DEBT FREEDOM...how many see it as the first step to SS?

[enjoy the ride]

I just got a notice from my credit card company that due to the rising cost of doing business, they would not allow the interest on the card I hold to drop below 6%. Previously the rate was tired to the prime,
This was supposed to be a change for all their cards although I can't see why this is true except to make up for bad debt caused by people not paying on their debts.
I don't carry debt on the card and never have. It just is worrisome to me that they feel that competition will not hurt them if they take this move.

Being debt free is a relief but still no guarentee of SS. I believe it takes people like Beekissed's parents, with the drive to do that much hard work for their whole lives. And some luck too- I know one family that was building their own house when the husband fell off the ladder and broke both arms. The medical bills and the years it took to get him back to finishing the house was a real set back. If his wife hadn't been employed, they would have probably lost their land. I also talked to another man who did lose his land due to a broken leg that needed surgeries and years to heal.

I really feel the tension between wanting (a wood stove) and not being able to get the money together (so far, it has all disappeared just when I thought I was there.) I keep telling myself that I do not NEED this -it just would make me feel more secure. I just might need it at some point.

I feel like those old kid's cartoons with a devil on one shoulder saying do it and an angel on the other saying resist.



Added: It just occured to me that I heard about a new credit card regulation that restricted increasing the per centage charged on a balance- I wonder if that is why it went up. If they can't raise the interest rate, maybe the goal is to set it high enough right at the beginning?????

 

[Zenbirder]

Some thoughts for those of us planning and dreaming of greater SS:

Being off grid technically means to not be hooked up to the power lines. I have met a few people in our part of the country who have had a romantic, but mostly poverty driven notion to go off grid. They can buy land in desolate areas here for around $200 an acre. People live in a trailer. If they have enough money they build a very small home, usually straw bale, adobe or the like. When the land is cheep like that there is no water, so they haul water. That makes gardening nearly impossible on any scale. They have no electricity because they are too poor to afford a system to generate their own, that is why they are off grid. Most people either eventually have a medical emergency, or just get tired of the poverty and the extreme hard work. They move back to town and get jobs and are back to renting. This is just my observations.

There are many other people I have met here who accomplish a wonderful life moving toward SS and generating their own power. In today's economics, it does not make sense for most people to go off grid when they generate their own power unless you have property that is too remote for electrical service. In our area if you want to generate your own electricity, as we do, the power companies pay you to do so. It is a part of government regulations that make the power companies generate some of the enegy from renewable sources. You can unhook from the system at any time by throwing a switch. Also the cost and technology of battery systems has a long way to improve.

My point in this rambling is to clarify "off-grid", which can mean either no electricity or making your own electricity but not being connected to the power lines.

Personally I don't want a life with no power, it would be much too hard, hard even to earn enough money for taxes even if you could grow enough to feed yourself. I do long, however, to be able to be self sufficient in generating the power that we consume. I also understand that the economics for us means we will not be off-grid.

 

[DrakeMaiden]

I enjoyed catching up on what you all have said since I've last stopped in.

Here is how I look at the "pay your mortgage in 2 1/2 years" bit: While it is nice to pay your mortgage off in a short period of time I don't think it is 1. practical for most mortgage holders and 2. worthwhile at this point in time. The nice thing about a traditional mortgage is that your payments are a set amount. Over time that amount becomes a smaller burden, due to inflation and (with any luck) salary increases over the years. When there is monetary inflation, debts can become much less of a burden, but only if you have reason to believe your income may increase with inflation. If not, then I'm not sure what to say, because the cost of everything (food, shelter) is going to continue to eat away at your set income and the more you throw at your mortgage, the less you will have to feed yourself at the end of the day.

Edited to add: Some mortgages do not allow you to pay early. Check your paperwork and see. If they don't incur a fee if you pay early, you may consider just paying a little extra with every payment. Then, if things get rough, you can fall back on the lower (required) payment.

 

[dacjohns]

I have not read the posts in this thread yet but I have been pondering the question.


I do.



Enough said? I didn't think so.

Keep in mind that self sufficiency is a philosophy and a lifestyle and next to impossible to fully achieve.

As long as you are in debt you are not self sufficient. You are tied to many variables and subject to unforeseen happenings. Look at the current state of the economy. What happens if the breadwinner loses the job that provides the family income? You now become even more dependant. Where is your food going to come from? Even if you have a supply of food will it last long enough? Is your house paid for? Will you lose your house? What about your transportation? How will utilities be paid?

If you are living within your means this shouldn't be a problem. If you are in debt whether for a home or consumer credit then you have to decide which bills get paid out of your savings. (Darn, just lost my train of thought).

Basically, if you are in debt then you are not self sufficient because someone else has claim on what you have are you are subject to that debt being called.



This isn't very well written but I hope you catch the gist of what I am trying to say.

