Debt – Free Living just makes sense. It is good for families, it is good for nations and it is good for local governments. There are definitely some barriers to becoming debt free. One of the issues surrounding becoming debt free is the argument of investment v. debt reduction.
I concede that debt may sometimes be necessary if a family decision is made that forces the decision, like buying a home in a school district that is far superior to the current choice. However, in doing so, wisdom is required. This decision should be well-researched, planned for and made in a measured way. The home purchased should fit the needs of the family and fit well within the budget of one income. This is wisdom. Then once the house is purchased, pay it off as soon as you can. There is no feeling quite like not having a mortgage payment. This far exceeds the feeling of money in the bank for most people.
I once had a friend who was really intent on reducing heating costs as low as possible during the winter. The objective was reached. What was the cost in human output? What was the cost in money? What was the cost in creativity?
During my friend’s pursuit 10 years ago, there seemed to be so much effort staying warm, that whatever creativity was available for new thinking was consumed by being cold. Yes, there was money saved, but at what cost? This is very different from the entitlement mentality that our government continues to pursue which hobbles the masses into inaction. This is the opposite approach to my friends “deep freeze”. In it’s typical upside down strategy, the government has the heat up to warm the house in the middle of summer. They are removing our natural creativity through dependency. It seems like they might be doing it on purpose. Weird, isn’t it?
Be wise. Placing yourself in an artificial “freeze” will stifle your natural creativity and growth and if you aren’t growing you are dying. So, during your quest for becoming debt-free you may consider a blended strategy of reduction and growth. If for instance you have a well planned business to start or self-fund (because there is no banking support now) you may want to save the some cash, reduce some debt and keep working your day job until you are prepared for your launch.
Remembering my deep freeze friend, similar questions apply to the issue of debt-free living. If debt is incurred, there had better be a plan to make up for the debt with work and savings reserve. This plan could include the business start up we discussed.
I suggest a calendar of this type because of the volatility of the market. You must have a fall back plan of cash reserve. This requires discipline and planning.
Debt reduction calendar with blended saving strategy
Debt 1 Debt 2 Debt 3 Debt 4 Save 5
Total $ $50000 $10000 $5000 $2500
Month 1 $1000 $500 $250 $250 $ 250
Month 2 $1000 $500 $250 $250 $ 250
Month 3 $1000 $500 $250 $250 $ 250
Month 4 $1000 $500 $250 $250 $ 250
… Add 1/2 of the $250 payment to the savings and next lowest payment.
Month 10 $1000 $500 $375 $0 $ 375
… Add 1/2 of the $375 payment to the savings and next lowest payment
Month 20 $1000 $687.50 $0 $0 $ 562.25
… Add 1/2 of the $687.50 payment to the savings and last payment
Month 22 $1343.75 $0 $0 $0 $ 906.25
… Add the $1343.75 to savings.
Month 46 $0 $0 $0 $0 $ 2250
So, you get rid of all your debts in 46 months and save $27,875. The test comes when the debts are gone. Are you going to continue saving and researching really good financial investments?
You can do it. It just takes resolve and determination.
God Bless You and God Bless America!
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