Living a Completely Debt Free Life

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After being an idiot with credit aged 18-19, I have lived the last 3 1/2 years completely debt free and for the last 2 years have been saving up for a deposit on a house (currently renting). However, I've come to realise that a. it may be hard for me to get a mortgage (number of reasons - 1. irresponsibility at a young age and never had anything on credit since and 2. I'm self employed.)

So, I've been number crunching and realised if I lived like I do now (i.e. rather frugally! ) I could have £100,000 saved up within 6 years. I would not beable to apply for a mortgage for three years due to the amount of books I would need. So, what is another 3 years in rented and buy just a modest house? Mortgage free and save up the next £80,000 to buy a nicer place (which would be easier with no rent / mortgage). Houses are fairly cheap where I live.

Are there any real disadvantages to doing this? And has anyone ever actually done this? I know it's unusual to say the least but I have no desire to ever have any debts again and am very disciplined when it comes to saving for something I want. Unfortunately I'm not disciplined when it comes to buying things on the 'never never'.

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Rugbyman said:

Shirley at your age life is for living .....go out and do some

Buy a silly V8 ........ go explore some wild place ...... spend some on hookers and coke

Dont , dont , dont waste your youth...you will never get it back

IMHO of course

ETA - I didnt do any of the above you understand ( Phil 46 )

Edited by Rugbyman on Thursday 12th July 12:41

Edited by Rugbyman on Thursday 12th July 12:42

I've got a 'silly V8' Travelled lots a few years ago and being a girl I'm not interested in hookers! Never opposed to 'investing' in lots of silly old cars

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Vytalis said:

On those figures, surely it would be better to build your own by knocking CAPEX off in chunks. Small plot of land, maybe a timber frame house bought / paid for in bits (buy the bits you need as you need it) with a static caravan in the interim on the site. Within 6 years you'll have your own house which would be worth a fair bit more than £100k and you'll not have had to pay for rent for many of those six years

James (aged 35 and three quarters with an epic mortgage and some great memories from my 20s)

Never even considered building my own place - would be something of a dream and thought you had to be 'epically rich' to do it! Definitely worth looking into.

I understand the get on and live your life. However, I'm settled down with a long term partner and will want to have a child once I'm about 30. I grew up in an unstable home due to epic financial irresponsibility on parents part so don't want that.

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PeanutHead said:

DJRC said:

The build your own gaff route is where I would recommend.

As long as you got a year or two, would be my choice also.

Time is not an issue

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hapless said:

anonymous said:

[redacted]

It doesn't seem so at the time though, does it? And I suspect the same is true for anything you used to do but now don't - it's hard to quantify the value you got by spending money on experiencing things.

To me 'experiencing things' is not anything to do with going out drinking. I have no particular desire to do that.

I also do not 'live like a hobo' I just don't buy things because of the labels and eat out once a fortnight instead of every week etc.

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Terminator X said:

Whilst I'm sure someone will correct me I've never understood all this "let's rent" business? It has to be better to get a house as early as you can to benifit from its sale price in 40/50yrs time vs renting for that time with nothing at the end?

TX.

When I started renting there was not an option to get a mortgage (no deposit, very recently self employed) I did not want to live with parents. I don't understand the 'let's rent' forever thing at all but for most people it is their only option for a while.

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boobles said:

Do you pay rent at the moment? If so, you are not debt free.

Interesting point. Debt to me = paying interest on something for the pleasure of ownership. Rent = hiring something for the pleasure of usage?

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Thank you for all the responses so far.

I think I may have given the wrong impression by saying I live 'frugally'. What I meant is I shop in places like Aldi rather than Tesco, Sainsburys etc. Eat out about once a fortnight. Holidays are going to car events in my classic cars. I don't have a modern car that loses money and costs a lot to insure, instead I have between four and five classics (newest 36 years old) and I like swapping my cars a lot. I don't wear 'designer' clothes or shoes.

Perhaps many of you think that is 'living like a hobo' I don't know but personally I don't have a problem with my current lifestyle.

As mentioned before I'm actually TERRIBLE with money, well not 'money' as such but 'credit', if I've got credit I simply cannot help myself but to spend it - every last penny. I don't want it.

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hapless said:

anonymous said:

[redacted]

What about the ones that don't do those things and still can't afford to buy a house? Because they don't have the c£25K lump sum deposit they'll need.

And with respect, at 40 you were not as fit as you were at 20. Unless you'd been frozen like Walt Disney.

Hapless - I see your point too There is stuff that I 'miss out on' - just like everyone else. Even people who spend every penny of their income miss out on stuff.

As for people having C.£25K deposit - personally I don't see how anyone with 2 average incomes coming in cannot afford to save up £25K unless they have serious debt problems already?

