How do you feel about debt?

[eljefino]

^ yeah but he controls that property while only putting up a small fraction of its worth. Good news if it goes up and if it goes down he can walk away with just the hit to his credit rating.

 

[wpod]

While I agree we are hooked on debt and it will bite us eventually, I have to wonder if the falling down will happen. Civilizations rise and fall, but usually not that quickly. Over the last 20 years of my adult life I’m not sure how many recessions, dips and bailouts I’ve seen.

There are those who head to the hills as “preppers”. I mean no disrespect to them, as they keep various skills and knowledge alive: but how many decades have these people been around, and was it worth whatever they stockpiled if they never got around to using it? If it makes them happy, then fine. But was it worth it?

The cycles seem to be 8 to 15 + or - years. Those that seem to really get hurt are those that get in to what ever when the market is at the top .

 

[wpod]

During periods of high inflation coupled with a stagnant market, a well purchased home with a low interest rate mortgage is a good thing. There are times where debt, even in large amounts, is a non issue.

I don't have any debt, own my home and cars/airplane, etc. I am concerned that my investments won't match inflation and the end result is a net loss of wealth. Right on the cusp of retirement. I expect a market correction, coupled with inflation in the near future, and I don't see any viable methods of wealth preservation.

Your out going needs to be less than the incoming and the worst times. Been retired for 21 year but that doesn't mean I quit all income producing things.

 

[Nick1994]

Not really true. Debt means you owe more than your assets value.
If I have a $300K mortgage on a house that has appreciated to $1M, that is a problem I will take every day.
I owe money but I am not in debt.
More than likely I used the bank's money to gain an appreciating asset. I would never been able to buy that same asset with cash.

Sorry Jeff, debt just means you owe something (usually money) to someone.

If I misplaced my wallet and I asked to borrow $20 for lunch, I'd be in debt to you in the amount of $20. Doesn't make a difference how much my net worth is.

 

[dishdude]

Sorry Jeff, debt just means you owe something (usually money) to someone.

If I misplaced my wallet and I asked to borrow $20 for lunch, I'd be in debt to you in the amount of $20. Doesn't make a difference how much my net worth is.

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But what if you could sell that lunch for $100 to repay that $20 you borrowed?

 

[PimTac]

Lunch?

 

[PWMDMD]

My education was about $250k but my interest rate on it is 0.65%. This is good debt as it's super-low interest and it allows me to make a great living.

My mortgage debt again is low interest 2.75% and I make more in a year than what I bought my house for 6 years ago.

Both vehicles are finances, one at 0.9% and the other at 1.9% and so not too worried here either.

I have no CC debt and run just about everything through my Amex and pay it off every month.

So, I have debt, but I'm paying minimal interest on it and it allows for additional cash flow, savings, and investment.

 

[Nick1994]

But what if you could sell that lunch for $100 to repay that $20 you borrowed?

Then that's a restaurant I want to find

 

[methusaleh]

This thread is a great example of the main non-automotive reasons that I keep coming back to BITOG.

The breadth and depth of experience and wisdom herein is incredible.

I have nothing to add except a gigantic “thank you” to you all.

My only debt is a car loan. No credit cards, no student loans. To only owe on one out of our four vehicles is nice.

I’ve spent almost 30 years in law enforcement and the last 13 years as a call firefighter/EMS, so I’ve seen the differences in crash outcomes between the structure and safety features in old vehicles versus new. Having a very low interest loan on a new vehicle that my family can travel in with peace of mind is a debt I’m willing to take on. My cash reserves aren’t much due to my wife’s medical conditions so paying cash for a new vehicle wasn’t an option.

 

[miden851]

I and my wife both do hate debt; we have debt on the house and one car that's it

we use CCs for points; we live below our means and have a good night sleep; that's what we appreciate the most

 

[wtd]

I don't like debt but have been in debt on a house and cars in the past. I'm debt free these days and plan to stay that way. The feeling of not owing someone is a good feeling.

 

[NormanBuntz]

As I've gotten older, I've concentrated on reducing our household debt. But for the purpose of purchasing a vehicle, I'll gladly take a 1.9% credit union loan any day vs. taking a big chunk out of my savings or investments. For that purpose, I believe it's better using other people's money.

 

[AutoMechanic]

I don’t like debt at all. Fortunately the only thing I’m in debt with is tools. I owe $1100 to Snap-on it would be way less but I always am needing something else. I paid it off once about a month after I started buying stuff tomorrow I’m making a $400 payment. I only have to pay him $40 but I try to do extra each week so hopefully I can have this debt go away if I ever stop buying stuff. I try to balance wants versus needs and try to figure out if there is an alternative place to get it other than the tool truck. I don’t want to go in debt with anything else at all but I may have too when the time comes to buy a house or something like that. The only thing about this debt is it’s not building credit because it’s not that type of account I have a regular truck account interest free money goes directly to the dealer. Everyone else I work with has the credit account with interest. I may sign up for that eventually but I’m not ready too right now.

 

[JeffKeryk]

I don’t like debt at all. Fortunately the only thing I’m in debt with is tools. I owe $1100 to Snap-on it would be way less but I always am needing something else. I paid it off once about a month after I started buying stuff tomorrow I’m making a $400 payment. I only have to pay him $40 but I try to do extra each week so hopefully I can have this debt go away if I ever stop buying stuff. I try to balance wants versus needs and try to figure out if there is an alternative place to get it other than the tool truck. I don’t want to go in debt with anything else at all but I may have too when the time comes to buy a house or something like that. The only thing about this debt is it’s not building credit because it’s not that type of account I have a regular truck account interest free money goes directly to the dealer. Everyone else I work with has the credit account with interest. I may sign up for that eventually but I’m not ready too right now.

