Anyone know how to live debt free?

Is it really possible for a glutenous American who wants everything now with no consequences later able to turn the tide?

Ok, let me explain...

First of all, have you ever heard of the Duggar family? http://www.duggarfamily.com/ I think the family is incredible and has something really special going on. For one thing, they made a commitment to live debt-free.

What exactly does that mean? Everything they own is bought and paid for, including a 7000 sq.ft. home. WOW. o_O That blew my mind. I would so love to have that kind of discipline. I can't tell you how sick I am of the whole credit "game".

I mean, do you realize how long it would take me to save 150,000 to pay for a house living off of 60,000/yr combined income? The most I could save annually is about 20K. That would take me roughly 8 years living meagerly, no vacations, no extras. ...but then again, I would OWN my home outright. I dunno...

Is there anyone out there that lives by these principles (that isn't wealthy...just average) that could give some insight into this lifestyle?

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  • pebble
    Lv 6
    1 decade ago
    Favorite Answer

    It isn't as difficult as people make it out to be. It just isn't as fun or pleasant. Here are some basic steps to getting wealthy without making tons of money (modified from Dave Ramsey's tips, check out his site for more detailed advice). Sorry this is so long but there are many steps to changing the behavior that gets so many in debt and out of savings.

    Step one: Control where your money is going

    1.Write down in a notebook every cent you spend and what you spend it on.

    2.Separate the needs vs. wants for everything you spent. Be honest.

    3.Evaluate where waste can be trimmed. Common areas are junk food, eating out, cigarettes, alcohol, unused or unnecessary services such as large cell phone or cable packages; maybe a gym membership you don’t use. Also shop around for auto and homeowners insurance. Look into energy saving tips, clip coupons and comparison shop. Angel Food Ministries could save you a lot on groceries (look them up online for a site near you, it is a service open to anyone and is not based on income. The food is the same you would buy at the store but about 50% cheaper.)

    Step two: Budget

    1.Use what you learned about your spending in step one to write a full budget.

    2.Put the budget in order of priority:

    Food

    Housing

    Utilities

    Transportation

    Clothing (only bare necessities)

    Student loans

    All other debts

    3.Assuming you can afford at least the minimums on all debts, and pay all bills in full, allow at least a little spending and entertainment money . Make it minimal while you are still in debt. Maybe something like ten percent of whatever is left after all bills are paid, or a set dollar amount such as $20 a week.

    4.If you cannot afford all bills, cut back further and bring in more income. You may need to consider downsizing your lifestyle: Sell a car with an expensive payment and buy in cash or with a smaller payment, a cheap car that gets from point A to point B. A better car can wait. Maybe move into a smaller house or an apartment. To bring in more income, do odd jobs, work and extra shift or take on a temporary part-time job.

    Step Three: Create an Emergency Fund:

    An ideal emergency fund is 3-6 months of expenses, this should be saved for after Steps Four and Five; for now a mini emergency fund should be started so Steps Four and Five are more possible. A mini emergency fund is $500 if you make less than $20k/year and $1000 if you make more. This should be funded ASAP (think weeks not months) Sell stuff work extra whatever it takes to get it done.

    Step Four: Cut the Cards!

    Now that you have money to fall back on if, say your tire blows out, it is time to ditch the credit card and you won't be able to use the excuse "it's just for emergencies" since you now have cash to pay for emergencies. This is the time to make the commitment to use no more credit and take out no more loans. Save for everything and settle for second best if you cannot afford better with cash.

    Step Five: Pay off debt

    Now that you have your mini emergency fund and are not acquiring any new debt, it is time to pay off the old debt. The sooner you pay it off the more you will save in the long run. It is very difficult to build a large bank account on average income while paying debt. That is why you should pay it off before you begin saving for big ticket items. I would not include a mortgage in this though. Interest rates are low enough that assuming the market rebounds as it has every other down turn, you should be able to make more with your money than you would pay in in interest in the long run. Easy steps to get you out of debt in an average of 18-24 months:

    1.Gather all debts

    2.Arrange from smallest to largest; write each debt and amount in order on a sheet of paper. Include the minimum payment of each.

    3.Pay the minimums on all EXCEPT the smallest debt. On this one put every extra penny towards until it is gone. Cross it off the list

    4.Move on to the next smallest debt. Pay the minimum on it + the minimum from the debt you paid off + every extra penny you can come up with until it is paid off. Continue until you are debt-free!

    Step Six: Fully-Funded Emergency Fund

    Save 3-6 months of expenses to be used only for emergencies. Put it in an account that gains interest but is accessible since the whole idea is to be able to use it when you need it.

    Once you do all this it is time to look into insurances, retirement funds, tuition funds, and of course savings for all your wants and needs.

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  • 4 years ago

    Well it depends on what kind of debt it is. If it's credit card debt then by all means get rid of it, the sooner the better. If it means cashing out a portfolio, sometimes it's worth. However there can be heafty monentary penalties, look before you leap. If however it's a school loan, relax, keep the investment, because the school loan was an investment and you should not view it as a negative. If it's a 401K plan you're cashing the penalties are vast, tred carefully there. But after all that, the simple truth is, yes, it is better to be debt free.

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  • 1 decade ago

    Yeah, the Duggars have like 18 kids to build the house for them. That makes it easier. I also understand they have a bunch of rental properties which require minimal work and provide a steady income.

    Unfortunately, as the old saying goes, "it takes money to make money." I wouldn't be too afraid of going into debt IF it means that you're using the money to invest in something that will provide you with greater wealth. Buying a rental property is a good example of an investment like that that can help you achieve financial independence.

    You can live debt free once you reach a certain modest level of wealth, but it's pretty hard until that point unless you live with extreme discipline. I'm talking about getting a small cheap apartment and a small cheap car, eating out rarely, finding cheap entertainment, waiting to have kids, and working hard at a decent job every day.

    I'm 28 with a wife and a mortgage, but our only debt is the house, a few cheap student loans, and my truck -- and the only thing keeping me from paying that off is Suze Orman's recommendation to have 8 months' worth of emergency money on hand. I think that's about as close as your average person can get, right?

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  • 1 decade ago

    Do like the Duggars. Live in a low cost of living state, don't buy fresh stuff (they use quite a bit of canned fruits and veggies), build your house with underage labor, don't buy fancy electronics, dress your kids alike in hand-me-downs or thrift store clothes, don't go out much, and have a TV show.

    And don't expect everything NOW. They have quite a lot of patience. Every couple of years, they wait nine months for something new.

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  • Anonymous
    1 decade ago

    Yea. Spend less money than what you make. It isn't exactly rocket science. It's just that no one wants to do it, because it sucks.

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  • 5 years ago

    Control your expenses, don't use credit cards. Don't buy anything that you don't need now.

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  • 1 decade ago

    try not to use your credit card.

    use debit instead

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