Debt Free

[BrilloPad]

When do you consider yourself debt free? when you have paid your mortgage off, or when you have clear all other debts?

I'm moving in to my 2nd year of contracting and i expect all my debts except mortgage to be paid off by mid 09. That is always allowing for a moderate war chest to allow me some play time when needed...

By just clearing your debts you might end up in a bit of a hole. Imagine you paid off the mortgage and then went out of work? With a bit of a war chest you could carry on as before.

Unless you feel more comfortable being mortgage free and living off the dole until you get work?

[Doggy Styles]

I don't actually regard the mortgage as a debt (though it is).

I only have the mortgage to repay and a small amount owing to my student loan company which will be paid in a couple of months. I therefore consider myself debt free as I don't have credit cards or higher purchase.

Of course a mortgage is a debt. It's a f**king great big one. Are you Gordon Brown?

You'll find out if you try not paying it back.

[minestrone]

Assuming that the mortgage value is the same as the value of the house then it can be said to be not a debt. Depends on your point of view.

Anyway I have totally no debt but then I don't have a house.

At the rate house prices are falling I might be cash buying the next one.

[Manic]

I don't have any debt except a big mortage which I'm planning on cutting in half.

[EternalOptimist]

When do you consider yourself debt free? when you have paid your mortgage off, or when you have clear all other debts?

I'm moving in to my 2nd year of contracting and i expect all my debts except mortgage to be paid off by mid 09. That is always allowing for a moderate war chest to allow me some play time when needed...

Well done my friend. I was in your position a few years ago, life just gets better.

If you want a real sense of direction, knock up an excel spreadsheet, or access database and project a load of 'what if' scenarios. Your decisions will become very easy to make.

[ratewhore]

I just have a mortgage and a car loan now. Cleared off everything else last year. Doubly happy with that as I did it after getting financially buggered during my divorce...

And, according to the Virgin One mortgage shrinker, I can pay off my mortgage in three and a half years...

...apparently!!

[Mich the Tester]

I have only a small debt from a hotel bill on the credit card, which I pay off at the end of the month, and then my mortgage, which isn’t all that big; less than twice household yearly income. I’m hoping to pay it off within 7 years and then go into academia where I can accept I’ll earn less as my costs will go down.

I keep a war chest to survive at least 6 months, so I’m not really too worried.

The key thing is that if you have a big rise in your income, like when you go from permie to contractor, it's very tempting to go out and buy a big house and a posh new car; we kept the house we lived in before I started contracting and I don't regret that.

[ChimpMaster]

Debt free means clearing all debts. Of course that doesn't mean that you can survive without any income - we'll always be indebted to the government... just try not paying your council tax!

There is a motivation greater than debt freedom: financial freedom. The purpose of this is to ensure that you are generating sufficient income (without going to work per say) to pay for your everyday expenses, plus some luxuries. That way you can live without actually having to work, and can choose when to work or what to do with your free time.

Some people use debt to leverage an income to create a pseudo "financial freedom" but I don't believe in that because ... you are still in debt. For example, buying a few BTL properties and living off the surplus from rental income doesn't make you debt free.

You're at the start of this journey but in a very good position. I was into my 30s when I started and I wish I had the foresight to have got into the game far earlier (I was a bit of a dosser).

[realityhack]

I became debt-free at the end of December, and then I used my credit card again.

[Solidec]

What if your non liquid assets are greater than your cash debt?

Eg stocks and shares?

are you still technically debt free?