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Pay Off Your Debts Early

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The following is a blog swap from Derek at Life And My Finances, where he writes about saving, investing, and his goal to share financial knowledge. 

I grew up in quite a large family. My parents had 4 boys and 1 girl – I am the youngest of the bunch. Since my parents started their family very early in life, they always had to watch their money. If I remember the story correctly, it wasn’t natural from the beginning. In fact, when they got married, my dad immediately went out and bought a motorcycle! Once my mom explained that their finances could not support the purchase, he had to give it up.

When they bought their first house, they were very uncomfortable with the large loan (I think it was $5,000 or so at the time, but today, that would equate to $30,000). They decided that even though money was tight, they were going to pay off that loan as soon as possible! Well, when they moved out of that house a few years later, it was fully paid off. And, they have never taken out a home loan since.

Through the years, because they made the decision to remain debt free, they were able to put 5 kids through private schooling, and even assisted with college tuition! Today, they still remain in a mortgage-free house and will most likely retire at the age of 62. It’s amazing how much one can afford when there are no debt payments.

I know that some of my siblings are still astonished, and they have actually asked my mom and dad how they did it! As I’m getting older, I am beginning to understand what a huge accomplishment that was as well. I mean, we didn’t grow up in a one bedroom house or anything. In fact, most of my childhood years were spent in a 4 bedroom, 2 bath house. We often went out to eat on the weekends and had regular vacations – it was a well-rounded life, and there was still some money to spare in the end because those large debts were gone early on in life.

This is the best lesson that my parents taught me. Live within my means, and if there are debts in your life, pay them off as fast as you can. My wife and I are actually working to pay off our debts right now. We are still young, but we believe in the power of getting rid of debt early, just like my parents did. If all goes according to plan, we should have our debts paid off by the end of March! Once we do this, it’s time to invest in our future! If we keep that up, wealth will certainly be showing up at our doorstep in no-time.

Wow, that is a big family! It’s so great that Derek’s parents were able to pay off their debt early. I hate consumer debt too and we do not have any right now. Yes! I had some private student loans when I first graduated college, but that had been paid off. We still have a mortgage though and we are working on that a little at a time.

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{ 23 comments… add one }

  • Moneycone February 4, 2011, 5:51 am

    The thing with this habit and life-style is that you pass it on to your kids as well! I would totally credit my parent for me not taking on debt. And I think my kid would too! (I hope!).

    Thanks for sharing Derek!

  • Melissa February 4, 2011, 7:36 am

    Great advice Derek! It was great you had such a good example. Kudos to you and your wife to paying off your debt at a young age.

    Once my husband finishes grad school, we will be focusing heavily on paying off student loan debt.

    • LifeAndMyFinances February 4, 2011, 12:10 pm

      @ Melissa. Thanks for the kudos! We are going to feel so wealthy when we’re back to owing nothing! It should happen very soon too! 🙂

  • LifeAndMyFinances February 4, 2011, 9:18 am

    Thanks MoneyCone! I certainly am glad that they were such a good example. It showed me first hand what is possible when there’s no debt weighing us down!

  • Jessica07 February 4, 2011, 12:18 pm

    That was a wonderful story. Thanks for sharing it. 🙂

    • LifeAndMyFinances February 4, 2011, 4:21 pm

      No problem Jessica! It was fun sharing my parents’ story. They have really taught me a lot.

  • Eliza from Happy Simple Living February 4, 2011, 2:40 pm

    What an inspiring story, Derek! Thanks for sharing it, and illustrating how taking care of those big debts early in life can result in so many years of happy living.

    • LifeAndMyFinances February 4, 2011, 4:22 pm

      If all goes well, I think my wife and I will buy a place, and have it paid off in 3 years! Then after those 3 years, we’ll really be relaxed and enjoying life! I can’t wait!

  • krantcents February 4, 2011, 4:30 pm

    What is so amazing is this is not the norm! My parents were adults during the depression which certainly affected their attitudes about money. Although I am not so sure because they started a business (w/o debt) in 1929, had a child (my oldest brother) and built a house. They took on their only debt in their entire lives which was mortgage of roughly $8,000 with a payment of $85 per month. That was huge in 1929! Although I am debt free except for my mortgage, I don’t mind debt that makes me money.

