Buying this new house has had me thinking a lot about the possibility of being debt free. It seems like everyone wants to be debt free. If you do a quick Google search on debt, you’ll find 45,400,000 web pages with advice on how to get out of debt. Still, I can’t help but ask myself, how important is it to be debt free? How much does it really matter in my day-to-day life?[bctt tweet=”I can’t help but ask myself, how important is it to be debt free? #eatdrinkandsave”]
I know this is a crazy topic for a frugal living blogger. For the past 5 years Tom and I have worked hard to get out of debt. It all started because we didn’t want to waste money on a high interest rate for our education loans. Somewhere along the way we’ve got it in our minds that we need to be completely debt free.
We’ve certainly made a dent in our debt. In little over 5 years we’ve gone from a combined total of $180,000 in debt to ~$50,000 (half is mine and half is Tom’s). It’s crazy to think that we have paid $130,000 back.
Here’s where things get tricky. We sold our house and made ~$52,000. If we were to put that money towards our loans we would be 100% debt free. I have to let that sink in for a minute. Debt. Free. Wouldn’t that be amazing?
We aren’t going to do it though. Even though we have the opportunity to be debt free, we are choosing to go further into debt in order to buy our house.
Sounds like a bad idea for a frugal living blogger, right?
After lots of thought, and tons of conversations with people who have a much better understanding of money than I do, I’ve found that this new debt will be worth it. Here are three reasons why we aren’t aiming to be debt free (right now).
- Now is the time to buy since interest rates are so low. We are able to afford much more for a house since we won’t be paying a large interest rate. I’m lucky to have a banker/ realtor and a financial planner in the family to explain that to me.
- Renting would cost just as much, if not more.
- We will be able to build equity in a house and hopefully make money in the long run.
We are still going to continue to pay off our loans at a faster than required rate. There is no point in losing money to a high interest rate.
I’m not saying that we should all throw caution to the wind and get into loads of debt. Just because we are taking on another mortgage loan doesn’t mean we are going to max out our credit cards and buy a new car. However, I do want you to think about your needs and specific situation when you think about debt. Talk to a financial planner, a realtor, or someone else who understand finances and your situation, and figure out what works for you. In our case, this is the best financial situation we could make at this time.
Living debt free is still a long-term goal. I don’t want to take it off the table just yet.
It’s important to note that paying off our debt quickly has helped us immensely. Our debt to income ratio is pretty good right now only because we’ve worked hard to pay off our debt. Had we taken our time to pay down our education loans we would not have been able to afford a house in our area. We have also drastically reduced the amount of money we are throwing away in interest each year.
What do you think? Are you striving to be debt free? Or does it not bother you at all?