Debt Free Living
During some of my reading today, I ended up at Wayne Hurlbert’s blog posting, “Building a Debt Free Company…”
I deal with a lot of small business entrepreurs and Internet based business owners (notice I called them Internet based again instead of that limiting “Internet business” term). And many of them see debt as a normal way of living and doing business.
I don’t. I see it as a horrible way of life.
Before I started my business online, I was in debt up to my ears. I had creditors calling almost every day. Discover called saying I could borrow from my VISA card to pay them. VISA called telling me to borrow from another card to pay them.
I called a credit counseling agency. They looked at all credit card debts and my income. And they told me they couldn’t help. There was nothing they could do and I would never get out of debt without going bankrupt.
Eventually I quit picking up the phone entirely. I couldn’t take the stress of dealing with the debt collectors (later on when I coached for company that helps improve credit scores I got to find out about all the illegal things the debt collectors were doing).
Once I started my online business, it didn’t take long to succeed and produce a good income (a good income to a former pizza delivery driver doesn’t take too long). It took close to two years to completely pay off all my debts (over $50,000 in debts).
Once I got out of debt…I made the committment to never go through that slavery again. Yes, that’s right. You’re not living for yourself or your family if you’re in debt…you’re living to pay the bill collectors. That’s not your stuff. It’s theirs.
I did borrow for my house, but my income was high enough at that point where I paid off the house in one year (quit buying anything else until it was paid).
I’ve had all kinds of “experts” tell me what a mistake that is of course. They say, “You should have a mortgage because of tax benefits…credit history…more investment money.”
The reason doesn’t matter. Remember this. Debt is slavery.
Proverbs 22:7 in the New American Standard edition says, “The rich rules over the poor,
And the borrower becomes the lender’s slave.”
You feel different when you’re totally out of debt. You feel freedom. If you’re never been as far down in the dumps as I have, you might not understand just why I value the freedom from debt so much. Also, if you’re never been totally out of debt, I doubt you understand the feeling of freedom you get from that either.
You are free. If you hate working with a client, you fire them. You don’t feel the pressure of debts and bills making you take actions you don’t want to. And you don’t tolerate nearly as much garbage going on around you anymore.
So don’t come telling me why I should take on debt for any reason. The whole mindset is a joke. I do own a credit card both personally and for my business. It does make things easier. I completely pay off those credit cards through their online systems about every two weeks. It’s funny when you see how often they raise my credit lines.
Don’t tell me I need to borrow money to get my credit up. I don’t. I know my most recent FICO score and you’d be hard pressed to come anywhere close. It was 822 on one of the credit reporting agencies (not sure on the others – this one is just so easy to see through one of my credit cards).
I loved being able to pay for a car with cash. Last time I was at a dealership I laughed at them when they wanted to run my credit just to make sure I could get a loan. It’s sad though it’s such a fight for price, because they know they’re not getting extra income from financing.
I talk quite a bit about living debt free in my Christian Financial Freedom book. It’s a Step-by-Step Guide for Walking in God’s Blessings including my whole story (including how some of that debt came from giving), and the spiritual aspects that helped lead me to success online (my Internet Integrity book covers the practical online aspects). You can pick up Financial Freedom at Amazon.com here…
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Man, we are so close. It’s really impressive. I’ve just read your Internet Integrity, and I absolutely like it.
Just two things that I didn’t like: Axandra (I’m not software) and cute for PDF, I found openoffice.org to be really easy.
By the way, PRweb isn’t free anymore, you should update this.
Otherwise, your book is number one.
I am like you, and I never liked to have debt, since they maintain you like a prisoner (without you knowing it).
For me it’s not concevable because as you will see in my bio, I like to change and live to a new country (I am also easily bored except for my religion and martial arts)
As I may hire you as a business coach, here is more about me and why we are so close…
You can read my bio here:
http://mynetmarketingland.com/blog/about
I think I will hire you as a coach after I make minimum $2000 a month with my own products. I am actually selling an average of $3000 every month online as an affiliate (your second plan in the book)
From now, you’ll see me often on your blog! I hope you don’t mind.
You don’t know, but you are on my list since dec 2005 when I first came online, I quickly found out who where the top online marketers (John Reese, Mandossian, Mike Filsaime, Yanik..) but something I noticed is that they were constantly talking about you or Dan Kennedy. One was really strange is that you weren’t involved in any promotion, you was like at another level.
I plan to catch you after sometimes, when I learned all the basics, because according to my experience, I knew that I wouldn’t benefit as a newbie with you or Dan.
