Is Money Freedom?
June 2, 2010 11 Comments
When I first wanted to become financially secure and stable I browsed PF blogs like there was no tomorrow.
All around the blog-o-sphere were people saying the same thing, or at least versions of the same thing. We all know it as the bible according to Dave Ramsey:
- Get yourself a $1,000 E-fund
- Get yourself out of debt ASAP
- Build a bigger E-fund
Now, I have no problem with this as a way of getting out of debt. And in fact, this was the method I have been essentially using for the last year and a half.
However, it has come to my attention in the past month that I may have been wrong.
What I failed to realize when I started out in this journey is that my lack of money wasn’t just keeping living in a day-to-day, month-to-month scenario. It was making me dependent on my job for survival. Sure, this may seem obvious, but hear me out.
When you only have a $1,000 emergency fund, while you are paying off your debts you are at the mercy of your circumstances. You can’t quit your job, you can’t accept a new job, you can’t leave a terrible home environment, you can’t go back to school, you can’t leave a dangerous life situation. For the period of time that you are in that debt repaying mode – your fate is set because you can’t afford anything different – if you don’t have adequate savings.
And when I first started, this didn’t matter. I didn’t see myself leaving the position that I was at until the debt was gone anyway, so it didn’t matter to me. However, we CAN NOT predict life. We CAN NOT predict the things that will make us happy or miserable or the opportunities that will arise in the future.
Yes, debt is terrible. I have vowed as soon as this debt is gone that I will not be taking on any more debt load – including cars and housing – for the rest of my life.
However, personal freedom is far more important than a zero debt balance. At first I didn’t understand why in the world Debt Ninja was so afraid to pay off his student loans even though he had the liquid cash to do so (he eventually did transfer $10,000 of his savings to pay down his loans, fyi). But now I get it. There is more to personal finance than having no debts – much more – this is about financial freedom. And sometimes financial freedom means slowing down on paying your debts to make sure you get the most out of life.