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As I was getting ready for bed the other night, I was lamenting to my wife how tired I was, but how I wanted to write something epic for this here blog. I started a few posts, but couldn’t bring myself to finish them because my heart was not in it. I wanted to write something to get people thinking, to get them to change the way they look at the world. But was I even capable of thinking outside the box? I was getting stuck in my own head, when my wife offered a suggestion.
“What if we never borrowed money? Like, ever?”
At first, the idea just kind of bounced off my head like a pass off a 49ers wide receiver (zing!). But as I let it marinate more, it started to intrigue me to think about all the life implications of never choosing to use debt as a tool to get anything. Would life be any different? What would be awesome about it? What would suck?
But let’s do something fun here. Let’s tell this story backwards, and then move forward to see the two completely different paths I had the option to choose. Ready?
My Life With Debt
Age 27. Current Debt
Now, I define debt as money borrowed for a purchase. Which means I would need to lump in credit cards with all my other debt, because I’m borrowing someone else’s purchase power only to pay them back later. I don’t keep a balance on my cards. Ever. I have 10 credit cards open right now. I pilfer them for the awesome rewards, and travel for free on vacations and trips. We have gone on a few free vacations this year already, with some bigger ones coming up in a year. And I thoroughly enjoy not paying a cent for those, because honestly, we couldn’t afford it otherwise!
We have student loan debt of just under $10,000. We have been chipping away at this debt for about four years, including a $3,000 chunk just recently. It has been a thorn in our side, but did allow Michelle to get a 4-year degree at a private college.
We have a very large mortgage (can’t share the details just yet, though you could probably deduce it searching around a bit). It’s about half our monthly income with all the taxes, insurance and PMI. We were underwater until about 6 months ago, and price has been steadily rising since. We love our home, and wouldn’t trade it for anything. No regrets in buying our home.
Age 24. New House.
It was an awesome year. We have been scrimping and savings and had been searching for a few months for our first home. We put the debt payoff on hold, and wanted to get ourselves into a house. We didn’t want to expand our family in an apartment, plus the market had gone WAY down, so we were surely at the bottom, and it was time to just on these great deals! When we finally decided to go out and look at houses, we bought one that day. Low down payment and HUGE mortgage. But we could swing it, and were pretty excited about it.
We also still had about $19,000 in student loans left at this time. We wanted to kill them quickly, but the house became a priority, and these were put on the backburner.
Age 23. Marriage.
We got married on August 2nd, 2008, and it was pretty awesome. Well, except that I was sick the entire time, and had puked my guts out the night before and didn’t sleep. I also got other people sick with this terrible bug. So I barely made it through the wedding. BUT, we were then married, and moved away from family down to Oregon so Michelle could finish up her senior year of college. And getting married was exciting because we finally got to combine our finances, and our DEBT!
I had saved some of my inheritance money and also saved like CRAZY to pay for half our wedding. But we ended up borrowing from a friend about $3,000 to pay for the rest of it. But our honeymoon (about $3,800) was put on a no-interest credit card because I knew I was getting some more inheritance at age 23. So we have $8,300 in personal debt to pay off. And here’s the funny part. We had the money to pay off about half of it, but since I knew we had money coming in, I left it there until we received the money. And this was AFTER I listened to Dave Ramsey! Obviously, it took a while to sink in.
Age 21. Dating.
Michelle and I started dating on March 31st, 2005. We ended up dating long distance when she moved 200 miles south to go to college. During the summers back, she would get summer jobs. After her 2nd year of college, her summer job was at the Nordstrom eBar making really “rich” people coffee. It was a joyous job filled with very kind people and no complaints….. But one of the perks of the job was that she got a 20% discount on Nordstrom clothing. Since Michelle didn’t want to mess with employee purchases, she just got the store card that had her employee number on it, making the 20% off transactions much easier.
She ended up running up a balance on the card, because what 20-year-old woman working at Nordstrom wouldn’t?! It wasn’t much, but the balance was left on there throughout the next year, until we got engaged, and started chatting about finances a bit more. I had learned at a young age (18) that credit card interest was ridiculous, so I said she should pay it off ASAP. She did end of paying it off, and we cancelled it shortly after marriage.
I also joined an Arts school to get a degree, but only paid for half of it, because I didn’t want to lose that much cash at once. I borrowed the rest and had about $16,000 in student loans. UGH! I ended up paying them all off when we got married and I received an inheritance. But not after paying a chunk of interest on them.
Age 18. Young and Dumb.
Everyone knows about my ridiculous story of blowing through $100,000 before turning 21. And all of that money was deposited into my account just after turning 18 years old. BAD IDEA. But, soon after, I also applied for my first credit card, because I wanted to build credit for some reason (not to buy a house, but because it’s what people do). The card limit was only $500, so at least I couldn’t get into trouble and blow a lot of money……..oh wait…
I charged most small purchases on there, and would pay it off every few weeks so as not to hit the limit. But I do remember the first time I missed a payment, and got charge something like 18% interest. I WAS APPALLED. I vowed never again to pay credit card interest, because it was straight up theft! But that credit card was the beginning of my life of borrowing money.
