# "What is 'your' definition of Debt-free? This is our situation, a financial question.



## jasmine31 (Jul 12, 2016)

*What is 'your' definition of Debt-free? This is our situation. A financial question.*

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jasmine31


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## FeministInPink (Sep 13, 2012)

*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.


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## TheGoodGuy (Apr 22, 2013)

*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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## TheGoodGuy (Apr 22, 2013)

*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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## Mr.D.E.B.T. (Jul 19, 2012)

*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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## Married but Happy (Aug 13, 2013)

*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.


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## MrsHolland (Jun 18, 2016)

*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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## FeministInPink (Sep 13, 2012)

*Re: "What is 'your' definition of Debt-free? This is our situation, a financial quest*



MrsHolland said:


> 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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## uhtred (Jun 22, 2016)

*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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## WorkingWife (May 15, 2015)

*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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## WorkingWife (May 15, 2015)

*Re: "What is 'your' definition of Debt-free? This is our situation, a financial quest*



TheGoodGuy said:


> 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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## Hope Shimmers (Jul 10, 2015)

*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.


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## 269370 (Dec 17, 2016)

*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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## 269370 (Dec 17, 2016)

*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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## Daisy12 (Jul 10, 2016)

*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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## 269370 (Dec 17, 2016)

*Re: "What is 'your' definition of Debt-free? This is our situation, a financial quest*



Hope Shimmers said:


> 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.
> 
> ...


Yes if bought at the right time ad in the right place property can be a good investment. Some people have also a talent for spotting undervalued properties.

_"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."_

Over 2 decades, it works out at around 11% per year which is quite good. Buying property as your own home is in majority of cases a good idea but buying as an investment, one has to be careful. There is also the potential headache of managing it.


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## uhtred (Jun 22, 2016)

*Re: "What is 'your' definition of Debt-free? This is our situation, a financial quest*

I think the key question on debt is whether or not the debt provides tools to future financial gain.

Mortgage - yes. You save on rent and in many cases the value of the property will increase.

Business / property investments: Potentially yes, but there is a substantial risk with any business, and your debt should never be more than you can cover if the investment fails.

Car: Maybe - if you need a car to get to work, borrowing to buy one is reasonable, but it should be for a functional car. Debt on a "fun" car" is rarely a good idea.

Student loans: Usually yes if you are getting a degree in something that will lead to improved job prospects in the future.


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## HD48 (Jan 14, 2017)

*Re: "What is 'your' definition of Debt-free? This is our situation, a financial quest*

To me, being "debt free" means the following: having no revolving credit card debt, having no monthly automobile payments, having no student loans, having no mortgage, and having no other such liabilities

Items such as paying for your children's college tuition while they are in school so they do not have debt when they finish I would not consider "debt", as this is just a worthwhile expense.

To be in a situation where you have zero mortgage debt, no student loans, no credit card debt, all cars paid off, etc, is a great place to be.

Personally, for me, as someone who is in his early forties with 4 children, whose only debt is a mortgage and my student loans and an acceptable amount of vehicle debt with the number of vehicles I have had to purchase for my family, I am happy with that. I remember Larry Burkett once said "You cannot use a credit card wisely, you can just use one less foolishly". If you don't pay any interest to the credit card companies, then you're winning. I do not think I will be "debt free" for many years, as I expect to be paying on a mortgage for the foreseeable future. The real question is do you have money left at the end of the month and whether or not you're living within your means. Every situation is different. I once had credit cards, thru college, and afterwards, and it took me years to pay them off, and I vowed to never own one again.


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## MarriedDude (Jun 21, 2014)

*Re: "What is 'your' definition of Debt-free? This is our situation, a financial quest*

Debt is a useful tool. It allows you to accomplish many things that you would otherwise not be able. 

Carefully subjugating the liability for that debt is critical. By having the lenders buy in, usually with the carrot of profit as greed is king, they will provide much...in the event it goes south...they get to own the loss.

Manipulating the system to maximize rewards while limiting risk should be ultimate goal.

TLDR...debt free means zero debt....as well as a low tolerance for risk


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## 269370 (Dec 17, 2016)

*Re: "What is 'your' definition of Debt-free? This is our situation, a financial quest*



inmyprime said:


> Yes if bought at the right time ad in the right place property can be a good investment. Some people have also a talent for spotting undervalued properties.
> 
> _"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."_
> 
> Over 2 decades, it works out at around 11% per year which is quite good. Buying property as your own home is in majority of cases a good idea but buying as an investment, one has to be careful. There is also the potential headache of managing it.


