In the financial world there is always the goal of being debt-free. So what does that mean to you? It seems that in the world of financial blogging it means to pay off all your debts such as mortgage, loans, credit cards, etc. Is that your goal? What if I said it’s not mine?
What does debt-free mean to me? It means two things. The second is more important than the first because if you achieve the second you’ll have had to have already achieved the first. So here is how I determine being debt-free:
Make a balance sheet listing your assets and liabilities. In order to be debt-free you need your liquid assets to outweigh your liabilities. Notice that I said liquid assets. This means that under any circumstances and whenever you choose, you can take your liquid assets and pay off the liabilities instantly. The key to this is liquid assets. If your money is tied up and you can’t get to it right away it doesn’t count. Think of the worst thing in the world happening now you need access to your money right away, this second. That’s liquid money. It doesn’t necessarily mean go to the bank and take it out. I mean transfer it and it will go right then, not three days from then.
This means that yes, I plan on having debt. Yes, I plan to always have a mortgage. I will have credit cards and maybe even a loan if I choose to. However, I will manage the mortgage, loan and especially the credit cards. I want to use other people’s money. I might use some of the things from Robert Kiyosaki. I might use some of Douglas Andrews‘ teachings. I don’t ever want to rely on banks, I want to be my own bank. I’m not saying these are the perfect concepts but they can work when used right. Pieces of these concepts are great and these aren’t the only concepts I enjoy learning about, just some of them.
Many people want to discredit these concepts using averages. These concepts are not for average people using average products. They are for people who want to be successful, be the best, be well above average. In order to do so they use the best products and work with people who understand this. There are very few people like that out there unfortunately.
So then what does debt-free mean to you? The most important thing is you and your peace of mind. I’ve come to grips with mine. Have you? What is peace of mind for you? What are you goals based on your peace of mind? Don’t base your goals on what other people tell you to do. Figure out what makes you happy and what you want to be. It’s all about you.
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I guess the only thing that I really don’t agree with is always having a mortgage. I think it is crazy to keep paying the interest if you are able to pay it off! The tax benefits aren’t as great as everyone really makes them out to be. I mean it is like giving someone a buck and then just having them give you a quarter back. I don’t see the point I guess. Great post though!
I always do make a list in every purchase using my credit card. so that i am always free on debt. not totally free but it is quietly cheaper.
.-= Welfred´s last blog ..ANZ Balance Visa Credit Card =-.
Welfred:
Tracking is definitely the first step. Proper management starts with knowing where you are. Thank you for the comment
Nate:
The reason I mention having a mortgage is not just for the tax benefits but how else can you use 3,4 or $500,000 of other people’s money? The interest can be a small price to pay for liquidy, use and control. it doens’t hurt if you can earn equal or better rate of return. Thank you for your thoughts and comments.
E of W
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