Thank you.

Re: Thank you.

• short+sassy member

  

  January 2017

  I regularly frequent the Money Matters board on the TK sister site, The Nest.  Most of the people on there consider "debt free" to be free of any CC debt or loan debt, other than a mortgage.  Of course, paying off a mortgage is TRULY debt free and a pretty awesome position to be in.  But most people aren't able to do that in their 30s.

  I would consider you and your H to be debt free, by the first standard.  With that said, I think most people should have bought a home and paid it off before they reach retirement age.  So, by that standard, I can see where the other CaféMom person is coming from.

  I don't think there is anything wrong with you and your H renting at this point in your all's lives.  There are a lot of things to be said for renting.  Especially if you all might move within the next few years.  But keep a future home purchase in mind.  The more money you have saved for a down payment, the better off you'll be.  Whenever and wherever you all decide to buy a house.  But it doesn't necessarily have to be in a savings account and I wouldn't even recommend that.  Put it in a safe investment, like a conservative mutual fund with a history of good returns.  Your money will still be liquid, but (probably) earning a lot more than it would in a less than 1% interest savings account.

  Heck, if you all stay in CA, you could rent the whole time during your working years and then have enough money saved to buy a house, CASH, in another part of the country.

  It's also VERY important to be saving for retirement.  I think most people don't save enough.  There are a lot of great retirement calculators online to give you all a good idea of what you should be putting toward that.

  Feel free to come join us on Money Matters at The Nest.  It's a friendly group and the posters on there are a wealth of information for all things money related.  Retirement, taxes, insurance, budgeting...you name it! 

  One last thing.  It's great to have an open mind and consider advice and other people's opinions.  But it really doesn't matter what I say or CafeMom poster or anybody else says.  If you all feel comfortable with where you all are financially and consider yourselves debt free, than that is your answer.  

  

  Report1 Reply
• MissKittyDanger member

  

  January 2017

  I work in the financial field - specifically dealing with debts - and by every means of the word, mortgage and vehicle 'debt' is good debt because you are constantly paying it and it's an asset for you.
  
  Rent is not considered a debt, but you do have to continue paying it. However, it's not an asset.
  
  What would be considered debt free? No credit card, loans {line of credit or student loan}. Basically if it's not an asset, it's a liability.
  
  Debt also does not mean financial hardship, which most people are confused about. I see people when they are spending beyond their means, for reference.

  Report0 Reply
• ei34 member

  

  January 2017

  I'm with you, when I hear "debt-free" I think no credit card loans, student loans, medical bills.  
  
  Everyone pays for their home- even a millionaire who buys a home outright still has to pay property tax (or maintenance, if it's in a building).
  
  Debt-free, 100K and comfy to others is a tricky question to answer because it really depends on where you live.  DH and I bring in more than that but in NYC, with three kids, it definitely doesn't feel like a lot.  
  
  I hope your H's IRA is a Roth IRA- no point in paying tax on your money once you're retired. 
  

  Report0 Reply
• banana468 member

  

  January 2017

  I personally wouldn't call your rent "debt".   It's an expense.  Your living quarters though are not an ASSET.   There's a difference.   While you may not have a lot of debt, it sounds like you don't have a lot of major assets.   Not a big deal - especially if owning would put you in the poor house (no pun intended) - but it's a slight difference. 
  
  We are not debt free.  We have a rental property with a mortgage on it and a mortgage on our home.   However we have no car loans and CC bills are paid in full every month.
  
  My parents however are debt free.   They have no mortgage, own their home and their cars and have retired from their jobs with sizable accounts and no medical debt.  

  Report0 Reply
• CharmedPam member

  

  January 2017

  I had this conversation the other day with a friend.  She gave me an extremely high number for her debt and i was like "what?".  She threw her house in the mix.  Actually, that's all it was.  I was like 'uh, no.  No one considers mortgage as part of debt.  You're in good shape'. 
  

  
  

  Report0 Reply
• MissKittyDanger member

  

  January 2017

  banana468 said:

  I personally wouldn't call your rent "debt".   It's an expense.  Your living quarters though are not an ASSET.   There's a difference.   While you may not have a lot of debt, it sounds like you don't have a lot of major assets.   Not a big deal - especially if owning would put you in the poor house (no pun intended) - but it's a slight difference. 
  
  We are not debt free.  We have a rental property with a mortgage on it and a mortgage on our home.   However we have no car loans and CC bills are paid in full every month.
  
  My parents however are debt free.   They have no mortgage, own their home and their cars and have retired from their jobs with sizable accounts and no medical debt.  

  Very similar wording to what I said

  Report1 Reply
• southernbelle0915 mod

  

  January 2017 edited January 2017

  I do not agree with her definition of debt. She says rent = debt because you pay it every month and you never pay it off.....
  
  If that's what debt is, then utility bills, groceries, car insurance, cell phone bills, internet bills, health insurance, etc. is all debt. No. 
  
  Rent and all of those other things listed above are expenses, not debt. 
  
  I consider debt any money you borrowed (for whatever reason) and still owe. Like a car loan, student loans, credit card debt that isn't paid timely, etc.
  
  I know this is a minority opinion, but I also consider a mortgage debt. Unless you've paid your principle to zero, you owe money and you don't outright own your home. The bank owns it.
  
  ETA: I should add that I don't think a mortgage is (necessarily) "bad" debt, but it's still debt. So yes, I do think there's a difference between good debt (investments that pay off down the line) and bad debt (borrowed money that doesn't have any payout down the line).

