I got paid today, and it is a GOOD thing.
Now, for the first time since we moved in to the house, we actually have ALL OUR BILLS PAID OFF at the same time.
It's a remarkably liberating feeling I must say.
Of course we've recently acquired a fair bit of debt, so I no longer have the corresponding satisfaction of saying I am debt free (a condition I maintained for some years), but you can't win them all eh.
Actually, compared to most households we have very little debt. The average family of four in this country as something like $25,000 in debt OTHER THAN their house and their car.
That's a lot of debt.
We have no credit card debt, no student loans, we're on a lease to own so we've got no mortgage debt (and we're building offset against the purchase price of the home), the truck was a bit of a hit ($13.5k financed plus about $4k in interest if we follow the payment schedule) but at least the payments are manageable and the interest rate isn't bad...
That leaves us with about $5 grand in personal debt, none of which is accruing interest (actually about 1/3 of that is offset by debts owed me, but as to how much of that I'll see back, who knows, so I don't count it).
Really, we're a lot better off than most folks. I can't imagine living under the kind of debt burden most American families do, it's just nuts.
Look at a "typical" middle class American family in a moderately expensive cost of living state (in CA, NY, or MA these numbers go WAY up). They've got $25,000 of credit card debt (or other revolving debt - at 15% if they're lucky), a $300,000 mortgage (say at 6% - you're LUCKY to get into a decent house around here for $300k, or maybe $250k if you want to drive an hour to work), and two new $40,000 cars (leased of course - with an effective interest rate of 9% - because they couldn't afford otherwise. The only thing dumber than paying interest on a depreciating asset, is paying interest on someone elses depreciating asset); the thought of all that just sickens me.
Lets say it averages out to $400k, accruing at 8% a year, averaged out to 20 years (between the mortgage rates and periods, the credit card rates and periods, and the car rates and periods), you'd have to pay $3400 a month JUST IN DEBT SERVICE ($1800 mortgage, $1600 in car and credit card payments); and for all that you only end up paying half of it on an actual asset.
Now you have to figure, thats $41k a year, add in another $30k a year to live on; and with the governments cut, you have to pull in over $100,000 a year just to make the nut. MAYBE if you're smart and lucky you manage to cut your costs down all the way around to $30k in debt service, and $30k in living expenses, that's STILL about $85,000 just to live on.
That's just insane.
We live that same lifestyle, without all the extra debt (our costs won't change much when we convert the mortgage, we've already factored in our car costs, and we have no revolving debt), and we only need about $70k to live (including the .gov bite).
Basically, because of the INSANE debt that so many families put themselves through, they are paying at least $15,000 more a year for the same standard of living, and most are probably paying $25,000 more. Somehow running these numbers, it's not hard to understand why peoplein this country accumulate debt at 105% of their savings rate.
Honestly, every bit of debt you have, is like twice as much in income taken away from you; because it's money that you can't do anything with. Instead of making YOU money, YOU'RE MONEY, is making money for SOMEONE ELSE (as is every bit of taxes, but that's another discussion).
It's basic opportunity cost math, and it's what keeps so many people, including people who earn plenty of money, from really getting ahead.
Why struggle to push $15,000 to $25,000 a year down the tubes? Worse, why have to pay extra taxes at a higher rate even, on that extra $25,000 you have to earn, just to see no benefit from either amount?
Personally I'd rather work less and enjoy my life more... or more likely in my case work the same amount and save/invest more.
