Becoming debt free
Discussion
Have developed this unhealthy obsession about becoming debt free (minus the mortgage). Came across a Dave Ramsay clip on YouTube which outlined the importance of ridding yourself of debt.
Now whilst I don't completely agree with his concrete views, it is appealing to know what you earn is yours and not owed to anyone else. Currently have 3 seperate lines of debt (2 very small amounts of 0%, 1 significant amount at a horrendous 9%).
My question, albeit slightly philosophical, is would you live a beans and rice life whilst doggedly paying off debt? Our would you strike a balance, pay them all gradually whilst still enjoying some luxuries?
Now whilst I don't completely agree with his concrete views, it is appealing to know what you earn is yours and not owed to anyone else. Currently have 3 seperate lines of debt (2 very small amounts of 0%, 1 significant amount at a horrendous 9%).
My question, albeit slightly philosophical, is would you live a beans and rice life whilst doggedly paying off debt? Our would you strike a balance, pay them all gradually whilst still enjoying some luxuries?
Lukas239 said:
My question, albeit slightly philosophical, is would you live a beans and rice life whilst doggedly paying off debt? Our would you strike a balance, pay them all gradually whilst still enjoying some luxuries?
To me would depend how long the rice & beans existence would last.... 6 months go for it. 6yrs well you maybe need to think some alternate strategies as life is too short.
What do you mean by unhealthy obsession? Debt is pretty damn unhealthy, got into some credit card debt years ago (various issues led to it) and you really see just how soulless the tyrants who lend are when you're beholden to them.
Just borrowed 15k to buy a new van though; I need it for work and current van is a bit "do you feel lucky punk", you can't buy a cheap secondhand auto van, and this works out significantly better for me than any lease/hire plan - its cheaper, allows me to modify it, and dispose exactly when it suits me (which might be sooner or later depending on environmental fashion)
Have told the mrs we're reigning it in a bit until I've paid it off early, in reality this means we'll try to keep meals out to once a week and maybe make our holidays marginally cheaper, so a bit less but not really slumming it.
Besides something like that that is essential and our small mortgage I avoid debt entirely now though. Would eat the rice and beans if I had to. We've got enough money for all the things we need and some of things we want, and few will ever have any more then that.
Just borrowed 15k to buy a new van though; I need it for work and current van is a bit "do you feel lucky punk", you can't buy a cheap secondhand auto van, and this works out significantly better for me than any lease/hire plan - its cheaper, allows me to modify it, and dispose exactly when it suits me (which might be sooner or later depending on environmental fashion)
Have told the mrs we're reigning it in a bit until I've paid it off early, in reality this means we'll try to keep meals out to once a week and maybe make our holidays marginally cheaper, so a bit less but not really slumming it.
Besides something like that that is essential and our small mortgage I avoid debt entirely now though. Would eat the rice and beans if I had to. We've got enough money for all the things we need and some of things we want, and few will ever have any more then that.
Edited by Teddy Lop on Saturday 16th March 09:10
Well, there's good debt and there's bad debt. Being debt free is probably not only unrealistic but probably not good in the financial long run.
I'm quite happy to take 0% finance deals when I know I have the cash sitting in a savings account earning me money. I'm also more than happy to have a credit card as long as it's cleared each month. We're refurbishing a house we've bought. For example, we've bought sofas, furniture, windows, roofline, and other big ticket items on 1-3 year 0% finance. I know that the money is safe in the bank and earning interest. Even the paltry amount is worth it over paying up front. The rest we've bought and cleared with the credit card and received 0.5% cashback. All of that is debt, but I wouldn't consider it bad debt.
Bad debt would be keeping large sums on credit cards for extended periods of time at extortionate rates. Taking payday loans or buying items on anything but a 0% deal.
I'm quite happy to take 0% finance deals when I know I have the cash sitting in a savings account earning me money. I'm also more than happy to have a credit card as long as it's cleared each month. We're refurbishing a house we've bought. For example, we've bought sofas, furniture, windows, roofline, and other big ticket items on 1-3 year 0% finance. I know that the money is safe in the bank and earning interest. Even the paltry amount is worth it over paying up front. The rest we've bought and cleared with the credit card and received 0.5% cashback. All of that is debt, but I wouldn't consider it bad debt.