  *********************************************************************************

  
  

  

  Report8 Reply
• banana468 member

  

  January 2017

  southernbelle0915 said:

  I do not agree with her definition of debt. She says rent = debt because you pay it every month and you never pay it off.....
  
  If that's what debt is, then utility bills, groceries, car insurance, cell phone bills, internet bills, health insurance, etc. is all debt. No. 
  
  Rent and all of those other things listed above are expenses, not debt. 
  
  I consider debt any money you borrowed (for whatever reason) and still owe. Like a car loan, student loans, credit card debt that isn't paid timely, etc.
  
  I know this is a minority opinion, but I also consider a mortgage debt. Unless you've paid your principle to zero, you owe money and you don't outright own your home. The bank owns it.
  
  ETA: I should add that I don't think a mortgage is (necessarily) "bad" debt, but it's still debt. So yes, I do think there's a difference between good debt (investments that pay off down the line) and bad debt (borrowed money that doesn't have any payout down the line).

  Totally agree.
  
  It's not debt because if DH and I can't afford the payments we no longer get to keep this asset.   It's better debt then buying so many things that my credit card bill can't be paid, but it's still debt that I pay every month with (low) interest.  
  
  And now I just have to hope that these investments DO pay off.   Thus far, the condo has been owned for 12 years and we'd have to pray to break even.   We have better luck with the house which was purchased post-market tanking.

  Report0 Reply
• spockforprez member

  

  January 2017

  There have been analyses that show in certain parts of the country you are far better off, financially-speaking, renting than buying a home. I don't know where in CA the OP lives but given what I know about that state, she could very well be in one of them.
  
  I personally feel safer owning a home because I know that the only thing that could cause us to have to leave is if we default on our mortgage (or, of course, some kind of serious health/safety issue). I have had enough bad landlords - both corporate and individual - to know that they wield almost all of the power in your relationship. And if shit goes south politically/globally we have a place to hunker down permanently. (Oh god I think my prepping-obsessed H is wearing off on me.)
  
  If you have a mortgage, in my opinion you are not debt-free. But I don't hate the word debt because I think it is a tool that can be used to your advantage. (Obviously high-interest consumer debt is not a tool and should be paid off asap!) But a mortgage is a tool. If you have a 3.25% interest rate on your mortgage, you can almost certainly get double that rate of return if you invest your extra money instead of prepaying your mortgage. Why not get double the money? Perhaps it is a boon to some people psychologically to pay off their mortgage, but I don't think it makes financial sense. We currently use the "every two weeks" mortgage payment method so we technically make a 13th payment every year but I'm not sure we'll prepay any more than that.
  

  
  

  Report1 Reply
• short+sassy member

  

  January 2017 edited January 2017

  MissKittyDanger said:

  I work in the financial field - specifically dealing with debts - and by every means of the word, mortgage and vehicle 'debt' is good debt because you are constantly paying it and it's an asset for you.
  
  Rent is not considered a debt, but you do have to continue paying it. However, it's not an asset.
  
  What would be considered debt free? No credit card, loans {line of credit or student loan}. Basically if it's not an asset, it's a liability.
  
  Debt also does not mean financial hardship, which most people are confused about. I see people when they are spending beyond their means, for reference.

  I agree and disagree with this.  There is definitely "good debt".  I personally leverage debt by buying investment properties that I can rent out for roughly 2x my expenses, including the mortgage.  I increase my income, while also paying down an appreciating asset.

  The mortgage on a personal home is also along that same idea.  Paying down what should be an appreciating asset and (hopefully) paying less for a mortgage than what renting a similar place would be.

  However, I disagree that an auto loan is a "good debt".  Sure, it is also an asset.  But it is a depreciating one.  Not knocking car loans!  I've certainly had them myself.  It's just not in the same "good debt" category that a home loan is (to me).

  One might even argue that student loans are a good debt.  Conventional wisdom says they are not.  But most people get student loans to invest in an education, that will allow them to get a job, where they can make more money.  A degree is an asset also.  Just an intangible one.     
  

  

  Report2 Reply
• CharmedPam member

  

  January 2017

  southernbelle0915 said:

  I do not agree with her definition of debt. She says rent = debt because you pay it every month and you never pay it off.....
  
  If that's what debt is, then utility bills, groceries, car insurance, cell phone bills, internet bills, health insurance, etc. is all debt. No. 
  
  Rent and all of those other things listed above are expenses, not debt. 
  
  I consider debt any money you borrowed (for whatever reason) and still owe. Like a car loan, student loans, credit card debt that isn't paid timely, etc.
  
  I know this is a minority opinion, but I also consider a mortgage debt. Unless you've paid your principle to zero, you owe money and you don't outright own your home. The bank owns it.
  
  ETA: I should add that I don't think a mortgage is (necessarily) "bad" debt, but it's still debt. So yes, I do think there's a difference between good debt (investments that pay off down the line) and bad debt (borrowed money that doesn't have any payout down the line).

  I see your point on this, too.  You phrased it well with "not bad debt...but still debt".   

  
  

  Report0 Reply
• Ro041 member

  

  January 2017

  thestaircase said:

  Hello, and Happy Wednesday to everyone.. I'm sorry for the longgg post ahead, but there is a financial question I want to ask. Not expect anyone make it through reading it since my post it so long, but I really appreciate it if anyone can help answer my question. Thank you so much.
  