 

[dacjohns]

I saw some home equity loan posts.

We had a home equity loan that was taken out to buy a tractor and put in our pond. We had to make the interest payments and we were good to go. (Nothing like a way for the bank to keep earning money.) The interest was tied to the prime interest rate so for a while our minimum payment kept going up. When we sold our place in New Mexico we were able to pay of the home equity loan plus the property loan. It was good to have those debts off of our shoulders.

The home equity loan seemed like the right thing to do at the time but it was a millstone around our necks. In retrospect it wasn't such a good idea and we would not recommend anyone take one out.

 

[dacjohns]

It sounds like a tempting idea on paper, but

I'm with you poppycat - That is a very big "but". (no pun intended)
I am not sure that living completely off grid in the backwoods would be feasible in todays USA society. At least not for one family alone. The amount of work involved to live that life would be tremendous. You would definately not be able to have a job because all your time would be spent trying to survive. Back in the day when people did live like that, they depended on neighbors and friends for help and they were not taxed to death. I don't think you would get that kind of help today. If you owned enough land to survive on you would have to make major income from it in order to just pay the taxes. To make that income you would not only have to produce enough for yourself, but to sell. Then you are back to... you need money for fuel to get your stuff to market which will require a vehicle which requires a tag and insurance and upkeep.
And round and round you go....were you stop, nobody knows.

So yes "It looks good on paper" BUT

Agreed.

Self sufficiency is a lifestyle that take a lot of time. Now that I am working full time the time needed for the lifestyle I would like to live is not available. There aren't enough hours in the weekend and not enough daylight during the week. I only see my chickens on weekends.

It can be a wicked circle. We bought another car because I had a job and my wife had to go to town for church responsibilities. Now I have to keep the job to pay for the car.

 

[dacjohns]

What an awesome discussion.

 

[PamsPride]

yea this ad for paying off the mortgage fast wasn't a debt consolidation deal place.

it was a "proven system" from some guy making money off selling you his "system"---LOL---you know

I always wonder when I hear about "their systems" if they truly work but I dont' want to spend money to find out..HA HA HA

If it is the one I am thinking about I understand the system...not sure if I can fully explain it though. I will try....and it is NOT something for me.

The idea is that you use your home equity line of credit (HELOC). Say you have a $10K open line of credit on it. Take out the whole $10K and put it on your morgage. Then have your paycheck automatically deposited into the account because the HELOC goes on your average daily balance....so you pay less interest on a daily basis. Then as you get that $10K balance paid down....you can not have it go into the positive...it is a loan...then you cash it out for the $10K again and put it on your morgage again. And you continue to pay your morgage as you normally would. You use your HELOC just like you would a checking account.
Your morgage is ammorized so if you put $10K a year on it then that knocks down your morgage considerable making more go toward principle and less toward interest.
It only works if you actually make more than you spend and you do not use the HELOC on other things because you are using it as your checking account...so if you are down to oweing $8K you don't go getting a big screen tv because there is $2K credit open.

Does that make sense??


A math example
Morgage $70K
HELOC $10K

Put $10K on morgage...now owe $60K on morgage.
Paycheck $2K deposited on the HELOC in the month.
Spend $1500 on living expenses that month.

Now owe $9500 on HELOC and $60K morgage...and pay regular interest and principle on $60K instead of $70K (Which means more toward principle)

Next month Owe $9500 on HELOC
Paycheck $2K deposited on the HELOC in the month.
Spend $1500 on living expenses that month.
Now you owe $9K on HELOC.

ECT ECT ECT....

Several months later...you owe $500 on HELOC....Have to 'cash out' the entire HELOC again before the $2K paycheck is deposited to keep the HELOC from going positive. Put the $9500 on your morgage. Owe $10K on the HELOC again. Owe less than $50K on morgage now. Probably more like $43-45K. Because more $$ went toward principle that entire year with your regular payments.


If you use a morgage ammorization calculator it will show you how much sooner you can pay off your morgage if you were to make a one time a year $10K principle payment. If you did that 3 times on top of making regular payments it would make a huge difference on your morgage prepayment schedule.

So, if it is the gimmick that I am thinking of this is how it works. Hope I explained it good enough.

 

[FarmerChick]

that is super interesting....my problem right off the bat, I do not have the discipline to handle this situation.

I had a home equity loan....stupidest thing I ever did.....took forever to pay it off!!!!! and when I did I swore I would never do it again.............but for someone who is disciplined...you would be crazy not to do this. Me, no way, cause I know me, I would be in debt all over the place then..HA HA

thanks so much for typing that out.

 

[FarmerChick]

We had a home equity loan that was taken out to buy a tractor and put in our pond.


***Dacs, hmmmm...seems like a waste to put that new tractor in your pond? A new fish castle? LOL-LOL====