"What is 'your' definition of Debt-free? This is our situation, a financial question. - Talk About Marriage
Financial Problems in Marriage When financial times are tough, it adds to the stress we deal with on a daily basis. This section is for talking about how financial problems affect our relationships and ways to cope.

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post #1 of 40 (permalink) Old 01-19-2017, 08:09 AM Thread Starter
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What is 'your' definition of Debt-free? This is our situation. A financial question.

Hello, and Happy Thursday to everyone.. For starter I just want to say I know this section of the forum is title "Financial problems in marriage". We Don't have a financial problem, I just have a financial question. I think it go here because it financial related, my apology if I posted it in the wrong section of the forum.


I'm sorry for the longgg post ahead, but there is a financial question I want to ask. Not expect anyone make it through reading it since my post it so long, but I really appreciate it if anyone can help answer my question. Thank you so much.

So, on a mommie-baby site that I'm a frequent poster on CafeMom (it a community forum for mommies, pregnancy, women who TTC, etc.. where women talk to other women for advice and support). There is a thread where a poster aksed if there anyone in there who not have any debt, and asked what Debt-free is to everyone.. Alot of ladies in there replies, pretty much posters there share about their financial situation whether they have debt or not, and exchanged their viewpoint of what to them is the meaning of Debt-free.

So me as a regular poster in there, I replied in that thread too. I might not be a very bright girl, but I think I know what Debt-free mean.. Please try to read it to the end in order to get a clear picture of the question I'm trying to ask.
So this is my replied in that thread:

[[ We Debt-free, zero debt. No student loans debt, we never have school debt. No credit cards debt. No medical debt.. Cars are paid off, long paid off. I mean we have insurance, but both our cars his and mine are paid off.

Rent and All bills are pay on time early every month way before the due date; once we get the bills we pay it right away mail out the payment the next day.. Credit card bills, same thing. Mail out payment next day way early before the due date. We have excellent/perfect credit scores.
Our credit card bills is just what we use charge with our credit cards for that month, and once we get the bill we mail out the check right away next day pay it off. Never once we own credit cards a penny, let alone own a dollar.
Everything, Rent and all bills including credit cards bills are all pay on time way early every month actually. Never once we have a late payment, let alone a missed payment.

My husband make decent income, he make 100K a year (money don't fall down from the sky. He has to work long hours in order to make that income. But he has No difficulty of bring in 100K income a year).. Despite we live in a HCOL state California, but life is comfy for us due to we both Debt-free. And we both are not big spender.
He very responsible with money, he work hard to secure for our future. To make sure we always be in a comfortable fiancial position.

His checking account it just where he pays Rent and all bills; and he pays it all, I don't have to pay anything. (Yes, he has me as Joint on his checking account).
His life saving is not in his checking. It his saving accounts and his retirement accounts are where all his life saving money are at.
---He has two Saving accounts, and both accounts have more than decent saving money in it save for emergency/rainy days. (Yes, he has me as Joint on both of his saving accounts).
---He has two 401k accounts and one IRA account saving for retirement, and all three has more than decent money retirement saving in it, especially his IRA account.. He prefers IRA, he used to have three 401k accounts but last time he roll one to his IRA. (Yes, he has me as the Primary beneficiary on all three of it).
---He has Life insurance, Health insurance. He has excellent/perfect credit scores.. Eventhough he has more than decent money in his Saving accounts and his 401k and IRA retirement accounts, he still want Life insurance just in case. He is a huge planner. (Yes, he has me as the Primary beneficiary on his Life insurance. And I'm on his Health insurance).

I'm a girl with only a High school diploma, No college degree. I work minimum wage jobs all my life, I make minimum wage. He on the other hand, make 100K a year. I told him repeatedly I don't want to be on any of his financial accounts (I understand our incomes difference, it alot).. But he adamant put me as Joint in all his bank accounts, and as Primary beneficiary on all his retirement accounts and Life insurance. I refused, he insists. I refused, he insists. I don't know what to do so I let him have it his ways.

We dislike debt. We never over spend. We budget everything.. Every month money go in what in what, we have everything budget lay out all and ready.
We do live BELOW our means. We rent in the lowest monthly rent place. No, we don't need to live in a high-end place with swimming pools and work out gyms and all that stuff, lol. we don't care those stuff.. I told my husband why pay the top expensive rent monthly when we can find a place with much lower/cheaper rent? It helps each month to add MORE money into your savings if we paying lower rent.
Perhaps I'm cheap, but to me having 'Cash' in our saving accounts is more important than live in a high-end place.. It not just money in Saving accounts, it also money in 401k and IRA retirement too, the more retirement savings we have the better we be in our old age.