  So, on a mommie-baby site that I'm a frequent poster on CafeMom (it a community forum for mommies, pregnancy, women who TTC, etc.. where women talk to other women for advice and support). There is a thread where a poster aksed if there anyone in there who not have any debt, and asked what Debt-free is to everyone.. Alot of ladies in there replies, pretty much posters there share about their financial situation whether they have debt or not, and exchanged their viewpoint of what to them is the meaning of Debt-free.
  
  So me as a regular poster in there, I replied in that thread too. I might not be a very bright girl, but I think I know what Debt-free mean.. Please try to read it to the end in order to get a clear picture of the question I'm trying to ask.
  So this is my replied in that thread:
  
  [[ We Debt-free, zero debt. No student loans debt, we never have school debt. No credit cards debt. No medical debt.. Cars are paid off, long paid off. I mean we have insurance, but both our cars his and mine are paid off.
  
  Rent and All bills are pay on time early every month way before the due date; once we get the bills we pay it right away mail out the payment the next day.. Credit card bills, same thing. Mail out payment next day way early before the due date. We have excellent/perfect credit scores.
  Our credit card bills is just what we use charge with our credit cards for that month, and once we get the bill we mail out the check right away next day pay it off. Never once we own credit cards a penny, let alone own a dollar.
  Everything, Rent and all bills including credit cards bills are all pay on time way early every month actually. Never once we have a late payment, let alone a missed payment.
  
  My husband make decent income, he make 100K a year (money don't fall down from the sky. He has to work long hours in order to make that income. But he has No difficulty of bring in 100K income a year).. Despite we live in a HCOL state California, but life is comfy for us due to we both Debt-free. And we both are not big spender.
  He very responsible with money, he work hard to secure for our future. To make sure we always be in a comfortable fiancial position.
  
  His checking account it just where he pays Rent and all bills; and he pays it all, I don't have to pay anything. (Yes, he has me as Joint on his checking account).
  His life saving is not in his checking. It his saving accounts and his retirement accounts are where all his life saving money are at.
  ----He has two Saving accounts, and both accounts have more than decent saving money in it save for emergency/rainy days. (Yes, he has me as Joint on both of his saving accounts).
  ---He has two 401k accounts and one IRA account saving for retirement, and all three has more than decent money retirement saving in it, especially his IRA account.. He prefers IRA, he used to have three 401k accounts but last time he roll one to his IRA. (Yes, he has me as the Primary beneficiary on all three of it).
  ---He has Life insurance, Health insurance. He has excellent/perfect credit scores.. Eventhough he has more than decent money in his Saving accounts and his 401k and IRA retirement accounts, he still want Life insurance just in case. He is a huge planner. (Yes, he has me as the Primary beneficiary on his Life insurance. And I'm on his Health insurance).
  
  I'm a girl with only a High school diploma, No college degree. I work minimum wage jobs all my life, I make minimum wage. He on the other hand, make 100K a year. I told him repeatedly I don't want to be on any of his financial accounts (I understand our incomes difference, it alot).. But he adamant put me as Joint in all his bank accounts, and as Primary beneficiary on all his retirement accounts and Life insurance. I refused, he insists. I refused, he insists. I don't know what to do so I let him have it his ways.
  
  We dislike debt. We never over spend. We budget everything.. Every month money go in what in what, we have everything budget lay out all and ready.
  We do live BELOW our means. We rent in the lowest monthly rent place. No, we don't need to live in a high-end place with swimming pools and work out gyms and all that stuff, lol. we don't care those stuff.. I told my husband why pay the top expensive rent monthly when we can find a place with much lower/cheaper rent? It helps each month to add MORE money into your savings if we paying lower rent.
  Perhaps I'm cheap, but to me having 'Cash' in our saving accounts is more important than live in a high-end place.. It not just money in Saving accounts, it also money in 401k and IRA retirement too, the more retirement savings we have the better we be in our old age.
  
  'Cash' in our saving accounts is still count as an asset right? Liquid form of asset.
  Also retirement savings in our 401k and IRA accounts are also assets right?
  
  No, we personally don't want to own a home in California. Anyone who live in California know how expensive it is to buy a house here.. Same with New York. You talking about two HIGHEST cost of living states in the U.S., and the highest home prices too.
  We don't want to buy a house in California because we not staying in this state till the day we die. We thinking of relocate to Georgia (where my husband mom side of the family all are at), perhaps we buy a house there in Georgia, we just want to buy a condo or townhouse.. It just never was a 'must need/must have' to us own a house in this HCOL state California and the house prices here are ridiculously high.
  Why buy a house in ridiculous high price California when houses in the South are at a much lower price?
  
  Anyways, I'm very frugal. I'm a coupon person; I cut coupons, I save coupons, I use coupons.. I save every dollar as I can.
  My husband make 100K a year and I'm here cutting coupons out of weekly grocery ads, lol.. even coupons like buy one get one half off, or .75 cents off I still cut out use and save.
  I'm not a huge planner like my husband, but I'm frugal.
  
  Is Debt-free and making 100K a year income comfy to others? Probably not, but to us it comfy. And being Debt-free sure help alot.. And what added further to the help it our lifestyle, we both are not big spender and we live Below our means. We hate debt, so our goal is lifetime Debt-free.
  
  oh, and our age.. I'm 31, I'll be turning 32 soon. My husband he a year younger than me; he 30 (just turn 31 few months ago). ]]
  
  ----------------------------------------------
  okay, so that is the financial situation of me and my husband, I considered we are Debt-free. Perhaps my definition of what Debt-free is is different from others, but to me I think we Debt-free.
  
