What does debt free mean to you?

[disney1990]

To me debt free equals no debt. No mortgage, no credit cards, etc. The only expenses you have are regular monthly expenses, electricity, insurance payments, etc.

 

[mombrontrent]

Being Canadian also I have seen the figures you mentioned. I was confused at first too about whether the average debt of $150,000 included mortgage but I concluded that it must. There are alot of older people that have their house paid off or people that rent and have no mortgage. Until last summer we only owed about $70,000 (the remainder of our our mortgage on our townhouse). Then we moved to a bigger home and now we owe $225,000 on our house, bought a couple new van and car and we now owe a lot more then the average $150,000. I'm fine with it since we have quite a bit of equity in the home and I'd rather have the debt on my home then have no debt and just be renting as I see my home as an investment. We make sure to never have a balance on our credit cards, pay for things like vacations, furniture ect up front.

 

[crisi]

In the U.S. (I don't know about Canada, but I suspect its similar) you'll often also have large student loan debts. So a young professional married couple with a house may have $500k in debt (but two professional educations - say an M.D. and an MBA with good salary prospects and current income to buy the house). That will send your averages higher.

 

[Tiger926]

In the U.S. (I don't know about Canada, but I suspect its similar) you'll often also have large student loan debts. So a young professional married couple with a house may have $500k in debt (but two professional educations - say an M.D. and an MBA with good salary prospects and current income to buy the house). That will send your averages higher.

We have student loans, but nothing like you guys in the US. Neither hubby nor I had any University student loan debt when we married, so we were grateful for that.

I edited my original post, as I totally forgot about student loan debt, as it was not relevant to us, so it escaped my mind.

Tiger

 

[tnd]

In the U.S. (I don't know about Canada, but I suspect its similar) you'll often also have large student loan debts. So a young professional married couple with a house may have $500k in debt (but two professional educations - say an M.D. and an MBA with good salary prospects and current income to buy the house). That will send your averages higher.

That's our issue, my husband is a doctor and I am a lawyer and I suspect our student loan balance is higher than most mortgages in America. And we have a mortgage on top of that.

 

[maggiew]

Well, I would consider a person debt free with only a mortgage and 1 car payment.

Debt to me is more like credit card, student loan debt.

Maggie

 

[QVCshopper]

We are debt free. We own everything, including our house, cars, etc. outright. We have enough to buy a new car without a loan when we need one. If we move, though, we will no longer be debt free. It's a big consideration, but we think it might be worth it to get into one of the best school districts in our state.

In all, we have a nest egg that we're quite proud of, plus I put myself through college. We are not incredibly high earners, but we are incredibly high savers. It all really adds up after a while. But I'd say I'm pretty obsessed with saving money. It's really a lifelong hobby of mine, and I converted my DH long ago.

 

[Pakey]

Debt free means just that; no debt of any kind.

We were debt free until we decided to buy an investment property. I want to pay it off; my husband does not. It gives us something to discuss frequently, lol.

 

[scootch]

debt-free - you only have to pay water, sewer, lights
cable and internet

ditto... this is my idea... and it does feel very nice.

 

[a1tinkfans]

I thought debt free referred to people that had No debt, nothing....so 150K seems reasonable to me if one owns a home, tho I would not like to be paying off that loan

 

[cseca]

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...

 

[scottmel]

Debt free is no morgage, no car, no CC payments. NOTHING.

We became debt free when I hit 40 and DH43. We did a 10 year morgage on our house and saved a TON of interest. It was tough, I won't lie some months were super tight b/c I am just an aggressive saver/payer'offer of any bill. However nothing felt better than owning our own home and writing a check for a brand new car. I use to listen to DAve RAmsey but am guilty that I didn't follow all his rules - we still enjoyed life and did stuff just on a smaller scale and not as often. My dad always told me "Live like no one else today so you can live like no one else later"........No truer words ever spoken....

 

[DawnM]

I guess it would mean no mortgage or anything, however, on the Dave Ramsey boards many claim debt free to mean nothing BUT the mortgage.

We have no debt except the mortgage. We owe 13.5 more years on it, but I am really hoping to get that down to 10 years.

Dawn

 

[LovableGluttons]

Debt free is owing no one. No loans, mortgage, no credit cards.

Having liquid assests beyond that is even more important. Having enough saved to pay for college for your children (so they can support themselves without parent wallets), having a retirement funded so you are not relying on Social Security or other investments which have a considerable amount of risk.

It really is okay not to drive new cars, live in mansions, or buy expensive things to find happiness in life.

Being debt free means you could walk away from your job because the money isn't the big thing keeping you there.

It is freedom.

 

[QVCshopper]

Being debt free means you could walk away from your job because the money isn't the big thing keeping you there.

It is freedom.

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.

 

[TDC Nala]

I can't count the mortgage as I can't own the condo without one. I don't have any credit card debt or non-mortgage loan debt, no car loan, no credit card interest, student loan paid off a long time ago. Still need a job to pay for the condo and its maintenance fees (would need to pay rent if I didn't have the condo anyway), car insurance, gas (I don't drive all that much though), car taxes and fees, food/beverages, clothing, personal supplies, DVC maintenance fees, utilities, medical not covered by insurance (which I also need the job for), fun.

 

[LovableGluttons]

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.

If you have saved enough in your life to generate interest income that more than covers those expenses, you could walk away. You don't need the income to cover those bills because your savings are generating enough income to sustain you.

That's financial freedom to me.

 

[C.Ann]

To me debt free equals no debt. No mortgage, no credit cards, etc. The only expenses you have are regular monthly expenses, electricity, insurance payments, etc.

This..

 

[QVCshopper]

If you have saved enough in your life to generate interest income that more than covers those expenses, you could walk away. You don't need the income to cover those bills because your savings are generating enough income to sustain you.

That's financial freedom to me.

But I'm only 34! I guess you're talking about retirement. There's no way I could sustain my family on our savings unless we had millions stashed away.

Being debt free vs. the financial freedom you speak of are two very different things. The latter is often reserved for those who have worked for a long period of time and saved a lot along the way.

 

[bowne90]

To me, debt-free means that I don't owe any money to anyone. No loans, mortgages or credit card debt.