PS: It is very likely that you would have got better returns if you put 300k in the stockmarket and left it for 20 years; this was an unusually good period for property. But his is of course with hindsight.


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## FeministInPink (Sep 13, 2012)

*Re: "What is 'your' definition of Debt-free? This is our situation, a financial quest*



inmyprime said:


> PS: It is very likely that you would have got better returns if you put 300k in the stockmarket and left it for 20 years; this was an unusually good period for property. But his is of course with hindsight.


True, but you can only do that if you have $300k in cash up front.

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## jb02157 (Apr 16, 2014)

*Re: "What is 'your' definition of Debt-free? This is our situation, a financial quest*

I think I would consider paying rent as not living debt free. Debt free to me means no housing expenses so house is paid off in full.


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## Andy1001 (Jun 29, 2016)

*Re: "What is 'your' definition of Debt-free? This is our situation, a financial quest*

Putting three hundred grand in the stock market twenty years ago may have brought a big return but it depends on where you invested.Investing in a single company is fraught with danger,consider Enron.People are advised to use investment trusts to spread their investment over many different companies,consider Bernie Madoff.You always risk losing everything when dealing on the stock market unless you know what you are doing and are willing to research companies financial records and even then you are taking a chance.


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## DTO (Dec 18, 2011)

Jasmine,

First, 100k is a good income. Most families don't make that in total (even in CA).

I agree with your definition of debt-free. Those are common words with a clear definitions. However, that other lady brings up a good point that debt-free does not necessarily mean well-off or better off than someone who has some debt.

I, for instance, owe $250k on a house worth around double that. My mortgage payment would not cover most apartments in my area. Plus, that payment is fixed and the home will be paid eventually.

You'd have a hard time convincing most people that I am worse off than someone making the same money but paying my mortgage to rent a small apartment.


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## 269370 (Dec 17, 2016)

*Re: "What is 'your' definition of Debt-free? This is our situation, a financial quest*



FeministInPink said:


> True, but you can only do that if you have $300k in cash up front.
> 
> Sent from my SM-G930T using Tapatalk


Actually you can easily borrow to invest (at rates below that offered by mortgages). It's not usually recommended (because people get greedy and over-leverage to boost returns). 
Buying a house is essentially a leveraged investment too.
People who bought houses in the US around 2006 experienced the full meaning of that.


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## kristin2349 (Sep 12, 2013)

*Re: "What is 'your' definition of Debt-free? This is our situation, a financial quest*



jb02157 said:


> I think I would consider paying rent as not living debt free. Debt free to me means no housing expenses so house is paid off in full.


My home is paid for in full, I still have housing expenses. My real estate taxes are about 15K per year, there is also home maintenance to be considered. When you rent repairs and maintenance are covered by your landlord. Living expenses can't be avoided, even my family cemetary plot had a pretty expensive buy in that covers ongoing maintenance of the grounds.


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## 269370 (Dec 17, 2016)

*Re: "What is 'your' definition of Debt-free? This is our situation, a financial quest*



Andy1001 said:


> Putting three hundred grand in the stock market twenty years ago may have brought a big return but it depends on where you invested.Investing in a single company is fraught with danger,consider Enron.People are advised to use investment trusts to spread their investment over many different companies,consider Bernie Madoff.You always risk losing everything when dealing on the stock market unless you know what you are doing and are willing to research companies financial records and even then you are taking a chance.


I obviously meant putting the money across the market (in SP500 tracker for example), not in a single stock or Bernie Madoff! (No speculation).
Actually I looked it up, the return between 1980 and 2000 would have been 17.5% pa. $300,000 would have turned into $8,000,000 (with dividends reinvested, see here: https://dqydj.com/sp-500-return-calculator/

But that was a pretty unique period for both housing AND the stock market. 
I just mean that there are other (better) ways to accumulate wealth, without speculation.
Which is indeed how we accumulated our wealth, to some degree. (The other part came from hard work).


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## SimplyAmorous (Nov 25, 2009)

*Re: What is 'your' definition of Debt-free? This is our situation. A financial questi*



jasmine31 said:


> *[[ *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.
> ...


 It's very admirable how you & he have handled your money & have the future well covered...Clearly you are both "savers" ... Your husband may be more of the careful planner between you, but you are his frugal helpmate ... it's a superb match... I don't think the 2 of you will be fighting over finances any time soon!! 



> 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, 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.