  BUT then there is a replied from a poster, she quote me and she said that is Not Debt-free.. okay, she got me confused and I second think question what really Debt-free is then?
  This is her replied, I cut and paste what she wrote to me in CafeMom to here:
  [[[ You pay rent every month. I don't view that as debt-free, it's akin to having a mortgage. One that you'll never pay off. ]]]
  So by her quote above replied to me, and her viewpoint of what Debt-free is. Me and my husband we not Debt-free Solely because we pay 'Rent'.. But we rent in the lowest monthly rent place, so we can have More money save added to our savings and retirement. Our rent is way low compared to my husband income. I don't see how can our rent is considered our debt? We don't own rent a penny, once we get the rent bill, we sign a check immediately mail out next day pay it.
  
  IF by her definition what she wrote (in the bold bracket [[[     ]]]); then by her definition, nobody is Debt-free then (since we have to pay Rent or Mortgage)..
  Because those who rent, whether it high or low rent they have to pay monthly Rent. If not rent, then those who buy house, whether it high or low monthly mortgage payment, they still have to pay Mortgage.
  
  So my question is, do you agree with what that poster said (her quote in bold bracket above)--her definition of Debt-free? According to our situation above, we Debt-free to me. Am I thinking Debt-free definition wrong here?
  Yes, I'm an easily confuse girl, and right now I'm confuse. That poster she throw me off. So what is really Debt-free then? What is 'your' definition of Debt-free?
  
  
  

  tl, dr - Do you consider rent to be debt?
  
  I consider my mortgage part of my debt, but I understand why those with financial backgrounds do not.  

  
  

  Report2 Reply
• thefanciestbeckler member

  

  January 2017

  I didn't read your whole post, I must confess.

  I work at a mortgage company. A mortgage is good debt, but still debt. With that being said, for DH and I, we would consider "debt free" to be free of all debt other than our mortgage. In my area, it is very common to own a home rather than rent a house or apartment. So in our minds a mortgage is pretty much a given, and we view it more like an investment. 

  
  

  Report1 Reply
• lovesclimbing member

  

  January 2017 edited January 2017

  Yea, I couldn't get through that whole post. I agree that a mortgage is "good" debt (I use it in quotes because while I would prefer to pay cash and paying cash would obviously be the better option, that's all but impossible these days), but it's still debt. It's still money you owe someone else. 
  
  I strongly disagree that a car loan is good debt. It depreciates and rapidly loses value. I hate vehicle loans (and yes, H and I have had them. But only after buying a vehicle for cash and then having that crap out on us very shortly thereafter). I hope to plan and save in such a way we never have to have another one. 
  
  Rent is not debt, and I don't know anyone who thinks that. I think her definition is very odd. 
  
  Debt-free means no loans/debt - school, vehicle, home, business, credit card, etc.
  
  ETA: Debt-free has nothing whatsoever to do with how much money you make or whether you consider yourself to be living comfortably. It simply is a statement on whether or not you owe anyone money. You can be a pauper living on the street and be debt-free. 
  
  ETA2: So by the responders' criteria of debt-free, she herself, even if she owns her home, will never be debt-free. Because by that same logic paying for utilities every month, a cell-phone bill, etc. counts as debt. 

  Report1 Reply
• MissKittyDanger member

  

  January 2017

  short+sassy said:

  MissKittyDanger said:

  I work in the financial field - specifically dealing with debts - and by every means of the word, mortgage and vehicle 'debt' is good debt because you are constantly paying it and it's an asset for you.
  
  Rent is not considered a debt, but you do have to continue paying it. However, it's not an asset.
  
  What would be considered debt free? No credit card, loans {line of credit or student loan}. Basically if it's not an asset, it's a liability.
  
  Debt also does not mean financial hardship, which most people are confused about. I see people when they are spending beyond their means, for reference.

  I agree and disagree with this.  There is definitely "good debt".  I personally leverage debt by buying investment properties that I can rent out for roughly 2x my expenses, including the mortgage.  I increase my income, while also paying down an appreciating asset.

  The mortgage on a personal home is also along that same idea.  Paying down what should be an appreciating asset and (hopefully) paying less for a mortgage than what renting a similar place would be.

  However, I disagree that an auto loan is a "good debt".  Sure, it is also an asset.  But it is a depreciating one.  Not knocking car loans!  I've certainly had them myself.  It's just not in the same "good debt" category that a home loan is (to me).

  One might even argue that student loans are a good debt.  Conventional wisdom says they are not.  But most people get student loans to invest in an education, that will allow them to get a job, where they can make more money.  A degree is an asset also.  Just an intangible one.     
  

  Vehicle loans are considered 'good debt' because the fact it reports as an asset on your credit report, that's really only reason why. Once you pay it off, it shows a positive rating on your report that you want in the future.
  When M and I were getting a vehicle, we had issues because we had zero assets but good credit. We had to find a different type of lender who could help. We got a good interest rating but had to put both of our names on the loan even though M makes enough {and does all the payments}
  
  I've heard about the student debt, but I still so disagree because not everyone can get a job in their field right away. {although the Canadian Govn't has changed policies about that - different topic}
  

  Report0 Reply
• TheMostHappy15 member

  

  January 2017

  I think it's sort of silly to be fixated on being debt free when, as many PPs pointed out, debt can be a very positive thing. The word debt has negative connotations, but for many (most?) people having a mortgage debt is a smarter financial decision than renting indefinitely.
  
