10 Ideas for Living a Life Without Credit or Debt Every Tuesday is Finance & Family Day at Zen Habits. My dad and I were talking about his recent financial turnaround, and one of the things he said was that he loves being free of debt. My dad doesn't have the best of credit, and he isn't wealthy. He has a decent income, an old car that seems to run fine and doesn't belong to a bank, no personal loans or mortgage (he rents), no credit card debt. Being free of the burden of debt is liberating, he says. Of course, with his credit history, he can't get a car loan on his own, or a mortgage, so life isn't perfect. But I advised him: forget about borrowing money. Stay debt-free and frugal, and you can bank your income and live a credit-free life. That's not the life for many people, of course, because as with anything, there are trade-offs. Sure, you can live without the burden of debt, but it's harder to travel without a credit card. It's also hard for many people to rent for most of their lives, instead of getting a mortgage. And in some areas it's hard to even rent without a good credit history (it's not an issue where I live). However, for my dad, who lives a pretty simple life these days, it could work. Here are some ideas for living a credit-free life, if that appeals to you (if it doesn't, skip this article and don't start a debate in the comments!). 1 - Save an emergency fund. Many people use their credit cards as a sort of emergency fund if there's an unexpected expense, the card comes out to the rescue. Instead, use the money you aren't paying towards debt to build up a healthy emergency fund, keeping you out of debt when something unexpected comes up. Living without credit can be risky, but having a strong emergency fund (aim for $1,000 initially, then build it up to 3-6 months or more of expenses). 2 - Save for goals. Once you've got the emergency fund adequately covered, you can start saving for other things. Set savings goals for yourself: do you want to travel, or buy a car, or save for college, or renovate your home, or buy a yacht? Decide on your highest-priority goals, and set a dollar figure. Now save towards those goals. Without debt, it should be fairly easy. 3 - Get a debit card. If you need to use a credit card in certain situations, such as buying something online, often you can use a debit or check card instead, if it has the name of a major credit company such as Visa or Mastercard. I went several years without a credit card, but using a Mastercard debit card, and had no problems at all. It actually worked every place you would need a credit card, but I wasn't buying stuff on credit it was debited straight from my checking account, meaning I would need to have the money first before purchasing anything. 4 - Earn interest instead of paying it. The problem with debt or credit is that you waste money paying interest. It eats away at your finances. Instead, make your money work for you by investing it. With the magic of compound interest, your investments will grow over time, meaning that money you would have been paying toward interest is now earning interest instead and multiplying. That's good math. 5 - Buy a car on cash. For those who have been buying vehicles with auto loans all their lives, it may seem impossible to buy a car on cash. But it's very possible, and many people do it. My grandparents, for example, always buy their cars with cash (and always have, except for their first car 50 years ago). So instead of making loan payments, and paying double the price of the car or more over the term of the loan, they make savings deposits, and end up with the amount it costs to buy two cars in their bank account over the course of five years. This is something I'm trying to do myself I'm going to use my current car as long as possible, save the amount that I'm now paying for my loan every month (it's almost paid off now), and then buy my next car in cash. It'll be a used car, but it'll be all mine. 6 - Invest for retirement. This is just common sense, no matter what your credit or debt situation, but without debt payments, it makes sense to accelerate your retirement investments (as one of your savings goals). Then you can retire early, thanks to not being in debt. 7 - Travel without credit. It's a common belief that you can't rent a hotel room or a car without a credit card. This is false. It's easy to rent a hotel room, for example, with a cash deposit. You just need to call around to find the right hotels. The same goes with car rentals (see this article for more evidence of this). And if you want to find a cash-only car rental company, see this listing. 8 - Rent without credit. While no credit checks are done for apartment or house rentals on Guam, where I live, in many places a credit check is standard practice. However, there are options you can use to rent without a credit card or a credit check, including a larger deposit. See this article for more options. 9 - Buy a home without credit. Now, if buying a car on cash seemed impossible, surely buying a home on cash just cannot be done. But it can, and people have done it. I'm even considering doing it myself. First of all, in many cases, renting a home instead of buying (and investing the savings) is smarter financially. If you can invest the difference and let that grow over time, you can buy a home on cash. And at the same time, you won't pay triple the value of the home (as most people do over the course of a home mortgage, due to interest). This item actually deserves a full post on its own, as it requires a longer explanation, but I don't feel qualified to write it. Suffice it to say that it can be done, and has been done. 10 - Use PayPal online. I'm not a big fan of online shopping well, actually I love to shop online, but I think it's bad for your finances, only because it's so easy to do. You end up buying stuff online that you might have resisted in the real world. But if you must buy something online, and don't want to get a credit card (or a debit card), in many cases it can be done with PayPal meaning that you have to have the money before you make the purchase. I've heard of people who don't like PayPal, but I haven't had a problem so far. Source : http://zenhabits.net/10-ideas-for-living-a-life-without-credit-or-debt/
Might have, not sure. Read so much it all tends to blur after awhile. I'll take a look at your link when you get the chance.
