What's the average age that people are debt free in America?

[dave_the_nerd]

We paid our house off at around age 42 I guess and that was the last outstanding debt we had. I have no idea however what the average age in America a person typically becomes debt free. For most I would say the answer is "never".

Yeah, I would guess "death."

 

[kranky]

Ramsey's belief is that all debt is bad. I tend to be that way myself. But I certainly understand why people don't rush to pay down a mortgage, as it's just about the only leveraged asset they have access to. It does presume home values will rise and investments will grow more than the mortgage interest rate after factoring in the tax deduction - but that's not a stupid stand to take even if things don't work out. There are no guarantees.

I don't like being in debt on cars so we don't borrow for those. Even if they dangle a 0% interest offer, I still have to worry about the car being upside down in case of an accident.

We worked hard to pay off our mortgage a few years early and put that extra money into savings. Being totally out of debt means that besides food and utilities, the only other money we HAVE to spend is for property taxes.

One of the defining moments in my anti-debt opinion was when I was a kid and my parents borrowed to get new windows in our lower-middle class rowhouse. I don't remember the numbers exactly, but let's say they borrowed $3,000. Pay back over 5 years. They made monthly payments of around $90 for 3 years (sum of about $3,200 paid). Then they got a small inheritance from an aunt and wanted to pay off what they assumed was a small remaining balance. They were told the remaining balance was around $2,000. On a $3,000 loan they paid on for 3 years already!

Turned out the scammy window company finance arm used a method of computing finance charge (precomputed and add) that meant there was no benefit to paying the loan early. The total they owed was about $5300 (including finance charge) and they owed that amount even if they had paid the loan off in the first month. That really had an impact on me - if I borrow money, it's on the lender's terms even if they are unfair to the extreme.

Beyond the financial benefits of being debt-free, there is the aspect of freedom. You have more freedom to make big life choices when you don't have to worry about paying back debt to make them work.

 

[xeemzor]

Ramsey's belief is that all debt is bad. I tend to be that way myself. But I certainly understand why people don't rush to pay down a mortgage, as it's just about the only leveraged asset they have access to. It does presume home values will rise and investments will grow more than the mortgage interest rate after factoring in the tax deduction - but that's not a stupid stand to take even if things don't work out. There are no guarantees.

I don't like being in debt on cars so we don't borrow for those. Even if they dangle a 0% interest offer, I still have to worry about the car being upside down in case of an accident.

We worked hard to pay off our mortgage a few years early and put that extra money into savings. Being totally out of debt means that besides food and utilities, the only other money we HAVE to spend is for property taxes.

One of the defining moments in my anti-debt opinion was when I was a kid and my parents borrowed to get new windows in our lower-middle class rowhouse. I don't remember the numbers exactly, but let's say they borrowed $3,000. Pay back over 5 years. They made monthly payments of around $90 for 3 years (sum of about $3,200 paid). Then they got a small inheritance from an aunt and wanted to pay off what they assumed was a small remaining balance. They were told the remaining balance was around $2,000. On a $3,000 loan they paid on for 3 years already!

Turned out the scammy window company finance arm used a method of computing finance charge (precomputed and add) that meant there was no benefit to paying the loan early. The total they owed was about $5300 (including finance charge) and they owed that amount even if they had paid the loan off in the first month. That really had an impact on me - if I borrow money, it's on the lender's terms even if they are unfair to the extreme.

Beyond the financial benefits of being debt-free, there is the aspect of freedom. You have more freedom to make big life choices when you don't have to worry about paying back debt to make them work.

Great post. It's painful to see all these new college grads with $40k+ of debt and terrible job prospects. Debt culture is ruining our ability to deal with unforeseen challenges and plan for the future. Sometimes I feel like I'm the only one I know under 30 earning a reasonable salary with no debt.

 

[Vdubchaos]

Great post. It's painful to see all these new college grads with $40k+ of debt and terrible job prospects. Debt culture is ruining our ability to deal with unforeseen challenges and plan for the future. Sometimes I feel like I'm the only one I know under 30 earning a reasonable salary with no debt.

