Posted: 9/21/2014 11:55:13 PM EDT
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Simple question:
Is there ever a time when debt is appropriate as a tool to become otherwise more prepared? Examples: - getting a mortgage to buy a BOL - getting a loan for a reliable automobile - buying prep stuff before paying extra on your house mortgage My answer would be that debt is a tool that can be leveraged if you are very wise about it. Granted, most folks don't use debt this way, and are in way over their heads. I would submit that there is a huge difference in getting a modest loan for a piece of land when a good deal pops up but you don't have the cash, when the loan is very manageable, and the property is resource rich in wood, water and pasture, VS buying a huge house or expensive car on debt just to impress your friends or to enjoy the lifestyle of the rich and famous. (of course there are so many conditions to this, but just going simple comparison here) Thoughts? TLDR: Having no debt with good preps is most desirable, but debt is a tool that can be used wisely when needed. |
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Debt is a very important tool, and when used wisely, is a way to leverage your betterment.
If you have to use debt to attempt to enjoy the 'lifestyle of the rich and famous', you will never have any idea what being 'independently wealthy' is like. Huge houses and fancy cars, are often the expression of an unhealthy ego. |
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If you can borrow money (debt) at 3% and invest it at 7% (profit,) you're ahead of the game.
It's really just a mathematical equation, which we can't answer, but is quite evident to you. The adage of 'you can't make money, without spending money,' comes to mind. How you do it, is the thirty two cent question. Chris |
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I know I'm going to be swimming up stream on this one, but my answer is "no".
Mathematically and numerically you could make an argument for debt. However, most o us have problems with behavior, not math. If we were rational, logical and followed through with real math, no one would take a 30 year mortgage on anything. And cold hard math would preclude most debt. Our real problems come when we tend to over spend because debt is less painful, not as visible, full costs are not transparent, etc. When 98% of us cannot afford something, we rationalize it by saying it's only $49 a month, we'll pay it off in six month while the rate is still 0%, etc and we simply end up a little farther in the hole... I'm firmly of the belief that debt is not great tool. It's too often misused. If you run on the debt free/pay cash route, it does take longer. This is a disadvantage. However, when discipline kicks in you start to take a firm look at your spending, really start to separate wants from needs, and once behavior is changed, can stockpile, save, pay off debt, etc incredibly fast.. Most of us will need to borrow to buy a home. This is necessary. However, if you cannot afford a 15 year mortgage, it's not a good deal. If you must take a 30 year, you are over spending, and the math does not work (no matter how you try to fudge numbers). With discipline you can likely pay off said home in 7 or 8 years. Mortgaging for a second home, a BOl etc is NOT a good idea. Being indebted is not a prep. Others will jump on this, and claim I'm wrong. I can only offer this in my defense: Back in 2004-2005 I posted a lot of financial rants and raves. Some remember them. I argued long and hard against borrowing to buy homes. Many claimed I was an idiot, since prices were doubling and tripling. The market collapsed, the people went underwater, needed a federal bailout or just plain went bankrupt. It's hard to be a prepper when you are living in a 1986 dodge caravan... Instead of being in debt, I opted for the debt free life. I lost a job, retrained, did not particularly like the new job, and decided to retire. I've never made good money, never had a well paying job and didn't win any lotteries. I simply lived debt free, and I am now retired. I've been retired for several years now, and I am a ripe old age of 46. Life is good  . No debt , and money in the bank, is a HUGE prep... Instead of working today to pay for that home, car or prep I bought in 2005, my 2005 dollars (as well as my 2006,2007,2008,... 2013, 2014 dollars) are in the bank/brokerage/etc paying me. When you don't give money to the bank for interest, those dollars are still yours, can be used instead to buy preps or be put to work for you.
