People are surprised when they learn we have maintained a debt free household for the last twenty years. For many, they realize for the first time, that being debt free is possible. Others think they could never become debt free as their total debt seems overwhelming.
When we first heard the concept of living debt free, we were about $500,000 in debt. I couldn’t imagine how we could pay off all our debt and begin living debt free. Was it even possible? But when I put pencil to paper, I discovered that it was not only possible, but could happen much quicker than I ever imagined. So, we made the decision to become debt free and have stayed that way. We made our final house payment in 2001 marking the end of our personal debt.
We have reaped many benefits from living debt free, some I did not anticipate, such as having a better/happier medical practice. All in all, I don’t ever want to go back to living our life with debt. It’s just not worth it. Having lived on both sides of debt, I know first-hand which is superior. It is far better to be a lender than a borrower. Following are ten of the many benefits we have experience.
1: More Peace of Mind
I didn’t realize how much that last little student loan, at only 3% interest, was effecting me until it was gone. I thought a small 3% loan was not a big deal, but I was wrong. After we made the final payment, I felt a weight lift off my shoulders that I didn’t even know was there. As we eliminated each additional debt my burden became lighter. It is hard to comprehend the deleterious effect something is having on us until the cause is gone.
This is a lot like being sleep deprived as a surgeon. I didn’t realize how much my lack of sleep was affecting me until a few months after I retired and finally had caught up on my sleep. I just thought that dragging feeling I had was normal. Turned out there was a better way.
2: Less Risk of Repossession
There is a component of risk when a debt is shouldered. The risk level dictates the interest rate. The more risk the lender is feeling, the higher return they require to take the risk.
If they have a risk then so do I. If something happens and I can’t make the payments, the lender will come after me. I must somehow come up with the money or they will take my collateral. Either way I lose.
3: Better/Happier Medical Career
I didn’t see this one coming until after I had been debt free for a while. Once the threat of losing my house disappeared, I felt empowered to make changes at work. There were some procedures in my medical practice that I didn’t like doing. Since these procedures paid well I felt I needed to do them in order to maximize my income as long as I owed money to others.
Only after becoming debt free did I gain the courage to drop the things from my practice that I didn’t like doing. I told my office manager to stop adding the cases I didn’t enjoy to my schedule and instead give them to my partners who liked doing them. Then I braced for the fallout. But it never came.
My partners, who liked doing the cases I gave up, got more cases that they liked which made them happy. Some of their cases in turn shifted to me, filling my schedule with more cases that I liked, so I was happy. Surprisingly, my income did not fall. This one change made me so much happier practicing medicine.
I don’t think I would have ever summoned the courage to make that change if I had remained in debt.
4: Work Less
Without the burden of debt hanging over me, I had less drive to work and produce a large income. With no debt payments to make, our monthly expenses drastically decreased and we were able to live our same lifestyle on a much smaller paycheck. Because of the effect of taxes, for every dollar I did not need to pay in debt service, I could decrease my gross income by $1.50 while keeping the same lifestyle.
After making this change we took more vacations, and I started taking the Monday off after every call weekend. This extra time off did not affect our lifestyle because the money we used to pay in debt service more than covered it.
5: Greater Retirement Savings
Once we were debt free, we had a large amount of money available each month that needed a place to go. After increasing our vacation budget, we decided to funnel the rest of the money that had been going to debt payments into our savings for retirement. Remembering how well my grandmother did in rental real estate, we decided to invest in real estate.
Turns out that those real estate investments were enough to fund my entire retirement budget. We developed our real estate investment plan after we were debt free. You can read the full story in The Doctors Guide to Real Estate Investing for Busy Professionals.
6: Earlier Retirement
Since our retirement fund was spinning off a nice monthly profit, and our expenses had been reduced now that our debt had been paid off, the amount we needed to save to reach our retirement savings number had been reduced significantly. With this new smaller retirement savings number, we could retire sooner.
I would not have been able to leave my twenty year practice at age 51 had we not been debt free.
7: Better Marriage
Many sources put money issues at the top of the list of things that hurt marriages and lead to divorce. By eliminating these money issues couples have more peace of mind, a large cushion in their budget, and less stress over money, which leads to fewer arguments about money, creating a better marriage and a lower divorce rate.
I didn’t comprehend the importance of this until I started doing my Financial Makeover program. I still remember the first time a couple told me they were so happy to be working with me because taking the financial makeover had stopped their arguments over money. Those arguments had been creating a huge strain in their marriage. In their case, it was simply bringing debt under control and creating a plan to become debt free that put their marriage back in harmony.
8: The Risk of Bankruptcy is Gone
Bankruptcy is the legal way you can get your creditors off your back when you are unable to pay your debt obligations. Without any debt obligations, there isn’t any possibility of needing to file bankruptcy.
9: All Your Income is Available to Spend
When we lived with debt, a large portion of my earned income was already spoken for. We could not spend all the money I earned because much of it needed to go to the bank to pay for stuff we purchased in the past. Once we had become debt free, my whole paycheck was available to spend in the present.
10: Purchases have no After Effects
When we converted to using cash instead of borrowing to purchase an item, the deal was done; no further payments were required. We were able to make this change long before we became debt free. If we use credit to pay for our vacation, we are continually haunted by the payments until they are finally paid off. If we buy a car on credit, every month we get reminded that we spent money we didn’t have until we make the final payment.
Living debt free is a lot different. Now when we buy something it is ours and we are not confronted with the cost again. We just paid cash for a grand piano. The deal is done. We will not be making those easy/hard monthly payments. We can fully enjoy the piano knowing it is completely paid for and ours.
These are just a few of the great advantages of living life without the burden of debt. It is very important, when you consider a life without debt, that you seek advice from someone who has become debt free. Those who haven’t become debt free don’t have any idea what it is like on the other side. If you need more information about becoming debt free or want to hear more about our debt free journey, pick up a copy of The Doctors Guide to Eliminating Debt and start your own debt free journey today. You won’t regret it.