Are you free of debt?

[rattlsnak]

For the first time in my life I am 100% debt free but that's soon to change. Buying a house soon so back to the grindstone for another 30 years.. lol..

[DanielDudley]

Originally Posted by fintstone

Personally, I separate my debt between investment debt and personal debt. I have multiple rental homes. Some are paid off and some are not but have significant equity. I could sell some and pay off others to eliminate debt/payments, but that would also reduce potential growth and tax advantages...so I have chosen not to do so, even though it would increase my cash flow. Having some leverage is a big investment advantage. Currently, all proceeds are channeled back into paying off the mortgages, but it will take at least 10 more years to pay all off.

As far as personal debt, I have a large mortgage on a home I purchased only a couple of years ago. I have enough in retirement accounts that I can access without penalty (other than income tax) and could easily pay it off, but with the low interest rates and tax advantage...it does not make financial sense (although I often think about doing so). I have a defined pension plan where I will not really need extra cash flow to live my relatively frugal lifestyle. There

So, I could be debt free if I chose to do so...but choose not to. I have not borrowed for cars or anything else for about 15 years. That does seem to be unwise in most cases.

Pretty much this. ^^^ If I can make 8% + on the money that would pay for a truck that is being financed at 0%, why would I not do that and write off the truck payments ?

[fintstone]

Originally Posted by aschen

if a bank is willing to loan you say 200k for a mortgage at xx percent, what do you know that they do not, such that you have a high probability of a better return than them?


I think the real discussion is the joys of living significantly below your means, and not necessarily debt free vs debt

I would guess that they need to diversify their investments, are less willing to take a risk on a single family home and don't need a place to live.

Yes, I average a much higher percentage return (especially after taxes) on my investments than the 3.5% I pay the bank.

You could say the same regarding any business loan as well. The bank is actually betting that you can earn a better return than they can.

[Otter74]

I think the real discussion is the joys of living significantly below your means, and not necessarily debt free vs debt

Yes, yes, yes.

I took on some debt for art school, and paid it off as quickly as I could, a couple of years or so. I have been debt-free for about 15 years. I could save more than I do, but I have always lived below my means. I have a credit card (they have their benefits, but it took me ages to get one again and take advantage of them), and pay it off every month.

[aschen]

Sure but the bank is willing to take a near sure bet 3.5% return investment as a rational investment.

They need to diversify and have some of there assets in minimal risk, and so do I. I think the real moral is to "do both" when it comes to paying down debt vs investing in higher risk/return things

The ratio of the divide between the two is a bit personal and depends on individual circumstances as well. I like most everyone else have earned well more then 3.5% in aggregate in the long and medium term, but I would gladly commit to some further investments at this rate if the returns are guaranteed.

[pwd72s]

Yes. As I posted on this board a long time ago, financial happiness is when you stop paying interest and others pay interest to you.

[jcommin]

I have been a saver all of my life - the debt I did carry (home). Got married and that changed a bit. Had a few cars loans but what really changed was in 2006. I got divorced and that was just a mess - heavy debt, owed the IRS, the housing market crashed and my youngest had a drug/behavioral problem that needed attention.

Flash forward, no house, no car debt, IRS paid off, no credit card debt, son is clean and going to college and I have very little money left. I'm ok, it is just money: it's not my life. I'm fortunate to have had the money, a good paying job, good health and fortune to whether the last several years. I can truly understand that a catastrophic event can wipe someone out financially or maybe not get the attention or service they need because they don't have the financial resources.

I don't take anything for granted anymore - life can get in the way and things change no matter how much we plan.

[wdfifteen]

I haven't had any personal debt for a long time. I used to use credit to fund business projects, but I'm not even very aggressive about that any more. There is more to life than making money.

[jwasbury]

Very few people can pay cash for NYC metro area real-estate. Debt is required for even "Wealthy Americans" to be homeowners in these parts.

