Anytime my husband or I tells someone that the only debt we have is the mortgage, we usually end up receiving some pretty strange looks. We even sometimes hear things like “you need a credit card for emergencies” or “credit cards aren’t debt” and even, “I don’t understand how you afford to live without credit cards since you’re living on one income”.
Truth be told, when we first started our debt-free journey I was concerned that we wouldn’t be able to make it without credit cards. I mean we’re told from the time we’re 16 years old that we must have a credit card to build up credit. So, naturally credit cards are comfortable to us. We don’t stress over carrying a balance on our cards because well, everyone does it so why should we worry if we have a balance or not.
And honestly, we used to be one of those folks – we only stressed about the balance on our credit cards when they were getting close to the credit limit. We didn’t see credit cards as debt – we saw them as a way to earn “free money” in the form of cash back points and skymiles.
But once we jumped onboard the debt-free crazy train we realized that the balance on those credit cards was in fact debt. We owed those companies that money and that cash back we had “earned” just ended up being applied to the credit card balance.
We had to completely change our way of thinking when it came to credit cards in order to realize our debt-free dreams. We started asking ourselves why we were spending so much money on our credit cards when we could have honestly just paid cash for these things.
Were we using our credit cards merely to earn the bonus points? Were we using them to keep our cash – in case of an emergency? Were we using our credit cards for the simple reason that we didn’t know anything different?
Yes. Yes to all of the above.
We were using our credit cards because we thought it was great being able to earn cashback on purchases and thought that the only way to be able to do that was with a credit card. That was until I discovered Ebates – a cashback site where you can earn cashback on your online purchases without having to go through a credit card. (In fact, if I need to shop at Walmart or Target, I usually go online to Ebates, select Walmart.com, make my purchases and then select “in store pickup”, pay with my debit card and then head into Walmart to grab my stuff. That way I’ve earned my cashback on items I need right now without having to reach for a credit card.)
We were also using our credit cards as a way to “keep” our cash. So, let’s say we needed a new catalytic converter we would use a credit card instead of paying cash because our cash was in limited supply. But honestly, we have an auto fund where our car related expenses come from so attempting to hold onto that cash just ended up costing us more money in interest.
And, we didn’t know any different. I mean our parents use credit cards so that’s all that we knew. We literally didn’t know that you could live a great life without credit. We thought that we had to have credit cards in order to be able to buy a car, when in fact; if you just pay cash for your car you don’t have to worry about your credit score.
Seriously, when we bought my Sequoia two years ago they didn’t ask to run our credit or anything! All I had to do, was write the check and it was a super simple transaction – no discussing interest, payments, down payments, total amounts owed – nothing. The math was super simple – the price of the car, plus the tax and title, equals the amount I had to write the check for.
I know that may seem silly, but if the only way you’ve ever purchased a car was with a loan, it’s a strange experience paying cash for one. It’s the same thing with purchasing a home. I can remember asking our mortgage broker all these questions because I didn’t understand half of the math involved in purchasing our home and his exact words were “Jessi, don’t stress yourself over the math because it doesn’t make sense and there’s no way that I can explain it to you to make sense. It’s just what is required of an FHA loan.”
Seriously, our broker (who was great by the way) even told me that he didn’t understand the math. Oh and in case you’re new here – I’m an accountant, I like numbers and I like knowing how much something costs. It was crazy, but you know…I didn’t question him anymore because the main thing I was concerned with was the payment – how much was this going to cost us every month.
That’s where the debt-free life differs. Instead of focusing on the payment amount, you start focusing on the actual cost of something because instead of relying on credit to make your purchase, you’re relying on the cash you’ve got in your hand.
So, if you’re on the debt-free journey and struggling with the fear of leaving the “comfort” of debt behind, I encourage you to step out in fear anyway. The grass really is greener over here. 🙂
Are you on the debt-free journey? If so, what has been the hardest part for you to “come to terms with”?
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