'Cash' in our saving accounts is still count as an asset right? Liquid form of asset.
Also retirement savings in our 401k and IRA accounts are also assets right?

No, we personally don't want to own a home in California. Anyone who live in California know how expensive it is to buy a house here.. Same with New York. You talking about two HIGHEST cost of living states in the U.S., and the highest home prices too.
We don't want to buy a house in California because we not staying in this state till the day we die. We thinking of relocate to Georgia (where my husband mom side of the family all are at), perhaps we buy a house there in Georgia, we just want to buy a condo or townhouse.. It just never was a 'must need/must have' to us own a house in this HCOL state California and the house prices here are ridiculously high.
Why buy a house in ridiculous high price California when houses in the South are at a much lower price?

Anyways, I'm very frugal. I'm a coupon person; I cut coupons, I save coupons, I use coupons.. I save every dollar as I can.
My husband make 100K a year and I'm here cutting coupons out of weekly grocery ads, lol.. even coupons like buy one get one half off, or .75 cents off I still cut out use and save.
I'm not a huge planner like my husband, but I'm frugal.

Is Debt-free and making 100K a year income comfy to others? Probably not, but to us it comfy. And being Debt-free sure help alot.. And what added further to the help it our lifestyle, we both are not big spender and we live Below our means. We hate debt, so our goal is lifetime Debt-free.

oh, and our age.. I'm 31, I'll be turning 32 soon. My husband he a year younger than me; he 30 (just turn 31 few months ago). ]]


----------------------------------------------
okay, so that is the financial situation of me and my husband, I considered we are Debt-free. Perhaps my definition of what Debt-free is is different from others, but to me I think we Debt-free.

BUT then there is a replied from a poster, she quote me and she said that is Not Debt-free.. okay, she got me confused and I second think question what really Debt-free is then?
This is her replied, I cut and paste what she wrote to me in CafeMom to here: [[[ You pay rent every month. I don't view that as debt-free, it's akin to having a mortgage. One that you'll never pay off. ]]]
So by her quote above replied to me, and her viewpoint of what Debt-free is. Me and my husband we not Debt-free Solely because we pay 'Rent'.. But we rent in the lowest monthly rent place, so we can have More money save added to our savings and retirement. Our rent is way low compared to my husband income. I don't see how can our rent is considered our debt? We don't own rent a penny, once we get the rent bill, we sign a check immediately mail out next day pay it.

IF by her definition what she wrote (in the blue bold bracket), nobody is Debt-free then unless they born with a silver spoon in their mouth.. Because those who rent, whether it high or low rent they have to pay monthly Rent. If not rent, then those who buy house, whether it high or low monthly mortgage payment, they still have to pay Mortgage.
Then by her definition, nobody is Debt-free then (since we have to pay Rent or Mortgage).

So my question is, do you agree with what that poster said (her quote in blue bracket above)--her definition of Debt-free? According to our situation above, we Debt-free to me. Am I thinking Debt-free definition wrong here?
Yes, I'm an easily confuse girl, and right now I'm confuse. That poster she throw me off. So what is really Debt-free then? What is 'your' definition of Debt-free?



If need live translation, I be more than happy to help. Chinese here & here. Vietnamese here.
LONG& TMI(Regard something my DH did 10 years ago); just so hard for me to understand

Last edited by jasmine31; 01-25-2017 at 12:21 PM.
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post #2 of 40 (permalink) Old 01-19-2017, 08:19 AM
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Re: "What is 'your' definition of Debt-free? This is our situation, a financial quest

I don't think rent qualifies as debt, because once your lease is up (or once you break the lease, if you have that option), you are under no additional financial obligation. Debt is paying back money to an entity from which it was borrowed; you didn't borrow the rent amount from anyone, you're not paying anyone back. You're just paying a monthly expense. So yes, you are debt-free.

If you were paying a monthly mortgage, then you would have debt.

The other poster who said you weren't debt-free doesn't understand the concept of debt.

~Happily un-married since December 9, 2013~
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post #3 of 40 (permalink) Old 01-19-2017, 08:50 AM
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Re: "What is 'your' definition of Debt-free? This is our situation, a financial quest

I agree with FIP. Rent is an housing expense, yes, but not tied to a property that you're liable for. Debt you are on the hook for no matter if the asset appreciates in value or depreciates - you agreed to pay that amount no matter what. Rent is just an expense that you can walk away from (sometimes with a penalty, but you can still walk away.)

But it doesn't really matter if someone has a different definition of debt. If you're happy with the lifestyle you have and proud to not have credit card, car, and mortgage payments, then be proud of it! I think you're doing very well keeping your expenses low and living below your means. So many people don't make that choice and end up in some real financial trouble.