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66comanche said:

So OP is saying she can save £100k over 6 years, to the people advocating building your own house over time, just how does this work? First she will have to buy the plot of land, which is likely to cost surely at least tens of thousands of pounds for something with planning permission, maybe a couple of years savings. Then she will have £16-17k a year to put towards the building of the house, probably enough to employ a labourer but not many materials for him to work with! The idea of a static caravan on site is a good one as the extra rent saved can be ploughed into the house, but I think this is something to be done years down the line, building a house piecemeal as funds come in sounds a nightmare.

Maybe a way onto the ladder sooner would be one of the shared ownership properties? Even if you start with one which is only 25% ownership, with the amount you profess to be able to save you can pay that off pretty quickly, then move to 50%, paying reduced rent from the off and reducing it further over time. Being self-employed though and sounds like you are fairly new to it? Just a word of caution to being overly optimistic too soon.

If you can amass a good pile of cash then buy at auction, get something which needs some work doing and you'll get plenty for your money.

This is exactly the sort of advice I was after, thank you.

My income is a fairly steady one and I've been self employed for two years now.

I have thought of shared ownership properties but few seem to have much drive space. I'm also concerned about the residual value of buying a new / newish property. More likely to fall than an old one bought that needs a load of work - I'm not afraid to get my hands dirty. Perhaps I'm wrong - I know next to nothing about the property market and whilst I know that I could buy (for instance) ten cars per year and make £1000 on each one, I don't have the knowledge about property to make money on it. However, I don't wish to lose money on it either.

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Rugbyman said:

V8Triumph said:

Thank you for all the responses so far.


As mentioned before I'm actually TERRIBLE with money, well not 'money' as such but 'credit', if I've got credit I simply cannot help myself but to spend it - every last penny. I don't want it.

That being the case you are doing the right thing ...... do a self build and get that bloke off Grand Designs in

and dont dismiss the male hookers !!!!

ROFL - I'll get him to build me a two storey 6 car garage too, while I'm at it ...

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CaptainSlow said:

davepoth said:

Get a credit card, buy something small (like a packet of crisps) on it each month, and pay it off in full each month. You'll pay nothing in interest, but it'll get you some good credit history fairly rapidly.

This, plus a pay monthly phone if you don't have one already.

Maybe even take out a small unsecured loan and pay it back over the term...it'll cost you in interest but will make your credit history a lot stronger.

Are you saying it is better to live life with credit than to just save up for stuff you want and pay cash?

ETA - If so why?

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CaptainSlow said:

V8Triumph said:

Are you saying it is better to live life with credit than to just save up for stuff you want and pay cash?

ETA - If so why?

If you want to been seen as a lower credit risk for things such as a mortgage and will make you eligible for lower rates.

Also helps with other things such as contact hire leases and monthly mobiles etc.

Reason being it's better to have a history of paying back credit than no history at all.

Thank you for the info. In all honesty this feels irrelevant to me. I'm trying to avoid the mortgage by buying outright - saving for the house itself.

I do not ever plan on having a contract hire lease and don't see the point in having a monthly mobile - I ring almost everyone on my BT landline phone. Only have a mobile for 'emergencies'.

So for someone who does want to avoid ANY type of credit - are there any benefits to having a 'good credit score'?

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Obiwonkeyblokey said:

Adenauer said:

Me too.

But be very careful as it can turn out a lot more expensive then you had budgeted for. About 50% more expensve in my case

100% in my case and still not done. ho hum.

Good to hear from people actually building houses . Doesn't seem really ideal for a first property, IMO. Still may be worth looking into though.

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CaptainSlow said:

V8Triumph said:

So for someone who does want to avoid ANY type of credit - are there any benefits to having a 'good credit score'?

Yes, it's worth having, especially if you can obtain one for no cost to yourself ie paying of a credit card each month. There may be somethings you want that you don't consider as credit eg Sky subsription etc. Also, you may want to avoid credit now (don't we all?) but things change in life and later on you may not be able to avoid it.

I can certainly see where you are coming from. However, I know that I cannot (or wasn't able to when younger) handle having credit.

To be honest if I couldn't live within my means these days I'd go without and if st really hit the fan I'd sell one or two of my (more expensive) cars. It doesn't cost me an awful lot per week to 'get by'. Perhaps I'm happy with a lifestyle most people would hate, I don't know.

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sideways sid said:

V8Triumph said:

CaptainSlow said:

davepoth said:

Get a credit card, buy something small (like a packet of crisps) on it each month, and pay it off in full each month. You'll pay nothing in interest, but it'll get you some good credit history fairly rapidly.

This, plus a pay monthly phone if you don't have one already.

Maybe even take out a small unsecured loan and pay it back over the term...it'll cost you in interest but will make your credit history a lot stronger.

Are you saying it is better to live life with credit than to just save up for stuff you want and pay cash?

ETA - If so why?

OP, I can appreciate that you don't want to get into debt but there's an important difference between credit cards and a mortgage, which you're not showing that you understand.