 Myself and husband have always lived below our means too.. as you describe here.. in our early years.. this helped us put down a whopping down payment when we found the house of our dreams.. then pay it off quickly, saving a ton on interest... I would recommend that to anyone, if they can swing it, for whatever their future goals are .... often they say "save for a rainy day".. I like to call it a "torrential downpour" ...to have this sort of savings set aside...it gives a couple a lot of "Peace"... for when emergencies come up, too many vehicle troubles, just buy another one...if we need a lawyer.. whatever.. and also to achieve that "debt free" state.. whether it's with renting with a ton in the bank (like yourselves) or for a family like ours.. we make less a year than you & your husband - but have 6 kids !! A goal of ours was always to buy a house... we didn't want to rent.. 

*Question*: Do you both want to be home owners someday? .. what does that look like: Do you want a yard, to live in the city close to everything going on, more suburban where the houses are spread out a little.. or are you a Country girl ...dreaming of more peace & quiet, possibly some land? Where do you imagine raising some children? Do you & he have this in common also.. have similar dreams? 



> 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.


 Smart wife... I am sure your husband very much appreciates your being this way...his being such a careful planner himself...and if you stay at home, you have the time to devote to seeking out the best deals, cutting those coupons in your free time.. I did this for years too.. still do when I get my hands on some.. to be honest.. posting on this forum.. is what took me away from cutting as many in the past so many years... every little bit helps !! Do you try to get as many rebates as you can too?



> *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.


 It would be "very comfortable" for us as a family- where we live, it's a high unemployment area, relatively lower cost for buying houses.. not many good jobs around.. Even making considerably less than your husband with 5 kids still at home.. we would be considered "Middle class" on this calculator (below)... though take what we make & place us in New York City or California.. we'd be low income for sure.. 

Are you in the US middle class? Try our income calculator | Pew Research Center 



> 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.


 Try to take no mind to her opinion....here is how I would interpret this...: in HER WORLD she likely wants/ plans to be a home owner and she views having a monthly rent payment as excess money going down the drain.. (again it's just an opinion).. some home owner TAXES alone cost more than RENT in a years time.. so really.. we're all a slave to TAXES anyway... 

To be honest.. I can see where this woman is coming from ... but that's not to say you aren't debt free either, as you see the posters here feel you surely are ....it's just HER WAY , what she personally considers "debt free"... I guess one could look at it as "Debt" always carries some form of "interest" with it, or something can be repossessed... Rent doesn't carry any of those things.. right.. 



> 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).


 What she meant was.... nothing to do with coming from a rich family.... just that she wouldn't consider it debt free until the last monthly mortgage payment was satisfied in full = no more payments.. just paying utilities, common repairs & taxes on the house/ property...Period...

One doesn't have to be come from high income parents to achieve this, we certainly didn't.. 



> 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?


 My feeling is this... don't allow her definition to throw you off, to confuse you or anything like this. You & husband are doing wonderful.. at the rate you are going...give it a few years .. I bet you could take all the money you have saved... and near buy a house, paying in cash & never make 1 mortgage payment.. so you go from being your definition of debt free straight to Hers !! All good. 




HD48 said:


> I remember Larry Burkett once said *"You cannot use a credit card wisely, you can just use one less foolishly".* If you don't pay any interest to the credit card companies, then you're winning. I do not think I will be "debt free" for many years, as I expect to be paying on a mortgage for the foreseeable future. The real question is do you have money left at the end of the month and whether or not you're living within your means. Every situation is different. I once had credit cards, thru college, and afterwards, and it took me years to pay them off, and I vowed to never own one again.


 I'm one of those people who LOVE credit cards.. I put everything on there.. all our food (using the card that gives 3% back), Gas (using the card that gives 5% back)... I pay our kids Orthodontist bills with it, cable...I even paid for one of our used cars with my credit card... EVERYTHING I possibly can.. I wish I could put our house taxes on there.. but they won't let me.. I do this because I get "cash back".. I specifically look for the best cash back awards cards... I've never paid interest on a credit card... I make about $400 a year doing this.... I appreciate that using credit has it's other perks -like when you have a dispute, done that a time or two...

But true.. if you can't pay in full when the bill comes.. by all means...cut them up!


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## FeministInPink (Sep 13, 2012)

*Re: "What is 'your' definition of Debt-free? This is our situation, a financial quest*



inmyprime said:


> Actually you can easily borrow to invest (at rates below that offered by mortgages). It's not usually recommended (because people get greedy and over-leverage to boost returns).
> Buying a house is essentially a leveraged investment too.
> People who bought houses in the US around 2006 experienced the full meaning of that.