  This is the kind of issue where I feel people tend to draw arbitrary lines to try to make themselves feel better about their own specific circumstances (not saying OP or anyone in this thread is doing that, just my experience with this kind of convo in general). For example, some people take a lot of pride in not even having a credit card, while others say it's fine to have a credit card as long as you pay it off immediately, while others feel it's most financially responsible to accumulate some credit debt in order to support themselves in a venture that is ultimately going to make them way more money than someone who wasn't willing to be in debt for a little while. Honestly all of those choices can be good in some situations and bad in others, but people tend to fixate on justifying their particular choice.
  
  So yeah, OP I would consider you to be debt free but I think it's kind of waste of time to worry about defining exactly what that means or treating it as a status that is universally desirable. 

  Report1 Reply
• short+sassy member

  

  January 2017

  MissKittyDanger said:

  short+sassy said:

  MissKittyDanger said:

  I work in the financial field - specifically dealing with debts - and by every means of the word, mortgage and vehicle 'debt' is good debt because you are constantly paying it and it's an asset for you.
  
  Rent is not considered a debt, but you do have to continue paying it. However, it's not an asset.
  
  What would be considered debt free? No credit card, loans {line of credit or student loan}. Basically if it's not an asset, it's a liability.
  
  Debt also does not mean financial hardship, which most people are confused about. I see people when they are spending beyond their means, for reference.

  I agree and disagree with this.  There is definitely "good debt".  I personally leverage debt by buying investment properties that I can rent out for roughly 2x my expenses, including the mortgage.  I increase my income, while also paying down an appreciating asset.

  The mortgage on a personal home is also along that same idea.  Paying down what should be an appreciating asset and (hopefully) paying less for a mortgage than what renting a similar place would be.

  However, I disagree that an auto loan is a "good debt".  Sure, it is also an asset.  But it is a depreciating one.  Not knocking car loans!  I've certainly had them myself.  It's just not in the same "good debt" category that a home loan is (to me).

  One might even argue that student loans are a good debt.  Conventional wisdom says they are not.  But most people get student loans to invest in an education, that will allow them to get a job, where they can make more money.  A degree is an asset also.  Just an intangible one.     
  

  Vehicle loans are considered 'good debt' because the fact it reports as an asset on your credit report, that's really only reason why. Once you pay it off, it shows a positive rating on your report that you want in the future.
  When M and I were getting a vehicle, we had issues because we had zero assets but good credit. We had to find a different type of lender who could help. We got a good interest rating but had to put both of our names on the loan even though M makes enough {and does all the payments}
  
  I've heard about the student debt, but I still so disagree because not everyone can get a job in their field right away. {although the Canadian Govn't has changed policies about that - different topic}
  

  
  I should have better explained that.  Technically speaking, they are considered "good debt" by credit reports/financial institutions/conventional wisdom, etc.  But from a practical standpoint, there is nothing "good" about a car loan.  Other than it allows someone to buy a car that they couldn't buy otherwise.  But it still borrowing $X for an asset that will be worth less and less money, over time.

  
  

  spockforprez said:

  There have been analyses that show in certain parts of the country you are far better off, financially-speaking, renting than buying a home. I don't know where in CA the OP lives but given what I know about that state, she could very well be in one of them.
  
  I personally feel safer owning a home because I know that the only thing that could cause us to have to leave is if we default on our mortgage (or, of course, some kind of serious health/safety issue). I have had enough bad landlords - both corporate and individual - to know that they wield almost all of the power in your relationship. And if shit goes south politically/globally we have a place to hunker down permanently. (Oh god I think my prepping-obsessed H is wearing off on me.)
  
  If you have a mortgage, in my opinion you are not debt-free. But I don't hate the word debt because I think it is a tool that can be used to your advantage. (Obviously high-interest consumer debt is not a tool and should be paid off asap!) But a mortgage is a tool. If you have a 3.25% interest rate on your mortgage, you can almost certainly get double that rate of return if you invest your extra money instead of prepaying your mortgage. Why not get double the money? Perhaps it is a boon to some people psychologically to pay off their mortgage, but I don't think it makes financial sense. We currently use the "every two weeks" mortgage payment method so we technically make a 13th payment every year but I'm not sure we'll prepay any more than that.
  

  Oooohhh...really, REALLY not true.  Perhaps true for responsible and moral tenants, like I'm assuming you and your H were.  But when a LL gets a bad tenant, it can be a financial nightmare and their hands can be largely tied.  Especially if they are in a tenant-friendly state.  And every state, even LL friendly ones, has substantial protection for tenants.  I'm definitely not saying there aren't bad landlords out there.  Unfortunately, there are.  But there are bad tenants also and a LL has a LOT more financial risk on the line.

  Not trying to start a "which is worse" conversation.  Because a bad egg is a bad egg, on either side of the coin.  But most people don't know what its like to own rental property and the challenges it entails.  So I like to remind .  It is also substantially less profitable than most people think it is, lol.  The expenses are enormous for rental properties and those expenses roll in every month, whether a tenant as stopped paying rent or the place is sitting vacant.

  To the second bolded, this is so wise!  I would never pooh-pooh someone for wanting to focus on paying off their mortgage, but it is not the best financial move for exactly those reasons.  And retirement savings with extra money should be a bigger priority.  Not saying people can't do both, of course. 

  Not to mention, just because a person pays off their mortgage, doesn't mean there not still going to be spending a large chunk of cheddar every year for insurance and property taxes. 
  