Bad debt would be keeping large sums on credit cards for extended periods of time at extortionate rates. Taking payday loans or buying items on anything but a 0% deal.
The first thing is to create a budget
Your incomes
Your outgoings - and split them into fixed and nice to have/variable.
You can then see right now what you should have left over each month - if however more is going out than coming in you need to cut out costs to meet your needs.
Now on the fixed costs if you have loans they are going to sit in there - what APR are they? Are you overpaying any and if so which one (is it the highest APR or the lowest)?
It might be possible and worth while moving some of the debt to a lower rate or 0% balance transfer rate - but you need to consider the balance transfer fee).
Work our when each debt expires as is and then the difference if you moved it to cheaper Apr how many months payments do you save?
Are you out of deal on the mortgage ie on the SVR ? If so what is that rate? You could remortgage to a lesser Apr and save a lot.
You could do the grocery challenge move from brands to own label ie downgrade or downgrade supermarket (though Aldi isn’t oddly).
Your incomes
Your outgoings - and split them into fixed and nice to have/variable.
You can then see right now what you should have left over each month - if however more is going out than coming in you need to cut out costs to meet your needs.
Now on the fixed costs if you have loans they are going to sit in there - what APR are they? Are you overpaying any and if so which one (is it the highest APR or the lowest)?
It might be possible and worth while moving some of the debt to a lower rate or 0% balance transfer rate - but you need to consider the balance transfer fee).
Work our when each debt expires as is and then the difference if you moved it to cheaper Apr how many months payments do you save?
Are you out of deal on the mortgage ie on the SVR ? If so what is that rate? You could remortgage to a lesser Apr and save a lot.
You could do the grocery challenge move from brands to own label ie downgrade or downgrade supermarket (though Aldi isn’t oddly).
227bhp said:
Google 'FIRE retire early', it's a thing.
However to counter that - I’ve sadly seen the scenario where people have gone down the route of always planning for the future to then have life cut short. There is a balance - you only have 1 life and who knows when it is or isn’t your time.
I have some friends where parents grandparents uncles etc all barely breach 60 sadly all effing cancer out of their control. If you were in that situation I’d say you might want to think a lot more of life now than life later - that may come over a bit heartless but is not meant to be it’s cold hard facts.
Welshbeef said:
227bhp said:
Google 'FIRE retire early', it's a thing.
However to counter that - I’ve sadly seen the scenario where people have gone down the route of always planning for the future to then have life cut short. There is a balance - you only have 1 life and who knows when it is or isn’t your time.
I have some friends where parents grandparents uncles etc all barely breach 60 sadly all effing cancer out of their control. If you were in that situation I’d say you might want to think a lot more of life now than life later - that may come over a bit heartless but is not meant to be it’s cold hard facts.
I looked at FIRE and decided it wasn’t for me, it sounds like a real gamble - money/debt vs quality of life.
2 sMoKiN bArReLs said:
When we was kids my ma told me if you can't afford you can't have it. Apart from a mortgage for a short while I've never had any debt at all. For my generation that was not unusual. It does feel good, although for most of my life I didn't really understand that.
I was brought up like this, now at 53 feeling the benefit of it, hoping to retire in 3 years and only find part time work if i want to!Henners said:
Would agree with this, balance is best IMO.
I looked at FIRE and decided it wasn’t for me, it sounds like a real gamble - money/debt vs quality of life.
And this is it, my biggest debt comes from a loan I used to fund my own education; a decision that has paid off in terms of earning potential. I looked at FIRE and decided it wasn’t for me, it sounds like a real gamble - money/debt vs quality of life.
As it stands I can afford my bills, put some money into savings, some into S&S and also pay my debts gradually whilst having some left over to enjoy.
Is deciding whether that balance is prolonging the pain or not.
Lukas239 said:
My question, albeit slightly philosophical, is would you live a beans and rice life whilst doggedly paying off debt? Our would you strike a balance, pay them all gradually whilst still enjoying some luxuries?
For me I'd be straight on to Operation Super Save and do the beans on toast diet to get it paid off, but, as someone else mentioned you need to consider the time frame. Also are you doing it alone or with a family, as that would make it more difficult I'm sure.I was brought up to save a 3rd, invest a 3rd and live on a 3rd. I've been fortunate that I live about as debt free as anyone on an average income can. I have a less than £100k mortgage (not including the rental properties), no loans, PCP or finance etc. I have used an interest free credit card twice, for the bigger purchases but have always set up a DD to have it paid off the month before the interest free period finishes.
