The following guest post was written by CPF reader Amy Sullivan.
We live in a country resounding “Instant Gratification!” as its lifestyle cadence call. But despite the fact debt has become a badge of the American dream, some folks are going back to saving money and paying for big-ticket items with cash. With this new concept, there is no debt, there is no minimum payment due…but there is a lingering question – is it worth it?
Put debt into perspective
My husband and I decided to sell our home and severely live below our means to save 75% of our six-figure household income. In less than 10 years, we hope to pay for our next house with cash. Why?
First, the Bible is clear on debt — “The borrower is slave to the lender,” Pro. 22:7. We did not want to live outside of God’s Word.
Second, much of America is obligated to work at least 30 years (the most popular term for a mortgage loan) to pay off their home – often the biggest debt they incur. So they punch in their 9-5 continuously while life passes them by. We did not want our life decisions (where we live, vacation time, sick time, etc.) to become dictated by jobs.
Is it worth it?
Americans are caught up in appearances. Ask any person what they think a millionaire looks like and they’ll likely explain a person with posh appeal and expensive possessions. I passed a woman at a mall who I overheard saying “Well, she doesn’t look rich.” My husband was talking to a co-worker who said “I saw so-and-so driving a such-and-such. He must being doing good!”
Because we plan to pay cash for our house, my husband and I worked to “get over ourselves.” We had to:
- Be OK with renting an apartment
- Be content driving our outdated, rusty-but-trusty Toyota
- Be creative with our wardrobe
- Find free ways to bide our time
- Stop shopping retail, start shopping discount
- Start eating simple at home…a lot
To not bend your beliefs or lifestyle to satisfy other peoples’ view frees you to focus on your goal.
You have the freedom to say no
Part of saving money is knowing when and how to spend it. Outside of our expenses (which included rent, utilities and groceries), my husband and I had additional money we could either put in savings or spend. To decide, we ask ourselves three questions:
- Is it a “thing” or an “experience”? Experiences are worth more than an item you will eventually lose interest in and sell online for half the price.
- Is it necessary? Decide if you can live without this item or experience or if it is absolutely essential (ex: flying home for a sibling’s wedding).
- Can it be bought for cheaper? If the price tag is hefty, try to bargain with friends, put an ad online or check out discount sites.
Especially with requests from family and friends, these questions help make saying yes or no easier and less emotional because there is logic to back it up.
You don’t have to waste time counting pennies
Aside from the obvious “stop using your credit card” and “pay off your balances,” you have to allocate your money. Many families devise budgets – little pools of money they can pull from to pay for certain items. They may even put “savings” into their plan. However, what do you think is the first to suffer when they overspend in another category or have an unseen emergency? What category do you think is the last to increase in “pool size”?
Instead of categorizing savings, know how much you will be able to save each month and automatically transfer the amount into your savings. Making savings automatic doesn’t even give you a chance to waver on saving your desired amount. Then you just live on the rest. It’s a lot easier than punching budget numbers every month.
You reap lots of rewards in the process
Our goal is to save enough money to buy a house with cash within 10 years. But that doesn’t mean we have to wait 10 years to feel any reward from living this lifestyle.
Turning from debt pours blessings on you and your family:
- You are pleasing God by not being slave to the lender.
- You feel less pressure to get a higher paying job to support your lifestyle. There is more flexibility if your wife wants to stay at home to raise your children or if you want to switch careers.
- You have less stress when it comes time to pay bills.
- You get enjoyment from seeing your savings account balance rise every month.
- You enjoy the company of others instead of worrying what they think of you.
- You come to realize what possessions you truly do and do not need.
You can get away from discouragement
Discouragement can derail your goals. But before you take out a loan, consider two things:
- The feeling you will have once you have the debt
- The feeling you will have if you save the money and pay for your big-ticket item with cash. Usually one of these feelings will prevent you from acting.
Your ROI will be great
Remember instant gratification, while the popular cry of Americans today, often leaves you chained to your desk, unhappy, dissatisfied. Delayed gratification, however, is a little investment with a big return. What a novel idea.