Honestly, I don’t approach Dan yet. It’s for later, from now I will study your techniques and really start my business.
I like affiliate marketing, but something bother me here, I don’t have control over the products, and I really like to treat my customers like they are kings. With core affiliate marketing, it isn’t possible.
Oh, and I was about to forget, one of my biggest advantage is that I can see… For instance, I see that you are really someone who can coach me.
I am a martial artist, and it is the same in my activities, I am good at what I do because I know how to choose a sensei, I can see who is really good and passionate at what he does, and who is just good or doing it for cash.
The result is never the same.
What I need is to stop being in front of my computer… Don’t get me wrong, I like affiliate marketing and Internet marketing, however I enjoy more reading and practising my martial art.
I will read your other ebooks now.
The statement on PRweb.com will be changed when I edit the book next, although I still find prwebdirect.com to be my favorite please for press releases (even though you pay now). That’s why this hasn’t been changed yet. As for the rest of your comments, you wrote quite a report here.
Great post, Terry. Last May, my debt exceeded $46,000. That was a wake-up call for me. Since then, I’ve paid off nearly half. I’ve got about a year left before it’s gone. What a happy day that will be!
Hey Terry,
Some how I missed you being back online… I happened to come across your site yesterday.
You are so right about being “slavery” and it wasn’t too long that my husband and I faced a similar situation that bankruptcy looked like the only option.
We worked our way out from under that debt. We established a policy of no cash… no buy. It was hard but I can tell you it’s better than dreading answering the phone or going to the mail box.
I’ve always considered you to be the “Top” internet marketer with integrity and learned so much from you that help my business so much.
Glad I stumbled upon your site
Terry this is an awesome lesson.
Thank you for sharing.
Up until a few years ago I used to work at a video duplication company, and we used to dupe a Nightingale Conant program about getting out of debt.
In it the author (can’t remember his name) demonstrated why it makes no mathematical sense to keep a mortgage you could pay off.
It’s been about 5 years since I saw it (so I may have my details off a little) but it went something like this:
If you are, for example, in the 28% tax bracket and you purposely don’t pay your house off for the tax deduction, that means for every $1 of interest you pay to your bank, you save 28 cents in federal taxes.
But, when you pay that bad-boy off, you get to keep the 72 cents that used to go to the finance company and pay the 28 cents to the gummint.
Which means:
By not paying your house off you pay 72 cents to keep 28 cents.
When you pay it off you keep the 72 cents and pay the 28 cents.
Unless I’m missing something here, what’s the benefit of keeping a mortgage you could pay off?
Hi Ryan,
Sounds like you were near where I was…You’ll soon experience the freedom of having that thing paid off. Even if you don’t consider the financial benefits, it just feels like you’re releasing a huge load off.
Terry
Thank you Ann and Ben for both your comments.
I think a lot of people don’t want to face the reality of what it takes to get out of debt sometimes. My wife and I did the same thing as you Ann for quite a while…only cash for all purchases. For several years we didn’t even have a credit card.
Eventually I picked up credit cards again because it makes travel and buying online easier, but I always know how much is on there and pay it off before any interest is ever charged.
I can add one complaint to your list Ben. The accountants will tell you how you can earn more in investments than the money you save from paying off your mortgage. This is usually true although no investment is 100% risk free while paying off your mortgage is. It just doesn’t take into account the extra income you can earn because of the freedom you feel after the debt is paid.
Ben – I believe the program you’re referring to is by John Cummuta… Transforming Debt into Wealth.
Terry – I sat in on a couple of meetings where a financial planner demonstrated what you talk about… how investments can earn more interest than the interest you pay on your mortgage, etc.
Like you said, it doesn’t account for a few things: how you feel when the mortgage is paid off, less risk involved with paying off your mortgage vs. investing… and… the fact that fiat money could at any point become worthless, in which case a house (real asset) will be worth far more than (worthless) paper money.
Are You a Prisoner of the American Dream?…
Are you a prisoner of the American Dream? Most people go through life with blinders on… never realizing that there’s a bigger picture that they fail to see. Even sadder, is the fact that the people they turn to for……
I didn’t realize that it was so long Terry.
Not a problem Franck…I just commented that way as you have the longest comment here so far.
[...] Debt Free Living – By Terry Dean [...]
Well said, “borrower becomes the lender’s slave”!
Once you are in debt, you don’t live for yourself anymore, you live to repay the debt. You work for money for the lender, you don’t work for money for yourself anymore.
