Debt and quality of life.

[Beo3]

Growing up in a lower blue collar household I watched my parents struggle, not with unnecessary debt, but with just being able to slightly stay afloat.

I too struggled when my wife and I first married as we had three children in three years, a mortgage and she who opted to stay home and raise our children.

Fast forward twenty five years and I am completely debt free and intend to remain that way.

To me, it was the greatest achievement to be able to pay off my mortgage early and to have my children graduate college without debt.

[Vince M.]

I paid everything off in my mid 30's. Saved for a few years and now I can buy or do whatever I want. Very few know what its like to be young, have a large pile and no debt on anything. It feels VERY GOOD.

The other side of the coin of saving and paying things off is I actually spend much less. Having money makes you more conservative.

[DocHorton]

One of my bigger financial regrets is not borrowing more and buying more real estate the last 15 years when rates where silly low.

I would not be in the position I am in without taking on a lot of debt, but it has worked out wonderfully. The key is having a good, stable income to service it, and living below your means.

I would go with choice B.

[Vince M.]

Originally Posted by DocHorton

One of my bigger financial regrets is not borrowing more and buying more real estate the last 15 years when rates where silly low.

I would not be in the position I am in without taking on a lot of debt, but it has worked out wonderfully. The key is having a good, stable income to service it, and living below your means.

I would go with choice B.

The thing is the last 15 years wont be the last go around of the perpetual pump and dump. I plan to buy up as much as possible cash this next go around and sleep well while it matures vs sweating with a monthly nut.

[ButtButt]

I'm pretty ok with mortgage debt on my homes since the rates were so damn low for the past 10+ years and it was easy to make much more than that in the market, but that's about it. No car loans, credit cards always paid off every month, etc. With rates going up so much now though I'm not sure about the future, luckily I did well enough the past few years and can afford to pay them all off if needed.

I do have friends that are comfortable taking out max loans at a high interest rate to buy cars and other luxury items. They sometimes ask me why I don't buy a nicer car but a car is a depreciating asset (most of the time) and my threshold for that is about 5-10% of your net worth max. Cars where I live are expensive, so I'm sorry if I don't feel like blowing a million bucks on a Porsche even if I could afford it. I wonder if that feeling will ever go away though (maybe when my midlife crisis hits)

[enjoythemusic]

Originally Posted by Vince M.

I paid everything off in my mid 30's. Saved for a few years and now I can buy or do whatever I want. Very few know what its like to be young, have a large pile and no debt on anything. It feels VERY GOOD.

The other side of the coin of saving and paying things off is I actually spend much less. Having money makes you more conservative.

SOOO much this, bravo!

[DocHorton]

Originally Posted by Vince M.

The thing is the last 15 years wont be the last go around of the perpetual pump and dump. I plan to buy up as much as possible cash this next go around and sleep well while it matures vs sweating with a monthly nut.

Just because you use debt doesn't mean you are overleveraged. I also enjoy the 2-5x leveraged returns that debt provides vs. paying cash. I'm waiting with cash as well since current rates make it harder to justify financing. I just have a lot more since I didn't pay cash for fewer properties.

We aren't going to see 3% and lower interest rates for awhile....it was the best opportunity of my lifetime to kill it with proper debt.

Don't get me wrong, I can see the advantages to being debt free, and I could have been there in my early 30's if I wanted to. I just think there are more advantages to using debt properly if you are wanting to maximize returns and net worth.

[bobernet]

Originally Posted by DocHorton

Just because you use debt doesn't mean you are overleveraged. I also enjoy the 2-5x leveraged returns that debt provides vs. paying cash. I'm waiting with cash as well since current rates make it harder to justify financing. I just have a lot more since I didn't pay cash for fewer properties.

We aren't going to see 3% and lower interest rates for awhile....it was the best opportunity of my lifetime to kill it with proper debt.

Don't get me wrong, I can see the advantages to being debt free, and I could have been there in my early 30's if I wanted to. I just think there are more advantages to using debt properly if you are wanting to maximize returns and net worth.

Financially, you’re completely right. However, humans aren’t just calculators. There is an emotional freedom that comes from being completely debt-free, even if not, yet, financially independent. High earners often stress about changing/losing jobs and finding something comparable or a step up. Knowing that you could feed your family and be ok digging ditches or flipping burgers provides a mental safety net that shouldn’t be dismissed.

Neither path is wrong. Being over-leveraged and slaving to service your debt is a kind of hell. That’s wrong.

[DocHorton]

Well said.

[SDGT3]

Originally Posted by daveathall

Before I bought (mortgage) my first house, a friend advised me to get the biggest mortgage I could afford and that it would kill me for the first couple of years but it would be worth it.

My CPA told me to do this and we took his advise. Those first couple years were very lean, but things get better. I now tell my children to do the same and expect lean times until raises and inflation make that "FIXED" rate easier to handle.

Paying off one's mortgage not only frees up funds for other things, including retirement savings, but more importantly psychologically comes with a sense of weight off the shoulders.

