Mar 062011

One of the keys to a minimalist lifestyle that should have a priority over everything else is the elimination of debt.  Nothing restricts your freedom more than owing money.  It will prevent you from doing the things you want to do, causing undo stress, and tearing apart families and friendships.  Once you get debt free your whole outlook on life changes for the better.

I’m going to cover three basic kinds of debt in this post, all three of which I have been guilty of, and all three of which, I am proud to say, I have eliminated.  The most recent and one of the most debilitating is credit card debt.

They make it so easy.  Low (Ha, yeah right) introductory rates.  Easy credit.  High limits.  Swipe the card.  Buy now pay later.  We make the mistake of trying to fund a lifestyle with credit and it just doesn’t work.  We can justify the purchase all we want but it comes back to bite us in the ass later.  I used to use a credit card heavily.  It helped fund my business, made it easy to get things I needed.  But it was too easy to throw a dinner on the card.  Short on cash this week, use the card for groceries.  New computer device comes out.  Gotta have it.  Charge it.  It doesn’t take long to ring up a big balance and then the interest rates kick in.  My revelation came last year when my card company, who I have had for 30 years took advantage of the new laws and upped my rate to 25%.  Let that sink in for a minute….25%.  Used to be you could get that rate from some guy named Louie down at the local pool hall and all you stood at risk for nonpayment was a broken knee cap.  25%!   And they said it with a straight face.  I walked into the local bank and saw they were paying out .10% interest if you kept $10,000 in an account with them.  Are they fucking serious?  Apparently so.  Luckily, at the end of the year I was able to pay off the balance.  And as soon as my balance showed 0.00 I called and cancelled the card.  “But we can lower the rate”, they said.  No thanks.  “But you will lose that big line of credit”.  Yes I will.  And with my credit rating I can get it back if I ever needed it again.  I won’t need it again.  If you are carrying a large amount of credit card debt, your first priority before you do anything else is to eliminate the debt and get rid of the credit cards.  It is flat out a crime and you should not be the victim.  If you don’t have the cash, you don’t need whatever it is you are trying to obtain.  It’s a simple yet painful rule but essential.

It is estimated that the average person spends 1/3 of their yearly income on a vehicle.  Gas, maintenance, insurance, and of course, those lovely payments every month.  I have not had a vehicle payment in over 10 years now.  My last vehicle I was able to pay cash for and luckily it has been one of the best vehicles I have ever had.  But it is getting long in the tooth and with the cost of fuel going over $4 a gallon and beyond I will have to make some hard decisions in the near future.  But that is a post for another time.  We all love a new car.  There is a lot of pride in ownership of that one special vehicle that was made just for you (just like the 300 million others on the road).  But let’s be real.  By the time the first year has gone in a 5 year loan all that newness is gone.  Now it’s a burden to maintain the vehicle while it loses money for every mile you put on it.  Upkeep is very expensive with oil changes, schedule maintenance, and of course, the required insurance.  Most people are going to use a car for just getting from point A to point B.  Drive to work, go to the store, etc.  So really you need something dependable.  Far too often we over buy and get a vehicle that is way more than we need.  Air conditioning is nice but do you really need a tv screen in your car?  If you are sitting on a big car loan or lease and you are upside down the best thing you can do is try to maintain the vehicle as best as you can and get it paid off or get rid of it and downsize to something a bit more affordable.  If you live in a city, say someplace like Key West, a car is more of a luxury than necessity.  Think about public transportation or a bicycle.  Put all that money that would go towards car payments to better use like a retirement fund.  Sit down sometime and try to figure out what your vehicle costs to keep and run every year.  It will shock you.

When you don’t own a house and have no mortgage it’s really kind of fun in a selfish and evil way to watch how the real estate market has bombed over the last few years.  I’ve owned 2 properties over my lifetime.  One I lost money on, the other I did pretty good.  But unless it is a deal of a lifetime, I’ll be damned if I ever take out another mortgage again.  Who ever came up with the idea of compound interest was one sadistic evil bastard.  Even Einstein couldn’t figure it out.  It amazes me that we willing accept terms that no rational being should ever accept.  How you can borrow $50000 and wind up paying back $150000 is just plain idiotic.  Yet people do it every day.  You buy a property with the belief that in X number of years the value of that property will be worth more than you paid for it.  Not so much these days.  I bought my first house over 20 years ago.  Sold it 15 years later.  The selling price was about $15000 more than what I bought for it but factor in interest and all the upkeep and it lost big time.   Every one said, no hold onto it because it will go up more.  Today I could go back and buy the same house for less than what I originally paid for it.  Sorry, the numbers just don’t add up.  Unless you are sure and intent that you are staying in a place for a long time or the property is making money, there is no point to a mortgage.  Yes, I pay rent because I have to live somewhere, but I have no lease.  I don’t have to throw money into maintaining or upgrading my little spot of paradise.  And if something better comes along I can go.

When if comes to debt the odds are stacked against the borrower.  Obscene interest rates, fees, and terms that are normally associated with criminal activity are considered mainstream and accepted.  But, it doesn’t have to be that way.  A minimalist lifestyle has no debt.  You are beholding to no one.  No debt means being able to take more chances with your career.  Creating a lifestyle that you may have only dreamed about.  Or, as in my case, packing up and moving to the Keys.  And living quite well in an area with a high cost of living.  I’m the last person anyone should be taking financial advice from but I am quite sure of one thing.  Get rid of the debt and you will be a much happier person.

Til next time.

The Fritter

If you ain’t got the cash, go with out it.