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The Gift of Debt – Motivation Through the Murder of Mortgages

The Gift of Debt

You know I hate debt.  Heck, we paid off both of our cars less than 2 years into our car loans.  Now we save cash for future cars.  We paid off the mortgage of our first home, now our rental property, in 6 years.  Some of you have even pointed out that I could have used that $70,o00 in principal payments on something that could have earned me more than the 4.5% interest that we saved.  I argued that owning a home outright is a sort of insurance policy for us self-employed people.

BUT, today I want to look at debt in a slightly different light than usual.  I want to see any of the debt we’ve ever had as a gift…what did it lead to overall?

Our Debt History

Mr. BFS and I are 30 years old.  The debts that we’ve had so far have been a family college loan, 2 car loans, and 2 mortgages in our lives so far.  Here is our debt history:

  • The $8000 family college loan was forgiven a few months after we started making payments when we graduated in 2005.
  • The first car loan of $11,000 came along in 2005 too.  It spurred us to live like college kids even when we started making decent money since we wanted to pay off the 6.1% car quickly.  In early 2007, our Chevy Aveo was in my name.
  • Then we took on a $91,200 mortgage in mid-2007.  We lived on less than we could have in order to make principal payments from the very beginning.
  • We splurged on a better family/hobby job vehicle for Mr. BFS in 2008, so we got a $20,000 car loan for the Prius at 4.1%.  We again tightened our belts and paid off that car loan in 2010.
  • In late 2012, we bought our current home and signed up for another $208,000 of mortgage debt.
  • In early 2013, we paid off the first mortgage to give ourselves some monthly breathing room in regards to cash flow.

So our “only” current debt is the $204,000 mortgage left on our current home.  I italicized “only” because $204,000 is a lot of debt in my eyes.  I don’t care if it’s considered “good” debt.  It’s money that I owe someone, and my home isn’t really my home completely until that balance is zero.  And the 4% interest, which is about $600 a month, is truly annoying too.

Slaughtering Debt Motivates Us

Looking at our last 8 years out of college, it is obvious that our debts actually caused us to live on less consciously.  We’ve definitely embraced some lifestyle inflation, but not to the point that we couldn’t save for our future or tackle current debt.  We simply funnel extra money to our priorities, and debt repayment is a huge priority for us.  So in that way, debt is actually one of the main motivating factors for the beneficial financial decisions that we’ve made up to this point.  Not too shabby.

Do I appreciate debt anymore now than before?  Nope.  But I will say that we don’t regret any of our debts, and they have motivated us to stay on track to pay them off and get ready for our future.

How do you see your debt?

This post is part of The Gift of Debt Series an eight-day, multi-blogger extravaganza hosted by The Fiscal Flamingo. The series is designed to give you the permission to kick up your heels, embrace your debt with glee, and look forward to finding the gold at the end of the rainbow.  Follow along in the series as we tell the story of our gift and encourage you to find yours.

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13 comments to The Gift of Debt – Motivation Through the Murder of Mortgages

  • christopher

    debt to cash ratio 4.3:.9

  • We don’t like debt either. We have killed all debt we have had. Not sure if we are going to kill the mortgage immediately though. It’s a really low rate, and probably the lowest rate of debt we can ever get. Especially since we are going to be trying to build a real estate portfolio.

  • Great story Crystal. I am killing my debt, but leaving my mortgage, because we plan on selling in a few months. I do want to tackle the new mortgage and work on clearing it off the books relatively quickly.

  • Part of my debt is from overindulgence and mom guilt and I am ashamed of that debt.

    Part of my debt is from re-educating myself so I could make more money to support my family. I wish I didn’t have that debt but I am proud of what I have accomplished.

  • For me it’s something like ‘never again’. It was a difficult part of my life and I wouldn’t go back there again. Have learned my lesson: save money and wait until I can pay for the stuff with no loans.

