What’s it like to be debt free? Short answer:
But why, exactly?
I’ll share my experience here.
You may be working hard to become debt free. Some of you are SO close! Others are so covered up in debt that paying off a house isn’t even in the conversation. You’d just be happy to be “debt free except the mortgage.”
You might also be in the camp that doesn’t mind having debt, or paying it off slowly, in favor of investing your money to attempt to beat interest rates and get invested earlier in life to maximize compounded interest over time.
I paid off $150,000 in debt, including my home, over the course of 3.5 years, by the ripe young age of 28.
I thought I would share my thoughts with you about what life is like after becoming debt free. Shoot, maybe you’ll decide that it’s not for you. Or maybe you’ll find some inspiration to stay your course, or even to start your journey to becoming debt free.
1. Peace of Mind
This is probably the #1 reason most people want to be debt free.
What dreamers say: “Can you imagine how awesome it’d be to not owe anybody anything?”
Peace of mind that, no matter what, you don’t owe anybody anything. Bonus points if you’ve paid off your house. You don’t have to worry about a roof over your head. The rest of it, well you can figure it out.
Sure, things might be tough with the loss of a job, but not having -any-debt-at-all sure levels the playing field, doesn’t it?
The answer is YES. It does all of the above and so much more. And peace of mind looks different for everyone who becomes debt free, I’m sure.
For us… We don’t worry about housing. We always have reliable transportation. We have money to save for new transportation now so that we’re ready when the time comes that we need something better. Whether or not the bills will be paid, or if we’ll have enough for the basics, those conversations never happen. We spend zero time worrying about our needs being met with money.
2. Confidence on the J-O-B
I didn’t like the control my 9-5 job, and my boss (by extension) seemed to have over me.
I wanted to remove that factor from my employment equation so that I could have more freedom and control in my career. And now I do.
When I have to have a difficult conversation with my boss or a peer, or if my company struggles, or if my colleagues are gossiping about news that someone will be let go, I am not worried. It’s not even a factor anymore.
My job decisions are based purely on my job, and I believe I’ve been even more confident and successful because of it. I think a lot of people are afraid to step up and make hard or unpopular decisions because they fear for their job.
I’m not telling anyone to go tell their manager off, and that’s not what I do either. What I’m saying is that having confidence to speak truth and logic in the midst of “oh shiny object!” decision making has not only made me enjoy work a lot more, but it’s also made me a lot more successful.
I speak and lead with extra confidence at work knowing that my manager has nothing on me. All four of my current and past managers know that I have no debt, and that I live on a fraction of my income. I make sure of it. So not only are they aware of my talent as a leader, and marketability as a technology professional, but they are also aware that I don’t need this job.
Think about how this confidence might change your work reality.
3. Freedom to Build Wealth or Spend Freely
Doesn’t matter which one you choose. We’ve done both.
The point is: you get to pick one and do the hell out of it.
After we paid off the last debt, we spent a good couple of years spending money “freely”, and by that I mean we gave ourselves a cap-ex budget for yearly projects (maybe $10-12,000), fun money of $150-$300 a month, and a travel budget of $600 a month. We still invested a good chunk of change.
But in the last year and a half, we’ve really buckled down. We’re super focused on building wealth. And that’s the beauty of this perk. You get to pick what you do with all that cash flow you free up by becoming debt free.
In the last three months, we’ve increased our net worth significantly. You can read more about that here:
- June 2017 Net Worth Update: $450,223 (+$15,400)
- May 2017 Net Worth Update: $434,824 (+$14,000)
- Tag: Net Worth Updates
4. Sense of Accomplishment
When you climb to the peak of a monstrous mountain of debt, there’s a lasting sense of accomplishment. There’s no doubt about it. You feel so confident that you can accomplish any goal or challenge life throws at you.
When I talk to others about personal finance, especially those who disagree, I have an extra level of confidence because I have actually done the things I’m talking about. I have the results to show for it.
Every now and then, during a soft disagreement, I’ll hear the other person say, “Well, then again, it’s worked out pretty well for you.”
It’s hard for people to argue with results.
The results are exponential for couples, in my opinion, because there’s this huge validation of your ability to work together on a topic that brings about the end of many relationships.
And if you think you won’t have other goals in life, think again. It doesn’t stop with becoming debt free…
5. Comfort Taking More Risk for Bigger Rewards
For those who are interested in building wealth after becoming debt free, I believe this is one of the coolest perks.
With investing, typically the highest returns are accompanied by the highest levels of risk. In order to invest, you need cash and a tolerance for risk. Well, you guessed it, in order to invest for high returns, you have to have two things: lots of cash and a high risk tolerance.
We have great cash flow, low expenses, and a paid-off house, so we are a lot more comfortable taking higher levels of risk for a chance to reap the benefits. We can absorb some loss without it affecting us much. It doesn’t mean that we don’t do the research before we invest, but we now feel free to take on more risk with our money which we believe will ultimately result in larger gains.
It’s a great feeling because we are able to dabble in several different types of investments. Examples of “risky” for us? We’ve purchased some individual stocks, cryptocurrency (BTC and ETH primarily), and we’re looking to make our first real estate purchase in 2017.
6. The Hedonic Treadmill
So I’ve shared five benefits. Here’s a bonus reality.
Don’t become debt free because you think your happiness levels will be permanently multiplied. That’s not how it works, as we discovered. You have to work on being happy, regardless of your current situation. Your mind is designed to adapt and level out your happiness levels, despite major life events.
Wikipedia provides this definition:
The hedonic treadmill, also known as hedonic adaptation, is the observed tendency of humans to quickly return to a relatively stable level of happiness despite major positive or negative events or life changes. (click here to read the entire wiki article)
We’ve all experienced this in some form or fashion. As a kid, all my brother and I ever wanted was a pool. We bugged Mom about it every year. One summer, we finally got one. By the end of summer, you couldn’t get us into that pool to save our lives! Older pets are given away. Salary increases feel amazing for about two pay periods. The newness wears away, and we begin looking for the next thing to stimulate us.
Hedonic adaptation can also be helpful. Obviously, if you’ve just had a death in the family or a serious break-up, you don’t want to be trapped in eternal grief. You want to get on that treadmill, process emotions, adapt, and move forward with life. Thankfully, we do adapt.
So what’s it like to be debt free? Yes, amazing, on cloud 9! … For a time. Then you adapt, and it becomes, “oh, yeah we’re debt free,” with a happy shrug of the shoulders. It sounds slightly disappointing, I realize. And maybe I’ll be the only one to openly admit it. But it’s the truth, and I want you to be happy today.
Keep pressing and paying off debt. It’s definitely worth the effort. But don’t wait till you’re debt free to be happy.