Why I Hate Debt and Believe You Should Too
For new readers who haven't read my early posts, you may not know what my thoughts are on debt. So what are they? Am I leveraged up to my eyeballs, making minimum payments every month while I invest everything I can to earn higher returns than I pay in interest?
The truth is that I'm not in any debt, what-so-ever. It's not because I got everything handed to me, although I'll be the first to say that I did have it easier than some. Even after getting a lot of things given to me during my high school and college years, I managed to get myself into debt in my twenties. At 24 years old, I was over $25,000 in debt.
Today, I have zero debt. No, it wasn't forgiven by the government, the strategy many people today are using to handle their debt. "Oh, I'll just pay on it for X years and then it will be forgiven. No, I didn't give back the keys to my car and throw my hands in the air. Instead, I rolled up my sleeves and threw every single dollar I had outside of food, lights and shelter at my debt... for years....
It Took Years of Sacrifice to Pay It Off
I sacrificed to an extent many people aren't willing to do to get myself out of my debt. But, why did I do it? The interest rates were pretty low on my car, at 4.9% and just a bit higher on my student loan. So why would I go through all that effort when I could have gotten by just fine paying the minimum every month? Because debt is horrible. It hurts you and it keeps you down in a place where you have zero options and zero flexibility.
My financial journey started when I was underneath that $25,000 pile of debt while only earning a bit more than that per year. At the time, I lived in a boring little apartment, had hardly any furniture, wore run of the mill clothes and didn't have any of the "luxury goods" most people came to reply upon as needs. People would ask, "Kraig, you don't have benefits at work? You are only making that much?" I was a young adult barely getting by.
But deep down, I wanted to accomplish my dreams some day. As a recent college graduate, everyone was asking me, "Kraig, so what are you going to do with your business degree?" And I would respond with, "Well, I'm going to work at X company for a couple years and then I want to start my own business" (By the way, those two years turned into six). My plans were to not to work in the corporate world for long. In fact, I remember the day I decided to drop my Finance major in college. Things were gearing up to send me in a direction towards an internship with a big company, where I'd become an analyst of some sort. I was being trained to be a small cog in very large machine. I remembered back to my dreams of entrepreneurship and doing my own thing, finally deciding "screw this". "I'm in college to learn about business, not to learn how to do a job". And I switched to entrepreneurial management, so I could actually start learning something valuable.
Back to my early twenties, I was sitting under a bunch of debt. After looking through bookshelves, flipping through the channels and searching on the internet for somebody, anybody to help guide me in the direction I wanted to go, I found Dave Ramsey. Well, I found others first, and they sucked. Dave was the first person I found who actually motivated and inspired me. Everything changed from there.
Dave Ramsey Motivated Me to Get Out
Dave reminded me how crappy debt is. I had forgotten that in the 7 years following my dad's death. Before that, my dad was there to lead me by example and smack me upside the head when I thought about borrowing money. Now, I had Dave to tell me to get the heck out of that mess, just like my dad would have done.
So I listened. I got the heck out. It was one of the hardest things I've ever done. I killed it for two and a half years, writing massive checks to GMAC (eventually becoming Ally Bank) and to Federal Direct Loans. I became debt-free in December 2010, a MAJOR turning point for my life.
From there, I put myself on a path to make things happen in my life. Yes, I would build myself to a point where I could chase my dreams. No, it wasn't easy. I had to save and save and save. I still live in the same apartment, still have the same furniture and still live the same lifestyle as I did while getting out of debt.
You know what I don't have anymore? I don't have money stress. I don't need my next paycheck. I don't need to borrow money anymore. In fact, I don't think I ever need to borrow money again. Here's the best thing: I don't have to do business with all those idiot banks or lenders anymore. Keep your money big banks. I don't need your services.
Do You Know How Being Debt Free Feels?
Logging into my Mint.com account today, I notice a couple things. First off, my expenses are exceeding my income for the first time in three and a half years, but I'm not worried. Secondly, my credit card and loan totals sit at a ridiculously comfortable zero dollars. Imagine for a second, not owing anybody any money. How would that feel? I'd hope many of you are in the same debt free boat as I am, but for those of you in debt, imagine what it would feel like. Pretty awesome, huh? Let me tell you that however great you imagine it feels, triple that and that's how it really feels.