The key to prepping is not debt. It's discipline. Think about it. As a prepper, you deny today's pleasure (going out for dinner) so you can stockpile for tomorrow. We are 'forward focused". This is prepping. Applying this same discipline (some financial modest today for tomorrow's gain) is simply an extension of this same principle.... The only time borrowing to prep make sense is in an immediate short term sense: Like using your credit card to buy more water and groceries 24 hours before the hurricane hits, or using the card to pay for the hotel because you evacuated. And I'd argue that if you are using the credit card like this you already failed at prepping. |
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i used to purchase very little on credit.
with rates at 3-5% i am completing a lot of expensive projects and paying the off as quickly as possible. things i siply would not have done at 8-10% apr. that said i maintain no more than about 5k or less on CC debt. that is a limit that if need i could stroke a check and pay off tomorrow without too much pain. i also don't charge frivolous things, i use it real needs or to advance my position on things in the future ONLY. i do use my card for daily purchases but i also come home and pay them off that afternoon. the charges acrue cash rewards and paying the off directly no interest. so every 2-3 months i end up with a 100.00 or so cash back to help offset any small int. payments i might have made on the large projects. |
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Quoted:
If we were rational, logical and followed through with real math, no one would take a 30 year mortgage on anything. Quoted:
If we were rational, logical and followed through with real math, no one would take a 30 year mortgage on anything. I will respectfully disagree... especially now when we're seeing inflation outpace mortgage interest (for those that locked in on low fixed rates)... A disciplined person has a LOT of potential to leverage debt to grow their finances in a BIG way. The problem is that there aren't many people that are disciplined... IE, they may have a low rate mortgage and choose not to pay it down because of the low rate, but then they either spend that money or just let it sit in their savings account making .2% interest... which is counter productive. You have to be disciplined, have financial goals, know what the hell you're doing, and DO IT. FWIW, I'm probably in a minority, but I was able to buy when the economy was in the pits. I was fresh out of college with good credit history, a secure job with promise of quick advancement, engaged to be married, and they were offering the first time home-buyer credit. IE, housing prices couldn't be beat. Because I was fresh out of college (starting salary) & single (1 income) all I could afford was a 30 year mortgage according to the bank. But the bank's algorithm that says how much you can afford does not account for personal responsibility, personal discipline, or other individual factors. IE, they didn't care that I was the most frugal person on the planet and I could devote 50%+ of my income to a mortgage payment. But I knew the house I was buying was a really good deal that had a lot of potential for quick value growth. Fast-forward 5 years. By getting married (2nd income) career advancement (more income) taking special jobs that offered bonus income (even more income) I paid enough extra principle on my mortgage to take it from 30 years to 14 years in the first 3 years I owned my home. I then re-financed my mortgage to a 10 year fixed at 2.75% interest rate and now have less than 8 years left. My home's value has appreciated ~$65,000 from when I bought it and my total interest paid to-date on my mortgage isn't even close to that. In the meantime, by limiting my payments (after the refi) to just the monthly amount, I have been able to invest in the markets and other places of well-being for my family. I currently have a full 1 year emergency fund in liquid assets/money mkt etc. and have some significant investments that have some VERY good returns right now. If I had chosen the debt-free lifestyle I would likely be just now looking at houses, wondering if I could even afford half the house I'm living in today, and if I could, I would be looking at spending nearly every penny I had to do it. There is a lot to be said for being disciplined.... Had I waited until I could afford a 15 or 10 year mortgage as you proposed it would be counter productive because the home prices would just continue to rise as the value of the dollar falls. Debt, in an inflationary ecomony, can greatly benefit those that are disciplined and know how to properly utilize and leverage it for their advancement. Even on a 30 year mortage, and inflationary economy can make the "interest" a moot point because by the time it's said & done, when you're at the end of the mortgage road, you are paying today's less-valuable dollars for a property you bought years ago. Is there potential to lose big in this? Absolutely... But like I said above, be disciplined, have goals, know what you're doing, it's very simple... Quoted:The key to prepping is not debt. It's discipline.
Exactly! Discipline is the key to ALL of this... |
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I am going with frozenny and The_Beer_Slayer on this one.
It is a lot harder to get out of the trap than into it. 
