Most Americans carry some type of debt – in fact it is often stated that 77% of American households carry some form of debt. But what would it feel like to be completely debt free?
If you are interested in participating in Open Money and sharing your financial journey – feel free to reach out to me at erintalksmoney@gmail.com
Thanks for watching @ErinTalksMoney I appreciate you!
Disclaimer: Please note that this video is made for entertainment purposes only and not to be taken as financial advice. Always make sure to do your own research.
Looking for more money videos, I post new videos every week, subscribe to my channel:
While you are here, why not check out some of my other videos:
Saving 40% of my income:
What’s the right age to retire:
Here’s why I quit my job:
What it looks like to be among Americas wealthiest:
Here are some common budgeting mistakes:
#openmoney #debtfree…(read more)
LEARN MORE ABOUT: 401k Plans
REVEALED: Best Investment During Inflation
HOW TO INVEST IN GOLD: Gold IRA Investing
HOW TO INVEST IN SILVER: Silver IRA Investing
Personal finance is personal. He’s paid off his mortgage and is happy to continue working for another 15 years, so good for HIM! Now that he’s completely debt free, it makes it a lot easier to go into overdrive with investing.
I have 1 car payment left next month and I am debt free. I can taste it.
I'm happy for this gentleman to be living debt free. Thats the goal, but I'm not sure he's in a position to buy a $40,000 truck with only $10,000 in the bank. I get the feeling he'll tap his 401(k) again since he's using it like a savings account rather than a retirement account. At 42 I would like to have seen his retirement account a bit bigger because inflation is so much right now
i have never been in debt. I don't understand how debt free is a big accomplishment? I am a multi-millionaire, but just from consistent investing over time. never made > 100K.
This video series has me wondering what your average viewer age is!
YIKES .. . He is earning 85k as a head of houshold tax filer
Any other taxable income over 85k ( which includes the 401 withdrawal) will be taxed at 24% fed + 6.78% Neb state taxe +10% early withdrawal penalty.
He he did not specify the payoff amount but I will assume it was approximately 80k .
When you include the fed and state tax plus the penalty he had to withdraw 133k to net the 80k .
He is only 42 years old and has 30 years left till RMDs hit .
With 30 years of growth appreciating at the historical average of 8% the opportunity cost on the $133k early distribution will be over 1.3mil. by RMD time .
This seems to be a steep price to pay when you consider that the future value on the 130k home appreciating at the historical average of 3.50% will be worth 365k
I'm not sure how close this is to the actual payoff but in this scenario the opportunity cost of paying off this mortgage was over 1mill.
Having said that there is still a huge value of a paid for home you just have to really think things over when you pull from your retirement at an early age .
.
While we can, and some will in the comments below, legitimately question some of the choices today's Open Money interview subject made, what is beyond question is his state of grace with regard to his finances. This is someone, to borrow Dave Ramsey's phrase, at financial peace.
And he has done so, in his early 40s, and after a divorce, raising a family, and paying off a mortgage, with an average income and a lower-cost Midwest part of the U.S. to cal home. He's a person who enjoys simple pleasures — playing a slot machine in Vegas while visiting family there — and has outsized goals, like owning a Tesla Cybertruck. And despite his modesty and plainspoken style, his interest in electric vehicles and solar power adds some intrigue.
Last, while his path to debt freedom was a little winding, as it is for most, his occasional reference to personal finance concepts — the 4% rule being one — shows that he has done some homework and not just achieved independence by accident. All in all, another great choice for the OM series, and as always, well-interviewed by Erin.
Withdrawing from the 401k to pay off the mortgage was a mistake, but he panicked due to covid. Personally, what scares me more than having a mortgage in my 30s and 40s and young enough to still actively make an income is to have not enough to retire on when I'm a senior citizen.
But I gotta ding the car purchase. It would be better for him to invest more now to make up for getting scared and withdrawing from the 401k… There's not a lot in his retirement accounts for his age…especially not for his 1mill goal.
Would love to get financially buff with Buffett. Debt free does come with a lot less stress.
Borrowing against 401K to pay off mortgage is not smart. Sorry.
Roth IRA allows early withdrawal with no penalty for up to the contributed amount. He has $20k Roth IRA (0:42). If he has contributed $15k to it and it has grown to $20k, he can withdraw $15k ANY TIME with no penalty. Since the money in Roth was already taxed, you are allowed to do that, as opposed to the pre-tax money of traditional IRA and 401(k).
Funny, I remember the days when acquiring a credit card was nearly impossible for a 20-year-old. I didn't even have one until 1998 and I was 27 or 28 at that time.
I don't agree with what he did, but that's how I manage my finances. I don't make financial decisions based on how "I feel"! I make them on what will help me grow my wealth even more. Good for him on doing what's best for him!
Not the path I would have taken but seems to be working great for him. He seams like he doesn’t have a worry in the world
Not what I would have done, but it’s not my money, my life, or my temperament that is at issue. Good luck to you sir.
Great conversation. Need to connect with Warren Buffet like yesterday. I would use credit and never debit but pay it in full on the due dates. Great to be debt free and especially the house.
Can't say I agree with what this gentleman did. First, if he bought his house 7 years ago, the value would have appreciated greatly. If he needed money, he could have borrowed at a very low rate. If he took money out of his 401k after covid hit, he took it out after the value had fell greatly, in addition to the 10% penalty. If for some reason he lost his job, or some other issue happened, and he couldn't make the equity payments, then he could consider the 401k withdraw.
Early withdrawn is NOT a good idea.
Enjoyed your interview Erin, money questions were fun and fun to learn how others view their finances.
Ehh not the road I would have gone down. Taking a 10% 401k penalty and planning to buy a truck he can't truly afford. Not me.
No debt is always good! Nice video
taking $ out of 401K AND paying a penalty to pay of a appreciating asset is so STUPID. now the money is tied into house and cant recoup until it sells. AND lost all that growth through the years. DUMB- kudos to Erin though to not rub this in- she knows he should not have done that.
he didnt borrow from 401k he withdrew it with a penalty
Very cool, thanks, Andy. Good luck.