Here's my position on debt. SCREW DEBT. Get out of it at all costs and commit to never going back. If you want to be normal, fine, go ahead and keep your debt around. If you want a future where you owe no one money, where you have complete freedom to live your life how you want to live it, then jump on the debt-free bandwagon. No, it won't be easy. But if you give it all you got like I did, you'll get out sooner than you think. I have to warn you though, it will take selling many, many things and giving up on most of your "luxuries", which you will come to not even miss.
Cable TV? Please, I can find better things to do. Eating out? I can prepare my own meals and don't feel the need to hire someone to do it for me. Buying a house? As an unmarried person, I see no need for four bedrooms, two living rooms, a formal dining room and a double sink bathroom. The thought of air-conditioning a massive house in the summer and heating it in the winter makes me cringe. I'll take my debt-free life where I can chase my dreams and live on my own terms over selling my time for a paycheck just to make minimum payments on my debt. It's simple, I hate debt and you should hate it too.
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42 Comments
- Done by Forty says:September 16, 2013 at 4:56 PM
We first starting paying attention to our finances thanks to Dave Ramsey, too. We owe that guy a lot and think he does a lot of good for his listeners. That said, there is a lot that Dave says that we now feel is a little off, having read more over the years. His recommended 100% stock asset allocation seems particularly aggressive considering how risk averse he is re: debt. And he typically doesn't consider opportunity costs when considering debt repayment: regardless of whether your interest rate is 1% or 10%, he recommends paying off debt before investing any more than 15% of your income. In any case, even though we are 100% debt free, we are more tolerant of debt for those who approach it wisely and choose to, say, invest rather than pay down their home mortgage, or who choose to utilize a credit card for rewards.
- Kraig @ Young Cheap Living says:September 16, 2013 at 5:02 PM
DBF, Glad to hear you found Dave to be inspiring and motivating as well. Of course, he isn't perfect, like the rest of us. I do tend to side with him on the benefits of not playing the debt game though. It isn't about the math for me, but instead about how great it is to not owe people money. Take care!
- Cedric says:September 24, 2013 at 7:27 AM
Kraig, I agree. It's not about the math in my opinion. It's about the emotional highs that come with becoming debt free. Not having debt hovering over your shoulders must be a excellent feeling. I still have debt but I feel great knowing I am doing something about it every day. I can only imagine how I will feel once I am debt free. Great comment DBF and KM
- Chris says:September 16, 2013 at 6:24 PM
Great post Kraig! I agree with you about both debt and Dave. My wife and I graduated from college back in 1992. Being both rather frugal we didn't have a huge load of debt but at a beginning teacher's salary and a baby on the way our basic expenses were stressing us out cause there was more month at the end of the money. I don't know where we found out about Dave but we found his first edition of "Financial Peace" and learned about the envelope system and the Debt snowball. We used those two systems and the stress just melted away. Using cash for almost everything sounds crazy today but it really limits your spending cause it hurts to pull out $20's rather then swiping your visa. Fast forward 20 years, three kids later we also feel great about being debt free within shooting range of semi retirement in our forties. It's like you said getting debt free and investing the difference from frugal living gives you delicious options. Add two or three generous helpings of ERE, Dividend Mantra, Lacking Ambition, JLCollins, and your blog and you have a recipe for success. Thanks for helping to inspire all of us. Chris
- Kraig @ Young Cheap Living says:September 16, 2013 at 6:29 PM
Chris, Nice. I didn't know you were a Dave follower. Yes, using cash is more painful than swiping plastic. Cash, although, is a pain to keep track of and to have on hand at all times. That's my issue with it and why I usually use a debit card instead. Congrats on being in such a great position now. Has it been 20 years since taking Dave's course? Or just since you started paying attention to money? I love the options being debt free gives you. Oh boy, you listed some real great blogs there, of course mine being the greatest (kidding of course as mine's in last among those). You bet, thanks for being a part of it all with us! Talk to you soon my friend,
- Chris says:September 16, 2013 at 7:30 PM