Most people simply do not have the discipline to pay off any debt they incur as quickly as possible. Companies know this, that is why they offer "free money", knowing that most will fall into the trap. For example, companies offer free financing for 12 months, no interest.... free money, sounds good. But, they know most people will not pay off the balance before the end date (and then they get to add all the interest from the beginning) Plus they know, once they get that credit card into someones hands, they will more than likely "need" to buy other stuff using it, because "life happens" |
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Quoted:
Is there potential to lose big in this? Absolutely... But like I said above, be disciplined, have goals, know what you're doing, it's very simple... Exactly, the problem is, 90+% of people are not disciplined to do what you did. That is why the banks algorithm does not take it into account. (it is not "normal") ETA If it was that simple, you would not have seen so many people on the news crying when the housing bubble burst. |
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Borrowing money is a cash flow management tool. Where people get in trouble is seeing as the the only means to get something or a never to be used means.
I'll give you an example, a very fresh one, I bought a Harley this year. My original plan was to simply use my IRA money (I'm over the 59 1/2 penalty age) but being prudent I did the math. I could take the money out of my IRA and pay normal income tax or borrow at 1.5% interest over the length of the loan. At my income level, I would have paid twice as much in taxes than interest over the life of the loan, so I borrowed the money. Now that wasn't counting the dividends earned on that same money over the life of the loan. Obviously in this example, I could have paid cash. In fact, a big dent in my personal savings (not IRA), I could have still paid cash. What I'm getting at here is though some people may consider a Harely a must have, its really not so falls like any luxury item in that debt is cash flow management tool only category. Another example, I put almost $3,000 a month revery month on a credit card (mostly business). I pay it off every month. I"m using the credit line then as a cash flow tool. Many times over the years I've had credit companies including banks literally screw up. It really is as easy as some idiot hit the wrong button, their systems kick in, and suddenly cash flow arrangements at this cost become that cost, not even to mention the time despite paying double payments on time, one second mortgage company started foreclosure on my house. The same many times I've had to write a check and close them out opting then to either forego the cash flow hit or seek another cash flow arrangement under similar terms. The real measure of wealth is not cash less debt. Its net worth and net worth is divided into time buckets, time to access funds to react to cash flow fluctuations. Those buckets vary from right this instant, a week, to six months like in liquidating a house. Now not all of us, in fact most of us aren't, are lucky enough to have enough cash on hand we can buy a house and pay it off. This is what the 2008 housing crisis was all about, balloon payments and a dead market that pushed that time bucket out to the impossible limit. This was compounded by a loss of jobs, reduction of cash flow in. What we then need to do is anticipate such things. The usual expert advice is to have six months of expenses laid back for such cash flow interruptions. Now obviously, that's a number set on an average and what we need individually can be quite different. Some may need three years while others weeks. What this fund is, is buying time to narrow that time bucket to a manageable level. That's get a new job or in a worse case sell a house, etc. This is our personal financial plan, by this date I will be at this financial level. Most of us at first start out those time buckets very small but if we stay the course, a combination of debt, savings, and investment, we achieve a point that debt is just that a cash flow tool. Until then, its an anchor we must always be prepared it may slip and in my experience it will too. Until then like a card game, we deal our money this much for this, that much for that, and that much in reserve. Everyone's financial pan will be a little different but the basic premise needs to be the same or we are walking on thin ice, for Mr. Murphy is real and shit happens. The biggest mistake I see, even now when we should know better, is young people making their financial plan their home. The idea being you buy a home as a financial investment with the intent of selling it. That's what bit everyone in 2008, equity dropped and time to sell increased. Investment diversity is a very good thing. Those who survived the 2008 crash either did so at the skin of their teeth at a loss or were divested to where they could withstand the increased time bucket. Now to one of Tj's pet sayings, A plan with no flexibility is a decision not a plan. Plans have an option A and option B. At my age now, the danger age close to retirement, I thank my stars I had the foresight to make my plan around three avenues need only two to meet the plan. One of my retirement investments went belly up. Same for my house, I thank my stars that unlike most I knew when I bought my home besides an investment, I looked at it as is is sustainable