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Thanks for this reminder! I recently resolved to be content in my apartment until ALL my debts are cleared. This means I probably won’t be taking advantage of the extended tax credit for first time home buyers (I’ve read some interesting articles that indicated mathmatically they may be a good thing anyway).
Delayed gratification is definitely worth it!
Kita
I really wish you well.
Here is my concern with your plan. If you are able to save 75% of your income, after paying rent and eating, I’d imagine that you’d have been able to aggressively accelerate the payment on the mortgage of the house you lived in, and in 10 years or fewer have achieved your stated goal.
On the other hand, you sold in the midst of a real estate crisis, a relative bottom in the market. Can housing be even lower ten years hence? I suppose it’s possible, but I dare say not likely. So you sold at the bottom to try to buy back in 10 years when the housing market is higher.
I understand the comfort that goes with being debt free. I wonder about the Biblical aspect of the ‘lender’ quotes. There was a time that when a young couple was married, the community came together and raised a house over a few days time. The economics of buying a house with 100% cash is pretty “out of the box” thinking for most people. You are rare in your thinking, and as I started, I wish you well, I’d love to follow your progress.
Joe
I absolutely love this part of the article:
“Second, much of America is obligated to work at least 30 years (the most popular term for a mortgage loan) to pay off their home – often the biggest debt they incur. So they punch in their 9-5 continuously while life passes them by. We did not want our life decisions (where we live, vacation time, sick time, etc.) to become dictated by jobs.”
I never really thought about a mortgage in those terms and I think it will help us focus on the goal of paying cash for a home. Even if we can’t pay cash, I don’t want to buy a home until we debt free and able to aggressively pay on the mortgage to have it gone in 5-7 years. Thanks for the article!
Amy, this post is brilliant in it’s challenge to conventional thinking. That’s how really good posts are written! (They get us to think.)
Your stated plan is to save to pay cash for a house, but I’d offer that you will (or have) discoverd an even bigger payoff. A fat bank account, combined with low living expenses and zero debt means you’re beholden to no one. You may not have all of the toys and exotic experiences of the trendy crowd, but you’ll have your soul and nothing is more important.
My guess is that a job loss won’t crush you the way it will a more typical household. You’ll probably sleep better than most people on most nights. Mission work will be easier for you than it is for others because you’ll have fewer strings (posessions) tying you down and more control of your money and time.
I believe that is worth giving up the suburban homestead for. Nearly anyone at any income level can live such a life, but only if we’re willing to give up certain aspects of the suburban lifestyle. You’re doing that and setting an example for others–well done! You and your husband may be writing a book about this one day.
Joe Taxpayer–the days when ” the community came together and raised a house over a few days time” was back when a house was a place to live, and not an psuedo investment the cost of which juiced by generous tax breaks and long term financing. The couple for whom the house was raised would be permanant occupants of the house and members of the community. Now we flip to get a better house, “take advantage of low interest rates” or some other financial gain. I’m not at all sure that today’s way is the right course.
My delayed gratification story starts with the introduction of the iPhone in 2007. I definitely could not afford the $600 price tag and $99 monthly service, but I went for it anyway. 4 months in, and I really couldn’t afford the credit card debt I was creating for myself. I came to the realization that I had to sell the phone—big bummer for a tech guy like myself.
It took 2 years for me to get to the point of being able to actually afford the phone, and when I went and bought it, it felt amazing to be able to pay for it cash, knowing it wouldn’t be a burden for me. The journey I took getting to that day is, in many ways, more valuable than achieving the goal of being able to afford an iPhone. I learned quickly that I could survive without it. (I do love it, though!)
JoeTaxpayer,
Thanks for your comments. I definitely see your point and we considered this when we sold our house. BUT, we currently live in Ohio and the place we are both from is Wisconsin. In the near future, we plan on moving back to Wisconsin due to family and an pending baby. Selling was the thing we wanted/needed to do to accelerate our goals with the inevitable move. Thus, the reason for selling. If it weren’t for this, we wouldn’t have sold. Hope this explains our logic.
I do hope it’s worth it! We’ve been debt-free since May. We have our emergency fund, and now we’re saving up money to buy a house. We’ll be taking on a mortgage, and our goal is to put at least 10-20 percent down on a 15-year mortgage.