Yea we did it the old fashion way. We read his book. There were no courses or radio or TV shows back then in 1992. We had no idea we would be in this position now. We just had to get rid of the stress. Before reading that book every month I remember at bill paying time it was like...oh shit...we are in such deep shit! What are we gonna do? Which bill are we gonna not pay? I remember we also instituted a mad money fund. For us this was a big stress reducer. What we do is give each other $100 a month to spend as we please. The other spouse can't complain about how we spend it, within reason if you get my drift..no prostitutes allowed. All other money was allocated to the envelope system or to pay down the mortgage. We would cash our checks each month from my little teaching salary and..my wife did daycare for kids in our home. The bank must have thought we were drug dealers or launderers...is that a word? Anyhow we would hand them our checks and a list of cash we wanted each month. When it was gone we stopped spending. We still paid some of our bills by check but we enjoyed not being surprised each month by Big ass visa bills that was created by your significant other. The mad money helped limit that a lot too. The down side was a lot of our friends were driving really nice cars and living in pretty big homes. Our little house is 950 sq feet and we have 5 people. It's tight but we are a pretty close family. But I must admit we questioned ourselves a lot before 2008. It seemed everybody around us was living it up compared to us ...everybody was buying bigger houses, RV's, and tons of fun looking stuff and we were there just with our tent an bikes and simple stuff. At the time we were unaware that it was financed until the stories came out. Another thing we did is place the least frugal person....my wife in charge of the cash and I did the investments. She loved having that control and feels good to have defined the envelopes that get funded. Of course we talk about how things are going once a month. . We rarely ever argue about money which is nice. Enough for now. Chris
- Kraig @ Young Cheap Living says:September 17, 2013 at 12:09 PM
Chris, Wow, so you're one of Dave's early followers. That's awesome that things turned out well for you after putting in some hard work. Regarding mad money, we all need a little money that we can blow, right? It is tough living below your means when friends and family are living high on the hog. Interesting strategy about placing the spender in the money management position. Take care,
- ajaveen says:September 18, 2013 at 1:45 PM
Congrats Chris! Great job. I am currently getting out of debt slowly but surely.
- Joe says:September 16, 2013 at 6:59 PM
Hey Kraig, How do you view weddings. They are incredibly overpriced. Just curious as to your thoughts on paying for one in your future.
- Kraig @ Young Cheap Living says:September 16, 2013 at 7:03 PM
Hi Joe, Great question. I'm warming up to the idea. Of course, thinking of wedding expenses was an initial shock to the system. When I do it (and I may in the foreseeable future), I'll be earmarking a sum of money for it and basically letting it go. My goal would be to not go over that amount and communicate with my partner that just because the cash isn't there now for big fancy purchases, doesn't mean we won't be able to do awesome things in the future and have a happy marriage. Obviously, a mate that doesn't think along those lines isn't going to be a good match for me. I believe it's a good use of money, but I don't believe in being careless with money, even if it's for a wedding. What are your thoughts, Joe?
- Kraig @ Young Cheap Living says:September 16, 2013 at 7:06 PM
Joe, By the way, I'm going to be looking for cheap venues, basically as cheap as she will go, when the time comes. Of course, it's a compromise.
- Wade says:September 16, 2013 at 9:05 PM
Great post Kraig. Debt free-dom is my favorite topic. Our family hit debt free including the house in fall 2007. It was a huge step and we never looked back. We are more diversified with our investments than Dave Ramsey recommends as well. I tried researching ways to invest with things other than stocks/bonds/etfs. For now I stick closer to a 60/40 mix of stocks and bonds. It is more conservative than financial guy would like, but that is ok. We continue to use a cash envelope system for groceries, household, dining out, and a few other select items. I love to spend cash. Cash is king. We do use our debit card for gas and misc things, but we primarily spend good old cash. I like it. Being debt free has allowed me to quit my 8 to 5 job at age 42. Now my wife is still working (she didn't want to be the one to get a more flexible career). I'm going to very slowly look at ideas to bring in income. It should be a fun adventure. Wade
- Chris says:September 16, 2013 at 11:22 PM
Sounds like Wade has a good thing going. How did that first year go for you Wade psychologically after working hard all those years? I am not sure we can pull off the full meal deal of retirement because of my wife wanting to do the same, three kids still at home and the crazy cost of healthcare($650 per month).
