How do you feel about debt?

[dlundblad]

I had several mortgages at one time. Bought investment property. The rents covered the mortgages. They have been paid off for years and now provide retirement income-allowed me to retire at 55 years of age.

I could’ve bought a house right down the road from me for $60k. Decent house for the price. Nice 2.5 car garage. I’m guessing I could have rented the place out for $1k a month and kept the garage for myself.

Dwelled on it and dwelled on it and then it was sold. Odd situation though because she was on disability and apparently only made $700ish a month and couldn’t have large sums of money in her bank account over $2k or so. So I was told. I have no idea how that sort of thing works.

 

[Imp4]

The act of borrowing money and incurring debt is a tool just like any other tool in my toolbox.
I can misuse it and suffer the consequences or I can use it correctly and reap the benefits.

 

[tbm5690]

To the OP's title "How do you FEEL about debt" I would sure hope all feel negatively towards debt, regardless of the type. I understand the financial benefit in borrowing at low rates (or zero) and keeping your money to work for you in the market, but this is only looking at it from a dollars and cents standpoint. Debt means you owe someone, and that doesn't change no matter what. The principle behind owing no man and the peace of mind knowing what you have is actually yours changes things.

 

[tblt44]

No like it.
Only depth here is house.
If I get a 6 month or year promotion with zero interest it's always paid off early.
I drive older trucks with 200k just to stay out of debt. Will need to buy something one day but put it off as long as I can

 

[alarmguy]

... What bothers me is that if the banks had been charging anything close to a reasonable interest rate (10% ?) my debts wouldn't be nearly as large as they are. I know that people like me are being charged 24% because so many others have walked away from their debts. And I know the banks are somewhat greedier than they used to be and gross mismanagement of some hasn't helped.

Reasonable rate? Not to sound cold but what is a reasonable rate?
Someone goes to borrow money from someone and the person borrowing the money is the one to determine what is reasonable?
That is kind of backwards, I call it supply and demand, dont borrow money and there isnt an issue. The gross mismanagement is on the part of the person that needs to borrow not on the person willing to lend money.

We need to get out of the mentality that other hard working people have to pay other peoples debts to society. We are a free people, no one has that right to take my money and give it to other families who were less prudent in their budgets.

True but not everyone can afford a house in most markets.

 

[alarmguy]

True but not everyone can afford a house in most markets.

Of course not everyone can afford home in certain markets, they do have the option to move where they can afford one.
There isnt enough space on the ground to build a home so everyone can afford a home in a particular area.
People can afford home if they choose to move to an area that fits their budget.

 

[alarmguy]

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?

Sooner or later something is going to stop this insanity, either willfully or by default. Dont think it cant happen here ... Japan in far worst shape as many "free" countries but Japan had a stagnant stock market for almost 2 decades. Japanese stock market hit a high in 1989 and lost 50% of its value over the next 3 years until 1993 ish, 25 years later it was still at that low level, only this past year has it recovered 25% of the 50% loss back in 1989 and to this day 45% of the debt is still held by Bank of Japan. Really think about that, we take for granted our investments in our 401k's real estate markets, ect ...ect... nothing is guarenteed prudent use of debt will make sure your not caught with your pants down and never count unrealized gains in equities markets as a gain until it is turned into cash/sold.
We are on a slippery slope right now.
http://www.usdebtclock.org

 

[doitmyself]

In before the one guy mentions "chest pounding".

Hey, you are the first to bring it up this time. That would be me, and you were reading my mind! I've been here since the beginnings (2002, member # 50) and I am butt hurt that you only refer to me as "the one guy", LOL. Geez, I still occasionally promote your celebrity status by mentioning your epic rock thread.

Unlike similar threads over the years that preached the ONLY way to buy a vehicle was with cash, this thread has lots of balanced, rational discussion about debt. I especially connected with FowVay on page one, who recommends to be careful that you don't let wealth accumulation result in regretting not living a full life when old age takes over. I attempt, often fail, to live mindfully and in balance.

Here's my favorite Pablo, just for you, xoxoxoxoxo

 

[vavavroom]

Being in debt has become way too affordable and many people are comfortable being in debt.

 

[Dave Hess]

alarmguy,

A market correction and interest rate increase would be very sensible next year.

 

[PimTac]

Dont think it cant happen here ... Japan in far worst shape as many "free" countries but Japan had a stagnant stock market for almost 2 decades.

It can happen here and it has.

The Great Secular Bear Market 1966-1982.