We’ve made short term sacrifices hoping that the long term will be better.
people that believe and live the delayed gratification mantra are the lot that laughs last. I learnt about it some time ago and i have been living it daily. Forgoing a present pleasure for the expectation of a better future one always means that you never get short changed in any way, be it financially or in any other aspect of life. Like for instance i dont have a car and being a petrolhead(a person that is literally addicted to the roar of midengined cars) i have decided to forgo going into debt to get a car and invested that money in the hope that in the future, i will buy one when i can fully afford a GT car without having to literally sell my soul to the banking institutions for some cash. This goes for a myriad of other things in my life
I love the idea of delayed gratification. In fact, I think you’ll find that the things you are waiting to have in the future really don’t matter as much as you once thought. That is ultimate freedom.
I’m only somewhat in agreement with delayed gratification. Mainly because the things you will want to do later in life will be markedly different than the ones you want to do now. So although you have the freedom to do what you want when you’re older, you are also sitting on a pile of regrets for things you wanted to do when you were younger.
I’m also curious about your thoughts concerning the scripture verse “The borrower is slave to the lender,” Pro. 22:7. Although many people were slaves and many continue to be today, that doesn’t preclude them for serving God. So although you have debt you are not living outside of God’s word.
Then he said to them, “Give to Caesar what is Caesar’s, and to God what is God’s.” Matthew 22:21
Hi Joe,
I agree with you that you can still have debt and live inside God’s Word IF you are still putting Him first. But many people today get INTO debt for and over worldly things (fancy house, car, vacation, clothes, etc) to impress others and live without sacrifice. That is the sin. That is not putting Him first.
Debt is really a foothold to Satan. He uses debt to bring worry and frustration into the mix, not to mention the priority of working hard and long to pay back those debts. Debt really can be a wedge between us and God.
I think that is why faith and your personal relationship are so important. Through faith, God convicts us as individuals so we can grow more in His Son (see Romans 14). For my husband and me, God is very clear. The things we would buy with credit are worldly things for worldly reasons and would push us farther from God. When we live without debt, we will have more free time to serve because we won’t be working 40+ hours to pay off anything.
Also, correct me if I’m wrong, but I think in Matthew, “Give to Caesar what is Casesar’s” refers to taxes.
Thanks for the explanation Amy! I agree with what you’re saying, especially when it comes to worldly possessions. I like to use the “5 year rule” for most non-essential purchase. What will my life be life in 5 years with/without this?
Most possessions don’t even last 5 years!
I appreciate the thought, really I do, but it was all lost on me when I came to the part that referred to the 6 figure income and living on 75% of it. I live on a disability and am just short of making a 5 figure income. Quite frankly, I would feel like I was living high on the hog to go up to the 25% that the writers of the article are referring to. If you can do it, all the power to you…just keep in mind what Jesus said numerous times about people like me, and there are more of us than the middle class would like to admit. I didn’t choose this, I am not an addict of any sort, and I really feel ignored by the body of Christ!
I think the article is very well written. From many of the people I see, they view their ‘keeping up with the Jonses’ lifestyle as a necessity, not a choice. When we step back and look at what God wants from us, it’s clear that he wants our hearts and our souls….this is sadly often forgotten, or simply complicated by many. My family has been blessed with a job for my husband that is stable enough, and provides enough so I can, thankfully, stay at home with our three (soon to be four) children. It isn’t always easy, and the choices do get hard, but keeping in mind where God wants us to be makes it so much easier.
To Jenny, if you are feeling ignored by the body of Christ, remember this, “for the LORD your God goes with you; he will never leave you nor forsake you.” Deut 31:6
Hi Amy,
I’m one of Sarah’s friends and saw a link to your blog on hers (and then a link to this from your blog)…
Well said and well written. My husband and I have been going through FPU and I agree that delayed gratification can create so much space in your life for God to move. It’s amazing when we begin to challenge the status quo and to live differently how it impacts other areas of our lives. Blessings to your family as you continue on this journey. Continue to inspire others and show them a different way!