upon retirement. You wouldn't believe the people I know that are living in homes now retired they can't afford them and their children are making this payment or that like investing in their one day inheritance waiting on their loved one to die tor recover their personal investment. Investing in the housing market is no different than investing in any other business. You need to separate that thinking into investment or home thinking. Always plan for the end game. Now I'll touch on cars just a little. I have four of them right now. Two are paid for late models very low mileage, two I owe on, and both I owe on I can pay off tomorrow if needs be. That sounds like a lot but its really not. One is my wife's, one my sons, one a truck for towing. hauling, and one my company car for work. Now not everyone is going to be able to do that. In fact, most can't. A car is typically the second thing right behind a home we buy on credit. Unlike a home, cars lose their value right out of the lot and continue to decline with time. Its very important we know our break even point. That's the point what we owe is less than what the car is worth. This can be a killer with a loss of income or even in a bad traffic accident your car is totaled. Typically on a new car no money down, that's about two years into paying the payments. There's some great tools on this now, NADA, and Kelly Blue Book. Though a diminishing investment, cars can be a cash flow tool if you are below the break even with the stipulation time to sell. Though I buy a new car about every two years, business or whatever, I can't tell you the last time I traded one in. That never works for me financially. The advantage of being below the break even is you can always sell the car, the disadvantage is the car dealers will always look to capitalize on that. That's why Kelly and NADA have resale and trade in values. I'm here to tell you, that its a lucky man that sees any of his equity on a trade in. Grouping a trade in with sale price is how they cut into your equity. Unless you live in NYC or some other big city, most of us can't live without cars. Most of us can't afford to either buy clunkers for cash or pay cash for new cars. All of us can be on the right side of a car loan. That just takes some patience, planning, and most of all not being lazy. Its really not that hard to sell a car. There's tools out there like Autotrader and local papers almost all have internet place an ad. Heck, I just sold an old truck and made a deal to sell two motorcycles and an ATV all to the same buyer (a dealer that's what he does is buy and resell). I knew how much I could sell each item for separately including the cost to get them ready to sell and sell. I could have made $900 more doing them individually, but I decreased my out of pocket and that time bucket (by months) by taking this deal. We both walked away happy. Last but not least is the physiological aspect of debt. Do it wisely its accept your deal, be happy, and put it behind you. Done improperly its an anchor that pulls at you like a heavy weight while chaining you as sure as chains secured a slave. Our goals should always be using debt as a cash flow tool and not as the only means. The only thing debt does is reduce time buckets, time to save, and what value we get is not instant gratification but shortening our overall goal achievements and that achievement is always the end game, retirement and later death. Like our lives every loan has an end game. Achieving that end game is the goal, not making payments all our lives. Knowing this is on the good side of a loan and this will be paid for when reduce stress and allow us to manage our plan. Not knowing is like walking in a dark alley in the bad side of town. Too many people go through life reactionary, a disaster just waiting on the shoe to fall. No, most of you all won't be able to start life out of the gate without the monkey on your back, but you can put a chain on that monkey right out of the gate with the goal one day that monkey is not there anymore and debt just becomes what it is, a tool. Tj |
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Debt is a tool. At current free money interest rates, I have no problem riding some debt for things that significantly better our lives or will appreciate in value. Key is SOME debt, and knowing the difference between the needs/wants. Example: We are getting our property established with a good sized garden, fruit trees, grapes, berries, etc that takes YEARS to get going. We are also starting to get into our middle years, our oldest is 8. Right now, we live mortgage free. We own our house. We would like to move to more acreage, but I will NOT live under a mortgage. So we either start making a lot more money soon or we stay put. Assuming we stay put, I plan on buying some land. Hopefully some land right around us, but that looks highly unlikely. If I can't get something right around us, we will get some hunting land in the 20-40 acre range within an hour or so drive time. I will take a loan out for it. It gives us some hunting land to spend time with my sons, family vacation spot and just a nice place to go for our family. No sense in getting it when the kids are out of the house, so I would take a loan out and get it now. My kids are only young once, and I want to maximize the time with them doing outdoor things. Public land out here is so heavily hunted its stupid, so you either own land or know someone who does.