I didn't know that!

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## 269370 (Dec 17, 2016)

*Re: "What is 'your' definition of Debt-free? This is our situation, a financial quest*



FeministInPink said:


> I didn't know that!
> 
> Sent from my SM-G930T using Tapatalk




Trading on margin is one way, but there are many other ways to leverage long term investments. It has a bad name because it is normally associated with speculation/gambling but if used carefully, it's actually a very powerful tool (Buffett uses it too, even though he always speaks negatively about over-leveraging, rightly so). Because stock markets are more volatile, you have to be more careful and having only a 10% "downpayment" would be too risky (though traders often use much higher leverage ratios).
I always used a bit of gearing with my investments between 10-20% typically (increasing a little during stressed times and reducing in better times when markets are doing well) and have done very well (around 20% pa for the last 12 years). I would have been happy with half this return.
Anyway, my focus is on income (dividends) and it's a nice feeling when it starts overtaking your salary. Work becomes a bonus, not a necessity.



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## Davidmidwest (Nov 22, 2016)

*Re: What is 'your' definition of Debt-free? This is our situation. A financial questi*

Dear Jasmine,

i am so happy for you, your husband, and family. Be sure some of that money is put into a IRA of some sort for you. at least $5K a year. Also, have your husband take a break for putting money into his IRAs.' and start banking up to two years of gross salary or one year of gross salary. This is why. I made $70K a year for the last ten years. In debt with student loan debt, a mortgage, two cars, medical bills, and paying off my wife's credit cards. The has been no money left. THEN MY CAREER TANKED AND i HAVE NO CHANCE TO EARN THAT WAGE AGAIN.

Head this warning. A career can tank for cause, due to the economy, or he pissed off the wrong person. HE could take a pay cut too. if he gets ill, depressed, and can't function until a year later; therefore, your entire family's life will be derailed. Oh, he could be obsoleted with downsizing, your husband's earning potential and the chance to get a same amount paying job could disappear, he could never get back into his career or not find a job in his field. It happened to me me. I got depressed, I was out of work, burnt out on Administrative Director job at $70K, I can't get back in. My transferable skills only Pay $40K. A $30K loss is BIIIIGGG, Big!

Please SAVE CASH UP TO HIS $100k IN CASH IN CASE OF A JOB LOSS To protect you and he if either of you can't get good paying job again. WITH THAT IN RESERVE YOU CAN WEATHER ANY CRISIS. iF NOT YOUR ARE DOOMED AND WILL BE HEADED TO USE THE CREDIT CARDS.

By the WAY hide away $3,000 or more in a safe deposit box for housing and food should you need to leave your home in an emergency, or if you spouse kicks you out or makes you move out of the house with a court order. You will not have to stay at a homeless shelter, live in the car, You can stay a long time at a Motel Six with $5K until things work out and you can regroup your next move.
Mark my words. Hide it. I am in a precarious position going through a divorce and no money if I am forced to move. No hidden stash, no survival. If you squirrel money away don't tell anybody, ever.


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## tech-novelist (May 15, 2014)

*Re: "What is 'your' definition of Debt-free? This is our situation, a financial quest*

Debt free means that all your bills are paid off every month and you don't owe anyone anything for any longer than that. Obviously if you buy something and don't pay cash on the barrel head for it, you have debt until you pay it off, but as long as you do that every month, I would consider you debt free.

As for me, I have a mortgage and no other debt.

And as to the multiple recommendations for real estate investing, I don't agree. It is highly risky in many regards and looks good only so long as interest rates are low and prices keep going up. I don't count my house as part of my net worth, and since my mortgage is non-recourse I could walk away if there were a real estate crash. Not that I have any intention or expectation of that, but that fact allows me to ignore the mortgage as well as the supposed equity.


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## Satya (Jun 22, 2012)

*Re: What is 'your' definition of Debt-free? This is our situation. A financial questi*

The OP hasn't returned.


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## EleGirl (Dec 3, 2011)

*Re: What is 'your' definition of Debt-free? This is our situation. A financial questi*



Satya said:


> The OP hasn't returned.


I know that she is still reading. Guess she just has not seen a need to reply.


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## EleGirl (Dec 3, 2011)

*Re: "What is 'your' definition of Debt-free? This is our situation, a financial quest*

Debit is money that we owe; money that is due. Generally we think of debt as instruments in the form of loans, mortgages, credit cards, etc. -- basically financial obligations that span more than one financial period. We can look at either a month or a year as a financial period. Most bills are paid on a monthly basis. things like taxes, mortgages, loans, etc tend to span a multiple years.