  

  Report0 Reply
• southernbelle0915 mod

  

  January 2017

  Credit is necessary and important, but it also depends on a consumerist system that values spending vs. savings. So yes, by credit agency standards in our American, consumerist system, a car loan may be considered "good debt" but I'm with @lovesclimbing there - I do not think car loans are good debt.
  
  Tangent... I think it's only because car loans are so common in America that credit agencies are able to use them as an indicator. We live in a car centrist society in general where many people over-spend on cars. For some reason, they feel they "should" be driving a relatively new car or a certain type of car or that the car is more than just transportation, like it's some kind of reflection of who they are, how much money they make, things they're into, whatever. However, most people can't afford to pay for a car that's up to whatever standards they think they deserve - so they take out a loan. I don't think that (in and of itself) makes it "good debt". But obviously that's the personal opinion of someone who isn't an economist.

  *********************************************************************************

  
  

  

  Report2 Reply
• TrixieJess member

  

  January 2017

  MissKittyDanger said:

  short+sassy said:

  MissKittyDanger said:

  I work in the financial field - specifically dealing with debts - and by every means of the word, mortgage and vehicle 'debt' is good debt because you are constantly paying it and it's an asset for you.
  
  Rent is not considered a debt, but you do have to continue paying it. However, it's not an asset.
  
  What would be considered debt free? No credit card, loans {line of credit or student loan}. Basically if it's not an asset, it's a liability.
  
  Debt also does not mean financial hardship, which most people are confused about. I see people when they are spending beyond their means, for reference.

  I agree and disagree with this.  There is definitely "good debt".  I personally leverage debt by buying investment properties that I can rent out for roughly 2x my expenses, including the mortgage.  I increase my income, while also paying down an appreciating asset.

  The mortgage on a personal home is also along that same idea.  Paying down what should be an appreciating asset and (hopefully) paying less for a mortgage than what renting a similar place would be.

  However, I disagree that an auto loan is a "good debt".  Sure, it is also an asset.  But it is a depreciating one.  Not knocking car loans!  I've certainly had them myself.  It's just not in the same "good debt" category that a home loan is (to me).

  One might even argue that student loans are a good debt.  Conventional wisdom says they are not.  But most people get student loans to invest in an education, that will allow them to get a job, where they can make more money.  A degree is an asset also.  Just an intangible one.     
  

  Vehicle loans are considered 'good debt' because the fact it reports as an asset on your credit report, that's really only reason why. Once you pay it off, it shows a positive rating on your report that you want in the future.
  When M and I were getting a vehicle, we had issues because we had zero assets but good credit. We had to find a different type of lender who could help. We got a good interest rating but had to put both of our names on the loan even though M makes enough {and does all the payments}
  
  I've heard about the student debt, but I still so disagree because not everyone can get a job in their field right away. {although the Canadian Govn't has changed policies about that - different topic}
  

  In Canada the Federal portion of your Student debt doesn't show up on your credit report, only the provincial. 
  
  As someone who works in finance, a mortgage is considered an asset/equity whereas credit cards are debt/expenses. If you pay them off every month, then they can help build your credit, if not, you can be in trouble. 

  Report0 Reply
• lovesclimbing member

  

  January 2017

  southernbelle0915 said:

  Credit is necessary and important, but it also depends on a consumerist system that values spending vs. savings. So yes, by credit agency standards in our American, consumerist system, a car loan may be considered "good debt" but I'm with @lovesclimbing there - I do not think car loans are good debt.
  
  Tangent... I think it's only because car loans are so common in America that credit agencies are able to use them as an indicator. We live in a car centrist society in general where many people over-spend on cars. For some reason, they feel they "should" be driving a relatively new car or a certain type of car or that the car is more than just transportation, like it's some kind of reflection of who they are, how much money they make, things they're into, whatever. However, most people can't afford to pay for a car that's up to whatever standards they think they deserve - so they take out a loan. I don't think that (in and of itself) makes it "good debt". But obviously that's the personal opinion of someone who isn't an economist.

  So much yes to this entire post, particularly the bolded. I think it's very sad that credit is so necessary in this day and age.
  
  I'm a big believer (for the most part) in Dave Ramsay's school of personal financial management. On some things I disagree, but living debt-free is truly the best way to go. He believes you shouldn't use credit cards at all. I disagree with that because there's a lot of benefits you can get with certain credit cards, and it sure makes it a lot easier to do somethings (like rent a car), but he also aims that advice at the general population who don't pay off their balance every month. 

  Report1 Reply
• STARMOON44 member

  

  January 2017

  That woman is an idiot. Stop using that forum for financial stuff. Debt has an actual meaning. It does not include expenses that you pay for with money you have. 

  Report3 Reply
• banana468 member

  

  January 2017

  southernbelle0915 said:

  Credit is necessary and important, but it also depends on a consumerist system that values spending vs. savings. So yes, by credit agency standards in our American, consumerist system, a car loan may be considered "good debt" but I'm with @lovesclimbing there - I do not think car loans are good debt.
  
  Tangent... I think it's only because car loans are so common in America that credit agencies are able to use them as an indicator. We live in a car centrist society in general where many people over-spend on cars. For some reason, they feel they "should" be driving a relatively new car or a certain type of car or that the car is more than just transportation, like it's some kind of reflection of who they are, how much money they make, things they're into, whatever. However, most people can't afford to pay for a car that's up to whatever standards they think they deserve - so they take out a loan. I don't think that (in and of itself) makes it "good debt". But obviously that's the personal opinion of someone who isn't an economist.

