Debt free living: a dream or a reality?

What do you picture when you hear or read about the term ‘debt free living’?

Before the hubby and I started our journey to become debt free, we used to dream about debt free living as though it were a little pot of gold at the end of a rainbow. Beautiful and so tempting to try to reach it, yet seemingly impossible to make any real progress on getting anywhere near it!

However, as we started to actually make progress on paying back our debt, we’re glad to say that the thought of living debt free is gradually becoming a little bit more real. And funnily enough, it doesn’t look like a little pot of gold to us anymore. (It still looks damn good though.)

I think this is because we now have a different outlook on our overall finances these days than we did before.

What being debt free meant to us a year ago

For us debt freedom used to mean getting rid of our credit cards and loans so that we just had mortgage debt one day. And if you’d have asked us a year ago what we’d be spending our money on once we became debt free, we would smile dreamily and outline how we’d spend our new found freedom from debt like this:

1. Go on a well deserved holiday first and foremost. Somewhere exotic and maybe even treat ourselves to business class flights. Then we’d make sure to go on holiday at least once per year.

2. Buy a whole new wardrobe each to make up for all the time we’ve been wearing holey clothes (yes this is true I’m afraid). I particularly wanted to buy some really nice work clothes from Reiss, one item I had in mind was a smart suit which would set me back at least £300.

3. The hubby wanted to buy a new Tag Heuer watch because we sold his old one on eBay a while back to pay off debt.

4. Buy a big / nice house in a great location, which we’d then spend money on doing up and putting our own stamp on it.

5. Start eating out again in nice restaurants, getting a babysitter now and then and basically enjoying ourselves if we felt like it. We’d definitely be in need of some treats by then!

It seems like the thought of being debt free wasn’t all that real to us and this wish list above was about making up for the sacrifices we were already making.

Any Twilight fans out there?

Remember in the last book / film Breaking Dawn Part 2 when Bella opens her eyes as a vampire and sees her new world for the first time? There was nothing wrong with the old world, in fact it was just fine. But in Bella’s eyes, everything looks brighter, clearer, sharper and quite frankly better looking than before. 🙂

And that’s kind of how we feel now about our wish list for debt free living. Working hard to pay back our debt has made us appreciate money more than ever. These days, we look at our bank account and see ‘numbers’ not money.

When we’ve paid off our debt, we may well carry out some of those wishes from the old list above. Maybe not the suit from Reiss or the watch but we could probably do with a few items each of quality clothing when we’re living debt free. We may go on a holiday when we’ve saved up for it. Hopefully an exotic one but the flights will be economy class and we’ll be making sure that we get all the best deals on accommodation.

I guess the thing is that we now have a brighter, sharper, more clearer vision for living debt free. The old wish list had a few things missing that we’ve since realised are really important such as saving for retirement and working towards complete financial freedom.

What debt free living means to us now

We’re thinking that paying off our debts is just the beginning! For the last year, we’ve actually been preparing to get our finances in order by clearing our debts, saving more and earning more money. Here’s our new wish list for what we’d like to do once we’re debt free:

1. Save more for retirement

Currently our retirement plans are loose at best with a couple of rental properties (one which used to be our home) which are both mortgaged to the hilt and we don’t earn anything from them. This will change in the future (we hope!) once those mortgages are paid off and we can start taking an income.

But realistically, even with rental income from these, once tax is deducted they won’t provide enough to live on when we retire. So starting from this year, we’ll be looking at other ways to save money for retirement.

In fact, we’ve just opened a Cash ISA each for both myself and the hubby and will be putting a little away each month even whilst we’re tackling the debts. By using a Cash ISA, we can save up to £5,760 each year tax free! (Here’s a list of the best Cash ISAs for 2014 according to Money Saving Expert in case you’re interested). When the debts are gone, we’ll be able to save more money each month for our future.

2. Save up a deposit and buy a perfectly adequate house

We rent at the moment but once we’re debt free, we still want to buy a house. In the past, we’ve been guilty of stretching ourselves and buying more than we could afford when we didn’t even need to. So next time, we’ll be looking for a house that meets our needs perfectly without being overly flash or expensive.

This will be our long term home, possibly a project and yes we’ll put our own stamp on it. But we’ll do so gradually and make the most of our craft skills to turn our house into a home.

We know we’ll have to take on a mortgage to buy our long term home but we’ll save up a good deposit and look around for the best mortgage deals. Our aim will be to make sure we can afford a mortgage easily. Once we have a mortgage in place, we’ll be trying to pay it off as quickly as possible by making extra payments. Our mission then will be to become mortgage free!

3. Educate ourselves about investing

We don’t know much at all right now about investing but in our debt free future, that will change. We’ll learn about the different ways we can use our savings to give us a return on our investment and build our wealth.

4. Find our dream jobs

Without credit card and loan debt, we’ll both be able to have a little breathing space financially to assess our working lives and think about following our passions. I know I want to remain self employed but I’d like to explore other avenues as opposed to what I’m doing at the moment. It’s no secret that I enjoy blogging and I’d love to take this to the next level!

5. Plan to enjoy ourselves

Our debt free future will still be about making the most of every penny which is exactly what we’re doing now. The difference will be that we won’t have the heavy burden of being in debt to worry about. Which means that if we want to go out to eat now and then, we can treat ourselves without feeling guilty. We won’t feel guilty because we’ll put a small amount of money each month into a pot so that if we feel like going out, the money is already there. Plus we’ll use vouchers wherever possible!

6. Give our daughter experiences that she’ll love

One thing that both the hubby and I have been concerned about whilst paying off debt is worrying that we’re not giving our daughter enough. We don’t mean material things, rather fulfilling experiences or memories that she’ll enjoy. We’ve not managed to do too badly in this area since we’ve been paying back our debt but we hope to give our daughter the option to go swimming every week or pay for a regular hobby she might be interested in. So each month, we’ll put a little money aside for this too.

Once we’re in a good financial position, we’ll put more money into her savings account to go towards her education or for a deposit for a house when she’s older. That won’t be money for her to blow as a student at Uni though! As we raise her, we want to teach her to be smart with her cash and not make the same mistakes we did. 🙂

Debt free living can be a reality for anyone if they want it!

Rather than looking at debt freedom as the unattainable pot of gold at the end of the rainbow, we now see it as a gift that we will receive in due course by way of a reward for our hard work. A gift which if used wisely, will bring us further opportunities and allow us to make good financial choices about our future.

Is debt free living your dream? What does debt freedom mean to you?

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Related posts:

• The Gift of Debt: A Taste of Freedom
• Why being happy at work should be a priority
• Don’t wait to pay off your debt

Image courtesy of Free Digital Photos – ‘Freedom‘ by graur razvan ionut