Social Security claiming strategy. People get emotionally invested in their decisions.

In my mind, hanging on to a low rate mortgage makes sense because I want a fairly large liquid position in the early, sort of exploratory phase of retirement. I’m not giving up that much in mortgage interest versus what my cash reserves earn, and I want to be prepared to handle surprises. I could wipe out the balance of the mortgage but I want to keep my powder dry for 2-3 years in case my planning proves a bit faulty.

I'm debating both those issues (mortgage vs pay it off and social security now or at 70)

Regarding the mortgage, it would be so tempting to sell my NJ house and pay off all debt, including the VT house, but that would leave me with a fairly small reserve. And my interest rate is around 4%--not bad. My NJ house is only 3.25.

I'm 90% sure I'm going to wait until 70 to collect SS (4 years from now) because it makes a considerable difference in my monthly check, but I play with the idea of just taking it now, continuing to work, and just socking the money away. But given I'm very healthy, and my relatives who didn't do themselves in with bad lifestyle choices lived a very long life, so I'm probably smarter to wait.

[herbgeek]

but I play with the idea of just taking it now, continuing to work, and just socking the money away.

Have you looked into how much of your social security would be taken back by taxes if you took it now with your high income, versus waiting until 70, when you'd presumably not still be employed?

[Gardnr]

Have you looked into how much of your social security would be taken back by taxes if you took it now with your high income, versus waiting until 70, when you'd presumably not still be employed?

+1

[Alan]

Have you looked into how much of your social security would be taken back by taxes if you took it now with your high income, versus waiting until 70, when you'd presumably not still be employed?Based upon what Catherine had told us, she is now 66 years of age. The full retirement age for persons born between 1943 and 1954 is 66 years of age. Once a person reaches their full retirement age there is no restriction on earnings which would impact their monthly benefit.

[Teacher Terry]

Our house was paid for but when interest rates went down to 3% we took some out to have more liquid assets. We took a 30 year and our mortgage is 400.

[LDAHL]

Our house was paid for but when interest rates went down to 3% we took some out to have more liquid assets. We took a 30 year and our mortgage is 400.

As rates rise you may have reason to be very pleased with that decision in the near future.