- Kraig @ Young Cheap Living says:September 17, 2013 at 12:12 PM
Chris, Great question for Wade. I too am curious. It was quite a shock even for me in switching from the job to a self employment type situation. I'm still getting use to it.
- Wade says:September 17, 2013 at 4:03 PM
Hello Chris, Ask me again in 1 year. I am only 3 weeks into my "post 8 to 5" transition. So too early. I'm hoping to do something on my own and part time. I have a lot of ideas, but going to take some time to see what interesting things happen. I'm also looking at some passive income ideas. Make my money work instead of me. I will keep everyone posted through the comments on the various topics. Wade
- Daddy Domestic says:September 17, 2013 at 7:37 PM
Hi Wade/Chris/Kraig, I can tell you that going from full time bread winner to part time provider can be a rough transition. I was laid off three months ago, but was sick of the 9-5 job anyway. My wife has a great career she loves and we're expecting our first baby in March. Therefore, we decided I'd work from home and watch the little one when he/she arrive. At first we were both super excited about it, and still generally are, but we've also been through a crazy range of emotions since then. I've had a few days questioning my value as a provider...a few days feeling great....my wife wondering what kind of mom she'll be if she's working....and a lot of questions from business associates about what the hell we're doing. The great thing is my wife and I have an outstanding marriage, we both make family our priority, and we have virtually no debt. If we weren't in a good financial situation, we wouldn't have the flexibility to do this. We're feeling good about it right now, but there will be "waves of emotion" just so you guys know they will ebb and flow like the sea. Keep in touch and I'll share the journey with you -Bryan
- Kraig @ Young Cheap Living says:September 17, 2013 at 8:16 PM
Bryan, This is truly valuable advice. Thanks so much for sharing your ups and downs with us. I've begun to understand what you're talking about in the last two months or so that I've been without a traditional job. At first, I was in a sort of shock. Then, I questioned my value as a potential provider for my family. There have also been good times, like when the stock market went up, when I helped a dozen people set up their first blog and when Jason and I launched our podcast. Again, thanks for sharing.
- Kraig @ Young Cheap Living says:September 17, 2013 at 12:10 PM
Hi Wade, What a great time to hit debt free-dom, in late 2007. I bet the housing crash didn't affect you too much at that point! :) Nice work on being able to quit your day job to focus on doing other things that hopefully you'll enjoy more. Keep us posted on how things go! Talk to you soon,
- Cash Rebel says:September 17, 2013 at 7:09 AM
Maybe I've been reading blogs like yours too long, but I'm still amazed by my friends who just keep debt around. I feel it should be something worth changing your life about, but most people are comfortable with it.
- Kraig @ Young Cheap Living says:September 17, 2013 at 12:13 PM
CR, I'm amazed as well by friends who keep debt around. People can justify it by interest rates being low apparently. I can't, because I look at it as stress. Even zero interest is too much for me, because it's the peace of mind I'm looking for, not the savings of a buck or two.
- Ashley @ Saving Money in your Twenties says:September 17, 2013 at 8:47 AM
Another awesome post! I hate debt but I've never actually had any (i know, i know... super lucky). The closest I came was about a year and a half ago when I contemplated getting a brand new car (this was before my financial freedom revolution, obviously). I almost had a panic attack when I realized how much I'd be paying every month JUST for a car loan. Then I put the car decision off for a few months and by the time I started thinking about it again, I had saved up enough to avoid the loan! Anyway, point of the story = I never want to owe anyone money.
- Kraig @ Young Cheap Living says:September 17, 2013 at 12:17 PM
Hi Ashley, Glad to hear from a fellow debt hater. It sounds like your parents taught you well (and possibly helped also) during your early adulthood years, which is great. Wow, nice job NOT buying that new car. That would have hurt, big time. You would be working on debt repayment for several years instead of fixing your sights on financial independence and/or escaping the norm to do what matters. Keep up that attitude and you'll be in great shape in the future! Talk to you soon,
- Ivan says:September 17, 2013 at 7:01 PM
"I never want to owe anyone money"... That's a great attitude, Ashley! I can't stand the idea of owing someone else money either - mostly because that would mean they own my life. Now THAT's a scary thought...
- Kraig @ Young Cheap Living says:September 17, 2013 at 7:37 PM
Agreed, Ivan. I don't want anyone else owning my life either.