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I am a huge fan of Dave Ramsey, and agree with him that debt is (more often than not) not worth the risks it often engenders.
That said, I am not a total follower of his (yet) either. This year I have managed to pay off a HUGE amount of debt, but a recent legal proceeding has caused that number to grow. Also, I got a creepy bug that said, "Stop planning and start prepping already!", so I've added some debt there. Nothing unmanageable, but I would have preferred to do it for cash. The real question is how much risk are you willing to shoulder? |
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My only comment on the 30 year mortgage is, if you HAVE to get the 30 year mortgage because you can't afford the 15 year one, then you are buying too much of a house. But, if you can afford the 15 year mortgage, then I think you should finance the home on a 30 year loan. That will keep your payments lower. You can and should be paying it down quicker by paying extra toward the principal but if life throws you a curve ball and you have to drop to the min monthly payment, it'll be a lot less painful on a 30 year payment cost vs a 15.
My wife and I pay extra down on our mortgage every month and it has dropped our principal a lot. I've made it my goal to have it paid off in a few more years. We are trying to sell it and build another house and if we are able to do that, we'll have a small loan on our new house...depending on how much we spend on the new house to build it. |
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Leveraging your future for the now is antithetical to preparedness.
3 reasons why debt is dumb - especially in the name of preparedness. 1 - As others have mentioned, the math might work out, but that's only one factor in the over all equation. The vast majority of my tools, reloading equipment, camping equipment, shooting gear, etc., is stuff I have bought for pennies on the dollar off of guys who needed to sell because of some unforeseen emergency - because who would have thought that an emergency would come up. I'm sure all of them had "the math worked out," but in the end it is more about behavior than anything else. I have greatly profited from people who thought that they were going to be responsible with debt. 2 - Having debt sitting over your head when society goes sideways will make it that much worse. If you think that you're going to wake up one day to a mad max free for all, have at it. But anything short of that means that laws will be enforced - including the laws governing loans. Do you know what loan companies do when rapid inflation hits? They call in their notes. So if you borrow 50K for a BOL & we get hit with runaway inflation, you'll think "man, good thing I've got the BOL to retreat to," and your bank will think "man, good thing we've got a clause in the contract that lets us demand payment in full right now." If the bank calls in the note & you can't pay off your balance, by law the bank will suddenly own your BOL and everything in it, and you will be screwed. 3 - The most important thing... Prep for what is most likely going to happen first. If you buy 20K rounds of .223 getting ready for the zombie apocalypse but don't have a spare tire for your truck, you're an idiot and you're not prepared. Because a flat on the highway is far more likely to happen than a zombie apocalypse. In the same way, if you've got a months supply of food in your basement but you have crappy (or no) health insurance, an under funded retirement account, and no savings, you're an idiot and you're not prepared. Because old age, illness, and emergencies are FAR more likely to happen than the collapse of society. If you really want to be prepared for anything, get your financials in order first. For example, you mentioned a loan to get a reliable automobile. Why get a loan? If you had a preparedness mindset you would have realized that cars are consumable items and created a sinking fund to replace your current auto when it was needed. Because replacing cars is a VERY predictable expense. If you've got to get a loan to replace something like a car, regardless of how many bullets and beans you've collected, you're not prepared. Debt isn't a tool to achieve preparedness, it is a result of a lack of preparedness. |
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Sounds from some of the responses where some folks are claiming debt is a bad thing...
