Back To Basics: Debt-Free Is The Path To Financial Success
The goal is to get ahead with our money and start experiencing more success with our finances. We want to return to the basics of financial wisdom to learn how to accomplish this. One important way to achieve any financial goal is to observe what other successful people have done to win with their money. Once we know what others have done, we simply emulate their behavior to get the 
same monetary results.
A lot of people that are truly successful with money live a debt-free lifestyle. If they do borrow money, they pay off the debt early to lower risk and avoid paying interest. In order to become more financially successful, let’s set a goal to become debt-free.
This may seem like a very audacious goal, but it is achievable and in probably less time than you think. I know because my wife and I paid off all our debt except our mortgage earlier this year. So, I can personally testify that this is possible for the average person to become debt-free.
The advantages of debt-free living.
There are numerous advantages to living a debt-free lifestyle. Before you commit yourself to any goal, it is important that you understand why it is necessary. Therefore, I want to highlight a few reasons that you should firmly decide right now to pay off all your debt.
1. Being debt-free lowers financial stress.
Do you feel nervous about your financial position? Do you start sweating profusely or have to down antacids by the handful every month when the bills arrive? If so, then you are a prime candidate for considering a debt-free lifestyle. Is it all really worth it? Wouldn’t it be better to hunker down, pay off your debt, and eliminate the source of your stress? Why live this way?
I can tell you that living without debt is a lot better way to live. It ends the emotional roller coaster which alone significantly increases one’s quality of life.
2. Being debt-free lowers your financial risk.
Debt is risky because you commit to paying it back on time or agree to suffer some prearranged consequences. The consequences may include things like paying penalties, incurring higher interest rates, and/or forfeiting your collateral. If you pay cash up front for purchases, you totally eliminate this financial risk.
With debt you have a greater potential downside if you lose your job, suffer a personal disaster, or encounter a serious health issue. Why take the risk?
3. Being debt-free opens up your options.
Debt is a trap that limits your choices. You are tied to paying it off one way or another. It becomes a ball and chain that robs you of your freedom. Once you have a pile of debt, then you have to keep your nose to the grind stone because you lack financial margin. One little trip up and your whole house of cards is going to come tumbling down. It doesn’t have to be this way.
Becoming debt-free gives you back control of your life. It gets the creditors off your back and allows you to make the decisions again.
Debt myths revealed and lies exposed.
There are numerous falsehoods that exist and are perpetrated by institutions that make a profit by charging consumers interest on loans. It is important that we first recognize and debunk these myths before we can embrace a debt-free lifestyle.
1. Debt is not the path to a better life.
Banks and financial institutions have done a fantastic job of selling us on the idea that credit cards, home equity lines of credit and car loans give us financial power. This is simply not true. What this debt does is line their pockets with profits. We’ve all enjoyed the “priceless” MasterCard commercials, but it is time to realize that true financial freedom comes from being debt-free not charging items we cannot afford!
Do you want to continue taking financial advice from people that need the government to bailout their businesses because they’re broke? Not me!
2. Debt is not a tool.
Okay, debt is a tool. It is a tool to make bankers rich, but it is not a tool to make you rich (unless you are a banker)! I think the financial industry has recently proven that you cannot borrow money from one place, invest it in another and make it work for the long-term. It is just too risky. This will get you in a bind and fast.
Just take a look at all the people that took out adjustable-rate or balloon mortgages. They borrowed money, invested it in a house they couldn’t afford and bet that they could refinance it before the day of reckoning. It was a gamble and they lost. This is not the way to win with money.
3. Debt is not inevitable.
Many of us were raised to believe that the way to get what you want was by using debt. We saw our parents buy things on credit cards and other consumer loans. We grew up thinking that a car payment was just a way of life. We were trained for instant gratification. When you want something, just whip out the plastic and get it. Of course, this has caught up with many of us over the years.
It is time to realize that debt is not inevitable. It is possible to live without it. We can do what our grandparents or great grandparents did. We can wait until we have the money before we buy things. I know it is a radical idea, but one whose time has come.