Whether or not rent is a debt depends on the rental/lease agreement.

If you have a lease agreement that says that you agree to lease the apartment for x number of months/years, then it's a debt because even if you move out you owe it. Some leases have a way to get out of that obligation, others do not.

If you have a month-to-month rental agreement then it's an expense and not a debt. You don't own the money if you move out.

But your point that you and your husband are basically debt free is true. You have no loans, mortgage, credit card debt, etc. You only have the expense of day to day living. 

If I were you, I would ignore what the women on that site say about this. They are basically wrong. I would also not argue with them about it.


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## CuddleBug (Nov 26, 2012)

*Re: What is 'your' definition of Debt-free? This is our situation. A financial questi*



jasmine31 said:


> 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.
> ...



When I'm dead.......:grin2::laugh:

Seriously, no mortgage, no rent, no car debts and no student loans. That's my definition of debt free.

Basic things like food, electricity, clothing, transportation you need until you die.


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## jasmine31 (Jul 12, 2016)

*Re: "What is 'your' definition of Debt-free? This is our situation, a financial quest*

eta: Thank you Sir tech-novelist for your advice. Thank you very much.


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## tech-novelist (May 15, 2014)

*Re: "What is 'your' definition of Debt-free? This is our situation, a financial quest*



jasmine31 said:


> ---------------------------------------------------------------------------------------------------
> My husband he Debt-free (we both are). So there no debt for us to worry about.
> His 401k and IRA retirement, he max out it out every year. So retirement savings is not a problem. He does have more than decent amount of savings for retirement.
> 
> ...


There is no particular reason to have two savings accounts, but there is also no reason not to. Why does he have two accounts?



jasmine31 said:


> oh, and my other question. I know yearly my husband max out his retirement savings. I know the 401k and IRA are SEPARATE from Social Security taxes right?
> I ask this because I see my husband paychecks (he gets pay weekly), and in his paychecks it automatically deduct for Social Security tax.
> So when he retire, he can collect both--simultaneously both his Social Security retirement (the Social Security tax that deduct from his paychecks), AND his 401k and IRA right?
> The IRA and 401k are his, he max it out every year. That is SEPARATE from the Social Security tax that deduct from his paycheck, so he should get BOTH simultaneously when he retire right? I'm a bit confuse on this, can you explain it to me? Thank you Sir.
> He has me as the Primary beneficiary on both his 401k and IRA. And I do understand how 401k/IRA works, I just a bit confuse about the Social Security tax. He should be able to get BOTH when he retired right? I mean it his hard work money, it just it deducted out of his paychecks.


Yes, Social Security is separate from 401k/IRA money. Right now people can get payments from all of those different sources, although it is possible that some day the government will say "You have too much money and there are poor people who need that money more than you do, so we are going to reduce (or eliminate) your Social Security payment because we don't have enough money to pay everyone, even though it was their own money." No one knows when or if that will happen, but it is a possibility. I wouldn't let it stop me from saving as much as possible though, because your own money is still better than having to rely on the government.



jasmine31 said:


> -----------------------------------------------------------------------------------------------------
> 
> oh, and one last question, if you can give me advice on this. What should I say next time if my husband ask me if I'm okay with him work holidays.. He always ask me if I'm okay with him work overtime or holidays, and I said I'm okay (because of the overtime pays, and the holiday pays). But perhaps next time he ask me if I'm okay with him work holidays, I should just not comment and say it up to him and let him chose?
> 
> ...


I would ABSOLUTELY tell him I want him to work on those major holidays! My wife is a nurse (retired now) and she told me that there was a lot of competition between nurses as to who could get holiday pay, even though in her case it was only 50% more, not 150% more as in your husband's case.




jasmine31 said:


> .........
> Here the thing about my husband. My husband he very important on me and him eating together and go to bed together. When he work nights, he wants me to sleep in the daytime with him.. Eating together is very important to him, go to bed at the same time and wake up at the same time is also equally very important to him.
> He make it clear that he doesn't want me to even work part time, he said why do he wants his 'wife' to work? When he make enough for his wife to stay home. He said and asked that.
> I guess to him, he takes pride in provide for me--being the one that brings in the income/money. I guess to him it like that, I dunno.
> ...


