What does debt free mean to you?

[lisaross]

i soppose debt free means just that...having no mortgage, cc bills, loans etc.

BUT for me - i feel debt free i have a Mortgage - about 8 years left....but to me a very important thing is having an emergency fund - gives me piece of mind like others have said u always have day to day bill, food, gas, electric etc.

If u can go to sleep at night and feel pretty secure with your financial decisions u are doing ok!

We will need a new car in about the next year or so - my current minivan is about 12 years old...i am pretty excited to know that i have the money saved for a new car!!! that being said, if i get a 0% finance rate i will finance it and have a montly bill, BUT i have the money allocated to pay it off - so in essence will not have a car loan!

lisa

 

[Purseval]

This is an interesting discussion.

Strictly because before I met DH I think debt free means just that... no debt, mortgage, cars, etc... zero. If you use CC and can pay it every month then that will be considered no debt.

Then I met DH, we started talking about having what's called a smart debt.

DH is right. Debt is good when you use it wisely. Debt is also acceptable if you manage it properly no matter what Dave Ramsey may think. One may become "debt free" by stiffing every creditor and declaring bankruptcy. Is that something to be proud of?

We are debt free: no mortgage, no outstanding loans, everything we have is paid in full. Yet I wouldn't hesitate for a second to go into "debt" if someone offered us one of those 2 years same as cash promotions on, say, an appliance we needed to replace. I would sign up, wait 20 months while my money collects interest for me then pay it off with enough time to make sure there aren't any screwups. That's an example of a smart debt.

 

[shortbun]

Debt free means no debt. No mortgage, no school loans, no car loans, no department store debt.

 

[Colleen27]

Even with no debt, you still have a lot of bills and monthly expenses. Sure, it's great, but I wouldn't just walk away from a job because of no mortgage or car/education loans. There's still monthly bills and saving for retirement and college. Food, clothing, insurance, all extras. And taxes... always taxes. By the time you pay all of that, you're not left with an extremely large amount of money. Or at least, we're not. But, we do try to save a lot every year for retirement and college. If we had a mortgage and loans, we couldn't save half of what we save now.

I suppose it depends on what you mean by "walk away". Less debt and lower bills make for more options, like changing careers even though it means starting from entry-level in the new field, or being able to start a small business, or passing up travel/overtime in favor of being more available to one's family, or choosing to have one spouse leave the workforce to stay home with the kids.

Sitting back and living off of savings isn't likely for most, but there are a lot more options available when you don't have to take into account your ability to service your debts.

 

[MrsPete]

Debt-free seems rather self-explaintory to me: You don't owe anyone any money. That includes mortgage.

Someone said anyone who uses credit cards technically "has debt", but I disagree with that. If you're carrying a balance month-to-month and are making payments on that balance, that's debt. But if you've used your credit card this month and haven't received a bill for it yet, that's not debt -- you don't owe what you haven't yet been asked to pay.

 

[ExPirateShopGirl]

I suppose in the narrowest definition debt-free means not carrying a balance on anything beyond the net terms stated on your bill. By this definition, even having a cell phone plan agreement would be considered debt, as you would be obligated to continue paying for monthly service until the term of your agreement expires... or pay the hefty cancellation fee.

It's silly to wait until you have saved $200k to buy a home when you can take out a mortgage against it and deduct your interest and property taxes from your income tax owed and take advantage of the appreciation (hopefully) in your property's value.

Personally, I view debt as anything I don't have the cash (or collateral) on hand to cover should I need to pay it off tomorrow. Taking advantage of a zero % interest loan on a car (as mentioned by a pp) is a great example of letting someone else's money work for you. Paying for necessities throughout the month with a fee-free credit card (especially one that rewards you with miles or cash back) and paying it in full each month is not debt in my book. By using the card in such a way you're actually paying less for the items you're buying.

 

[crisi]

This is an interesting discussion.

Strictly because before I met DH I think debt free means just that... no debt, mortgage, cars, etc... zero. If you use CC and can pay it every month then that will be considered no debt.

Then I met DH, we started talking about having what's called a smart debt.
Say you have the $ to pay off your debt (whatever it may be). But you can get a mortgage/loan with a low interest say 4-5% AND in turn put the $ in the "market" to get a dividend around 10-15%. What would you do? Take the "free" $ or pay off your debt?

Now if you do take the dividend, would you still consider yourself debt free? Because technically you can cash everything off and pay off your debt.

Now of course all that depends on how comfortable you are with the market and the risk level. But it is still an interesting discussion nonetheless.

Just my 2 cents...

At some point leverage is worth while. We have a mortgage. And I have enough in cash and the stock market to pay it off it I wanted to - plus other assets (real estate, which is why we took out the mortgage). But I'm getting decent returns on the money in the market, and the cash is an emergency fund.

So I have debt (a mortgage, credit cards that are usually paid off every month, etc). And I have a fairly significant positive net worth despite that debt. So I'm no longer debt free. But I'm in better shape financially NOW than when I paid off my mortgage and - generally speaking - in better shape each month.

Debt isn't evil when its managed responsibly. But its a little like the glass of red wine that helps your health - it becomes really easy to go overboard and continue to justify it as "good for you."