- September 17, 2013 at 9:05 AM
Well said. I'm a debt hater as well. I "found" Dave Ramsey at about the same time I started aggressively paying off my student debt. Unlike Suze Orman and others who said that student loan debt is "good debt" and shouldn't prioritized in your debt pay down scheme, I liked it that Dave said that all debt is bad debt. Student loans were my only debt and once I started paying them off I was determined I'd never go into any debt again.
- Kraig @ Young Cheap Living says:September 17, 2013 at 12:18 PM
KK, Glad to hear the anti-debt attitude. Like you, I'm not going to get back in it either. It simply isn't worth it and I wouldn't give up this awesome feeling of being debt-free.
- Brenden says:September 17, 2013 at 7:59 PM
Great post! I am working to get rid of my debt. It doesn't keep me awake all night but I know it is keeping me from doing things I want to do. The payments are certainly one fixed expense I can do without. I know the overtime I am putting in will be worth it when I make that last payment.
- Kraig @ Young Cheap Living says:September 17, 2013 at 8:17 PM
Hi Brenden, Great to hear you're working on getting rid of it. It is painful to put all that money on it now, but you'll be glad you did. I look forward to hearing from you the day you make your debt a thing of the past. Take care,
- Jenna Brandon says:September 18, 2013 at 11:54 AM
I enjoyed reading your post. Debt can really restrain us from doing things that we want, things that are more valuable in life. It is hard to discipline one's self so that you can pay all your debts - like sticking to the bare necessities and avoiding wants.
- Kraig @ Young Cheap Living says:September 18, 2013 at 1:13 PM
Hi Jenna, Glad you enjoyed the post. Yes, debt can hurt us and that's why I'm against it. Glad to hear you're against it as well. It surely is hard to stay away from it, but worth it. Take care,
- ajaveen says:September 18, 2013 at 1:39 PM
Here’s my position on debt. SCREW DEBT. Get out of it at all costs and commit to never going back. I agree Kraig. As of today I had 8 credit cards. I have paid off 5 so far with 3 more credit cards to go ;-) I am now committed to get into any debt. My goal is to knock off my student loan within the next 5 years. I owe $26,600 so I hope to accomplish this by 2018.
- Kraig @ Young Cheap Living says:September 18, 2013 at 2:23 PM
ajaveen, Glad to have another one on our side regarding views on debt. Looks like you're making some serious progress on those credit cards. Good luck on those student loans. I hope you'll stop back here after you make your last payment and are free of all that weight. Take care,
- Ajaveen says:September 23, 2013 at 2:08 PM
Thanks Kraig. I will keep you posted as I pay off the last 3 credit cards ;-)
- Ajaveen says:October 4, 2013 at 8:22 AM
Kraig I just wanted to let you know that as of today I have paid off 3 credit cards! I am now credit card debt free. It took me four months to pay off 8 credit cards.
- Kraig @ Young Cheap Living says:October 4, 2013 at 8:50 AM
Ajaveen, THAT IS OUTSTANDING! Keep up the good work and tell that debt who's boss, my friend. Take care,
- Ajaveen says:October 4, 2013 at 9:57 AM
Thanks Kraig! Next is student loan.
- Jamie says:September 21, 2013 at 9:06 PM
I'll play devil's advocate on this one: even though I currently have a positive net worth, I do have some debt. For me, it's a matter of liquidity and rates. The debt I have is at 0.9%, which is pretty darn good, especially comparing it to things like credit card debt at 24%+. As I said, my net worth is positive, which means that I could, right now, pay off all of the debt with one big check. But I'm not, because that would mean basically emptying my checking account. I like having that money just sitting there (even if it isn't earning much interest) because I'm going through a huge transition right now (going from student to working full time) and I like the security of having 3+ months worth of emergency fund. Plus, I'm establishing a credit score, which I've never had before due to never having owned a credit card. Maybe in a few months, when I'm comfortable with my biweekly paycheck, I'll start paying off my debt, but for right now I'll leave it.