Because they FEAR their potential lack of ability to be responsible in the use of debt. That opinion has nothing to do with the value of debt, but it's more of an expression of their lack of confidence to manage it. Debt can be a powerful tool in the right hands, and a disaster in others. Just like most anything. |
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Quoted:
Sounds from some of the responses where some folks are claiming debt is a bad thing... Because they FEAR their potential lack of ability to be responsible in the use of debt. That opinion has nothing to do with the value of debt, but it's more of an expression of their lack of confidence to manage it. Debt can be a powerful tool in the right hands, and a disaster in others. Just like most anything. Debt is bad for what most people use it for. Debt can be beneficial when purchasing things that appreciate in value. Homes, businesses, & what not - things that appreciate/provide income that will offset the interest rate of the loan. But the OP isn't talking about going into debt for something that appreciates in value. A car, "preps", a secondary residence, all of these thing depreciate in value very quickly, making them poor reasons to go into debt. The BOL might be the one thing he mentions that has the potential to appreciate in value depending on its location. Though given that most BOLs remain relatively unimproved property and have little to no potential to generate revenue, I doubt it. |
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Most rural locations, away from job centers, do not appreciate in value compared to the rest of the market and therefore are not good "investments". BOL is a luxury for most. Either move to your BOL, make your primary home your main retreat (with a back up plan of course) or save up to buy a BOL. Unless you have everything else in place, debt is not the way to acquire a BOL.
As others have said, debt is a dangerous tool. I recommend it for primary residence and short term large purchase like car, medical or other things you need now buy haven't saved up the chunk of cash for. It's easy to get behind. If you look at the cost of financing you see it is a large expense that should be avoided when ever possible, but in some case it is still better than doing without. Like a home instead of rent, a car for getting to work, legal or medical expenses. If you have to borrow, you should buy a cheap home, a cheap car, a cheap lawyer, etc. Not a finance a Mercedes while paying rent and carrying CC debt. I don't' care how much you make that's stupid. IMO, you should not be financing regular prep purchases, ongoing expenses, cost of living, toys, guns or "investments". Do not borrow money to buy silver, stocks, income property, business opportunities. Also do not "save" money, invest, IRA, 401k, silver, etc while you are still carrying debt. Pay off debt first (except low interest mortgage), then work on retirement type of savings/investments. There is no point in setting money aside for the "future" while paying interest on money you already spent. Stupid to pay 18% interest while earning 4%. Pay off high interest debt first. |
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im avoiding debt as much as possible these days. should be totally debt free in about 1 year. except for my land payment. i will be buying a used truck, and a used camper next summer for cash.
the only debt i might get into, is once my land is paid off, i MIGHT take a construction loan, using the land, or part of the land for collateral, to get the money to build a house and garage on that site. im talking around maybe $100k... which i could pay off in maybe 6-10 years max. its a thought i was having, but, i would prefer paying for things as i can with cash if possible. |
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Agreed. Quoted:
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House. Education. Agreed. Totally agree. My daughters real education came after she disregarded my advice, went to a vocational college, couldn't get a job in the field she trained for, and then couldn't pay back the money she owed the school and now her credit is trashed. ETA: I believe that great philosopher David Lee Roth said it best in the first verse of his song 'Experience' "I learned half of what I know, from the worst teacher going..... experience" |
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Quoted:
Sounds from some of the responses where some folks are claiming debt is a bad thing... Because they FEAR their potential lack of ability to be responsible in the use of debt. That opinion has nothing to do with the value of debt, but it's more of an expression of their lack of confidence to manage it. Debt can be a powerful tool in the right hands, and a disaster in others. Just like most anything. My experience has been the same. Many of the "anti-debt" people I have spoken to are people that have at some point gotten into trouble with debt. Either credit cards and expensive cars as a young person, failed businesses or real estate problems. Just because it didn't work for them doesn't mean it is bad. Also hopefully they learned from their mistake and could do better if they had a do over. I have seen it go both ways and I do respect people that realize that its not for them. I have borrowed millions in my life and my usual position on debt is that I try to use it to make money more so than buy things I cannot afford. I am a fairly frugal person and try to live below my means however I have financed two personal residences and some used vehicles when I was younger. I have multiple credit cards, all of which have rewards, and use each of them for a certain purpose/business/job. I understand the opinion of some people with regard to debt but they also need to understand that debt is an important tool used for business and without it many of them would not have the jobs that their employer created by borrowing money for some sort of business purpose. Grove |
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Like Dirty Harry said, a man's got to know his limitations. How secure is your job? How long could you make payments if you lost it or got sick/injured? How big is your emergency fund? Do you have retirement savings that you could (albeit at great tax penalty) use to at least avoid default?
