*This post may contain affiliate links, please see my disclosure
As I was getting ready for bed the other night, I was lamenting to my wife how tired I was, but how I wanted to write something epic for this here blog. I started a few posts, but couldn’t bring myself to finish them because my heart was not in it. I wanted to write something to get people thinking, to get them to change the way they look at the world. But was I even capable of thinking outside the box? I was getting stuck in my own head, when my wife offered a suggestion.
“What if we never borrowed money? Like, ever?”
At first, the idea just kind of bounced off my head like a pass off a 49ers wide receiver (zing!). But as I let it marinate more, it started to intrigue me to think about all the life implications of never choosing to use debt as a tool to get anything. Would life be any different? What would be awesome about it? What would suck?
But let’s do something fun here. Let’s tell this story backwards, and then move forward to see the two completely different paths I had the option to choose. Ready?
My Life With Debt
Age 27. Current Debt
Now, I define debt as money borrowed for a purchase. Which means I would need to lump in credit cards with all my other debt, because I’m borrowing someone else’s purchase power only to pay them back later. I don’t keep a balance on my cards. Ever. I have 10 credit cards open right now. I pilfer them for the awesome rewards, and travel for free on vacations and trips. We have gone on a few free vacations this year already, with some bigger ones coming up in a year. And I thoroughly enjoy not paying a cent for those, because honestly, we couldn’t afford it otherwise!
We have student loan debt of just under $10,000. We have been chipping away at this debt for about four years, including a $3,000 chunk just recently. It has been a thorn in our side, but did allow Michelle to get a 4-year degree at a private college.
We have a very large mortgage (can’t share the details just yet, though you could probably deduce it searching around a bit). It’s about half our monthly income with all the taxes, insurance and PMI. We were underwater until about 6 months ago, and price has been steadily rising since. We love our home, and wouldn’t trade it for anything. No regrets in buying our home.
Age 24. New House.
It was an awesome year. We have been scrimping and savings and had been searching for a few months for our first home. We put the debt payoff on hold, and wanted to get ourselves into a house. We didn’t want to expand our family in an apartment, plus the market had gone WAY down, so we were surely at the bottom, and it was time to just on these great deals! When we finally decided to go out and look at houses, we bought one that day. Low down payment and HUGE mortgage. But we could swing it, and were pretty excited about it.
We also still had about $19,000 in student loans left at this time. We wanted to kill them quickly, but the house became a priority, and these were put on the backburner.
Age 23. Marriage.
We got married on August 2nd, 2008, and it was pretty awesome. Well, except that I was sick the entire time, and had puked my guts out the night before and didn’t sleep. I also got other people sick with this terrible bug. So I barely made it through the wedding. BUT, we were then married, and moved away from family down to Oregon so Michelle could finish up her senior year of college. And getting married was exciting because we finally got to combine our finances, and our DEBT!
I had saved some of my inheritance money and also saved like CRAZY to pay for half our wedding. But we ended up borrowing from a friend about $3,000 to pay for the rest of it. But our honeymoon (about $3,800) was put on a no-interest credit card because I knew I was getting some more inheritance at age 23. So we have $8,300 in personal debt to pay off. And here’s the funny part. We had the money to pay off about half of it, but since I knew we had money coming in, I left it there until we received the money. And this was AFTER I listened to Dave Ramsey! Obviously, it took a while to sink in.
Age 21. Dating.
Michelle and I started dating on March 31st, 2005. We ended up dating long distance when she moved 200 miles south to go to college. During the summers back, she would get summer jobs. After her 2nd year of college, her summer job was at the Nordstrom eBar making really “rich” people coffee. It was a joyous job filled with very kind people and no complaints….. But one of the perks of the job was that she got a 20% discount on Nordstrom clothing. Since Michelle didn’t want to mess with employee purchases, she just got the store card that had her employee number on it, making the 20% off transactions much easier.
She ended up running up a balance on the card, because what 20-year-old woman working at Nordstrom wouldn’t?! It wasn’t much, but the balance was left on there throughout the next year, until we got engaged, and started chatting about finances a bit more. I had learned at a young age (18) that credit card interest was ridiculous, so I said she should pay it off ASAP. She did end of paying it off, and we cancelled it shortly after marriage.