My Life Without Debt
Age 18. Young and A Little Smart(er).
I had just received $100,000 and deposited it in CD’s and several savings accounts. I wasn’t sure what I’d do with it, but I would eventually blow through it all because that’s what an 18-year-old with no financial training does! As I finished depositing all of my money, the kind teller asked me to sign up for a starter credit card. She said it would be great for building credit. I thought about it for a minute, but politely declined. Little did I know that would be the start of a different life.
I vowed from that day forward to never borrow money. Ever.
Age 21. Dating.
Michelle and I started dating on March 31st, 2005. We ended up dating long distance when she moved 200 miles south to go to college. During the summers back, she would get summer jobs. After her 2nd year of college, her summer job was at the Nordstrom eBar making really “rich” people coffee. It was a joyous job filled with very kind people and no complaints….. But one of the perks of the job was that she got a 20% discount on Nordstrom clothing. She thought about getting the store card to make the purchases easier, but decided not to.
She ended making a few purchases at Nordstrom for the good discount, but didn’t have much extra to spend, and decided to save some money instead. She saved up about $500, and put it away in a savings account as an emergency fund. After all, if something happened, she wouldn’t be borrowing money to fix it, because she didn’t’ believe in borrowing money. Ever.
I also joined an Arts school to get a degree, and paid for all of it in cash. W00t! I’m glad that I paid it all at once, because I hate interest, and wouldn’t even consider student loans. Those are for suckers!
Age 23. Marriage.
We got married on August 2nd, 2008, and it was pretty awesome. Well, except that I was sick the entire time, and had puked my guts out the night before and didn’t sleep. I also got other people sick with this terrible bug. So I barely made it through the wedding. BUT, we were then married, and moved away from family down to Oregon so Michelle could finish up her senior year of college. And getting married was exciting because we finally got to combine our finances!
I had saved some of my inheritance money and also saved like CRAZY to pay for our wedding. We ended up only spending about $6,000, and decided against the videographer and coffee cart for the guests. We paid cold, hard cash for it, and felt great about it. Though I was getting inheritance in a few months, I wanted to make sure we didn’t borrow ANY money. We were going to have an awesome honeymoon in Jamaica, but the wedding had drained our cash flow. So we decided to wait a few months until we had the cash on hand to book the flights and hotel. It was a bummer to have no vacation straight away, but we vowed never to borrow money. Ever. And now that we had discovered Dave Ramsey, we’re were totally sold. Time to cut up every credit card we lay our eyes on!!!
Age 25. No House.
I had my Arts degree, and Michelle had received her 4-year degree from an in-state school. We saved a bundle by keeping it in-state instead of an out of state private college that she had been looking at. Both our schools were paid for in cash, and we felt very proud to have no debt out of school. Since we didn’t have to tackle any debt, we started saving for a home we eventually wanted to buy. We had about $30,000 saved up (including the last of the inheritance), and only needed another $200,000 or so more to get something in the location we liked. But we were determined to never to borrow money. Ever.
Age 27. Current Savings.
Today, we’re still doing what we were doing 3 years ago, saving for a home. With our lower cost of living, we are able to save about $1,000 a month. So we have about $60,000 saved up (plus earnings). We’ve scrimped and saved as much as possible, but it look like we’ll be renting for another 10 years or so until we can afford a home. Except, by then, the amount of house we can afford will be MUCH less, what with inflation and all. We’ll probably just accept that buying a home in today’s market is just impossible, and be apartment dwellers for life. I kinda now wish we would have never vowed to NOT borrow money, ever. Feeling a bit depressed about it. The only thing that cheers me up is that our net worth is more now than it would have been had we been debtors.
And since we save so much money, we don’t go on trips much. And watching everyone else benefit from credit card churning left a bitter taste in our mouths. Why do these debt-lovers get to enjoy all the free bonuses with all their borrowing and junk? Lame-sauce. Can’t we get some rewards for using money THE RIGHT WAY? Whatever, they can keep their free vacations!
I’m not really sure what to take away of this. I just kind of followed it as I was writing, but it seems like borrowing hasn’t been too detrimental, except that we’re a little bit behind in net worth where we could be. BUT, to think about how much money has disappeared to interest payments, that would definitely be a game-changer to look at that number. With the mortgage and all, I bet it’s CRAZY cash money. I kind of don’t want to figure that out. Actually, I’ll do it soon, but in another post so you can marinate on this one for a while.
What Do You Think?
Life didn’t look too much different without borrowing, except that we couldn’t buy a house or benefit from credit card rewards. Mostly, not owning a house would be the biggest bummer I think. Though I know we could rent one for a large chunk of change, I don’t think we would because our savings rate would cut in half and we’d NEVER own a home at that rate. Obviously there are a BILLION different factors that could have changed our “no debt” story in drastic ways, but I wanted to keep the story true to the original, just removing the debt.
So what do you think? Have you ever thought about what it would look like if you never borrowed money ever? Would life be better or worse in the end? I’d love to hear how your stories would change!