    • LifeAndMyFinances February 4, 2011, 7:34 pm

      Thanks for the comments Krantcents. I got my degree in Finance and was taught “good debt” and bad debt, and it made sense at the time. If you can make more money than you have to pay back per month (like on a rental property with a mortgage), then that’s considered good debt. It sounds all well and good until something goes wrong.

      When the sub prime mortgages went south in 2007, there were a lot of investers that thought they had “good debt” and ended up in upside-down mortgages.

      I would much rather live life debt free. It might take a little longer to build wealth this way, but at least I will protect myself against a disaster!

  • Finanzas Personales February 4, 2011, 6:30 pm

    That’s a good lesson you picked up at home. And again the topic about how early experiences shape our personal decisions in terms of money… something that I’ve always found amazing.
    Good luck with getting rid of the debt and growing your investments!!! I’m sure your clarity will allow you to get far on this one!

    • LifeAndMyFinances February 4, 2011, 7:36 pm

      Thanks Finanzas Personales! We feel that we are in a great place with our finances, and will be out of debt very soon. Hopefully, we’ll make our parents proud. 🙂

  • Clay Ivy Finance February 4, 2011, 7:15 pm

    That is great that they never took out another home loan. Most people sell their house and use all that money to make a down payment on a much more expensive house. Those who use the profits wisely avoid the problems faced by so many in today’s real estate market.

    • LifeAndMyFinances February 4, 2011, 7:39 pm

      You’re right Clay Ivy Finance – most people use the equity in their house to buy an even bigger place (which means a much larger price tag). My parents were able to get a larger house from wise purchases and careful saving. They did a great job and were an excellent model for what our future should be like.

      • retirebyforty February 5, 2011, 6:37 am

        Exactly! One of my friend kept trading up for bigger and bigger home. Now he has a McMansion on the river! That’s really great, but I bet they are trap at their jobs for another 30 years to pay for that. Most of my co-workers has the same mentality. One guy just purchased a McMansion with 2 kitchens. Why do you need 2 kitchens? He timed the market well and got an awesome place, but he’ll be working forever to pay it off.

  • 101 Centavos February 5, 2011, 6:55 am

    That is a great accomplishment, being mortgage free. One day, one day….

    • LifeAndMyFinances February 5, 2011, 7:10 am

      I’m glad that I thought about how well my parents did with their home purchases before my wife and I make the plunge on our first purchase. We will develop a plan to pay off that mortgage as soon as possible!

  • Will @ HackingTheBank.com February 5, 2011, 8:08 am

    I think it’s easy to get caught up in the work-until-you’re dead-so-that-you-can-enjoy-life-by-paying-debt mentality. It’s how most people are conditioned to live. I don’t know how I was able to escape that mindset, really. There’s no specific personal example I have like yours. Seems like you have a great plan there, keep up the good work.

    • LifeAndMyFinances February 5, 2011, 10:56 am

      @Will. I know a lot of people that would be in a world of hurt if they lost their jobs because of their debt loads. That’s just seems so stressful! I would much rather put a little extra toward my debt every month and get rid of it quickly! That way, I can truly enjoy life without worry.

  • Buck Inspire February 5, 2011, 1:34 pm

    Looks like your parents taught you well! I’ve learned my savings habits from my parents, too. They lived well below their means and instilled it in me. Now in their retirement years, I find myself encouraging them to enjoy it and spend a little of their hard earned dollars. Go figure! 🙂

    • LifeAndMyFinances February 6, 2011, 4:01 am

      They sure did! I am beginning to realize how difficult it really is to be debt-free. My wife and I are soon there, but I’m sure we’ll buy a house in the near-future, and then we’ll be grinding away at that debt again. It sure takes perseverance, careful planning, and discipline to follow through on eliminating all debts!

  • Jacob @ My Personal Finance Journey February 7, 2011, 6:52 pm

    An interesting and ongoing debate in the personal finance community would have to be whether or not it is better to 1) pay off your debts completely first or 2) pay off your high interest debt first, but then save for retirement prior to committing more money to paying off lower interest loans such as mortgages.

    What’s your take on this?

    • retirebyforty February 7, 2011, 10:23 pm

      I’m pretty sure Derek will say pay off all debts first.
      Personally, I think it’s better to pay off all consumer debts. Your car loan, credit card balance, student loans, and such. Mortgages are OK to carry especially on income producing rental properties.

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