  So much this.   Plus, the average car loan is larger and longer than previously issued and it has a lot more to do with keeping up with the joneses.   If you get a 7 year car loan and the average age of a car on the road is 11 years, you're not looking at a lot of time to be without a loan for a depreciating asset.  
  
  And on the mortgage front, while DH and I have had the benefit of timely paying tenants in our condo, we also know of people who have not had the benefit of using their real estate as income property because of a poor market which required the condo to sit vacant or for when they had to deal with tenants who did not pay on time.   And as PP stated, there are a lot of laws that benefit tenants and it takes a long time to get a tenant evicted.

  Report0 Reply
• TrixieJess member

  

  January 2017

  banana468 said:

  southernbelle0915 said:

  Credit is necessary and important, but it also depends on a consumerist system that values spending vs. savings. So yes, by credit agency standards in our American, consumerist system, a car loan may be considered "good debt" but I'm with @lovesclimbing there - I do not think car loans are good debt.
  
  Tangent... I think it's only because car loans are so common in America that credit agencies are able to use them as an indicator. We live in a car centrist society in general where many people over-spend on cars. For some reason, they feel they "should" be driving a relatively new car or a certain type of car or that the car is more than just transportation, like it's some kind of reflection of who they are, how much money they make, things they're into, whatever. However, most people can't afford to pay for a car that's up to whatever standards they think they deserve - so they take out a loan. I don't think that (in and of itself) makes it "good debt". But obviously that's the personal opinion of someone who isn't an economist.

  So much this.   Plus, the average car loan is larger and longer than previously issued and it has a lot more to do with keeping up with the joneses.   If you get a 7 year car loan and the average age of a car on the road is 11 years, you're not looking at a lot of time to be without a loan for a depreciating asset.  
  
  And on the mortgage front, while DH and I have had the benefit of timely paying tenants in our condo, we also know of people who have not had the benefit of using their real estate as income property because of a poor market which required the condo to sit vacant or for when they had to deal with tenants who did not pay on time.   And as PP stated, there are a lot of laws that benefit tenants and it takes a long time to get a tenant evicted.

  The only time a car loan works in your favour is if you use it for business purposes. You can write off a portion of the loan under your car expenses, as well as the car's depreciating value as an asset. 

  Report0 Reply
• SP29 member

  

  January 2017 edited January 2017

  STARMOON44 said:

  That woman is an idiot. Stop using that forum for financial stuff. Debt has an actual meaning. It does not include expenses that you pay for with money you have. 

  I agree with this.
  
  Rent isn't a debt. You are paying an expense with money you already have. You didn't take out a loan for the apartment that you are now paying back (which is what a mortgage is). You can walk away from the apartment at any time and move on to the next thing.
  
  How much you earn annually has nothing to do with it. There are people who work minimum wage and are debt free, and there are people who make in the 6 figures who are not debt free because they live beyond their means (ETA: I was not trying to say that just because you have debt means you live beyond your means, my point was that annual income has nothing to do with it). Also how much you make and how easy it is for you to live on that amount depends on the cost of living, which varies.
  
  DH and I are currently debt free. But in March we will not be (mortgage!). Interesting though how when we applied for our mortgage, DH has a better credit rating than I because he has used a credit card longer and for more (and has had more than one), even though we are both debit free and pay off our credit cards. You get penalized for not using credit!
  

  Report0 Reply
• ernursej member

  

  January 2017

  Debt to me is anything you owe. Could be good debt (house, potentially student loans) or bad debt (credit cards, potentially car loans).

  *I would think of student loans as good debt when you have the real potential to make back that investment. If you are spending $200,000 to get a degree in basketweaving with no potential to get a job in the basketwaving field, I would say that is bad debt. I know that not everyone will have that same view.

  I would consider debt free to not owe money to any business/person.

  Two scenarios:

  1) "A" has a mortgage of $198,000 at 2.67%, a credit card balance of $42.00 that she will pay off before the interest is applied and a car loan of $22,000 with zero interest over the life of the loan.

  2) "B" has paid off her mortgage, has a credit card balance of $1700.00 at 22.5% that won't be paid off for many months and a car loan of $15,000 at 3%.

  In my view - B has the debt that I would be concerned about. Credit cards and cars with owing balances with an interest rate are far worse than a mortgage which gives you equity as you pay it off.

  Renting means you don't have liability of ownership but you don't get the reward of equity later in life. As long as you are putting away enough to counter for not having a house to sell for income later in life, you are probably fine to rent.

  Report2 Reply
• CMGragain member

  

  January 2017 edited January 2017

  Here is a thought from someone in a different stage of life than most of you ladies.
  
  We were both twenty-five when we married.  We had no debts except our car loans.  we paid them off as soon as we could, and immediately bought a house in the expensive Washington, DC area.  We were both from Iowa, so prices were high by our standards.  We bought a single family fixer-upper in a good neighborhood for $51,000 (1977).  Maryland is one of those states that charges super high transfer taxes.
  
  In 1992, after starting our family and increasing income, we bought a new  for $210,000, selling our old house in a down market for $129,000.  This was the home where I resumed full time working, and our children went to college.  They both worked and saved, but we supplemented their savings so that they could attend state universities without acquiring any college debt.
  
  Daughter lived at home after graduating for 10 months while teaching school.  At the end of that time, in 2003, she bought a condo townhouse for $118,000,  (Oops!  Beginning of the housing bubble!)  and after her brother graduated, he rented her spare bedroom.
  
