Threats to Debt Freedom

The biggest threat to debt freedom is…going back in debt, and that’s one of my biggest worries now that we are debt free (minus the house).

I don’t plan on going out and borrowing any money in the near future, but I guess that’s the idea. If something unplanned were to happen, like one of our paid-for cars going kaput or a job loss, I’d be stuck flat-footed when it came to replacing it.

I’m trying to save $10,000 by Christmas, and I have no room to be saving for a replacement car, even though I know I should be. I suppose I could use the cash I’ve accumulated thus far to buy a cheap used car, which is what I’d have to do if my car died tomorrow, but if I wanted to make sure I have something decent that gets good gas mileage and is reliable, I’d have to spend more than I have today.

This is a bit frustrating because it goes to show that even after you escape the clutches of debt, its power is so strong that you must continue to prepare and take action against it to avoid falling back into its arms.

Because what good is debt freedom if you immediately have to take out another car loan? That would be demoralizing.


Luck Plays a Role

As I’ve said in the past, personal finance isn’t just about math. It’s more about psychology and learning to look past money myths.

It’s also about luck.

That’s right, in addition to relying on all the wisdom I’ve accumulated over years of reading hundreds if not thousands of personal finance articles, I am relying on luck and wishful thinking.

I am hoping that my car makes it until next year without any more major repairs, or without dying.

I am hoping that something major doesn’t happen to my house, like a roof leak or the death of the furnace.

Though it may sound strange, part of me believes in fate. I’ve been very lucky in my life.

What happens to me is what is supposed to happen.

This is not a guiding principle in my life, but rather an ever-present mantra that helps me breathe easier and sleep at night.

Life is about balance, and so is money. We want to be free from debt and obligation to lenders, but we also want to avoid having so much control that we obsess about every money decision and pout every day the markets are down.

A belief in a certain degree of fate and accepting that most things are beyond my control is how I sleep at night. It helps to take some of the pressure off and put it onto others.

Who knew you can find so much comfort in the fact that so much is beyond our control?

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  1. I hear ya mate. We fear going into debt now that we are debt free because something happens beyond our control or we simply don’t have enough money saved. I know for a fact we won’t ever spend more than we earn on our own accord as we know what will happen and we don’t want to go down that path. I think there is a certain threshold where we would feel comfortable and that is once all of our renovations are done and we have a nice chunk of change in our emergency funds again. Great post. Mr.CBB

  2. I’d have to go back and look but I read somewhere that 80% of what people worry about is completely outside of their control.

    As you said, what will happen will happen…how you respond is the more important thing.

  3. Your worry is short term. Once you have your padding of free cash built up you will start to feel a lot more comfortable with your situation. :-)

  4. Luck really does play a role. We can build emergency funds and savings and do things to make sure that luck “is on our side,” but even so, sh*t happens. But when it comes to stuff like that, don’t worry about it, because what can you do? Prepare as best you can, expect the worst, hope for the best…

  5. I guess this really reflects the psychological benefit of a decent sized emergency fund. I’m out of debt, but I don’t really worry too much about getting back in debt anytime soon. Then again I have favorable circumstances in that regards since my car should last for a long time and I don’t own a home where sudden expenses could pop up. So until I do buy a home I can live without any kind of worry about debt….that is unless I consider my girlfriend’s massive debt :S

  6. I think you have a great attitude about this. The important thing is that you’re taking the steps to prepare for the “what-ifs” the best that you can - all you can do after that is let go of the fear of the unknown and enjoy the life you’re living today. There’s always something to stress about and the hardest thing is not letting that happen to you (I know this all too well from experience - once I have one worry taken care of, I always seem to find another).

  7. You make a great point about not worrying about what you can’t control. I see people stressed out and worried all the time about things that they can’t possibly have any impact on. I’ve always been one to just let those things go. Sure, if I think the odds of a particular event happening are high, I’ll prepare a little contingency plan. But if I know that nothing I can do will have an impact on a situation, then just don’t worry about it. I think Covey’s book (The 7 Habits) devotes a whole chapter to this concept.

  8. But you can get a good, reliable car for cheap, if need be :) I’ve never spent over $2,000 for a car (except when I blew $100,000), but they have lasted for years.

    But I hear you, being debt free has to be awesome, but you also need to be on the defensive and build that EF quickly to put some distance between you and possible debt. You guys have pretty much rocked so far, I don’t see you going back into debt, no matter what pops up.

  9. A lot is beyond our control. I do the best I can to be in a good position. Just keep saving and you will get to the point where less and less will worry you about getting pulled back down by debt.

  10. I have the same fear while being in debt and paying it off. I don’t want to ever see that go in the wrong direction. When it does it’s “all hands on deck, to lower that debt bill!” Good luck in reaching your 10k goal by Christmas. (Luck does play a role!)

  11. A friend of mine has spent the last two years getting out of MAJOR credit card debt. She was SO close… and then her car died… I mean, DIED, not coming back, headed to the landfill. She is doing whatever she can to get around without having to buy a new car, which just isn’t in her budget right now. Her story sounds a lot like yours - with the major exception that the bad thing DID happen!

  12. John, stop reading my mind! I just talked to Jefferson about this last night. I told him how much I worried about going back into debt because this debt diet we’re on feels so restrictive. I find myself daydreaming about “when we get out of consumer debt” like it’s this mythical land where nothing else could possibly go wrong and we can afford to live like kings. The reality is that we’ll still have “debt”…in the form of a car payment that will be there to say hello for another few months after our cc debt is gone, and then we’ll still have our mortgage payment to make for probably several years. If Jefferson lost his job, we would still be so screwed…for lack of better words. :) Anyway, I totally hear you/feel you on this, and I applaud you for not letting go of the reigns on your wallets and minds! Good luck saving the money and I hope that you (and we!) can always be this smart and level-headed with finances.

  13. Luck plays a big part in your finances but like you said, it’s something that’s out of your control. You have to think about what scenario is the most likely to happen that might push you back into debt and use your emergency fund towards that. I’m lucky to have no debt other than a mortgage and I hope to always maintain a nice emergency fund. But then again, you don’t want too much of your money just sitting idly by.

  14. Excellent piece. It’s interesting to me how easy it is for some people to save toward “getting out of debt” but then struggle to keep up the momentum. It’s like the momentum completely goes away once the original goal is reached….although it really shouldn’t be gone.

  15. Sometimes life will beat you down, but you just have to pick up and plug away - and you would if it happened to you. You’ve got the saving habit now and if bad things happen, you will work your way out and get back on track.

  16. Good point John that money managment isn’t just about math. I think most look at it as having nothing to do with their habits or way of thinking/living. But it really is! Bad habits if addressed outwardly are like putting a bandaid on a cut without cleaning it out first.

  17. I think you’re well on your way to being debt-free for life. As long as you keep plugging away at the EF, your worries will be small. IF anything were to happen to your car, you could buy one outright if need be. Otherwise you could start building up a car fund once the EF is taken care of. Good luck!!

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