I had a jumbo mortgage on my Jersey City multi-family. Was aggressive in paying it down. Just sold the place for about 80% more than I paid. Would never have been possible without taking some risk/incurring debt.

[pwd72s]

Originally Posted by jcommin

I have been a saver all of my life - the debt I did carry (home). Got married and that changed a bit. Had a few cars loans but what really changed was in 2006. I got divorced and that was just a mess - heavy debt, owed the IRS, the housing market crashed and my youngest had a drug/behavioral problem that needed attention.

Flash forward, no house, no car debt, IRS paid off, no credit card debt, son is clean and going to college and I have very little money left. I'm ok, it is just money: it's not my life. I'm fortunate to have had the money, a good paying job, good health and fortune to whether the last several years. I can truly understand that a catastrophic event can wipe someone out financially or maybe not get the attention or service they need because they don't have the financial resources.

I don't take anything for granted anymore - life can get in the way and things change no matter how much we plan.

Boy howdy on that...life indeed has it's twists and turns...

[sammyg2]

Are you free of debt?

Pert Near.

No car loans, credit card is paid in full at end of every month, Mortgage is under a thousand a month and the interest rate is 3.5%.

I could write a check to pay it off but at 3.5% I'd be a fool to do that.
It'd be hard to find cheaper money nowadays.

[KFC911]

Originally Posted by wdfifteen

I haven't had any personal debt for a long time. I used to use credit to fund business projects, but I'm not even very aggressive about that any more. There is more to life than making money.

This is where I've been for quite some time also. To be clear, I suspect the folks on this thread have their act together and carry managable debt, but $ simply is not what I think life is all about. When I decided to exit the corporate world at 48 some years ago, it might have been the best decision I've ever made...other than getting the education which paved the way. I'm probably poor by comparison to many here, but my time (WAY more valuable than mere $) is mine....wouldn't have it any other way . All of my houses/property have been paid off for years, and they are a hassle too...but I reckon that is indeed a 1st world problem that's good to have. You can't take it with you when you go...either time or money. I know many don't understand...those that are motivated by $$$....I'm just not one

[Brando]

Free of debt? Yeah... no. Maybe by next year. But then, buying a house, so no again.

[gatotom]

debt has always been my friend, I have used the stuffings out of it over the yrs and has served me just fine.

I still have a mortgage on my house because I chose to have one, at 75% equity, no problems. I own my office building and sailboat, my car is leased out but then again I drive a Audi.

Right now money is cheap, interest in checking accounts are zip in my eyes, if interest was tied to real inflation, then you would make something.

[rwest]

I'm debt free, own my house, two cars and tons of other crap I really don't need!

I'm also pretty risk adverse, so my mental happiness at being debt free is much more valuable than trying to leverage loan money into a better return.

My "rule" now is that I would take out a mortgage or car loan if needed, but if I want some toy or gadget, that must be cash or zero interest financing.

I admire those who take the big risks and they deserve their earnings, of course many also lose everything trying.

[pete3799]

I was debt free until we bought the wife's car.
Everything else we own ,house and 29 acres, 4 other vehicles, etc. are paid for.

[Norm K]

Mortgage debt yes, but with a half-mil in equity and a 2.75% interest rate I'm not overly concerned about it.

[sc_rufctr]

One thing that does worry me. Our banks seem very keen to lend money to just about anyone. Interest only loans have become common for new houses.
Not that long ago you had to have something saved before they'd even considering lending you money.

[Don Ro]

Been debt free since '08. Retired. Paid cash for my new place in '10.
I've always dreamed of being debt free...since I was in my 30's.

[Macroni]

Hahaha…. joke right.

Professionally, Debt for me is a critical part of operating a profitable middle market business. It facilitates investments in buildings, equipment, inventories as well as funds working capital.

Personally, debt is currently 20% of my net worth with a weighted average interest rate of 3%.

Very comfortable…….