  DH retired from his federal government employment, and we sold the house.  Bad timing!  It was 2006!  We finally sold for about $500,000, paying enormous transfer taxes to the State of Maryland.
  
  We had a cash bundle of about $370,000.  We bought a house in Grand Junction, Colorado, and paid $378,000 for a house that is larger, in a great neighborhood, with a fabulous view.  No more mortgage.  No stairs, either!
  
  We know people who have rented all their lives.  Their rent payments have inflated over the years, and they will be paying rent for the rest of their lives, unless they win the Lottery.
  
  Meanwhile, daughter sold her townhouse after the housing recession recovered, for $167,000.  She rolled the equity into a small single family house with a fences back yard in a great neighborhood!
  All the years we paid on our mortgages, we received tax deductions on our interest payments.  These are higher in the first ten years of a mortgage.  Renters do not get this extra income.
  
  Buying a house is not always the best idea.  Location is everything.  If we had stayed in the expensive DC area, we probably couldn't have enjoyed the lifestyle we now do.  Many towns are poor places to invest.  The town my parent's were from is almost a ghost town, now, and they even moved the highway away from it.  All that is left is the courthouse, a gas station, a convenience store, and one small grocery store.  Sell your house there?  Good luck with that.
  
  Everybody has a different story.  I think that home ownership is still the best plan for most married couples, especially if you are planning to have children.  Part of our strategy was to own our homes for at least ten years before selling.
  
  Anyway, food for thought.
  

  

  Report3 Reply
• ScottishSarah member

  

  January 2017 edited January 2017

  OP, do you want a medal?

  

  Report8 Reply
• MobKaz member

  

  January 2017

  CMGragain said:

  Here is a thought from someone in a different stage of life than most of you ladies.
  
  We were both twenty-five when we married.  We had no debts except our car loans.  we paid them off as soon as we could, and immediately bought a house in the expensive Washington, DC area.  We were both from Iowa, so prices were high by our standards.  We bought a single family fixer-upper in a good neighborhood for $51,000 (1977).  Maryland is one of those states that charges super high transfer taxes.
  
  In 1992, after starting our family and increasing income, we bought a new  for $210,000, selling our old house in a down market for $129,000.  This was the home where I resumed full time working, and our children went to college.  They both worked and saved, but we supplemented their savings so that they could attend state universities without acquiring any college debt.
  
  Daughter lived at home after graduating for 10 months while teaching school.  At the end of that time, in 2003, she bought a condo townhouse for $118,000,  (Oops!  Beginning of the housing bubble!)  and after her brother graduated, he rented her spare bedroom.
  
  DH retired from his federal government employment, and we sold the house.  Bad timing!  It was 2006!  We finally sold for about $500,000, paying enormous transfer taxes to the State of Maryland.
  
  We had a cash bundle of about $370,000.  We bought a house in Grand Junction, Colorado, and paid $378,000 for a house that is larger, in a great neighborhood, with a fabulous view.  No more mortgage.  No stairs, either!
  
  We know people who have rented all their lives.  Their rent payments have inflated over the years, and they will be paying rent for the rest of their lives, unless they win the Lottery.
  
  Meanwhile, daughter sold her townhouse after the housing recession recovered, for $167,000.  She rolled the equity into a small single family house with a fences back yard in a great neighborhood!
  All the years we paid on our mortgages, we received tax deductions on our interest payments.  These are higher in the first ten years of a mortgage.  Renters do not get this extra income.
  
  Buying a house is not always the best idea.  Location is everything.  If we had stayed in the expensive DC area, we probably couldn't have enjoyed the lifestyle we now do.  Many towns are poor places to invest.  The town my parent's were from is almost a ghost town, now, and they even moved the highway away from it.  All that is left is the courthouse, a gas station, a convenience store, and one small grocery store.  Sell your house there?  Good luck with that.
  
  Everybody has a different story.  I think that home ownership is still the best plan for most married couples, especially if you are planning to have children.  Part of our strategy was to own our homes for at least ten years before selling.
  
  Anyway, food for thought.
  

  1977.  Let's also point out that, at that time, interest rates hovered at 13%! 
  
  Perk of being an OMH.....debt free.  However, we always chose to live slightly below our means.  We felt strongly that when necessary, it was always better to buy the smallest home in the best area then the biggest home in a questionable area (in terms of schools, growth, etc.). 
  

  Report3 Reply
• CMGragain member

  

  January 2017

  MobKaz said:

  
  

  1977.  Let's also point out that, at that time, interest rates hovered at 13%! 
  
  Perk of being an OMH.....debt free.  However, we always chose to live slightly below our means.  We felt strongly that when necessary, it was always better to buy the smallest home in the best area then the biggest home in a questionable area (in terms of schools, growth, etc.). 
  

  Actually, they were at 9.5%.  I still remember.  The 13% happened a few years later, and nobody moved unless they had to.  This was part of what ended the Carter administration.
  

  

  Report0 Reply
• charlotte989875 member

  

  January 2017 edited January 2017

  ScottishSarah said:

  OP, do you want a medal?

  Same.
  
  Good for you OP, but why does it matter what other people call debt-free. We're not debt free; student loans, mortgage, and yes shockingly we have a car loan, and not because we're keeping up with the Jones (whoever insultingly implied that's why people have car loans) but because my car from grad school died two months we closed on our house.
  
  We pay everything on time each month, but even if we didn't it doesn't make us better (or worse) than anyone else. The assumption in here that anyone with debt (especially bad debt) is irresponsible reads pretty judgy to me. 

  Report6 Reply