  • I’m like you: I cannot stand debts and paying interest. We just paid off my car this past Tuesday in 20 months, which makes me very happy. I know that, both my husband and I, do our very best to pay debts off as soon as possible–even if they’re interest-free for a couple of years. The purchases I’ve made with a loan aren’t truly mine until they’re paid for in full and that’s an unsettling feeling to have in my opinion.

  • Travis

    I’m 31 and have zero debt. I agree with you — owning a house free and clear is like an insurance policy and a HUGE stress relief. My house (worth about $300k) is paid for. I built it in 2005 and paid cash. I never got into student loan debt since I got scholarships and worked to pay the rest while going to school. I never carry a credit card balance and have my truck paid for in full.

    I know I *might* earn more if I carried a mortgage and had my money in the stock market. But, figure in 2005 when I built my house, the interest rates were around 5.8%. So, I basically guaranteed myself a 5.8% yearly return over the last 8.5 years (started in March ’05). Compounded yearly, that is a 57% return. I just checked the DJIA and it returned 48% over the same time. And, most importantly, as everything turned south in 2008/09, I had *zero* stress. So long as I could pay my measly $1600/yr property taxes, nobody was taking my house.

    Now, do I wish I had taken out a HELOC in March of 2009 and put as much money as I could in the stock market? Of course. But, my crystal ball was broken at the time…

  • @Christopher, can you sort of explain that for anybody who would love to figure out their debt to cash ratio?

    @SavvyFinancialLatina, yeah, we aren’t overpaying our current mortgage yet either. It’s at 4% and we want to concentrate on other investments first.

    @Grayson, yeah, we wouldn’t pay off our mortgage early if we were selling soon either.

    @Jane, morbid curiosity speaking…what mom guilt debt do you have?

    @dojo, good life lesson!

    @Lindsey, congrats!!! And that is generally the way I see debt too. Sometimes I put the feeling aside (like for 22 months of a 24 month, 0% interest loan, lol…but we’ll have the complete payment is cash set aside that whole time).

    @Travis, we probably won’t be completely debt free for another 5-10 years (so 35-40 years old), but I am aiming for it. I don’t worry about what I might earn more on – I just concentrate on that happy I-own-it-myself feeling instead. :-D

  • Mom debt is money I spent to help my sons that I probably should not have spent.

    I have been helping way too much with university costs even though neither child ever missed a movie or concert or night on the town with friends.

    I was making less than 40K per year for a few years when I first separated from the boys’ father and I used my line of credit to buy them stuff and activities because I felt so badly that their father chose not to help them even though he makes about 100K more each year than I do.

  • @Jane, oh, that sucks! I understand exactly how it happens though. You didn’t want to let them down. Now you can tell them, “I didn’t want to let you down and now you need to sacrifice some of your more expensive stuff so you don’t let me down.” And I am sorry about the mom guilt debt. Maybe you’ll feel better when you are like 90 years old and making sure to live with one of them… ;-)

  • Travis

    I should have mentioned this in my first comment: since you already own one house free and clear, I wouldn’t worry too much about the loan on the second. If a worse case scenario played out, you could lose one house, move back into the other, and still be debt free.

    If I had a rental property, I would do what you did too: have a mortgage on the primary residence and keep the rental free and clear. Normally banks charge what? About .5 to .8 percentage points higher for investment properties? Might as well go with the lower rate on the owner occupied residence. I would still sleep soundly knowing that one house is paid for, even if it’s the rental property. “Insurance policy” for the self-employed is still in place.

  • @Travis, here’s the funniest/oddest thing for us. Thanks to the rent we get right now ($1800), we would only actually save about $300 a month by moving back to our first house. I thought that was pretty cool. We are only paying about $300 a month to live in our dream house 20 years before we thought we could have it built. :-D People are just harsh when it comes to the idea of having roommates. :-)

    But yes, we probably don’t have to pay off this mortgage super fast thanks to owning the rent house. But I look forward to paying off this mortgage and actually having our total housing costs including property taxes go negative…

  • Thanks so much for participating in The Gift Of Debt series. You are an inspiration to murder my mortgage. :-)