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post #4 of 40 (permalink) Old 01-19-2017, 08:51 AM
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Re: "What is 'your' definition of Debt-free? This is our situation, a financial quest

For what it's worth I do have a mortgage payment so I'm not debt free. But I insisted on a 15 year note that I would pay less in interest in the long run.

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post #5 of 40 (permalink) Old 01-19-2017, 12:58 PM
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Re: "What is 'your' definition of Debt-free? This is our situation, a financial quest

Agreed, rent is not a debt, as debts are liabilities and not expenses. In regards to your living arrangements, I would consider you functionally retired, which simply means your not working to payoff debt. You have the ability to alter your cost of living and obtain income based on those costs instead of having to make all income decisions based on debt, great job!
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post #6 of 40 (permalink) Old 01-19-2017, 01:20 PM
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Re: "What is 'your' definition of Debt-free? This is our situation, a financial quest

I wouldn't think of rent as debt, but I can see how it could be construed as such: you are borrowing the use of a living space in return for a promise to pay the owner for a set period of time, usually committing to a year at a time (lease - a liability). If you have more than enough savings to pay the rent for the remainder of the term, then I'd say you're debt free. If being able to pay depends on having an ongoing income, then you are indebted to the landlord.

Love is an ideal thing; marriage is a real thing; a confusion of the real with the ideal never goes unpunished. - Johann Wolfgang von Goethe

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post #7 of 40 (permalink) Old 01-19-2017, 01:54 PM
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Re: "What is 'your' definition of Debt-free? This is our situation, a financial quest

Being debt free is not always the best financial path. On your income I would be buying investment properties as a way to increase wealth. You may be debt free now but paying rent when you are at retirement age will be a terrible lifestyle, always at the mercy of the home owner, no security, no control over the cost of rent.

I am fairly debt free in that I own my share of our home (valued at over $2mil so that is good equity), I own my car, no personal debt, no credit cards, share portfolio, cash in the bank etc.
But I have mortgage debt on various investment properties (3 of them will be given to my kids in the near future). Other people, renters like you, are paying off my investments. They may be debt free too but I am the one that is increasing my wealth.
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post #8 of 40 (permalink) Old 01-19-2017, 03:47 PM
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Re: "What is 'your' definition of Debt-free? This is our situation, a financial quest

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Originally Posted by MrsHolland View Post
Being debt free is not always the best financial path. On your income I would be buying investment properties as a way to increase wealth. You may be debt free now but paying rent when you are at retirement age will be a terrible lifestyle, always at the mercy of the home owner, no security, no control over the cost of rent.

I am fairly debt free in that I own my share of our home (valued at over $2mil so that is good equity), I own my car, no personal debt, no credit cards, share portfolio, cash in the bank etc.
But I have mortgage debt on various investment properties (3 of them will be given to my kids in the near future). Other people, renters like you, are paying off my investments. They may be debt free too but I am the one that is increasing my wealth.
True that. My partner has a lot of debt, because he owns three condos--all of which are rented out, so his tenants are paying off his debt for him. The first will be paid off within the next 5 years, I think, at which point, aside from taxes, it's just straight up income. Plus he has a decent amount of equity in each property.

He's trying to get me to buy my own place as soon as I can, so I can start doing the same thing. Not sure if I want to, but it's appealing. (It's hard getting over the mindblocks that come from growing up poor.)

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post #9 of 40 (permalink) Old 01-19-2017, 05:29 PM
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Re: "What is 'your' definition of Debt-free? This is our situation, a financial quest

Debt is a financial tool and very useful if used correctly. Month to month credit card debt is usually a problem (except in special circumstances). Car debt may be, but not always. House debt is often a good thing - at least in the US tax laws often make house debt a positive thing.

College debt is not itself good , but the education it buys can be very valuable and overall borrowing money for college is often quite positive.
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post #10 of 40 (permalink) Old 01-19-2017, 05:58 PM
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Re: What is 'your' definition of Debt-free? This is our situation. A financial questi

The poster is wrong. Rent is not "debt" - it's an "expense" but it is not "debt." A mortgage is debt because you borrowed money and now you are paying it back. Property taxes are an expense. Car Payment? Debt. Car Insurance? Expense.

So her point may be that you still have to come up with XYZ to get through the month. So in her mind maybe the expense of rent is just as much of a stress inducing mental burden as a mortgage so she sees it the same. But it's not the same. If your husband loses his job, you can walk away from your rental and find something cheaper - live out of your car if you must - but you won't owe anyone money. If you walk away from your mortgage, you still owe money. You may be out of a living space in both cases, but you are only in debt in the mortgage scenario.

Ha ha, I don't know why this lady is irritating me so much but what she said was ignorant. It bugs me when someone corrects someone else, but they are the one who is wrong.