I have a couple of thoughts for you, AM. First, no credit is better than bad credit. You might consider getting a credit card, using it for gas, groceries and things you usually pay cash for. Pay it off in full every month. One thing - it is easy to buy more with plastic. That's the reason casinos use chips; people part with it easier. Be carefull.

Second, I hope you are putting something away for your future; something outta every check. Once you have a little nestegg, you can buy into a nice S&P Index fund from Schwab or whoever.

You can thank me in 30 years when you have a few mil in your well diversified account. Your first money investment is very important.
Good luck and happy investing!

 

[Jimmy_Russells]

My wife and I are debt free in our early 40’s. Like someone else said earlier we paid our house off early but really, had we put that money into SPY we’d be much further ahead. But that is hindsight and you don’t really know that at the time.

With the way interest rates are now, and the way the stock market is performing, I don’t know why anyone would pay cash for anything major. If it’s an emotional thing that’s fine, but it’s absolutely costing you money.

 

[JHZR2]

My wife and I are debt free in our early 40’s. Like someone else said earlier we paid our house off early but really, had we put that money into SPY we’d be much further ahead. But that is hindsight and you don’t really know that at the time.

With the way interest rates are now, and the way the stock market is performing, I don’t know why anyone would pay cash for anything major. If it’s an emotional thing that’s fine, but it’s absolutely costing you money.

That’s theory. The unrealized gains and paper/hindsight is 20/20 where the market is performing so well thst you shoukd invest all cash and hold debt is unreasonable.

On paper I could have bought Walmart or tesla or Bitcoin, and had I only just done it I’d be uber rich. But that’s a back test, not reality.

 

[JeffKeryk]

My wife and I are debt free in our early 40’s. Like someone else said earlier we paid our house off early but really, had we put that money into SPY we’d be much further ahead. But that is hindsight and you don’t really know that at the time.

With the way interest rates are now, and the way the stock market is performing, I don’t know why anyone would pay cash for anything major. If it’s an emotional thing that’s fine, but it’s absolutely costing you money.

Sure we can look back and say I shoulda.... That game gets you nowhere.
Please don't forget risk. A balanced set of assets minimizes risk. If you leveraged yourself to buy stock and it tanks you still own the debt.
Having a home free and clear is amazing and pretty darn smart if you ask me. Well done.

 

[AutoMechanic]

I have a couple of thoughts for you, AM. First, no credit is better than bad credit. You might consider getting a credit card, using it for gas, groceries and things you usually pay cash for. Pay it off in full every month. One thing - it is easy to buy more with plastic. That's the reason casinos use chips; people part with it easier. Be carefull.

Second, I hope you are putting something away for your future; something outta every check. Once you have a little nestegg, you can buy into a nice S&P Index fund from Schwab or whoever.

You can thank me in 30 years when you have a few mil in your well diversified account. Your first money investment is very important.
Good luck and happy investing!

Yes I do save up for the future and retirement. Right now 5% of each check but might do more as I get older. I typically use my debit card and cash for everything. That’s a good idea on the card.

 

[Astro14]

Yes I do save up for the future and retirement. Right now 5% of each check but might do more as I get older. I typically use my debit card and cash for everything. That’s a good idea on the card.

Your next two moves:

1. Pay off the Snap On guy. He loves making interest off you, and it makes your tools even more expensive than they already are. This is bad debt. High interest. You gain nothing. Stop paying interest to him. Learn to distinguish between “need” and “want”. You’ve been buying tools for years now. You should have what you need. No more “wants” on credit. Save up some cash and then, and only then, if you feel like getting a sweet new tool, pull out your wallet and pay cash. Ive got no problem with you buying more tools, but don’t use debt to buy them.

2. Slowly move up from 5% to much more. It sounds like a lot but you need to be closer to 10% for retirement and 10% for savings to have cash for the next big purchase (whatever that is for you). 5% will never get you enough for retirement. Long explanation behind this, but your age allows you to make huge changes for the future. Take advantage. It can be hard to find money by cutting spending, so here is what I suggest: take half of your next raise and add that to your retirement contribution. Do that with each raise, and in a couple years, you’ll have both more money in your pocket, and be at that 10%.

 

[AutoMechanic]

Your next two moves:

1. Pay off the Snap On guy. He loves making interest off you, and it makes your tools even more expensive than they already are. This is bad debt. High interest. You gain nothing. Stop paying interest to him. Learn to distinguish between “need” and “want”. You’ve been buying tools for years now. You should have what you need. No more “wants” on credit. Save up some cash and then, and only then, if you feel like getting a sweet new tool, pull out your wallet and pay cash. Ive got no problem with you buying more tools, but don’t use debt to buy them.

2. Slowly move up from 5% to much more. It sounds like a lot but you need to be closer to 10% for retirement and 10% for savings to have cash for the next big purchase (whatever that is for you). 5% will never get you enough for retirement. Long explanation behind this, but your age allows you to make huge changes for the future. Take advantage. It can be hard to find money by cutting spending, so here is what I suggest: take half of your next raise and add that to your retirement contribution. Do that with each raise, and in a couple years, you’ll have both more money in your pocket, and be at that 10%.

I have a truck account going so it’s supposed to be interest free. The credit accounts have interest attached. At least that’s what they say. And thank you for the advice. I will raise it eventually. I like just paying for everything up front but that can’t always happen. If Snap-on shows up today like he is supposed too I’m going to pay him $400 trying to get it down and eventually to nothing again.