I also joined an Arts school to get a degree, but only paid for half of it, because I didn’t want to lose that much cash at once. I borrowed the rest and had about $16,000 in student loans. UGH! I ended up paying them all off when we got married and I received an inheritance. But not after paying a chunk of interest on them.
Age 18. Young and Dumb.
Everyone knows about my ridiculous story of blowing through $100,000 before turning 21. And all of that money was deposited into my account just after turning 18 years old. BAD IDEA. But, soon after, I also applied for my first credit card, because I wanted to build credit for some reason (not to buy a house, but because it’s what people do). The card limit was only $500, so at least I couldn’t get into trouble and blow a lot of money……..oh wait…
I charged most small purchases on there, and would pay it off every few weeks so as not to hit the limit. But I do remember the first time I missed a payment, and got charge something like 18% interest. I WAS APPALLED. I vowed never again to pay credit card interest, because it was straight up theft! But that credit card was the beginning of my life of borrowing money.
My Life Without Debt
Age 18. Young and A Little Smart(er).
I had just received $100,000 and deposited it in CD’s and several savings accounts. I wasn’t sure what I’d do with it, but I would eventually blow through it all because that’s what an 18-year-old with no financial training does! As I finished depositing all of my money, the kind teller asked me to sign up for a starter credit card. She said it would be great for building credit. I thought about it for a minute, but politely declined. Little did I know that would be the start of a different life.
I vowed from that day forward to never borrow money. Ever.
Age 21. Dating.
Michelle and I started dating on March 31st, 2005. We ended up dating long distance when she moved 200 miles south to go to college. During the summers back, she would get summer jobs. After her 2nd year of college, her summer job was at the Nordstrom eBar making really “rich” people coffee. It was a joyous job filled with very kind people and no complaints….. But one of the perks of the job was that she got a 20% discount on Nordstrom clothing. She thought about getting the store card to make the purchases easier, but decided not to.
She ended making a few purchases at Nordstrom for the good discount, but didn’t have much extra to spend, and decided to save some money instead. She saved up about $500, and put it away in a savings account as an emergency fund. After all, if something happened, she wouldn’t be borrowing money to fix it, because she didn’t’ believe in borrowing money. Ever.
I also joined an Arts school to get a degree, and paid for all of it in cash. W00t! I’m glad that I paid it all at once, because I hate interest, and wouldn’t even consider student loans. Those are for suckers!
Age 23. Marriage.
We got married on August 2nd, 2008, and it was pretty awesome. Well, except that I was sick the entire time, and had puked my guts out the night before and didn’t sleep. I also got other people sick with this terrible bug. So I barely made it through the wedding. BUT, we were then married, and moved away from family down to Oregon so Michelle could finish up her senior year of college. And getting married was exciting because we finally got to combine our finances!
I had saved some of my inheritance money and also saved like CRAZY to pay for our wedding. We ended up only spending about $6,000, and decided against the videographer and coffee cart for the guests. We paid cold, hard cash for it, and felt great about it. Though I was getting inheritance in a few months, I wanted to make sure we didn’t borrow ANY money. We were going to have an awesome honeymoon in Jamaica, but the wedding had drained our cash flow. So we decided to wait a few months until we had the cash on hand to book the flights and hotel. It was a bummer to have no vacation straight away, but we vowed never to borrow money. Ever. And now that we had discovered Dave Ramsey, we’re were totally sold. Time to cut up every credit card we lay our eyes on!!!
Age 25. No House.
I had my Arts degree, and Michelle had received her 4-year degree from an in-state school. We saved a bundle by keeping it in-state instead of an out of state private college that she had been looking at. Both our schools were paid for in cash, and we felt very proud to have no debt out of school. Since we didn’t have to tackle any debt, we started saving for a home we eventually wanted to buy. We had about $30,000 saved up (including the last of the inheritance), and only needed another $200,000 or so more to get something in the location we liked. But we were determined to never to borrow money. Ever.
Age 27. Current Savings.
Today, we’re still doing what we were doing 3 years ago, saving for a home. With our lower cost of living, we are able to save about $1,000 a month. So we have about $60,000 saved up (plus earnings). We’ve scrimped and saved as much as possible, but it look like we’ll be renting for another 10 years or so until we can afford a home. Except, by then, the amount of house we can afford will be MUCH less, what with inflation and all. We’ll probably just accept that buying a home in today’s market is just impossible, and be apartment dwellers for life. I kinda now wish we would have never vowed to NOT borrow money, ever. Feeling a bit depressed about it. The only thing that cheers me up is that our net worth is more now than it would have been had we been debtors.