Get a mortgage!!! It's "good/best" kind of debt!!!

Signed,
Student of Anandtech University

:biggrin:

 

[z1ggy]

^^ I'm sure glad Harvard School of Business taught you that "debt = debt" no matter how you look at it.

And don't try to deflect now by trying avoid the fact that you just got proven wrong abut mortgage debt. Good for your friend, but instead of saving up cash which could be actually loosing value, he should/could have placed all/some that money into stock/bonds and made money instead.

Like Captain says above, time value of money. Generally hoarding piles of cash is kind of dumb unless the markets are absolutely shit. But, I'll defer to him on that matter.

 

[Vdubchaos]

Beyond the financial benefits of being debt-free, there is the aspect of freedom. You have more freedom to make big life choices when you don't have to worry about paying back debt to make them work.

Correct

Also, when you are not tied down to 1 geographical location.......you have freedom to move and go wherever it is that one desires.

 

[ControlD]

My main reason for not wanting to carry any major debt is simply because I don't trust the lenders that much anymore.

We bought our house in 1997, and the mortgage got bought out by a couple of different companies before it finally resided with Countrywide. When the sub-prime bubble burst, all of those Countrywide accounts got bought out by Bank of America, which by my count was probably the fourth different institution to own my mortgage. Now, BoA decided to stop sending the bill through the mail. There was probably a sheet in the mortgage statement indicating this, I can't say for sure, but I never agreed to switch to electronic billing. We had been making 1.5x payments on our mortgage since we got it and never missed a payment. We did miss the next payment after the account was switched because we never got a bill in the mail. After one missed payment our account got sent to a collections agency and we were basically a step away from losing our house.

About a month later I paid off the balance of the house and told BoA to kiss my ass.

 

[Genx87]

Correct

Also, when you are not tied down to 1 geographical location.......you have freedom to move and go wherever it is that one desires.

So what do you propose people do to live? Save up money while living in a cardboard box? What if they cant save enough cash to keep up with inflation within the housing sector(appreciation)?

I dont understand your fanaticism about mortgage debt. Your friend saving his money sounds great on paper. Reality is unless he put it in the market. He was losing ~3% a year to inflation. That gets expensive once money becomes a full payment on a house. Rivaling the cost of a mortgage without the benefit of asset appreciation nor basic human needs like living quarters.

 

[Scarpozzi]

That lady is full of it, somehow makes a lot of money, or bought a really crappy house. Or worse, mommy and daddy bought it for her and she has an entitlement issue.

But it is possible to live a simplified life with manageable debt. I have been only dealing with a mortgage and more recently a car payment(after owning my car for 12 years and it finally kicked the bucket). Also manage to sock away a healthy portion of my income into retirement.

What I dont have is 2 kids, 2 car payments, daycare expenses, and a house that is too big and expensive for my income, and spending more than I can afford and holding onto CC debt.

I am not going after you on this. So please dont take offense. But what your situation described is like everybody I know who complains about money. They are all running the rat race trying to one up each other, live the american dream, live a champagne lifestyle on a beer budget. These people are all up to debt to their eyes and living paycheck to paycheck. And it doesn't matter the income. I have friends with household incomes of 50K up to 300K and they all live on the edge. The people with more money just buy more house, more cars, more daycare, and stupid stuff they dont need.

No offense taken, but I think everyone is making an assumption that I'm in debt up to my eyeballs..... I have 2 car payments because we replaced a 10 year old civic to prepare for having kids...it's now a 4 year old 4Runner with 30k miles that we'll drive until it dies. I have a 13 year old Buick and a 6 year old F150 (2nd car payment @ less than $10k on it)

My wife and I are both aggressively saving for retirement and trying to pay off debt. It's just slow going while living a moderate lifestyle and the daycare is depressing, but a necessity. I'm not going to say how exactly little debt we have, but the total is well under $200k and all but $10k is tied directly to insured assets. It's just tough when you lock down payment terms and can't change them after the fact without refinancing and losing the low rates.