Fast forward and just a couple months ago I took out a loan for the first time in decades on an average commuter car rather than pay cash. Why? Arbitrage. The interest rate was lower than what I could make in a safe, guaranteed Tbill.

[MrGoat]

Originally Posted by SDGT3

My CPA told me to do this and we took his advise. Those first couple years were very lean, but things get better. I now tell my children to do the same and expect lean times until raises and inflation make that "FIXED" rate easier to handle.

Paying off one's mortgage not only frees up funds for other things, including retirement savings, but more importantly psychologically comes with a sense of weight off the shoulders.

Fast forward and just a couple months ago I took out a loan for the first time in decades on an average commuter car rather than pay cash. Why? Arbitrage. The interest rate was lower than what I could make in a safe, guaranteed Tbill.

I would disagree. Get a mortgage you can afford and pay extra payments, I can see and advocate for. Getting a mortgage you can barely afford is not a great idea imo and I’m surprised a CPA told you that.


Sent from my Apple privacy invasion product

[SDGT3]

Originally Posted by MrGoat

I would disagree. Get a mortgage you can afford and pay extra payments, I can see and advocate for. Getting a mortgage you can barely afford is not a great idea imo and I’m surprised a CPA told you that.


Sent from my Apple privacy invasion product

It's actually worked out tremendously well. He told me that at 29 years old as my future earnings growth would be on the upswing. I highly doubt he would tell me that at 59 yo. As long as you get a fixed rate with the potential to refi to a lower rate down the road and live within your means, you'll be fine. Within 10 years, the house payment was less than my contemporaries were paying on a 2 bedroom apt. rental.

[NYG1121]

This doesnt account for where people live. Here in Boston area, it is very difficult to buy property with cash when you are young because of the cost of living. So no choice for most but to get a mortgage and live in debt.

I live by the philosophy that tomorrow is never promised and I am not waiting forever to enjoy my expensive hobbies. Life is a journey and you must enjoy it while it lasts. With that being said, its all about balance and I make sure bills get paid, a good portion of my salary goes to savings each month and the rest is up to me to spend on stupid stuff!

[77T]

It isn’t necessarily a binary choice.

I’d add an aspect to a “quality of life” definition - build memories to increase happiness.

In times of rampant inflation, using debt to stay ahead - to have a great home for the kids - to have great vacations - to enjoy the toys - can help a family who has a healthy cash flow but less capital.

Later, when times cycle to low interest rates and stable pricing, re-fi the debt and pay it off. Invest when others are holding back.

It is how many have built wealth with OPM (other people’s money) - it does take grit and creative math.

[Wcdhtwn]

I paid off my mortgage a couple of years ago. I hesitated over it… then did the math. Over the remaining 22 years of the mortgage I’ll save nearly $200,000 of interest.

[Polar Bear]

As a 30 something home owner, I'm pretty debt averse
I got a mortgage smaller than i could of (which was wise as interest rates cant be indefinitely fixed in Aus and they've started climbing recently)
I have a company car and my partner owns hers outright
We'll probably borrow to buy her a new one in the next few years, but that's the only debt i'm comfortable with

We're getting married 2024 and if we cant pay for the wedding in cash, we'll either scale back or postpone
I've spent the last 4 years renovating the house i bought. a little over $100k worth of work, all paid for in full in cash
We took 4 weeks off and went to Europe for Christmas a few years ago. $20k trip, paid in cash
Every watch i own, saved and paid cash
No Credit Cards
No "Buy now, Pay Later" accounts

A lot of people my age just compound their debt until it gets too much then consolidate to bring their payments down

I'll pass on that

A friend of mine once asked me "how much money would you need where it would completely change your life without ruining it?"
My answer at the time was: $396,585.84- my Mortgage
Clear that and i'm good

[ArtNouveau]

I have enjoyed nice things in my life, haven’t run up unnecessary debt since my 30’s. When I retired last year I made a big profit on my home of 30 years and was able to purchase my home in a new area for cash. My only debt is a $400 car payment at 1.9% interest and paying any credit cards off I might use for trips or purchases. I don’t have a fortune but I have some money in the bank, make 85% of what I made while working with pension and social security, and most of all have my health and happiness.
Cars have always been a weakness for me but I’m rethinking my past habits. The new car market is still crazy, interest rates are way back up, and I really don’t want to shell out too much cash.

[ButtButt]

Originally Posted by Polar Bear

No Credit Cards

No credit cards at all or no credit card debt? I meet quite a few people that are super against credit cards which I don't really understand, if you use them properly and pay it off every month the discounts/cash back and rewards points can add up to be quite a bit in savings.

[minute_man]

Originally Posted by ButtButt

No credit cards at all or no credit card debt? I meet quite a few people that are super against credit cards which I don't really understand, if you use them properly and pay it off every month the discounts/cash back and rewards points can add up to be quite a bit in savings.

I used to have a credit card up until debit cards began to be widely accepted, the world over. Ditched it ever since as I no longer have a need or use for one.

