Life After Debt

Debt is so ingrained into our everyday life that most people would consider it almost unusual to meet someone who is completely debt free.  No mortgage, car payment or even a line of credit.  In some regards, life after debt sounds a lot like life after death…it sounds good, but until you see it, it is a little hard to believe in.

While I’m not debt free yet, I have made a lot of progress to becoming debt free.  It hasn’t been easy road to travel, since too often the lure of new goods can pull you back off the path  (for example: ebook readers, new surround systems, or shoes…depending your particular vice).  Perhaps that is why life after debt is hard to understand for some people as once you achieve that level of success the results are invisible to most people.  Being debt free in some regards would often result in you looking poorer to others as you tend to drive an older car and live in a modest house.

Often the accumulation of debt is a direct result of a desire to compete with others.  In an attempt to keep up with the Jones, we buy the newer car even if the old one was fine or get a kitchen reno even when we don’t cook that much in it.  In some regards being debt free is the exact opposite behaviour as you often can’t be in competition with your neighbours since you don’t know what their debt levels are at and may in fact never know.  So be choosing to go after being debt free you exchange an external competition for an internal one.  While some blogs like this one, do you give you an idea of others debt loads often the comparison isn’t correct because of geography, income or even goals.  So in the end the desire to move past your debt is a battleground that solely exists in your head.

So how do you compete against someone who knows your every move before you do it?  You have to main weapons to defeat yourself and your debt: logic and emotion.  The logic side is the one most people are familiar with, as it includes budgets, monthly saving targets and spreadsheet plans full of numbers.  If logic worked by itself everyone would be rich since it would be easy to plan or even have someone help you plan your way out of debt.  Yet it doesn’t work that way, since far too often the emotion side gets in the way.  Emotion is a fantastic way to over ride logic as the ‘right‘ way to go ‘feels‘ that way, regards of the fact the numbers are saving: you can’t afford that.

Yet since we can’t get rid of emotion, you must instead try to accept that and then use it as best as you can to support your logical plan.  This is where you start trying to get your mind to work with you by the oldest trick in the book…you bribe yourself.  Do not under estimate how critical rewards are to changing and enforcing behaviour, but in the end it won’t be enough.  You also have to make the behaviour easy to do and make the wrong thing hard to do.  So how do you do that?  Here is an example, you could set up automatic payments to your debt so you don’t have to do anything to pay it off.  Then you also setup a few points in time where you reward yourself for paying off debt and even have a bonus reward if you get it done faster than the plan.  Last, but not least, you leave your credit card at home and keep your limits on your debit card low so you can’t get back into debt easily.  While doing all of this may seem like over kill, that is the point.  Your playing poker here with someone who knows your cards…you only hope to win is massively over strategically plan for that fact.

So now that you are armed, go out there and slay that debt.  Your opponent is a little to smart for their own good, so be careful for their tricks or you might end up in a cave clutching your gold card and calling it ‘your precious’ between rounds of saying ‘charge it’ at the mall.’

8 thoughts on “Life After Debt”

  1. Years ago I was subject to a certain measure of peer pressure by a friend who thought it was “a shame” that my mortgage was about to be paid off. He was adamant that leveraging and investing in real estate was the way to attain wealth (and that I should quickly get back into debt). I pondered what he said – and then decided that I preferred to remain debt-free (and sleep well at nights).

    The ending to that story is that he is now cash-poor and scrambling to pay the monthly fees for the several (empty) properties that he owns in Florida (after selling one great NJ property at a major loss in order to get needed cash).

  2. As of April 2012, I will be completely debt free… this will make it much easier to leave the Rat Race when I deem it time to do so.

  3. I agree paying off your debts is a great idea, especially in today’s economy. I’m bookmarking your site to review your tips and tools. Thanks!

  4. I have been debt free (including no mortgage) for many years now. Life still has challenges but debt isn’t one of them. I have a friend who is 48 who has saved so little that retirement isn’t even thinkable. I am retiring next month. I have mixed feelings about retiring but I am giving it a try. That is the flexibility being debt free and FI allows.

  5. Becoming debt-free was a big step towards my being able to retire in 2008 at age 45. This happened in 1998 when I paid off my mortgage, one I had for only 9 years. After that, I was basically living on one biweekly paycheck per month with the other one gravy. Three years later, I was able to switch to working part-time and still have money left over after covering my greatly reduced monthly expenses.

    Another “rule” I had in my earlier years was to never have more than one of the 3 types of large debt (student loans, car loans, home mortgage). I paid off my student loans before I took on the mortgage and always paid cash for my cars.

  6. There’s a lot of discussion in the mainstream news media in Canada about the massive (total) debt the United States has, but so far I have not seen any discussion of the massive (total) debt we in Canada have, a massive (total) debt that is skyrocketing higher at a very alarming rate as we speak. The politicians and the mainstream news media absolutely refuse to discuss this issue.

    (Click on the link at the end of my post to find the links which back up all of the statistics I am using in this post.)

    The total Government (Federal, State, and Local), business, and household debt in the United States is 52.6 trillion$

    The total Government (Federal, Provincial, and Municipal) business and household debt in Canada is 4.51 trillion$, and it went up an eye-popping 248 billion$ over the last 12 months. To put things into perspective the (Canadian) Federal Government`s program spending in the year 2010 was 245 billion$

    Since the United States`s population and gdp are approximately 10 times higher than Canada`s, there is not a lot of difference in the total debt numbers in the USA (52.6 trillion$) and the total debt numbers in Canada (4.51 trillion$), relatively speaking.

    The total Government (Federal, Provincial, and Municipal) business and household debt to nominal gdp in Canada is 278%

    In the year 2010 the total Government (Federal, Provincial, and Municipal) business and household debt in Canada grew 2.46 times faster than its nominal gdp (economy) did.

    Our economy is one big ponzi scheme, and a “day of reckoning” is just around the corner. When it comes, it is not going to be very pretty.

  7. I reside in the United States and the debt situation is and has been alarming. Too many people including the government do nto want to do what it takes to get out of /or controll debt. The easiest way out is to devalue the dollar, (thus the $4 dollar a gallon gas) increase inflation and pay the debt off with cheaper dollars. The typical citizen does not understand that the price increase inn commodities especially oil is a result of this. I am glad to say at 55 I am and have been totally debt free. I still own a business that is declining, but accepting that change is good this will enable me to expiernce my next stage whatever that may be. I would not have this attitude if I was burdened with debt. I hope you Canadians get agressive concerning your debt. We sure are not.

  8. We’ve had about 5 months warning that my husband needed to retire early due to medical issues. We’re usually very good about not having consumer debt, but he had gotten lax and had two vehicle loans and a credit card balance (all relatively small, but they nagged at me like sand in my shell.) Because we had some notice of his impending unemployment, I cut our budget way back and used much of his disability payments in paying down the loans. Next week we pay off the vehicles, only one week after he officially retired. I have to say that not having those hang over us is such a relief! I still have the mortgage to contend with, and pre-paying it while living on one salar is not going to be easy. But it too only has a few more years left on it, so once it’s all done, we’ll be breathing much easier!

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