A 15 year mortgage at 3-4% may well be the opportunity of a lifetime. Discover's 5% cash back on certain categories credit card purchases is free money. Over the years we've enjoyed many $1000s of free airline tickets from points "earned" by using a rewards Visa. Debt for a vehicle to get you to work each day is different than debt for a jet ski. |
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Fear of debt really has little to do with it - at least in my case.
For every person that borrows money and comes out ahead on the deal, there are 10 that do not. That is simply the reality. I have never defaulted on any debt I owed. But I can tell you this as an old guy: The less money that I owe, the more cash I have. The more cash I have, the better life seems. |
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Agreed. Quoted:
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House. Education. Agreed. House; yes. Education; no. Everything else; no way. We have leveraged debt for business and for rental property. No debt in our personal lives other than mortgage. And even that I am tempted to pay off with savings but I just can't bring myself to lock up most of my liquidity in my house. |
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If you had to do debt, I wouldn't do it on a BOL.
The bug out location is supposed to be your safe place away when disaster hits. Wether that is long term or short term is up in the air depending on the situation. If you mortgage that land then you don't really own it. What would happen when you needed it most and the bank comes a calling and removes you from it. Don't think it can happen? Look at the Great Depression. I would rather have them take my car then my land. I would rather let them take my "stuff" then my land. I can survive on my land. It has water, food, and shelter. I can live at least marginally well out there with no job, or income and not one person can come and take it. Unless I'm dead and cold. And at that point I won't give a dam. In case your wondering I am debt free except my truck. And it is the most free feeling ever. My entire monthly expenses equals $977. Property taxes are $400 a year. And I have 10 years of that tax money put away in a safe place. So even that is taken care of. |
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Debt can be used as a smart tool by some. As enslavement to others. Regardless of the specifics of others opinions you probably know the answer you are most comfortable with and you also know your credit score....
For us we avoid it whenever we can . Not because we've had issues with it or lack discipline to pay etc (as some elude to with anti debt people). I just don't want to be beholden to anyone. We have a 30 yr mortgage and that's its. We will probably pay it off far sooner. But at 3.75% (and when you factor in mortgage interest deduction we are at a real rate of closer to 2.5%) it's an easy decision for US. Should I lose my pensions (I'm retired and young 40's). I could pay my mortgage asking people "do you want fries with that" as a part time job. An inconvenience but easily covered. However when I do big purchases like appliances I will specifically pick out the business that has the fancy zero interest for 18 mos and I'll go open a CC and make payments for a few months than pay it off. Keeps the credit score high for emergencies/golden opportunities. ....Such as buying more land, or mom's aneurysm and the bills associated therewith. |
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The less debt the better IMO.
With that said its not always easy to do. My wife and I are down to our mortgage, one Jeep payment, and a small student loan. We are doing the best we can to pay everything off. We hope to be on a cash basis for vehicles in the next 3~5 years. That is of course providing my impulsive habits don't include buying another new vehicle any time soon. 
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I am a new homeowner, have a 15 year mortgage, and can make the payment, taxes, and insurance on it, and feed/clothe/put gas in my truck on less than half of what I make right now.
If I had any regrets it would have been purchasing a not-even-that-fancy pickup. $1k a month for three years is a lot of money. Don't go into debt for things you don't*need*. I would only make an exception for a house that is within your means to afford. Before taking debt for education, fully investigate the opportunity cost for the degree and make a realistic assessment of earnings potential, and make sure it really is worth it. |