4. Debt-free does not mean fun-free.
I think that some people believe that the only way to enjoy life is by living beyond their means. Have you ever listened to Dave Ramsey’s radio show? Do the people that call in seeking his advice because they are drowning in debt sound like they are having fun? No! It is just the opposite. I never get enough of hearing the calls where people are calling in to celebrate their freedom from debt! You can hear the joy and relief in their voices.
Becoming debt-free opens up your life to happiness and prosperity like you’ve never experienced! When was the last time that you were debt-free? Were you happier then?
Get on the right path to financial freedom!
Nugget of financial wisdom: True financial freedom begins when you become debt-free and start living within your means.
You really need to grasp the truth above if you want to win with money. Over the next several days, I will lead you through the steps to achieving financial freedom from debt. However, unless you embrace the ideas I have written about here as the absolute truth, then it is very unlikely that you will succeed with money. Ninety percent of what determines your financial success lies in your attitude toward money. Once you acknowledge this basic financial principle, then you are well on your way to financial freedom!
What are your thoughts about debt and becoming debt-free? I’d love to hear from you. Please leave a comment below with your opinion.
Photo by danesparza
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Evelyn Lim | Attraction Mind Map | Oct 7, 2008 | Reply
According to Robert Kiyosaki of Rich Dad Poor Dad, there is good debt or bad debt. Good debt can help increase your net wealth position.
However, I believe that if you are not financially all that savvy, then choosing to go totally debt-free is best rather than getting yourself into a loan situation; with no clear idea of how to manage when things go wrong.
Read Evelyn Lim | Attraction Mind Map´s lastest article - What Enneagram Profile Type Am I?
Jeff | Oct 7, 2008 | Reply
@Evelyn - I am not familiar with the details of Kiyosaki’s position on this, but true wealth equates to one’s net worth. Net worth is calculated as assets minus liabilities. Debt is always a liability. Therefore, it always lessens your true wealth.
I think there are very limited situations where debt makes sense. One example of “good” debt is a 15-year fixed rate mortgage. This is a very conservative use of debt to acquire a home. A home is a good investment because it typically increases in value unlike cars and other consumer goods.
Also, I’d suggest that it is those of us that are more financially savvy that choose to be debt-free. It doesn’t take a genius to use credit. It is supposedly our best and brightest financial gurus that are in need of a bailout right now due to bad debt. If these people couldn’t effectively manage debt when things went wrong, then who could?
Just my thoughts. Thanks for starting up the discussion!
valerie | Oct 7, 2008 | Reply
“Financially savvy.” It is so interesting, and you pointed it out, that those who claim the most financial savvy are those getting the bailout. Isn’t it ironic?
Read valerie´s lastest article - boot camp, round 2
Jeff | Oct 7, 2008 | Reply
@valerie - In my opinion, it is down right scary that those running our nation’s largest financial institutions got themselves in this mess. Talk about egg on your face!
How can they possibly suggest they are qualified to consult others on how to manage their finances when they can’t even effectively run their own companies?
Glblguy | Oct 7, 2008 | Reply
First, thanks for the link. Second, don’t be fooled, there is no such thing as good debt. There is debt that is less bad than others, but all debt is risky.
To take the home example, the people in California that bought their homes and used a 15 year mortgage thought they had good debt, an investment if you will. Then the their housing market completely tanked, and they are now faced with bankruptcy. Where’ the good in that?
With that said, I am fine with mortgages, but firmly believe they should be paid off as quickly as possible. They are risky and they are debt.
btw - Rich Dad, Poor Dad isn’t a very popular or credible book amoungst financial experts or financial bloggers, so not sure if I would look to him for good advice. Read Dave Ramsey, I think he’s a much better role model!
Read Glblguy´s lastest article - Should the church use debt?
Jeff | Oct 8, 2008 | Reply
@Glblguy - I agree that all debt is risky and I also agree with your statement that some debt is less bad than other debt.
