Would you forgo a a debt which would say, double your salary and pay itself back in three years just because of hatred of debt? Buying a house which appreciates in value?
There are well understood ways of determining if debt is a good choice.
You’re not debt free unless you live in the wilderness.
No. I have a car payment and student loans, and three credit cards in my name alone, and two that are shared. The three in my name are store charges and a gas card. They usually get paid to less than $50 every month. The shared ones have large balances that revolve. Credit score around 710, last time I checked.
According to Bloomberg in 2016, the average US family had about $16K in credit card debt, $28.5K in car loans, $175K mortgage, over $50K in student loans . . .
My husband and I have never had any debt whatsoever, with the exception of a 10 year mortgage of $28 thousand on the land we bought from my aunt 30 years ago, to build our house on (we built it ourselves from our savings). We saved up to buy our cars.
But we are miserly Whole Earth Catalog hippies, and also, privileged. My husband had a good job as an engineer. And we have had lots of help from both our families (such as the example of my aunt who sold us the 5 acres for half the going rate at the time). I love the security of debtlessness, but I try not to ascribe it to my own virtue. Tempting as that is.
I’ve got two big debts:
Mortgage on my primary home. This I could remove relatively easily, but it doesn’t make fiscal sense to do so as it’s one of my biggest deductions. The montly payment is tiny, I make an additional big payment every year to max that deduction.
Personal loan from my mother to pay for my secondary home. This has no fiscal consequences, but it was done in part as a way to take a windfall Mom got and split it up over time. If she ever needs higher payments (unlikely if she was a reasonable person, but she never has been), I’ll step them up as needed. Her heirs are my brothers and myself, three equal parts, so if she does die before the debt is paid in full I’ll owe 1/3 of whatever is left at that point to each Bro. Again: I could get rid of it relatively quick, it’s set up the way it is for general family convenience.
My no-fee cards are usually set for full payment (no interest). Sometimes I’ll set one for split payment at the beginning of a project to give myself a buffer before getting my first invoice paid; as soon as that first payment arrives I set them back to full payment and close the outstanding.
No mortgage or debt of any kind. Credit card paid automatically every month. We are very fortunate.I wish everyone was.
Not debt free and don’t plan on ever being so.
Well, since 1972 I got a mortgage that allowed me to buy a house that I eventually sold for five times what I paid for it. That might have made a difference in your life.
Hell, I still carry a mortgage, I’ve got almost 6 years and 10 months left on a 10 year fixed refinance I got for 2.875%. I’ve got 10 times the money I need to pay it off, but the investment returns I’ve made over the period since I refinanced have been 10.9%, so what kind of idiot would have done that?
Even if you own your house free and clear you’d still have property taxes. You will always be paying something to live where you do unless that’s a tent outside a van down by the river.
Yeah, and that would be below the rate of inflation, so, even if you don’t invest it, it’s basically free money.
My score was 850 for about 5 years. The situation was - One car payment that was automatically deducted. One CC paid off every month and I was making double house payments. Oh and utilities automatically paid every month.
Car and house are paid off, and it has dropped down to 838.
No, but on purpose. We have a mortgage. With the mortgage write off and the low mortgage interest rate, I have that money (plus enough to pay off the mortgage several more times) invested in the stock market. I come out a few thousand dollars ahead each year in dividends.
No car loans, no student loans (but we are in our 50s), no significant credit card debt (as in I almost always pay it off every month).
I thought there was a debt problem in this country. Glad to see no one has any debt.
Dopers are smarter than the average bear.
At least the ones responding to this thread.
I should, barring any crisis, be debt free in 4 months except the mortgage.
I switched jobs a few years ago and it turned out of to be a bad choice. I ended up telling the C.I.O to fuck off during a meeting cause she was insane. She had to manage via fear because she is incompetent and I won’t put up with that shit.
I ended up with a job I love with much better pay. However the period without a job ate all my available savings, I never touch my retirement accounts. So we were on a really tight budget. Then my wife and I decided to have kids. We had to do IVF. Two rounds. That we paid off. We had twins so milk and diapers ate up tons of money. We had to do the IVF thing right then due to our age, we couldn’t wait.
It was pretty ugly for a bit. Throw in a couple emergencies and it sucked.
I am down to a few thousand in credit card debt and the mortgage. The stock accounts are doing well, I refinanced the house so the payment went up a bit but I went from a 30 year loan to 15 and saved a couple hundred thousand over the life of the loan.
