The myth of the debt-free lifestyle?

Living Almost Large recently asked some questions about cash equalling affordability. The post is mainly about whether or not we can really afford something just because we can pay cash for it. I guess we are really talking about 1) the opportunity cost of putting, say, $50,000 into a car, instead of paying $15-20K and investing the rest; and 2) whether or not we can afford the add-ons that go along with that more expensive item (eg more expensive parts and repairs + extra fuel etc).

I guess this is really relevant for me because only over this past year of paying off debt have I really realised how much work is ahead of me, financially speaking, above and beyond the debt. I agree with LAL that you read PF books and you start dreaming of all the money you’ll have when your debts are gone. But the reality is that the money may:

  • be used to repair/replace things that you may have let run down while aggressively paying off debt eg you might buy a more reliable car that you then must be able to afford to service more often than your old dodgy one;
  • be used to buy the wants and needs you went without of when you were aggressively paying down debt
  • third and most importantly, be used for advancing your financial wellbeing

On that third point, I think I did get a bit down when I realised that even when I start working full-time, we would still be struggling to do all the things we knew we should financially. We will be saving for a home, saving an emergency fund, trying to boost our retirement accounts and investing a small monthly amount in a managed fund. It doesn’t leave much to kick up our heels, let me tell you (I’ve already done the maths).

I guess I am lucky that I can expect my wage to rise a fair bit annually, so after the first year or two of doing this we will have a little more room to breathe. I won’t rush to boost up all these categories with each pay rise either, because I think the important thing is for us to start ASAP, even if it isn’t that much that we put away each month.

I guess I’m saying that I agree. It does seem like you decide to get debt-free for one reason, and then you really get serious about your situation and realise that you actually aren’t even close yet. It does seem that there is no real `pay-off’ for being debt-free. But there is. It’s peace of mind. It’s just hard to remember that when you can see such a lot of work stretching forward and you’re still paying off the canoe you used twice in 2005!




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