Almost a pathological fear of debt, to my detriment?

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Lynx310650
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Almost a pathological fear of debt, to my detriment?

Post by Lynx310650 » Fri Jan 12, 2018 12:33 pm

I just cannot stand debt, even when it's arguably to my benefit to hold on to it because of low interest. Last year I paid off my spouse's $15000 student loan balance even though the interest rate was around 1.5%. I tried to hold a balance on my 0% intro APR credit cards, but hated seeing a balance and paid off after 2 months. I purchased a vehicle last year and financed for 5 years at 0.9%, and I am so tempted to just pay that off too although that really wouldn't make much sense.

I've never really held high interest debt, but even super low interest debt is difficult for me. I mean as far as "problems" go, this is very low on the totem pole. Still, I'm wondering if there are things I can do in terms of changing my perspective or just getting okay with at least holding on to SOME debt when it's at such a low interest rate, like my car loan?

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Toons
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Re: Almost a pathological fear of debt, to my detriment?

Post by Toons » Fri Jan 12, 2018 12:35 pm

"like my car loan"

No,
Free the Mind,
Remain Debt Free.
Do Not Be A Slave To The Lender


:happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

aristotelian
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Re: Almost a pathological fear of debt, to my detriment?

Post by aristotelian » Fri Jan 12, 2018 12:36 pm

Do you have a mortgage? That is probably the biggest way you can safely leverage debt. Unless you plan to go back to college, anything else is too short term and likely high interest, so using debt to invest could easily backfire. I would just enjoy the debt free lifestyle.

Sure, you could churn 0% interest credit card balances for 1% CD arbitrage plays, but is it worth the time, effort, and risk of a missed payment?

Lynx310650
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Re: Almost a pathological fear of debt, to my detriment?

Post by Lynx310650 » Fri Jan 12, 2018 12:41 pm

aristotelian wrote:
Fri Jan 12, 2018 12:36 pm
Do you have a mortgage? That is probably the biggest way you can safely leverage debt. Unless you plan to go back to college, anything else is too short term and likely high interest, so using debt to invest could easily backfire. I would just enjoy the debt free lifestyle.

Sure, you could churn 0% interest credit card balances for 1% CD arbitrage plays, but is it worth the time, effort, and risk of a missed payment?
No, no mortgage. The crazy home prices in my HCOL area is the biggest reason, but I must admit that my fear of debt has something to do with it as well. Even at historically low rates, I just hate the thought of being beholden to a payment for 30 years. One of my financial dreams/goals is to be able to comfortably pay for a home in cash in about 10-15 years and just live in that until death.

smitcat
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Re: Almost a pathological fear of debt, to my detriment?

Post by smitcat » Fri Jan 12, 2018 12:45 pm

Lynx310650 wrote:
Fri Jan 12, 2018 12:33 pm
I just cannot stand debt, even when it's arguably to my benefit to hold on to it because of low interest. Last year I paid off my spouse's $15000 student loan balance even though the interest rate was around 1.5%. I tried to hold a balance on my 0% intro APR credit cards, but hated seeing a balance and paid off after 2 months. I purchased a vehicle last year and financed for 5 years at 0.9%, and I am so tempted to just pay that off too although that really wouldn't make much sense.

I've never really held high interest debt, but even super low interest debt is difficult for me. I mean as far as "problems" go, this is very low on the totem pole. Still, I'm wondering if there are things I can do in terms of changing my perspective or just getting okay with at least holding on to SOME debt when it's at such a low interest rate, like my car loan?
Spend time practicing good financial decision making and see how debt can be part of that rather than an 'evil' in whatever form it is in.
Debt as a tool is much more valuable than no debt at all.

chicagoan23
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Re: Almost a pathological fear of debt, to my detriment?

Post by chicagoan23 » Fri Jan 12, 2018 12:58 pm

Lynx310650 wrote:
Fri Jan 12, 2018 12:33 pm
Still, I'm wondering if there are things I can do in terms of changing my perspective or just getting okay with at least holding on to SOME debt when it's at such a low interest rate, like my car loan?
Credit and insurance make the world go 'round. There's nothing wrong with borrowing money if it's sensible (as opposed to predatory). Of course, there's also no reason to have debt just to have it.

For me, I'd much rather max out all tax-favored accounts before paying off any debt. If you make enough to do that, then it is likely that taxes are your single biggest expense, and you should try to minimize that expense in every possible way because you get no marginal benefit to paying more in taxes.

If you are already maxing out everything, then there is no need to hold some debt at low interest rates. Unless, obviously, you get a mortgage.

TSR
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Re: Almost a pathological fear of debt, to my detriment?