 

[GMFan]

Hate it and avoid it like the plague. I refuse to take a mortgage out on a house - that’s how nuts I am when it comes to debt. If I can’t pay cash for something I don’t buy it. To me peace of mind of not owing anybody money is more valuable than the “thing”.

 

[JeffKeryk]

To the OP's title "How do you FEEL about debt" I would sure hope all feel negatively towards debt, regardless of the type. I understand the financial benefit in borrowing at low rates (or zero) and keeping your money to work for you in the market, but this is only looking at it from a dollars and cents standpoint. Debt means you owe someone, and that doesn't change no matter what. The principle behind owing no man and the peace of mind knowing what you have is actually yours changes things.

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.

 

[tbm5690]

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.

True as far as a mortgage goes in particular...I have one and realize that buying a decent house cash isn't a real option for most. Debt is simply money owed...even if you have a positive net worth (assets minus liabilities) you can still have debts.

 

[JeffKeryk]

One thing has been bugging me about this thread that I couldn't put my finger on.
In general (not all cases), the people who have "done well" on their own after starting with little or nothing, keep living below their means. Yes, they reap the rewards, but still are financially conservative.
I know others who inherited money, and, in many cases, bought real fancy cars, etc. They may have been relatively poor or raised in money, doesn't matter. They are good people, but, IMO, are financially careless. Money scares me.

 

[PimTac]

One thing has been bugging me about this thread that I couldn't put my finger on.
In general (not all cases), the people who have "done well" on their own after starting with little or nothing, keep living below their means. Yes, they reap the rewards, but still are financially conservative.
I know others who inherited money, and, in many cases, bought real fancy cars, etc. They may have been relatively poor or raised in money, doesn't matter. They are good people, but, IMO, are financially careless. Money scares me.

It all goes back to how you were raised and how you lived and spent money.

This person passed several years ago and I have his book. He lived with his wife and children in a modest house, drove an old Cadillac and brought brown bag lunches to work. His fellow workers kidded him on his frugal spending and his answer was, I’m happy and that is what counts.

He was the founder and Chairman of American Century mutual funds and was worth billions. James E. Stowers Jr.


https://www.dignitymemorial.com/obituaries/kansas-city-mo/james-stowers-5896939

 

[wings&wheels]

One thing has been bugging me about this thread that I couldn't put my finger on.
In general (not all cases), the people who have "done well" on their own after starting with little or nothing, keep living below their means. Yes, they reap the rewards, but still are financially conservative.
I know others who inherited money, and, in many cases, bought real fancy cars, etc. They may have been relatively poor or raised in money, doesn't matter. They are good people, but, IMO, are financially careless. Money scares me.

Slightly OT, but in line with your thoughts and observations. First job out of college I was a bank auditor for an old school bank holding company with a large trust and investment practice. For several reasons, locations being one of them, we had a fair amount of business from lottery winners and many if not most of the long term stories were not good. Some winners went right to the Trust team and did it right, education accounts, restricting access to the funds, etc., but there were many stories of bankruptcies, seizures, etc. from folks who won millions..... Always found it sad, but a good lesson.

 

[RavenTai]

Debt is a tool, and a powerful one, a force multiplier, if used improperly it gives others the power to make you poor, if used in the right ways at the right times it can help you find financial security.

 

[alarmguy]

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.

Yeah, you are in debt, if you don’t pay the mortgage, the bank will sell that million dollar home and give you whatever is left over if anything.
Also your $300,000 debt/mortgage is cash that is owed.
The home you claim is worth a million is an unrealized gain for what you say it’s worth until it is sold.

Just playing devils advocate, you are in debt, you do not own that home, the bank owns the home until the day you pay the bank back the money that they loaned you to buy it.
If you don’t pay them they will foreclose, sell what you thought was the house that you owned, throw you and your family out in the street and court will give you any left over money after your debt to the bank is paid.

 

[alarmguy]

alarmguy,

A market correction and interest rate increase would be very sensible next year.

It’s going to be an interesting year. I’m still fully invested but conservatively, maybe too conservative but not really looking for hitting anything out of the ball park.

I do expect to see a minimum of two interest rate hikes In addition to now ongoing tightening of QE. It will be interesting and I suspect when least expected once everything is behind us including Covid, supply chain, workforce, ect.. and the entire bright sunny future is here at last … will be the time that the market crashes.

Anyway, I agree with you. I find it fascinating and THINK I am prepared for whatever rolls around.