How do you feel about debt?
- Thread starter Nick1994
- Start date
Sometimes renting is a great deal.
Debt is bad overall, and has been way misused by most of the country.
Took me till I was in my mid 40's to realize it, and am now debt free (in my early 50's) except for my house (and will be done with that in less than 2 years).
While I agree there are times when it may be needed, if you can set yourself up to not ever need it, you are better off in the long run.
I am teaching my kids to put off instant satisfaction for long term gratification. If they can't pay cash for it, then they don't need to get it now.
Daughter is starting college and delayed starting so she could save enough to pay up front for it. She has a vehicle I gave her and is staying at home rent free while going to school.
My son has the same understanding when he graduates high school, either college, trade school, or military. He can stay at home if going to school to help save expenses.
Took me till I was in my mid 40's to realize it, and am now debt free (in my early 50's) except for my house (and will be done with that in less than 2 years).
While I agree there are times when it may be needed, if you can set yourself up to not ever need it, you are better off in the long run.
I am teaching my kids to put off instant satisfaction for long term gratification. If they can't pay cash for it, then they don't need to get it now.
Daughter is starting college and delayed starting so she could save enough to pay up front for it. She has a vehicle I gave her and is staying at home rent free while going to school.
My son has the same understanding when he graduates high school, either college, trade school, or military. He can stay at home if going to school to help save expenses.
Of course each persons situation will be different. Sometimes rent is really the only option
Another thing to consider is location. Buying a lesser priced home or renting at a cheaper price will usually place you in neighborhoods you will regret.
It is very difficult to buy a home or car without incurring debt. The good news, at least for now, is loans on those items are available at fairly low interest levels. However that is no excuse to spend more than you should which manifests itself in a very high income to debt ratio.
Carrying high credit card debt is insanely stupid unless it was incurred due to an emergency. Some credit card companies have rates approaching 25% these days. Are you kidding me ?
But even with low rates like on a car loan and home loan, I never felt entirely comfortable with debt. Psychologically there was always a specter hanging over my head that if anything happened I'd be in trouble. So I tried to limit auto loans to 48 months and paid off a 30 year mortgage in 19 years. Now in retirement, thanks to prudent planning, living a modest yet comfortable lifestyle and some luck I have "eff you" money and it's like a burden that I carried for about 30 years while working has been lifted off of my back.
When I was 35 age 65 seemed a long, long way away. I can tell you it goes a lot quicker than you can imagine. Watch your debt while you are young. And keep off of Facebook and Instagram and don't think you need to keep up with the Kardashians. You will be much happier now and later.
Carrying high credit card debt is insanely stupid unless it was incurred due to an emergency. Some credit card companies have rates approaching 25% these days. Are you kidding me ?
But even with low rates like on a car loan and home loan, I never felt entirely comfortable with debt. Psychologically there was always a specter hanging over my head that if anything happened I'd be in trouble. So I tried to limit auto loans to 48 months and paid off a 30 year mortgage in 19 years. Now in retirement, thanks to prudent planning, living a modest yet comfortable lifestyle and some luck I have "eff you" money and it's like a burden that I carried for about 30 years while working has been lifted off of my back.
When I was 35 age 65 seemed a long, long way away. I can tell you it goes a lot quicker than you can imagine. Watch your debt while you are young. And keep off of Facebook and Instagram and don't think you need to keep up with the Kardashians. You will be much happier now and later.
My FIL who worked at a National bank in Canada for many years use to tell me all the time, sundry debt is terrible (credit cards, small loans etc...) and the true measure is cashflow. His opinion is all debt is bad regardless of reason, amount or interest rate. He claimed there is a common misconception that because here in the USA you can use the mortgage interest as a tax deduction, having a mortgage is ok. Back to his original statement it is about cash flow... Saving a few hundred or a thousand dollars a year on interest credit but spending 10,000+ a year on a mortgage... Feels like going backwards to me.
To be frank I am not a huge fan of my FIL, but in this instance he appears to be correct IMO.
Just my $0.02
To be frank I am not a huge fan of my FIL, but in this instance he appears to be correct IMO.
Just my $0.02
Nick1994
$100 site donor 2024
Sold the car because the seats were unbearable for me, and other QC issues that I threw in the towel, sold it for more than what I paid.
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This one kills me. So true!
I can show you many people in Silicon Valley that have homes hundreds of thousands of dollars (millions?) over their purchase price but cannot afford to make the payments because they pulled $$ out for cars, vacations and "stuff they had to have". They could still sell and make a profit, but they couldn't afford to live here due to the high rents. Their property could easily have been free and clear today.
I can show you other people who worked as tree trimmers or whatever and have houses paid off that approach $2M. Bravo!
My friend Art owns a tree company, makes just a little, lives like a pauper but is a multi millionaire. Smart man!
Yeah, I used to be that guy. Owning anything was an impossible dream; maybe others could but not me.
This gorgeous gal I knew told me, "You need a better job." Invest in yourself. Her logic shocked me.
There is good debt, and bad debt. If it is debt that is servicing an appreciating asset like a house or investments, that is good debt. As long as the carrying charges are less than the increase in value of the asset. Right now, paying down good debt does not make sense as carrying charges are next to nothing. I use my HELOC as an investment loan account, and over the past year have easily made 10x the interest amount. If interest rates start sky rocketing, will just pay it off.
Debt is like a lever (in fact, it's often called leverage in finance) and that simply makes it a tool.
Like any tool, there are smart and dumb ways to use it.
Like any tool, it has to be used in a safe fashion.
Keep the above in mind and one can have a good experience with using debt in a smart and safe fashion.
Ignore the warnings and/or just be dumb with it and it can hurt you.
The only debt I have is my base model Kia, but that’s a 0% loan so I didn’t pass on that - they’re carrying the paper for nothing! I’m all in.
Credit cards are payed in full each month, own my dwelling.
Lots of dry powder to invest, just looking for bargains in dividend stocks. These are challenging times for that.
Credit cards are payed in full each month, own my dwelling.
Lots of dry powder to invest, just looking for bargains in dividend stocks. These are challenging times for that.
In before the one guy mentions "chest pounding". 
I made the mistake of going to college. I'll be taking those loans to my grave. That's been the biggest hindrance in my adult life. My current house will definitely be paid off before them and the house we're going to be buying soon will no doubt be paid off before them!
Otherwise, no credit card / car loans for me .
Otherwise, no credit card / car loans for me .
While I agree with you, and I like to round up payments, what would that $100 per month look like if it had been going into a 401k instead? If someone has 20 plus years to retirement, well that is a good long time for that money to grow.
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