Reading back it sounds a boring way to live but I have what I want, holidays, my Landrover Defender toy/project, my Mazda Pick up for dog, tip runs and daily transport as well as my BMW motorbike.....with the possibilty of another stable mate this year. With the exception of the 5 years I worked in Baghdad I'll never be the guy on loads of money so I have to make it work for me. I have a sub £40k salary topped up with over time when it's available, rental income once a year (I don't touch it monthly) and rider coaching for Rapid Training.
For you, how long can you/your family do the beans on tast diet and would it be long enough to sort the debt or at least put a huge dent in it? Can you live with out the "finer things"?
Re beans on toast
The average U.K. 2 adult weekly grocery shop is just over £50. So that’s a steer for you.
You might be having steak many times a week - reduce that (not necessarily with beans on toast) it will make a difference.
Make meals from scratch and make big batches - freeze them (a curry gets better if it’s cooked frozen and then re cooked
. ).
However if your only spending the U.K. average on food already or the amount you could save by having bread and water is such a low saving go back to the budget list what do you spend where why do you have to or do you choose to.
You might think hey I spend £300 pcm on petrol if I had a diesel it might be half of a smaller engine But the cost to change cars would mean it will take years to recover then it’s not worth it.
Fix gas and electric to as low as you can and fix it as far as you can.
Have a shopping list without one we are all human we pick up things as we go round the shop that’s things you don’t need.
Fill up with fuel at the cheapest place always.
Don’t buy a Costa or a bottle of water each day - but a cup/water bottle and reuse it (coffee make it at home )
Do you need a £148pcm sky subscription?? No you don’t you choose to.
Do you need to have the latest iPhone every cycle? No instead on the next cycle keep the handset and go sim only for a year or two or until the phone gets a bit unreliable then maybe do a contract again but don’t get the latest one get one a few years older (but brand new) you’ll save thousands.
Don’t buy and change cars often you’ll lose thousands
Don’t keep changing TVs 10 years is nothing for a TV so keep the one you have and make it last (or when you change have in your mind omit will be your main TV for the next decade ++).
Holidays cost a fortune U.K. or overseas — camping however is MUCH less and is a lot of fun (kids love it) BBQs every night
Get a national trust annual family pass c£100 - then days out anywhere in the country are only cost of fuel + take a picnic.
Instead of random gifts ask for specific things you really need. Or actually say don’t do gifts to adults.
Instead of going out for meals host dinner parties. A meal out for 4 lots of wine beer 3 course will be way over £200... do it at home to the same level firstly it’s more fun/(can be) then the cost is a fraction of the meal out and the booze well beers in a meal out are what £3-5 each a crate of beer 24 is below £20 or Prosecco a bottle is from £6 but on a meal out it would be that for one glass etc.
Cinema can burn a lot of cash parking drinks baby sitter vs Skybox office or equivalent.
If your going to do something next year say Silverstone classic then buy the early bird tickets save the ticket price a lot and then instead of £7 burgers and a take away meal there for a family into he £40++ territory take a picnic (it’s not inferior instead it can be way way better).
Planning things saves money vs erratic
The average U.K. 2 adult weekly grocery shop is just over £50. So that’s a steer for you.
You might be having steak many times a week - reduce that (not necessarily with beans on toast) it will make a difference.
Make meals from scratch and make big batches - freeze them (a curry gets better if it’s cooked frozen and then re cooked
. ). However if your only spending the U.K. average on food already or the amount you could save by having bread and water is such a low saving go back to the budget list what do you spend where why do you have to or do you choose to.
You might think hey I spend £300 pcm on petrol if I had a diesel it might be half of a smaller engine But the cost to change cars would mean it will take years to recover then it’s not worth it.
Fix gas and electric to as low as you can and fix it as far as you can.
Have a shopping list without one we are all human we pick up things as we go round the shop that’s things you don’t need.
Fill up with fuel at the cheapest place always.
Don’t buy a Costa or a bottle of water each day - but a cup/water bottle and reuse it (coffee make it at home )
Do you need a £148pcm sky subscription?? No you don’t you choose to.