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post #11 of 40 (permalink) Old 01-19-2017, 06:02 PM
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Re: "What is 'your' definition of Debt-free? This is our situation, a financial quest

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Originally Posted by TheGoodGuy View Post
But it doesn't really matter if someone has a different definition of debt. If you're happy with the lifestyle you have and proud to not have credit card, car, and mortgage payments, then be proud of it! I think you're doing very well keeping your expenses low and living below your means. So many people don't make that choice and end up in some real financial trouble.
Well said, except for the part I underlined. For some reason I find it so annoying that people seem to think they can have their own definitions for words - like what a word means is a matter of opinion! Debt is debt. Expenses are Expenses. People can (and do) say ignorant things all the time, but really there is only one definition for "Debt." (OK, I probably should look it up before I say something ignorant - there are probably multiple definitions - but the EXPENSE of rent is not one of them!
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post #12 of 40 (permalink) Old 01-19-2017, 06:27 PM
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Re: "What is 'your' definition of Debt-free? This is our situation, a financial quest

Direct living expenses (ie, mortgage or rent) are typically not counted as 'debt'. You are debt-free by the standards of most people.

However, I strongly agree with the above posters that 'debt' can be used to your advantage. For instance, you asked why anyone would want to buy a house in California. My family bought a house in the early 1980s in what was then being developed as a high-end LA community (Rolling Hills Estates). At the time it cost somewhere in the upper $300k. When it was sold two decades later, it sold for somewhere around 3 million.

Paying rent will never give you equity in anything. It will never increase your wealth. It is a very safe plan, but if you don't take risks, you won't increase your wealth.

I have been buying and selling properties for years. When I bought the first one (a 200+ acre farm), I had to borrow money. So I was not debt-free. But when I sold it, I made a ton of money and used that money to buy another property, which I also flipped for a profit and which I didn't have to finance.... and on and on.

I also don't pay my bills the second I receive them. You don't get extra credit (no pun intended) by doing that. As long as you pay it before it's due, you will get the same credit benefit and you will have your money to use for a longer period of time. I too pay off my credit cards in full every month, but I do it on the day before the payment is due (online).

It depends on what you want. People who are very risk-averse and conservative don't usually build much wealth. You might eventually want to consider buying a home of some sort to build equity, because at 30 years old you have a lot more years of rent to pay. As long as you are smart about where you are buying and what you are buying, you can have your place paid for in 20 or 30 years when you really need to stop thinking about paying rent.

One of the best things you could consider doing is to buy a duplex and finance it - live in half and rent the other half. Let someone else's rent pay off YOUR property.

Don't let people become a priority in your life when you're just an option in theirs.

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post #13 of 40 (permalink) Old 01-20-2017, 03:20 AM
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Re: What is 'your' definition of Debt-free? This is our situation. A financial questi

Yes you are "debt free" from what you described. But as someone said, being debt free is not necessarily the most efficient way for wealth accumulation. Companies perform better when they take on some debt but they have to make sure they are comfortable servicing it and that their return on equity is good.
We have some debt (i keep it between 20-30% of assets) but the return on all our equity exceeds the interest we pay on our debt by quite a large amount. So without debt we would perhaps be getting 100k from investments whereas with some debt, the income is closer to 150k+). This is from investments alone. We also work.
I think being debt-free is nice and all (and for most people perhaps the best way) but it seems a pointless argument to me because it is not a very efficient way to accumulate wealth.
On the other hand, too much debt is absolutely deadly.

It is true that paying rent can have its issues. With a mortgage loan, you can have the interest fixed so while the value of your property is likely to go up over time, the amount you pay each month will be fixed. There is no such guarantee with rent, which tends to rise with inflation.


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post #14 of 40 (permalink) Old 01-20-2017, 03:29 AM
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Re: What is 'your' definition of Debt-free? This is our situation. A financial questi

Continued: On the other hand you have more freedom and less repair costs etc when you rent a place. So swings and roundabouts.
I personally don't like property as an investment as costs can be quite high and they are not especially tax efficient.


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post #15 of 40 (permalink) Old 01-20-2017, 05:20 AM
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Re: "What is 'your' definition of Debt-free? This is our situation, a financial quest

I don't consider my mortage payment as debt, though I do understand that it is debt as it's money that was borrowed, but if I was not paying a mortage payment I would be paying rent so I consider it a cost of living expense. Where we live I could not rent a house my size, which we need as we are a family of 6, for the same amount as my mortage payment. In fact I'm sure the payment would be double if I rented my home. Buying our home seemed like a smart investment that really cost us no more than if we did rent, but gives us great equity when we go to retire.

From what you explain of your finacial situation I would consider you debt free.
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