Living A Life Without Debt Is Beautiful

Living a life without debt is an excellent thing. I have lived my whole life debt-free and thus managed to save some money every month. I invested that money. It already provides small monthly cash flow. I am not even looking for financial independence, but simply for the certainty that there is still a passive source of income that will probably never dry up completely.

Latest FED figures are threatening

In contrast, the latest FED figures on US household debt are worrying. This concerns the mortgage market. According to the FED, US mortgage originations rose by $224 billion, or 42 percent, in the fourth quarter of 2019 to reach $752 billion. That was the highest volume since the fourth quarter of 2005.

Latest FED figures on US household

Taking out a mortgage to buy a house is still quite an understandable thing to do, as households hardly have enough equity capital to finance their property. Besides, the credit score at origination is also relatively high and has been stable, especially over the last few years. A 50th percentile means that 50 percent of the credits have a higher score and 50 percent a lower score. Furthermore, a slight increase towards the end of the period in the fourth quarter is noticeable:

Credit Score at origination

The quarterly transition rates for current mortgages are also relatively low:

Quarterly transition rates for current mortgages
Quarterly transition rates for current mortgages

However, if one looks at the current effects of the COVID-19 crisis and the mass increase in unemployment, these values can also quickly correct downwards.

Other household debts may be avoidable

Some of the remaining household debts may be avoidable. This applies especially to credit cards and car loans. Here too, we are partly above the level of the financial crisis and great recession.

Total debt balance and its composition
Total debt balance and its composition

4 easy mechanism to start your life without debt today

You don’t have to be wealthy to live a life without debt. Living a life without debt is easier than you might think. Many people can integrate debt-reducing measures into their lives. Here are just a few examples of how to spend a little less than you earn each month (to stay cash flow positive). The good news is, you can use them already today.

1. Wait before you make any major investments

In any case, you should wait and give yourself some time to think before buying expensive new things. Often it is only a first impulse to want new stuff. This is strongly related to the reward system of your brain (see point 2). Waiting a week to buy expensive things makes you more independent of your mood.

Besides, you have time to inform yourself about this product. What do other people say about it? Is there a better one coming soon, or is it not as good as you might think? If at the end of the week you still think you want it, consider again how long you had to work for it and if it is still worth it.

If so, buy it and enjoy it. We’re all just human beings and not slaves. Being a slave to frugality is no more desirable than being a slave to capital.

2. Trick your reward system

Many impulse purchases are due to the reward system of the brain. People get high while shopping. It’s no joke! You should know the mechanisms in your brain and why you feel like this in some situations and like that in others.

3. Always keep an overview of income and expenditure

Do not make yourself dependent on your account balance! Always know where you stand financially, what your current income is, and how much you have already spent this month. A budget book is an excellent way to start tracking your behavior. In the beginning, writing a budget book is extremely exhausting, but it pays off in the long run. If you are trained after some time and have a good overview of your finances, such a book is no longer essential.

Meanwhile, you can also try out apps on your smartphone with which you can track your spendings. But pay attention to good data protection! You don’t want Amazon to know what you buy every day so they can send you personalized advertising (just kidding, we’re probably not there yet, but privacy is still a serious issue).

4. If you can try to generate an additional income

This fourth measure is particularly important because it acts as a lever. If you manage to build up an additional income, that is great. This income can be built up actively through a part-time job or passively through investments. In the beginning, it doesn’t matter, but with the time you should start to make your money work for you passively.

Explore different ways to invest your money. For example, dividend companies are an excellent way to generate cash flow. However, the most effective way is to invest in ETFs simply. It’s all up to you. The possibilities are infinite!


The level of household debt in the US is increasing. That’s unfortunate. Just four small mechanisms can ensure that you have a positive cash flow every month. These are just small steps. But you should definitely try them if you or your household is struggling with debt. Start your journey towards “Living a life without debt” as soon as possible.

All the best


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