Quoting Rothbard: Free PDF is available at http://mises.org/document/614/Mystery-of-Banking-The This is the one I was largely quoting verbatim in the "How to return to sound money" thread that I started a month or so ago. There are a few the people on here who have read it and would be a great resource for your explaining FRB thread (which is a great idea).
Good old Murray Rothbard, using his line of thought, that means mortgages are not money either because they don't constitute final payment. But handing the vendor my bank cheque hardly completes the matter; on the contrary, I then have to pay Commonwealth Bank $345 000, plus interest at some later date. So the $38billion currently owed by Australian's is not money Murray Rothbard? Curious. https://www.moneysmart.gov.au/borrowing-and-credit/credit-cards/credit-card-debt-clock
Shiney! Suggest you actually read what he says RE mortgages and why he differentiates. There are significant differences for a variety of reasons and he spends around a third of his 300-odd pages painstakingly going through the reasons in detail. The use of credit cards primarily leads to a short term boost in inflation through a reduction in the desire to hold cash reserves. The same effect happens if employers pay you monthly instead of six monthly or fortnightly instead of monthly etc - there is a reduction in the desire to hold cash reserves for the purposes of day to day spending which leads to a short term boost in the amount of money chasing the same current goods and services. As I have said numerous times now, please just go read his (or similar) book before you keep regurgitating the same tired misconceptions - it would create a lot less angst for everybody.
I've read it and just because he is Murray rothbard it doesn't mean everything he says is correct. Just ask Fekete that one. You need to braoden your economic diet bordsilver. It might actually make you question what you believe.
One thing's for bluddy sure - property prices and car prices would be a very small fraction of that they currenly are (compared to wages) in the absense of credit. In that sense credit is a scurge - designed to benefit the banking elite and imprison the average person to be a slave of the banks for the rest of his/her miserable life. Most people are just too dumb to understand that and actually think that credit "helps us" to afford stuff (like houses). what a croc...
Bizarre! Then why did you say what you said when you know it was a misrepresentation? Besides Fekete's "criticism" already being responded to showing that Fekete was wrong, he is not substantially different to Rothbard/Mises etc. He's like a small breakaway sect of catholics but still a catholic. Shoshtak and Salerno have also publically disagreed with each other but they are still "Austrians". Disagreements happen within the evolutionary biologists but none of them say that evolution itself is wrong. Consequently I fail to see why you bothered raising that. For the record, I don't place Rothbard up on some magical pedestal never to be wrong about any issue, but he did actually have a clue and rather than relearn what he took years to discover it's generally better to stand on the shoulders of giants rather than dismiss them and start from scratch particularly because he was one in a series of giants. (Bad analogy but screw it, posting anyway.)
Unfortunately though, that's the nature of the system. In as much as we can make personal choices regarding economics and finance according to our own ideologies, we don't get to dictate terms of the wider system which is thrust upon us. That's why we have debtor advocates on the site and clashes of ideology recognising this is how the real world operates, but will ultimately end in tears for many. This is also why I am strongly against any form of debt jubilee. It's clearly recognised that excessive debt creates wholesale system collapses and yet, the concept of a jubilee gives the biggest benefits to those who take the biggest risks. This doesn't correct the imbalance in the broken system, it exasperates it and endorses the opposite ideology on creating a sound system. In the absence of any real accounting for mistakes and misallocation of wealth, it's impossible to redress the growing imbalance of a failing economic system until it's utter destruction. I still find it so odd that on a site which has a core focus on sound money principles that there can be so much positive endorsement on debt. Even JP Morgan himself said only Gold and Silver are money, everything else is just credit! But my favourite public surmation on this issue has to go to one of my favourite ranters... [youtube]http://www.youtube.com/watch?v=rF-z-kbnJcs[/youtube] And you guys think *I* can go off my nut.... :lol:
:lol: Just had a look at that link. It's a pittance compared to mortgages etc. And most people pay them off every month or so, so it reinforces what Rothbard said.
Live within your means.. only buy stuff if you can afford.. if you cant.. save until you get enough to buy if we all did that there would be no VOLTRON banks powered up by huge leveraged players like Mr Kiyosaki and other players who use borrowed bank money to own huge portfolios 1for1
Currently no credit.. i try to be stress free so i live longer, can sleep at nights, and can maintain a full head of here... Buying a property without credit is my delimma. 1for1
Same here, no <strike>credit</strike> debt right now. I cleared it all before I left the country, and it was a very liberating feeling. I cannot however see a situation where I could buy property without utilising credit. For me though thoughts of property ownership are in the distant future. For now I will stick to living well within my means and not falling into the trap of using credit to satisfy my 'wants' like so many others tend to do.
