I’m often asked how it’s possible for me to live debt free. The answer is simple, but the process is difficult. You have to start with the will and determination to never borrow money again. Once you’ve drawn that proverbial line in the sand, you have to have the discipline to stay on that side of the line. One way to do that (and this is non-negotiable in my book) is to have a cash spending plan, or budget. In our house we do a zero-based budget every month before the month begins.
I like to force myself into those decisions so my only choice is to follow the plan. It’s called paying yourself first. For instance, if the plan is to invest 15% of our income for retirement, I have that automatically taken out of my check so I have no choice. If our budget calls for 10% of our income to go to our church, we write the check at the beginning of the month. That way the money is spent according to the plan before we can use it for more selfish things like impulse buys. So, simply said, we have a plan for our money before the money hits the wallet. And we never borrow money. Period.
The funny thing is, once you are debt free you start asking the other question: How could I possibly ever live in debt? I can’t imagine ever owing money again because it just doesn’t make sense to me anymore. Up until the day we payed off our mortgage, we had imagined ourselves always having a mortgage. Whether it was through buying a new house or buying some land somewhere we just couldn’t envision not having a mortgage. Even though we we otherwise debt free and had resolved not to borrow money again, the mortgage was still a part of our lives and we simply accepted that we couldn’t avoid it. But we kept working at it and once we paid it off and began to look at other options for a new house or bigger house, we realized that we did not want another mortgage. We had worked so hard to get to that point, there was no way we would go into debt again when the home we had was sufficient for our needs.
Especially in uncertain economic times, many people have a hard time envisioning themselves free of debt. They think it’s too hard to live debt free when the economy isn’t doing well. But bad economic times are exactly the best time to live debt free. Our income dropped from very good to almost nothing when I lost a job in manufacturing. That would have sent a normal person straight to the bank asking to refinance their house to give them some money to pay the bills. We didn’t have to do that because we had no debt and an emergency fund in place. We had so many more options because we were debt free. What a great feeling it is to have options!Matt Wegner is a personal finance, small business and leadership coach focused on teaching his clients the tools for L.I.F.E. (Living In Financial Excellence). Discover which paths are in front of you. Request a free planning session today or visit financialexcellence.net.