Again, you should definitely tell him you want him to work on those major holidays. That adds up to thousands of extra dollars a year that you can save (after paying California and Federal taxes, of course). And even if you don't want him to work more than the usual days, he could take off a "regular" day and work a major holiday instead, right? Then you would still be ahead 150% of a regular day's pay (before taxes). So yes, this is absolutely a good idea.


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## jasmine31 (Jul 12, 2016)

*Re: "What is 'your' definition of Debt-free? This is our situation, a financial quest*

edit: deleted 
jasmine31


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## DustyDog (Jul 12, 2016)

*Re: What is 'your' definition of Debt-free? This is our situation. A financial questi*

There is no ambiguity in the definition of "debt".

Debt means that you and another party have a legal agreement. You have been given money to spend NOW, which you will pay back later. Most debt show up as accounts on your credit record. A mortgage, a student loan, a car loan - these are all debts. Debts almost always include interest costs, which are essentially money down the drain, unless you place a high value on acquiring something before you have the cash to do so.

Rent is not a loan and does not constitute debt. It is an expense, and when you pay rent, you are paying for either the month to come or the month that just passed and you are not paying any interest.

Some key practical differences in terms of how they impact your life:
* In theory, you can stop an expense by halting your consumption of the thing you're paying for. E.g., tolerate hot summers and cold winters and do light-requiring activities only in the daytime and your electric bill goes WAY down.
* Most debt cannot be halted so quickly. Credit card debt is a good example...if you bought clothing and meals, then those are not things you can easily sell for enough money to pay off the credit card. Student loans are the same way. If the loan has collateral (car, house, boat, etc), then in theory you can sell the car/house/boat and pay off the debt - but you still need to live somewhere and get to work, so it's usually pretty darned inconvenient to do so, unless the asset is a pure luxury (yacht, for instance).


Re: Cost of housing. If you are in a place where a house costs a lot, then you are in a place where houses go up in value quickly - that's how that house got to that price to begin with. I'm not necessarily saying "go buy a house", there's a lot to be said for having a landlord deal with maintenance, especially if the husband works long hours or is out of country a lot.

I moved to CA in the late 90s. The price of housing was a shock. My employer graciously gave me a 6% raise "to compensate for COL difference from my previous state, Colorado". They had essentially terminated my job in Colorado and opened one in California and said "go". At the time, nobody was hiring people with my skills in Colorado, so I reluctantly went.

So, yeah...for what I could buy a house in CO for, I could get something tiny and in a high-risk neighborhood. So I decided I would rent. But rents were even higher than houses, relatively! I figured if I bought a house at the then-current mortgage rate of 8%, with minimal down payment (3%), my monthly payment, after figuring the tax deduction, was 30% less than rent. So, I did it - bought a house, not in a bad neighborhood but not far from it. I heard occasional gunshots and painted over graffitti from time to time.

I didn't plan to stay in CA, but figured on building up my retirement accounts, learning new skills on the new job and then seeing who elsewhere wanted me. Didn't like the women I met - all seemed very shallow - and it was as if I was the first man they'd seen in 10 years, I was VERY popular, but not enjoyng it. So, my last GF from Colorado and I decided she'd come out, we'd tie the knot, so now it was us. The economy, right after that, got smacked down hard, my pay was cut 30%, her temp job was cut 100% and nobody was hiring for my skills, anywhere. We hunkdered down, literally shut off electric and gas and only turned things back on when it got truly painful. We scrimped and managed to make it through while still maxing out the 401k plan and paying that mortgage.

As real estate collapsed in San Fran, and jobs were lost, many of those people, who'd been earning $500k at jobs that would never exist again, started retiring early and moving up north - to where we were. This caused 18% annual increases in house values where we were. Due to this we were able to re-fi from 8% down to a 2% adjustable-fixed for 5 years. We kept paying the payment as if it were 8%...and when the 5 years were up, we'd only owe $20k. But we didn't stay...when the economy started picking up again, my employer started moving to China and a competitor picked up up in Oregon, not only paying my move but giving me a 40% increase in pay.

The house in California? I owned it for just under 5 years, and sold it for 3X what I paid for it. Even if I include every single penny that went into it for utilities, interest, taxes, etc, it was a profit. That's rare. And that stroke of luck is the only reason we were able to buy land, outside the city, enjoy peace and quiet and so on, here in OR.


But - doing those sorts of things requires that you're interested enough in money to keep your eye on things. I don't like money - but splitting from my ex left me at zero at age 40, so I knew I had to build up faster than average to make it to retirement successfully.


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