The Deliberate Owl

Everyone told me buying a house would be complicated. Closing on a house was supposed to be an hours-long event with a binder filled with legal documents to sign. But when I showed up, I only had to sign two pieces of paper, both relating to the title search. They handed me the keys to the house, and I walked out 5 minutes later.

How was the process so fast? I'd sent the full amount as a wire transfer the day before.

Debt has become a foundational aspect of the modern economy. Between student loans, car payments, the phone payments rolled into everyone's cellphone bills, a mortgage, and credit card bills, it's quite common for those of my generation to have a negative net worth. And it's no problem, right? If you can borrow cheaply and live large today, then it's a no-brainer!

Well, maybe not.

First, purchasing with debt leads to overspending. Because the price is deferred, you don't feel the cost as much and so you buy more than you otherwise would. This can make it very difficult to maintain any kind of budget.

Second, debt limits your freedom. When you need $2500 a month just to cover debt payments, it drastically limits your job mobility. Losing or changing jobs becomes dramatically more risky. You become fragile. If disaster strikes, you'll burn through your savings, default on your debt, and destroy your credit. So you tend to avoid risky opportunities and long-distance moves in favor of staying where you are.

And third, there's a psychological aspect, a stressful crushing weight on your shoulders. Debt may feel so normal to you that you don't notice it, but when that weight is gone, it feels like breathing fresh mountain air after being inside all day.

Chronic debt is NOT normal. It's a modern invention. It's also not freeing.

Debt-free is freeing

As a family with two kids and a third on the way, we comfortably live off $20k/year—anything above that goes into savings. But we're not poor! We live in a nice three-bedroom home from the late ‘70s with a small yard (complete with garden and lawn), and hardwood floors. We have locally-made rustic wood furniture adorning our kitchen and living room. I drive a 2011 F-150. We eat healthy food. We have healthcare.

In short, we have everything we need.

How do we do it?

Everything is already paid for. Every single thing. No mortgage. No rent. No car payment. No student loans. Our biggest budget line item is food, followed by utilities.

Here's a few ways we keep our costs down:

• If we don't have the cash for something, we don't buy it. No credit cards!
• When we do need to make a significant purchase, we save up, determine the minimum we need, and buy high quality; the “buy once cry once” approach
• We rarely eat out—a couple times a year at most. A restaurant meal is expensive! So we cook everything at home.
• We avoid processed foods whenever we can; they're both expensive and unhealthy.
• We buy cheap and generic. We buy what's on sale and in season, and cook with that; Jacqueline is an expert at cooking unusual and delicious meals with sets of random ingredients.
• We don't buy alcohol often. When we do, it's for a social event.
• We buy most of our clothing, kids' toys, and furniture (except the fancy stuff that guests see) from thrift stores. It looks new, but at 1/10th the price! We patch and repair what we can, and use things until they're well and truly done.
• Kids don't have to be expensive. We don't buy expensive baby food. We get second-hand clothes and avoid cheap plastic toys—plastic breaks, but wood toys last forever! Plus, our kids love playing outside with naturally occuring toys: sticks, buckets of mud, bugs.
• We rarely spend money “on us.” We don't need the latest phone, the best laptop, or a vacation at a 5-star resort to be happy. We enjoy seeing how long we can get by with what we have, and we prefer family outings that involve state parks and kayaking rather than movie theaters and theme parks.

Can't buy me love

When we lived in Boston and Jacqueline was in school, our combined incomes were never above $80k/year. We lived on nothing back then, preferring to put the majority of our income in a mutual fund. When we moved to Idaho, we finished off the student loans that were on deferral and had $270k left. I got to buy a house with a wire transfer! The closing process took about five minutes because no bank was involved.

When we moved, the software business I had started in Boston became our only source of income. We actually lived off $20k/yr for a while as I got the business ramped up. Our income has improved since then, and we've upped our standard of living a bit, but our frugal habits are deeply ingrained.

And you know what? We're happier than most people are. I have a dream job working from home and we spend a lot of time together as a family. None of this would be possible if we lived a normal debt-driven materialistic life.

Happiness comes from being family-centric, having strong relationships, and knowing your purpose in the world. So stop trying to buy happiness with money, get rid of your debt, and embrace freedom.