- Personal Finance
Wanna be Debt Free?
Let's Talk Debt-Free
It's been fun talking about credit scores, but now I have a question about a related topic.
Great! The Oracle of Personal Finance is pleased to discuss all aspects of individual financial responsibility.
What's the deal with being debt free?
Ahhh... many folks have come to me in search of this holy grail. Being debt free has emerged as the new new thing.
What does it mean to be debt free?
To summarize, you don't owe nobody nothing.
I borrowed a cup of sugar from my neighbor to make a smoothie. Does that count?
My my, you are pedantic. No, that isn't what "debt free" actually means. We refer only to money.
What a relief. I still have his weed whacker in my garage.
With the money you save from being free of debt, you can purchase your own yard care implements.
Wow! Where can I order this debt-free stuff? Is there a web site I can click on?
Not exactly. Becoming debtless requires perseverance, patience, and perspicuity. You should also think about becoming penurious.
Evidently I should also invest in a dictionary.
Regardless of your literary aspirations, you can probably become free of debt if you are willing to work at it.
What's the first step?
Pay off all your (financial) debts.
Check. What's next?
Stop borrowing money.
oops. I borrowed money to pay off my debts.
That's what we in the business refer to as "The debt cycle." Breaking out of the cycle is difficult to do.
It sure is. Every morning I pay for my mega mocha frappe on my VISA card. I get the impression you disapprove.
I'm not judging you, but financing your morning coffee will not break you out of the debt cycle. Consider paying cash for small purchases. Studies indicate that consumers spend more money when they use a credit card instead of real money.
Not really. How much debt are you carrying?
Let's see... I have a mortgage, a second mortgage, several credit cards, a third mortgage, my neighbor's weed wacker...
Do you carry a balance on your credit cards?
Of course. I can't afford to pay all that money every month.
Break the debt cycle by paying down those credit cards as soon as possible. You are probably paying exorbitant interest rates.
They may not be exorbitant, but I think they are really high.
Credit card interest rates tend to be both high and exorbitant. Regardless of our choice of adjectives, work hard to reduce and eliminate credit card debt. That's the first step to becoming debt-free.
OK. Thanks again for the useful info. Want to share a smoothie with me?
I'll pass, but I do have some yard work...