A mortgage is secured on a property and enables you to live where you want to live today and pay for your home over time using the money that you would otherwise be saving up. You obviously understand the horrors of unsecured debt that can creep up quickly and multiply.

Perhaps you should consider saving until you have 25% of the value of your house (£25k or £45k given your examples) and then apply for a mortgage with two or three years of accounts behind you. The mortgage would be for the remaining £75k or £135k, which you could easily pay back over the normal 25-yr term, or overpay at your savings rate of £17k pa. That way you could be a homeowner in a couple of years and debt-free 5 years after that if being debt-free is still your priority then.

I understand entirely. My problem, however, is with having credit. I have an issue with it. If I can obtain it - I *will* want it *now*.

If I had a mortgage and after a couple of years, I'd be remortgaged to buy *that* E-type I've always wanted and one thing would become the next because I'd managed it once the next time it'd be an Aston Martin etc. etc. I know it sounds absolutely ridiculous. I know that really I should be able to control myself but the fact is I know I can't. If my access to money is locked away in assets - I'm fine. If it's liquid / attainable I have an overwhelming desire to spend it and yes that includes money I do not have!

For the past few years I've learnt to live credit free and as far as assets I have bought, completely depreciation free as well (not just cars, I buy other 'stuff' as well) which has not only satisfied my horrendous need to spend but has proved to be rather prudent.

What I was asking is for a person like this, am I best off staying completely credit free even as far as buying a house goes?

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hapless said:

Maxf said:

hapless said:

boobles said:

Do you pay rent at the moment? If so, you are not debt free.

Only if it's overdue, surely?

No - you'll owe the landlord for 12 months rent at a total of £x pa. They are just letting you pay it in manageable installments.

Is that standard rental practice? I had no idea (I've had a mortgage since I was 24). Don't people pay monthly in advance, or are all rental contracts annual now?

I have a 6 monthly renewable contract which I pay the whole lot in advance - so don't pay in monthly installments.

ETA - this is how little I trust myself with debt / money / credit. The only thing I have on direct debit is my BT phone bill, everything else I pay for in advance or as soon as the bill arrives.

Edited by V8Triumph on Thursday 12th July 15:37

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sideways sid said:

V8Triumph said:

sideways sid said:

V8Triumph said:

CaptainSlow said:

davepoth said:

Get a credit card, buy something small (like a packet of crisps) on it each month, and pay it off in full each month. You'll pay nothing in interest, but it'll get you some good credit history fairly rapidly.

This, plus a pay monthly phone if you don't have one already.

Maybe even take out a small unsecured loan and pay it back over the term...it'll cost you in interest but will make your credit history a lot stronger.

Are you saying it is better to live life with credit than to just save up for stuff you want and pay cash?

ETA - If so why?

OP, I can appreciate that you don't want to get into debt but there's an important difference between credit cards and a mortgage, which you're not showing that you understand.

A mortgage is secured on a property and enables you to live where you want to live today and pay for your home over time using the money that you would otherwise be saving up. You obviously understand the horrors of unsecured debt that can creep up quickly and multiply.

Perhaps you should consider saving until you have 25% of the value of your house (£25k or £45k given your examples) and then apply for a mortgage with two or three years of accounts behind you. The mortgage would be for the remaining £75k or £135k, which you could easily pay back over the normal 25-yr term, or overpay at your savings rate of £17k pa. That way you could be a homeowner in a couple of years and debt-free 5 years after that if being debt-free is still your priority then.

I understand entirely. My problem, however, is with having credit. I have an issue with it. If I can obtain it - I *will* want it *now*.

If I had a mortgage and after a couple of years, I'd be remortgaged to buy *that* E-type I've always wanted and one thing would become the next because I'd managed it once the next time it'd be an Aston Martin etc. etc. I know it sounds absolutely ridiculous. I know that really I should be able to control myself but the fact is I know I can't. If my access to money is locked away in assets - I'm fine. If it's liquid / attainable I have an overwhelming desire to spend it and yes that includes money I do not have!

For the past few years I've learnt to live credit free and as far as assets I have bought, completely depreciation free as well (not just cars, I buy other 'stuff' as well) which has not only satisfied my horrendous need to spend but has proved to be rather prudent.

What I was asking is for a person like this, am I best off staying completely credit free even as far as buying a house goes?

Apologies if this sounds flippant; but you're not happy to take on a mortgage through fear of remortgaging in the future, but you're happy that you won't spend £100k in cash!

I know it sounds ridiculous but absolutely. It's not 'cash' I have as such. I put my money into assets I know will not depreciate and may appreciate then when I've saved up enough sell some of the 'stuff' and hey presto I've got money to buy what I want.

Anyway, I think we've established that, yes as far as credit is concerned I need to grow up. However, I cannot for the life of me trust myself with it!