And since we save so much money, we don’t go on trips much. And watching everyone else benefit from credit card churning left a bitter taste in our mouths. Why do these debt-lovers get to enjoy all the free bonuses with all their borrowing and junk? Lame-sauce. Can’t we get some rewards for using money THE RIGHT WAY? Whatever, they can keep their free vacations!
I’m not really sure what to take away of this. I just kind of followed it as I was writing, but it seems like borrowing hasn’t been too detrimental, except that we’re a little bit behind in net worth where we could be. BUT, to think about how much money has disappeared to interest payments, that would definitely be a game-changer to look at that number. With the mortgage and all, I bet it’s CRAZY cash money. I kind of don’t want to figure that out. Actually, I’ll do it soon, but in another post so you can marinate on this one for a while.
What Do You Think?
Life didn’t look too much different without borrowing, except that we couldn’t buy a house or benefit from credit card rewards. Mostly, not owning a house would be the biggest bummer I think. Though I know we could rent one for a large chunk of change, I don’t think we would because our savings rate would cut in half and we’d NEVER own a home at that rate. Obviously there are a BILLION different factors that could have changed our “no debt” story in drastic ways, but I wanted to keep the story true to the original, just removing the debt.
So what do you think? Have you ever thought about what it would look like if you never borrowed money ever? Would life be better or worse in the end? I’d love to hear how your stories would change!
31 thoughts on “What If I Never Borrowed Money Ever?”
Besides credit cards, which as you say are technically debt even if you pay them off in full every month, I haven’t borrowed money for anything. But we absolutely plan on taking out a mortgage and thought about financing a vehicle if we could get a good enough rate. Though going the no-debt route for your entire life would certainly be better than racking up tons of debt, I think you can really do best with a balance. Debt can be very helpful when used correctly, as you guys are taking advantage of with all of the credit card rewards. But if you can’t manage it responsibly, then it’s probably better to avoid it.
I think my rule still stands after exploring this topic: “Only borrow on appreciating assets”. Well, that and credit card rewards 🙂
Very thought provoking! I think one of the major differences in the “no debt ever” stance is the day-to-day decisions. Maybe you’re saving $1,000/month now, but in the “no debt” scenario you’re more conservative in your budgeting and can save $1,200/month, etc. It’s very hard to predict! Great post though.
I may have a separate post on that. Your mindset definitely changes when debt is not an option, and you make different, more frugal choices (from my experience).
Your story would be very different if it was a no debt no inheritance story. If my wife wrote one she would have not made it to college likely. We are still working on her loans and we do hate them but they were worth it in the long run. I am betting they doubled her income.
Sounds like the debt did payoff. But I question whether I’m going to encourage my kids to borrow or not…
If I never borrowed money. My life would be completely different. I probably wouldn’t have been able to graduate so quickly, and it would have been very hard to pay rent while also paying tuition. I also wouldn’t have been able to buy my house.
It’s weird to think about the downsides of avoiding debt, huh?
Interesting comparison. I think you did the right thing by buying a house a few years ago. I wish I could say the same. We were in a pretty good position about 3 years ago, but still a little scared to make the jump. Now I’m kicking myself since homes have risen 30% in the past 6-months! So dumb!
Well, the market did crash quite a bit more afterwards, so I was kicking myself. But now we’ve got like $25k equity, so feels good. But don’t buy unless your 100% sure, sounds like you weren’t 🙂
Very interesting perspective! For me, I wish I could have never borrowed money and I wish my hubby hadn’t either. Yes, we got on the property ladder but without consumer debt, it would have been easier. We probably wouldn’t have moved house and stayed in a smaller home. But I think I would have been happier overall if we never borrowed – but saying that, if I didn’t have debt, I probably wouldn’t be so clear now on what I do and don’t want/need to spend my money on if that makes any sense!