 

[jlee]

Debt = debt

Any way you look at it.

So here you guys are, calling me names or "thinking" that you are offending me by saying "live in your moms basement"......which actually seems pretty appealing.

I work with a guy that lives at his moms and saves good 2-3k a MONTH. In couple of years he will be buying a house CASH (between his saving and his girls).

"The idiot loser" that most of you would call this guy will pay 0 debt on his mortgage and I'm pretty sure is way better off and did things smarter than most of us.

😎

I wish I could live at my moms and save shitload of money and get into short term debt or no debt at all.

It's a choice

I'm getting paid $250/mo to live in my house. Regardless, if your friend would invest his savings instead of using them to buy a house, he would be a far superior financial position.

Let's say he had $200k cash for a house. $200,000 invested for 30 years earning the average inflation-adjusted rate of return would provide $1.5mil in today's dollars, 30 years from now.

A $200k mortgage will cost $122,910.40 in interest at my mortgage rate (3.49%).

Option A) earns $1,322,451.01.
Option B) saves $122,910.40.

 

[Vdubchaos]

^^ I'm sure glad Harvard School of Business taught you that "debt = debt" no matter how you look at it.

And don't try to deflect now by trying avoid the fact that you just got proven wrong abut mortgage debt. Good for your friend, but instead of saving up cash which could be actually loosing value, he should/could have placed all/some that money into stock/bonds and made money instead.

Unfortunately you assumed that he didn't........but he did.

Like Captain says above, time value of money. Generally hoarding piles of cash is kind of dumb unless the markets are absolutely shit. But, I'll defer to him on that matter.

What he said means very little when it comes to mortgage debt.

At the end of the day, interest you are paying on the loan (which is usually into 10k+ a year for most Americans)= money down the toilet/profits to the bank.

And time value of American $ is dwindling as each day passes by, so you take your time and do whatever you want with it.

Printing presses haven't stopped and our Government still has 0 responsibility or accountability with our future money or budgets.

Why should they anyways? American's are in the comfort zone living like kings with "great debt".

All is dandy!!!

 

[xeemzor]

I'm getting paid $250/mo to live in my house. Regardless, if your friend would invest his savings instead of using them to buy a house, he would be a far superior financial position.

Let's say he had $200k cash for a house. $200,000 invested for 30 years earning the average inflation-adjusted rate of return would provide $1.5mil in today's dollars, 30 years from now.

A $200k mortgage will cost $122,910.40 in interest at my mortgage rate (3.49%).

Option A) earns $1,322,451.01.
Option B) saves $122,910.40.

This overly simple calculation doesn't take into account the massively increased housing prices caused by low interest rates. Once they rise to reasonable levels housing prices will drop like a rock. I'm saving for the day that happens so I can pick up some homes for cheap. In the mean time I'm happy to put my money in the market.

 

[Slew Foot]

Debt free in America? Never

 

[smackababy]

Unfortunately you assumed that he didn't........but he did.



What he said means very little when it comes to mortgage debt.

At the end of the day, interest you are paying on the loan (which is usually into 10k+ a year for most Americans)= money down the toilet/profits to the bank.

And time value of American $ is dwindling as each day passes by, so you take your time and do whatever you want with it.

Printing presses haven't stopped and our Government still has 0 responsibility or accountability with our future money or budgets.

Why should they anyways? American's are in the comfort zone living like kings with "great debt".

All is dandy!!!

I feel like you simply don't have a basic understand of economics. Which follows suit in all other advice you continue to give about relationships and such.

 

[purbeast0]

lol guys ... vdub has no "friend" who did that.

he does the same shit with EVERY SINGLE thread he posts in.

he ALWAYS knows "someone" or "a ton of people" who did "something".

 

[Capt Caveman]

Unfortunately you assumed that he didn't........but he did.



What he said means very little when it comes to mortgage debt.

At the end of the day, interest you are paying on the loan (which is usually into 10k+ a year for most Americans)= money down the toilet/profits to the bank.S

And time value of American $ is dwindling as each day passes by, so you take your time and do whatever you want with it.