Next year we should be debt free. We normally don’t used credit cards except for emergency and we will soon have enough saved so we probably won’t have to o do that anymore.
All in all, things look good. I also got a 15% raise this year which didn’t hurt.
Slee
Alright, I’ll bite. I am not debt free, but not in the usual sense. I don’t own a home and my 13-year-old vehicle was bought in cash several years ago. I don’t have any credit cards, so no consumer debt. I do, however, have debt in the form of unpaid bills, all medical – partly because I don’t make a lot of money and partly because I’m just lax in paying them. I’m also pretty annoyed that as much as I pay in premiums, my insurance doesn’t cover a lot of things I feel it should and I’m tired of being expected to pay on both ends. Since I’ve never in my adult life had credit, I’m not that broken up about the negative effect those unpaid bills have on my credit. I don’t ever expect to own a house until my parents pass away, if they still own one. I’m not looking forward to owning a home, either. I wish I could get a newer vehicle, but I appreciate never having to worry that one little economic catastrophe or dip in hours is going to get my car repo’d or my house foreclosed upon. I don’t know what’s going to happen to me in 20 years or so when I’m ready to stop working but I can’t, but I don’t think I’m in any position to really fight the system which I have never felt is designed to help me any more than it is to shake me down.
There’s smart debt and dumb debt. Mortgage loans and college loans can be good debt. They’re debt on appreciating assets. Debts on vacations and snow machines and bass boats are dumb debts. They’re debts on depreciating assets.
It shouldn’t be hard to tell the difference, but if you’re dumb enough that it is, you’re better off treating all debt as dumb.
Any tool can be useful to a skilled craftsman, but not everyone can build a house with a hammer, either, and for most people it would be disastrous to try. There are more people who lost their mortgaged homes, than who made a killing on them . There are many things that can be resold for a 5X gain, but surprisingly few people ever do it, despite ready access to the miracle of speculative credit.
As for me, I am content with all the wealth Ive ever had, and I have more now than I will ever need. More wealth might have made a negative difference in my life. I’ve been enriched by travel, the value of which has been greatly magnified by that fact that it was in one-dollar hotels in Laos, not in five-star condos in the Caribbean. But that’s my own unique perspective, and I don’t expect you to share it.
I have a mortgage, but no other debt. I was very fortunate to have inherited a modest sum a few years ago. That allowed me to pay off my car and credit card. And buy my horse.
I am debt free right now, but I haven’t always been. My first car was one I had to make payments on, because I was 22 and had no savings, but I calculated that if I quit the job I had (which I rode a bike to), and became a full-time free-lance interpreter, I could make almost double what I was making at my current job, and that was way more than what the car payments and insurance, plus my private health insurance I’d have to buy, cost. It was 1989, I was 22 and healthy, and found insurance that excluded maternity benefits, for $26/month (if I’d wanted maternity, would have been $46/month).
Then, later, I had a mortgage, and for a while, I had some medical bills I had to make payments on. I also ran up some credit card debt in my late 20s, but I learned my lesson and haven’t done it again.
I do use credit cards, but just often enough to keep them, because I’ve discovered that if I don’t have any credit cards, no one reports to the credit companies, it actually hurts my credit rating. I also occasionally need a credit card to rent something. I am going to need a van next month to move some stuff, and they require a credit card, not a debit card, for the deposit. If I don’t use them at least once every three months, the companies threaten to close the accounts.
I have three cards. Two have $2000 limits, and one has a $500 limit. I leave the two with high limits at home, except when I’m renting a van, or something like that, and I carry the smaller one with me, for things like tires that blow out on the road.
I also have a Mejier store card, because it gets me a 10-cent discount on gas, and I use it to go grocery shopping most of the time. It helps me keep my spending in a budget.
All cards get paid off before the end of the cycle, so I don’t pay any interest.
We don’t make a lot of money, and if we spent a lot in interest, we’d be living hand-to-mouth. As it is, we have a small savings account, a retirement account with USAA, and a college account for our son.
Now, there’s an amount of luck in play. I was driving a 22-year old car for a while, and if I didn’t know how to do repairs myself, it would have eaten me alive. As it was, still paying for parts, and for some of the things I couldn’t do myself were a strain. Then my great-uncle died and left me a pretty tidy legacy. I bought a new car outright. It’s a Chevy Spark, one of the cheapest cars on the market ($14,000), but it’s under warranty, and unlikely to break down in any event, as long as I treat it nice.
So, me, no debt, but I did have to learn the hard way to stay out of it.