Do you need to have the latest iPhone every cycle? No instead on the next cycle keep the handset and go sim only for a year or two or until the phone gets a bit unreliable then maybe do a contract again but don’t get the latest one get one a few years older (but brand new) you’ll save thousands.
Don’t buy and change cars often you’ll lose thousands
Don’t keep changing TVs 10 years is nothing for a TV so keep the one you have and make it last (or when you change have in your mind omit will be your main TV for the next decade ++).
Holidays cost a fortune U.K. or overseas — camping however is MUCH less and is a lot of fun (kids love it) BBQs every night
Get a national trust annual family pass c£100 - then days out anywhere in the country are only cost of fuel + take a picnic.
Instead of random gifts ask for specific things you really need. Or actually say don’t do gifts to adults.
Instead of going out for meals host dinner parties. A meal out for 4 lots of wine beer 3 course will be way over £200... do it at home to the same level firstly it’s more fun/(can be) then the cost is a fraction of the meal out and the booze well beers in a meal out are what £3-5 each a crate of beer 24 is below £20 or Prosecco a bottle is from £6 but on a meal out it would be that for one glass etc.
Cinema can burn a lot of cash parking drinks baby sitter vs Skybox office or equivalent.
If your going to do something next year say Silverstone classic then buy the early bird tickets save the ticket price a lot and then instead of £7 burgers and a take away meal there for a family into he £40++ territory take a picnic (it’s not inferior instead it can be way way better).
Planning things saves money vs erratic
Welshbeef said:
227bhp said:
Google 'FIRE retire early', it's a thing.
However to counter that - I’ve sadly seen the scenario where people have gone down the route of always planning for the future to then have life cut short. There is a balance - you only have 1 life and who knows when it is or isn’t your time.
I have some friends where parents grandparents uncles etc all barely breach 60 sadly all effing cancer out of their control. If you were in that situation I’d say you might want to think a lot more of life now than life later - that may come over a bit heartless but is not meant to be it’s cold hard facts.
There is another factor which I don't need to think about, but you do. We don't have any kids so can lead a much fuller life and don't have to worry whatever financial mess we leave behind.
Welshbeef said:
Re beans on toast
Planning things saves money vs erratic
Fear not, budget is well and truly sorted out. No excessive luxuries at all, run the cheapest motor on the planet and will do until it dies. Misses is a great cook and batches on the regular. Planning things saves money vs erratic
We're not hard up at all and I'm very thankful for that, it's just deciding whether to put everything spare into the debt or split it.
Lukas239 said:
Fear not, budget is well and truly sorted out. No excessive luxuries at all, run the cheapest motor on the planet and will do until it dies. Misses is a great cook and batches on the regular.
We're not hard up at all and I'm very thankful for that, it's just deciding whether to put everything spare into the debt or split it.
Totally depends on the APR. We're not hard up at all and I'm very thankful for that, it's just deciding whether to put everything spare into the debt or split it.
You need to have a 6 month reserve of cash but frankly I’d clear credit card debt and then any non mortgage loans.
At that point you can start to reduce the mortgage term by monthly overpayments be it £10pcm upwards it all reduces the term /saves you interest.
We are not master investors instead we all know how to pay a debt off
Balanced approach with some sort of targeted savings, a plan as to when you’ll have it all cleared mortgage free etc, plus some sort of retirement appreciation to follow after the mortgage is paid.
Sensible debts don’t worry me as sometimes it makes damn good sense to carry a bit of debt as long as it’s cheap and affordable.
But most of all enjoy your days while your young fit and able. I’d hate to miss giving my kids some childhood experiences and memories whether that’s days out, meals out together, holidays etc because that will come to an end at some point. Miss out on living life just so I can maybe say I’m debt free a bit sooner....scrap that.
Sensible debts don’t worry me as sometimes it makes damn good sense to carry a bit of debt as long as it’s cheap and affordable.
But most of all enjoy your days while your young fit and able. I’d hate to miss giving my kids some childhood experiences and memories whether that’s days out, meals out together, holidays etc because that will come to an end at some point. Miss out on living life just so I can maybe say I’m debt free a bit sooner....scrap that.
Gassing Station | Finance | Top of Page | What's New | My Stuff