[ButtButt]

Originally Posted by minute_man

I used to have a credit card up until debit cards began to be widely accepted, the world over. Ditched it ever since as I no longer have a need or use for one.

I guess everyone has their preferences and what they are comfortable with. On top of the savings I see credit cards as spending the bank's money first, while debit cards come straight out of your account. In case of a hack/fraud I would think it is much easier to recover/dispute a credit card charge which feels much safer to me.

[BroncoOne]

Originally Posted by ButtButt

I guess everyone has their preferences and what they are comfortable with. On top of the savings I see credit cards as spending the bank's money first, while debit cards come straight out of your account. In case of a hack/fraud I would think it is much easier to recover/dispute a credit card charge which feels much safer to me.

Correct. If you get defrauded with a compromised credit card, your maximum exposure is $50..

If your debit card is compromised, your maximum exposure is every dollar in your account, plus any available overdraft credit, plus fees. Then you have to become the FBI to try to prove that your former money is yours. Good luck. It’s why I never have a debit card.

Also, as has been noted, the discounts, cash back, free airline miles and other perks of a credit card with a low or no annual fee are free. Just pay it off every month.

[330ci]

Originally Posted by BroncoOne

Correct. If you get defrauded with a compromised credit card, your maximum exposure is $50..

If your debit card is compromised, your maximum exposure is every dollar in your account, plus any available overdraft credit, plus fees. Then you have to become the FBI to try to prove that your former money is yours. Good luck. It’s why I never have a debit card.

Also, as has been noted, the discounts, cash back, free airline miles and other perks of a credit card with a low or no annual fee are free. Just pay it off every month.

My debit card was lost/stolen 2 months ago. They reversed $1,000 in charges over the phone. Pretty sure you've got the same protections as a CC at this point unless they have your pin as well. Then you might be screwed

[Star Ferry]

Originally Posted by BroncoOne

Correct. If you get defrauded with a compromised credit card, your maximum exposure is $50..

If your debit card is compromised, your maximum exposure is every dollar in your account, plus any available overdraft credit, plus fees. Then you have to become the FBI to try to prove that your former money is yours. Good luck. It’s why I never have a debit card.

Also, as has been noted, the discounts, cash back, free airline miles and other perks of a credit card with a low or no annual fee are free. Just pay it off every month.

I agree there is nothing wrong with credit cards. I always pay cash at restaurants or for tips, and that’s just to save myself time and to take care of people who are taking care of me. But otherwise, most expenses should go on a credit card.

The best reason I can think of for not using a credit card would be someone who’s had past difficulties with overspending. In that case, it’s less about the math and more about imposing self discipline

[JParm]

Originally Posted by joli160

The only debt I have is my mortgage.
I never finance or borrow money for consumer goods nor for luxury stuff like watches, cars or holidays.
If my savings are not enough I just wait

This.

[superdog]

just popped up in my feed. very appropriate for this discussion.


https://www.yahoo.com/finance/news/l...180000779.html

[AzPaul]

Never made a lot of money but being an impressively attractive man, women have always been willing to buy me things. I'd say it's a blessing and a curse, but so far, the curse part hasn't revealed itself.

[daveathall]

Truthfully? I have bought things on credit when I can't afford to pay cash, they may be luxury items as well. I have always made sure that I have enough money to repay the payments. I wouldn't have ever had a Rolex or driven a new car if I had waited. Those that can afford to buy luxury items with their wages, that is good, not everyone can, I'm one of them.

I seem to be different, when I get to the stage that I need to use credit to buy basics such as food, then I have hit rock bottom and it is time to take stock and look at different ways. I have never been in that position though.

I have one life, I will live it.

[Trailboss516]

My only debt is a mortgage, and my rate is low enough I am happy to keep paying the monthly as-is.

[superdog]

Originally Posted by AzPaul

Never made a lot of money but being an impressively attractive man, women have always been willing to buy me things. I'd say it's a blessing and a curse, but so far, the curse part hasn't revealed itself.

[Star Ferry]

Originally Posted by daveathall

Truthfully? I have bought things on credit when I can't afford to pay cash, they may be luxury items as well. I have always made sure that I have enough money to repay the payments. I wouldn't have ever had a Rolex or driven a new car if I had waited. Those that can afford to buy luxury items with their wages, that is good, not everyone can, I'm one of them.

I seem to be different, when I get to the stage that I need to use credit to buy basics such as food, then I have hit rock bottom and it is time to take stock and look at different ways. I have never been in that position though.

I have one life, I will live it.

This is fair. Sometimes I cringe when this forum refers to Rolex or Omega or Tudor as beaters, as if $4000 or $5000 or even $10,000 is just a bit of lunch money. Whereas on other watch forums, folks are discussing mostly Seiko and micro-bands, and Rolex/Tudor/Omega are the aspirational grail pieces.

It’s really no different than someone financing a 40,000 pound car when a 30,000 pound car would have fully suited their needs. The marginal 10K pounds are a discretionary or luxury expense on credit.