Printing presses haven't stopped and our Government still has 0 responsibility or accountability with our future money or budgets.

Why should they anyways? American's are in the comfort zone living like kings with "great debt".

All is dandy!!!

:biggrin: Stop posting. If you actually, had anything of value to post, your post count would be zero.

 

[jlee]

This overly simple calculation doesn't take into account the massively increased housing prices caused by low interest rates. Once they rise to reasonable levels housing prices will drop like a rock. I'm saving for the day that happens so I can pick up some homes for cheap. In the mean time I'm happy to put my money in the market.

Overly simple calculations are sometimes appropriate for overly simple arguments; would you agree? 😉

Housing prices vary wildly depending on area, though - I realized I could either get a 2br apartment or buy a house for the same monthly cost (but with a house, I can have roommates funding my mortgage), so I bought. 🙂

 

[Vdubchaos]

So what do you propose people do to live? Save up money while living in a cardboard box? What if they cant save enough cash to keep up with inflation within the housing sector(appreciation)?

Actually a lot of AMerican's are already doing it. Maybe not cardboard boxes but there is plenty of tent towns and Tiny house movement is pretty big.....

Inflation shouldn't even be on the table for discussion here. It's been way beyond people's raises and expense costs for years.......so most Americans lose each year regardless.

I dont understand your fanaticism about mortgage debt. Your friend saving his money sounds great on paper. Reality is unless he put it in the market. He was losing ~3% a year to inflation. That gets expensive once money becomes a full payment on a house. Rivaling the cost of a mortgage without the benefit of asset appreciation nor basic human needs like living quarters.

He did put it in the market.

So tell me, who is worst.

The guy that buys a house and takes on debt and pays 200k in interest.

Or the guy that lives "in moms basement" and saves to buy the house outright.

Is the "debt" still "great/best debt" in that case?

It's all about perspective.

 

[Vdubchaos]

:biggrin: Stop posting. If you actually, had anything of value to post, your post count would be zero.

I won't.

All these horrible posts....yet you still read them.

:biggrin:

 

[smackababy]

lol guys ... vdub has no "friend" who did that.

he does the same shit with EVERY SINGLE thread he posts in.

he ALWAYS knows "someone" or "a ton of people" who did "something".

vdub actually has no friends. He has stated many times in L&R friends are not worth having, thus he has zero. He only associates his wife and kids. I feel bad for them.

 

[Vdubchaos]

I feel like you simply don't have a basic understand of economics. Which follows suit in all other advice you continue to give about relationships and such.

Go ahead, tell us about your expertise on economics and your relationship history/success.

There is no need to make it more complicated.

Debt = Debt

You and others can keep polishing the turd, but the fact remains. If you have a mortgage, you are in debt.

I know I know, I hate to spoil your "American dream" and all.

 

[Capt Caveman]

I won't.

All these horrible posts....yet you still read them.

:biggrin:

B/c you give me a good laugh that someone can be as stupid as you yet posts like an expert on every subject. It's hilarious how someone can be so stupid. Every time I see you post in L&R, I know it's going to be a gem of stupidity.

 

[Vdubchaos]

lol guys ... vdub has no "friend" who did that.

he does the same shit with EVERY SINGLE thread he posts in.

he ALWAYS knows "someone" or "a ton of people" who did "something".

You are just like Alke

First you state bunch of ignorant BS, then when you get cornered and have nothing mature/relevant to say on the subject and no answers.....you lower your standards to name calling and bunch of made up BS you pull out of your ass.

At least you are not the only one here.

I understand, you don't like to deal with realities or be wrong. Human nature.

 

[waffleironhead]

Has anyone started a scroll for vdub? The things vdub does not understand...

 

[highland145]

Bad debt...me owing someone.
Good debt...someone owing me and paying regularly.

Debt free by the time I was 44 (51 now) but that's only because I opened my own place. Otherwise, I'd still be in debt. I do have a 14y.o. so we'll see what college brings.