I think the takeaway is that we probably would have not had ANY consumer debt, but definitely would have borrowed for a house again. The student loans were not worth it, IMHO. Well, that, and we love credit card rewards 🙂
Credit card rewards are NOT free! Studies have been done that those who pay with credit cards average 33% higher spending than those who pay with cash. Credit card companies are not stupid … those merchant fees make them rich and they can afford to toss a few “rewards” back. There’s a mental mindset by credit card users that they are not spending real money, but they are — yes, ask David Ramsey!
Having written that, and being 70 years old with a lot of experience (good and bad), I choose to purchase with cash prepaid gift Mastercards (you could also use Visas) at $500 each and use them. There’s something very protective about monitoring the declining balances on paper, and I really do spend less than if I pulled credit cards every time. Best thing is, never a bill! (And, if I buy the gift cards at the right supermarket, I get a “reward” each time in supermarket points that exceeds card fees.) I average one of them per month. Especially valuable during Covid instead of handling bills and coins.
But, you still need a credit card to rent a car on vacation. Those agencies don’t want cash; they want MY credit limit as “security” … I just pay it off in full immediately afterwards.
There’s not a whole lot of money that we regret borrowing, perhaps some student loan money that I didn’t need, but was still able to pay back pretty quickly. Most of the most we borrowed went into investments that we thought were good for us and we’ve so far been mostly proven right and have a low mortgage and that’s it these days. We wouldn’t have been able to invest as much in the depth of the recession had we not borrowed, and would have missed out on some amazon real estate deals.
Borrowing for appreciating assets is the only way I want to borrow ever again. You could argue student loans for an education is an appreciating asset, but most anything else is not.
This may make me rethink my no student loan policy for grad school
It’s a toss up. I think you should approach grad school as if you couldn’t borrow, and that can help narrow down the choices for schooling and schedule, but don’t just quit because you’re $5,000 short or something, you should borrow for that. Student loans are a tricky one. For us, they weren’t worth it, but for other situations, they might be.
I definitely have thought of it, but then realized that there isn’t anything I can do about it now. Yes, it is nice to think about, but that just gets me a little upset at myself and there is no time for that.
It’s interesting that never having debt wouldn’t have made much difference. Even those who are generally against debt usually make an exception for a mortgage.
Yeah, I think the rule of thumb is that it’s ok if you can make money from it. Though people borrow for cars, and that’s ridiculous!
Spouse and I both borrowed $ for undergrad and grad school. Absolutely no regrets about that. We also moved “up” in house quite a bit when our kids were still young. Took out a nice little mortgage on that, but, again no regrets. Our old neighborhood was starting to be taken over by gang bangers so we moved into the best school district in our area. It’s been great and we’re really pushing to get this mortgage paid off in another 2 years. (fingers crossed)!
I wouldn’t have borrowed for my schooling because I didn’t have to. My wife had grants and assistance that would have fully paid for an in-state school, but she went out-of-state private, and we pulled out a total of $24,000. There’s a whole debate around whether it was worth it because she only worked for two years before changing jobs to be a stay-at-home mommy, but that’s a different can o’ worms.
Had I been smarter, I would have gotten and 4 year transfer from a community college. But I was dumb. And got an Arts degree. 🙂
Grad school is a whole other animal, and I would probably borrow for that if I had it planned out well and could pay it off quickly (i.e. 3 years or less) after graduation.
To me, it is so crazy to think that if you have no money borrowed (and no credit history), it is a bad thing. It makes sense in determining whether you’ll be a good payer, but shouldn’t that be a great thing if you didn’t have to borrow money from anyone, ever?! I do get it, but it’s still bizarre.
Credit is crazy. I honestly think if no one borrowed, prices would reset to affordable levels, and people could actually save money and purchase things like a car and a house. But nope, artificially high prices due to 30-year mortgage and debt.
Although I have no debt except for a small mortgage and car loan, I believe in debt. Not all kinds of debt, but low interest debt is important. I used mortgages to leverage my down payments for investments. I made a lot of money by doing that!I am making money now by using a low interest (1.99%) loan to buy my car. I have the money working for me in the stock market and making much more than the 1.99%.
Low interest debt on appreciating assets is where I borrow. Cars….I’m not really into that because of depreciation.
This is a great comparison. Sometimes in life, debt (managed properly) is the smart financial decision. The important thing is knowing when the debt is helpful to your long-term goals and when it will hinder.
Yup! Understanding borrowing is VERY important, just as is understanding WHAT you are borrowing money for!