Alpha Consumer

How to Live Absolutely Debt-Free

June 8, 2009 RSS Feed Print

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With so many stories out there about 20 and 30-somethings drowning in credit card and student loan debt, I set out to find someone who was entirely debt-free. I succeeded: Gregory Go, 31, cofounder of the personal finance site Wise Bread, has carried no debt whatsoever since paying off $10,000 in credit card debt in his early 20s. (That debt came from funding his college living expenses.)

Sure, he's made some sacrifices: He lives with a roommate outside of Los Angeles, drives a 15-year-old Honda Civic, and lounges on 20-year-old couches. But he wouldn't have it any other way. He's been able to fund his entrepreneurial efforts by working hard in his 20s and then generating enough savings so he could start up Wise Bread without taking on debt. Even though he's thought about buying a house, at this point he says he'd rather invest money in his business than take on debt for a home. "If I have to sink thousands of dollars into something, I'd rather it be my business, but I hope in a couple years I can have both," says Go.

Plus, it's not like he's living the life of a monk. He splurged on a huge 50-inch television so he can watch Lakers games in HD. To save money on his social life, he invites friends over for potlucks and game nights.

Go credits his parents with teaching him the value of money. As immigrants from the Philippines, they scrimped and stayed with relatives while they built their lives. They still took Go and his sister to musicals and concerts, by sitting in the back or getting half-price tickets. "I also have a memory of being in the upper upper balcony (in the last rows) watching RENT and Miss Saigon," recalls Go.

Great memories don't have to be expensive.

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soundtracks of AL 7:18AM July 17, 2009

The principle is to never spend more than your income. There are many examples today of the super rich that spent more than their income and are now broke or in jail. The idea that if you can make a million dollars a day you will never have any financial problems is a myth if you spend a million and one dollar a day. That leaves you broke and in debt.
That's the theory, but more reality is credit card misuse: Credit cards are convenient substitutes for your check book--but not for loans. If you don't have the money in the bank, don't write the check and don't use the credit card. It's that simple.
But what about a home or auto or college? If your income can afford a $50,000 home, don't sign up for a half million dollar home. Same for autos. A good one or two year old mechanic checked out auto is a far better buy for transportation than a new one. College? If mom & dad aren't affluent, many of the most successful people have worked to pay tuition, even if they had to take longer to graduate.
There is no law that says life has to be easy, but doing what is most likely possible works best for most of us and ends up being more satisfying than trying to live behond our means and hoping for some unlikely windfall to bail us out when we get in debt over our heads.

HillbillyBill of TN 6:55AM June 09, 2009

Many of us years ago also had an aversion to paying personal interest, UNTIL we hit the housing bubble (now bursted or bursting). For a few year there, the game was to borrow as much as possible on a mortgage, because, "Hey, the house is going up in value at a rate greater than the interest payments", and "Hey, houses ALWAYS go up, right?"
Well, times change.

Muser of NM 4:23PM June 08, 2009