I remember the first time I heard about living “debt-free.” It was from Dave Ramsey in Nashville, TN.
He has a radio show, books, the works…
But the strategy is drop dead simple:
You don’t buy things you can’t pay for.
Turns out, it’s a great way to live. Wish I had known just how great 10 years ago. Could have saved myself a LOT of headache.
Great post, Terry! We were there for a couple years, everything paid for, including the house. That was just an indescribable feeling, absolutely amazing freedom to not owe a penny to anyone while still in our 40’s. I think the main thing it provided us was just an enormous feeling of having new options regarding work, location, travel, giving, etc.
We had a change in situation and now have a mortgage again, but again with a plan to get it gone in time to help the kids through college debt-free starting in a few years.
This is so critical to teach our kids too. They are incredibly bombarded with easy credit and a strongly consumeristic environment. We were just talking about this the other night, that when you save $30 by NOT buying something, you actually save more than $30 because you would’ve had to earn, what, $40 to pay taxes and have $30 left for the purchase. Kids NEED to hear this stuff.
There is no freedom like being completely out of debt and paying your way with cash. That baloney about the tax advantages of a mortgage make no sense. Pay off the house THEN invest.
My $.02 worth.
Here are some pearls of wisdom…
1) Tailor your desires to your budget, not the other way around.
2) Don’t charge luxuries you can’t afford to pay off when your credit card bill comes.
3) Use your credit card as a convenience, not as a means of going into debt.
4) Never use a mortgage as an excuse to get a tax deduction. You can get the same tax deduction by donating to charity. Is the mortgage company your favorite charity?!
5) If you make one extra payment a year on a 30-year mortgage, you will cut off approximately 7 years, depending on your interest rate.
6) Avoid ripoffs and save money by following the advice in the brand new book, Mortgage Ripoffs and Money Savers. (See amazon or barnesandnoble.com.)
Carolyn Warren
http://www.mortgage-helper.com
Thank you all for posting…
I agree totally with the comments everyone is posting here. I personally don’t think any “stuff” is important enough to go into debt over except for a home (you will pay more by renting than getting in your own home unless you’re moving soon).
Then with the home…find a way to make an additional payment. I never computed it out, but Carolyn’s comment on saving 7 years on a mortgage by one extra payment per year is incredible! Think about how much interest that would save you also.
And I’m going to use that statement when talking to friends as well…”Is your mortgage company your favorite charity?”
Online businesses can be built easily without debt. It’s not necessary to enter into debt to develop a company. While it’s popular in some quarters to recommend credit as the fast track to success, debt can also be the express elevator downward to failure. If a company is loan free, it doesn’t have that opressive debt servicing overhead.
Bad decisions often result from the need to make those monthly payments. They can range from overstretching workloads to outright illegal activity; and everything bad in between. All too often, otherwise ethical business people will slide down the slippery slope to dishonest practices. Such is the power of debt to corrupt many good people.
A business person wanting to stay true to an ethical belief system would do well to avoid adding a list of creditors to the company’s books. Debt free is true freedom for any entrepreneur.
The guy who worte this article on being debt free is 100,000,000,000,000,000,000,000% right on the money. AMEN brother. He mentioned that some people advised him to keep a mortgage because of the tax benefits. Let’s see how this adds up in the common sense department:
A mortgage of 1 million dollars means about 6000 dollars to the as*hole banks every month(sorry for the redundancy) for 30 years. This adds up to 2,160,000 dollars over 30 years. Now even if the borrower gets a 30% return on mortgage paid over 30 years it will still cost him about 1.4 million dollars to own the house. Seems to me that the debt free option is better
You do become a slave to that debt. Fortunately, I learned that early before I started my internet businesses. I remember one instance, very early in my internet marketing career, when I thought about doing a joint venture with a certain individual. He was going to partner up with me and my business. One day he told me we needed about $20,000 to get our internet business started and we should open a line of credit He thought that using credit cards as leverage was a great tool. What he didn’t know is that internet businesses don’t cost a lot of money to start. He also couldn’t tell me what we would need the money for. Obviously I didn’t do business with him; the only thing he offered me at the time was the ability to create sites and put great graphics on them. Alot of people have that ability.
Always use a percentage of the money you make to market. There is no need to go into a lot of debt for any business venture online. Start small and then gain momentum.
Great post, Terry. My debt exceeds $32,000. This is a wake-up call for me. I’ve got about 2 years left before it’s gone. What a happy day that will be!