- Nightvid Cole says:October 15, 2013 at 5:19 PM
Nice to know there are others out there that think, if you don't have the money, you can't afford it! I am proud to be debt-free (always have been, hope I always will be.) A couple questions for fellow debt-avoiders: 1) How aggressively do you save for future large purchases (car, house, education, etc.)? and 2) If you save very aggressively (for example, living with roommates in a shared apt and paying yourself a "house payment", living close to work and paying yourself "car payment", etc.) how do you convince significant other(s) to accept it, in a culture that pushes everyone to spend spend spend ?
- J Ferraro says:March 9, 2014 at 11:55 PM
Good read, however I totally disagree. Debt is leverage. When I was 26, I was already 30k in debt, then went in for another 20k to buy inventory to start my own business, a month later I quit my job, got 15k paid out of entitlements, pumped that into more stock, and 5 months later I was completely out of debt with a cash flow positive business. Putting myself in a situation where the choices were success or bankruptcy, I went out and kicked ass because I used debt to motivate me to sink or swim. Technically I made a 'poor' decision, but now, I sit on the other side of the table, giving money out as an angel investor when something cool comes along, so it worked out just fine, and had I not made the decision to go into massive debt, I wouldn't be here right now. When there is the stress of "I might go broke", you get more motivated to get out of it. The problem isn't debt, the problem is taking on debt for the 'emotional purchases' (nice clothes, nice car), and not taking on debt to invest in yourself or your business. When I spent that 20k on inventory, I was telling myself, subconsciously that I believe in what I'm selling so much, that I'm willing to risk my financial status and potentially stuff myself up for life. That belief, carried over when I went out and sold the product onto customers, and it went nuts in a short period of time. Debt when used correctly, lets you get everything you want 10 times faster because you can leverage money you don't have. You can literally, pull money out of thin air to invest in yourself with debt. That's the most powerful tool in the arsenal to get success if you ask me. Just because you can't use it responsibly (and I didn't, for a long time), doesn't make it 'bad', it's a tool, learn to use it to your advantage. The big problem here, is the mindset, you don't take on debt anymore because you had a singular bad experience (got in uncontrollable debt, had to live without the trimmings for 2 and a half years), so you don't believe you can use debt responsibly now, and swear off the single most powerful tool you have to gain success. If you tried riding a bike and you fell off the first time, you wouldn't give up and say bicycles are stupid would you? Debt is the same, don't let one bad experience sour your attitude. You'd pick yourself up, analyze what you didn't do right, change your strategy, and try again. Instead take the lesson, don't take on debt for toys that give short term satisfaction, take on debt that will provide a return, investing in yourself falls into this category, use debt responsibly to leverage and bet on yourself and succeed massively, massively quickly. To me the saving mindset, of I need to slowly hoard money over time, is a losing mindset.
- Kraig @ Young Cheap Living says:March 10, 2014 at 9:23 AM
J, I appreciate you sharing your story and disagreeing with my article respectfully (which is hard to find these days). I know what you're saying is possible as I've heard it from others as well. My main concern is that most people won't likely see the "success" you saw from your situation. I believe that most people will fall and get financially destroyed by doing what you did. And because of that, I don't tell people to go out and do it. Regarding me personally, my only bad experience with debt was that I didn't like the feeling of being in it. Having far too much cash (or liquid investments) than I need instead gives me a great feeling. I believe I can find success without using debt, so for me personally, I'll continue to not use it. If others want to follow your advice and borrow money for their success, I won't argue. Like I said, what you experienced is possible and there are some people out there who will find great success doing things that way. Take care,
- Achu says:July 15, 2014 at 4:03 AM
Hi Mathias, i have read your post and its inspiring..i like it. by z way, i am from Ethiopia (Eastern Africa country)...i can say i am working in one of the biggest company of Africa..the problem is am in debt which i didnt borrow but rather a friend of my GF boorowed against my personal gurantor and he suddenly left to western country...the total debt i am in is 5,000 US dollar equivalent to 199,000 Ethiopian birr....i am being paid around 100 USD after deduction for the debt..currently i am living with my family but couldnt figure out how i can marry my soulmate ..we are together for the last 4 years..i am feeld desperate when i think of my future...maybe i will get rid of this thing after 7 years and then get married when i am 36 years old..imagine that...
- Achu says:July 15, 2014 at 4:04 AM
hey, sorry for the conversion rate ..it should be 5,000 x 20 birr = 100,000 birr..the total outstanding balance i will pay for the next 7 or more years excluding interest