I think that a 15-year fixed-rate mortgage is generally a pretty safe and conservative way to buy a home. For those in California that took out sub-prime, adjustable-rate, or balloon mortgages, they have certainly taken a beating. Of course, these people should have never taken out a mortgage in the first place because they weren’t ready.
The housing market didn’t really cause anyone to go bankrupt. It was an excessive amount of risk and debt that may have led some to bankruptcy.
I follow Dave Ramsey’s advice personally and he would definitely be my suggested financial role model as well.
Thanks for your comments and for adding some clarification about Rich Dad, Poor Dad!
marci | Oct 11, 2008 | Reply
Followed Frugal Dad’s link to here
Debt-free is definitely stress-free.
Right now I feel encased in a plastic bubble from all the economic crisis that is going on. I have not worried one bit about it all. I’m debt-free, including my little home, need about $300/month for the bare bones budget (if things got bad), and sleep well at night because of it all
I highly recommend it
Jeff | Oct 11, 2008 | Reply
@marci - I know what you mean when you say you feel like you are living encased in a plastic bubble. When one is debt-free, the effects of a downturn in the economy are certainly minimized. I feel the same way you do!
Thanks for sharing your debt-free experience!
Brandy Astwood | Oct 12, 2008 | Reply
My family of 8 have been working on the Dave Ramesy Total Money Makeover. Its hard but so freeing! Consumer debt wasnt our biggest proplem, medical bills were and still are our trouble area.
As for the houseing issue…..there is so much blame to go around. And it starts with us! When my hubby and I were looking to buy a home (we’re in northern California)we were appoved for $350k and the payments we so doable but we could not get comforable with the bankers assesment that we would be making more money in the future so the later higher payment would be no proplem….we almost fell for it! Luckly we decided to be consertive and work with what we have. That meant buying a lil house for $130k and making do with kids doubling up in rooms,used furniture and used cars. Our friends rolled their eyes at us and laughed at our lil house, but now that the market has turned so drasticly,they now have to pay the princable and interest, those same friends are loseing their homes or working tons of over time to make outrageous payments so they never get to enjoy their (banks) home or children.Way too much stress for me!
mrp | Oct 12, 2008 | Reply
I agree with Dave Ramsey and others….getting rid of debt lessens stress hugely. I’ve paid off 2 loans this past year. mostly by diligently saving each and every paycheck. I’ve read it is common in China to save 30 percent or more of one’s income. I strive for that. not easy…but 20 percent is often do able. I have a small emergency fund, and am able to save much faster now that I’ve eliminated two loan payments. Still have other loans to pay off, but am working on that. No credit card debt also helps keep a low stress level. thanks to all for your encouraging tips.
Jeff | Oct 13, 2008 | Reply
@Brandy - You obviously made the right decision concerning the house. Way to go! I’m glad to hear that there are people out there taking personal responsibility and deciding for themselves the smart thing to do.
@mrp - Paying off debt is so freeing! It sounds like you are doing a fantastic job. Keep going and you will thank yourself for it!
Thanks for sharing your experiences!
Barbara | Oct 18, 2008 | Reply
Jeff, you are spot on with these points. I found this article on Timothy Carters (beachbody) site. We follow twitter :). I am proud to say I am debt free finally. What a mindset change!
Saver Queen | Oct 19, 2008 | Reply
Brandy Astwood - good for you. You trusted your instincts and you got it right. It really doesn’t matter what other people think, does it? You can’t just follow the herd, when it comes to money, or anything else. I truly believe that if you do what you know is right, you will come out ahead and lead the best life for you. It’s okay to go against the grain sometimes. After all, one reason a lot of people get into debt in the first place is the desire to gain others approval by looking wealthy and in-style.
Jeff | Oct 20, 2008 | Reply
@Saver Queen - Isn’t it crazy how people bury themselves in debt simply to gain or maintain the approval of their neighbors? Many people in America are living well beyond their means. They have created a facade of a lifestyle that they can barely keep afloat. Debt-free is a much better way to go!
Thanks for adding to the discussion!