Post by TSR » Fri Jan 12, 2018 1:04 pm

There's another phenomenon that I tend to have, which is not so much fear of debt as it is annoyance with the idea of having another payment in my life. For me, there is significant value in paying off a relatively low-priced obligation (your car note, for example) in order to get another monthly payment out of my life and free up that cash flow. It may not make much mathematical sense from an investment perspective, but I place a lot of value on convenience and the avoidance of mental clutter. In other words, if you need another excuse to pay that sucker off, feel free to use this one. Good luck!

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AAA
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Re: Almost a pathological fear of debt, to my detriment?

Post by AAA » Fri Jan 12, 2018 1:11 pm

I'm like you. When I had a mortgage, I prepaid principal each month and then when the balance got down to a certain level I just paid it off. Do what makes you comfortable, even if there's a financial advantage to do otherwise.

Rupert
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Re: Almost a pathological fear of debt, to my detriment?

Post by Rupert » Fri Jan 12, 2018 1:13 pm

There's no reason for you to change your perspective so long as you aren't depriving yourself and your loved ones of things you need (and things you want, within reason) just in order to avoid debt. If you're living in an unsafe dump and driving an unsafe car just to avoid debt, that's a problem.

Lexi
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Re: Almost a pathological fear of debt, to my detriment?

Post by Lexi » Fri Jan 12, 2018 1:14 pm

The only debt I have held is:
Home mortgages never more than 80% of purchase price of home
Credit cards always paid in full monthly
Bridge loan once when moving and owned both houses briefly

Never had a car loan, heloc, personal loan, any other. Was lucky to have parents pay for undergrad and to get scholarship for grad school. Mortgages paid off.

No regrets. Being debt free goes a long way toward achieving financial independence.

You don’t have a problem other than the need to take the plunge at some point and get the first mortgage which can seem overwhelming initially.

Grt2bOutdoors
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Re: Almost a pathological fear of debt, to my detriment?

Post by Grt2bOutdoors » Fri Jan 12, 2018 1:17 pm

AAA wrote:
Fri Jan 12, 2018 1:11 pm
I'm like you. When I had a mortgage, I prepaid principal each month and then when the balance got down to a certain level I just paid it off. Do what makes you comfortable, even if there's a financial advantage to do otherwise.
It’s a good strategy providing you have sufficient liquidity in case of job loss, medical emergencies (insurance does not pay for everything - ask me how I know), are fully funding all retirement plans, do take vacations and live your life. Do not focus your life solely on debt repayment. Had I not taken out a mortgage I would not have been able to purchase my house. Everything in moderation.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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BL
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Re: Almost a pathological fear of debt, to my detriment?

Post by BL » Fri Jan 12, 2018 1:17 pm

You didn't reply as to whether you and spouse are investing maximum amounts in 401k and Roth IRAs or ??
If you have taken care of retirement, emergency funds, etc., then feel free to pay it all off. If you can afford a house but the only reason you don't buy one is you hate debt, then you may be harming yourself or especially your family.

Lou354
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Re: Almost a pathological fear of debt, to my detriment?

Post by Lou354 » Fri Jan 12, 2018 1:18 pm

Being wary of debt is a good instinct. But like all good things it can be taken to extremes. I’d say don’t worry about it, except for the fact that it bothers you. Whatever you do on other loans, my advice is to avoid CC debt, since that’s how lots of people get in trouble and you know the CC companies aren’t offering those 0% intro rates for your benefit.

Any idea where your “almost pathological” fear comes from? In my father’s case it was the experience of being born into a poor family and then coming of age during the Depression. He never borrowed for anything, and was in his late 40’s when my parents bought their first house. By the way, they and their kids never suffered from their avoiding debt, and that’s a pretty good measure of success.

LiterallyIronic
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Re: Almost a pathological fear of debt, to my detriment?

Post by LiterallyIronic » Fri Jan 12, 2018 1:20 pm

Lynx310650 wrote:
Fri Jan 12, 2018 12:41 pm
Even at historically low rates, I just hate the thought of being beholden to a payment for 30 years.
I hear you on that. We just got a 30 year mortgage, and have only made three payments so far. But we always pre-pay enough principal to make sure that we're paying more principal than interest. Last month we had to do an extra $257 in principal, but this month we only have to do an extra $254, so it'll get easier and easier (but our plan is to pay either: 1) enough to make principal more than interest; or 2) $200, whichever is greater, so we'll never pay less than $200 extra toward principal). But at 3.875% interest, we could probably do better putting that money in the market. But I can't have this mortgage hanging around for 30 years.

DrGoogle2017
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Re: Almost a pathological fear of debt, to my detriment?

Post by DrGoogle2017 » Fri Jan 12, 2018 1:25 pm

I only have mortgage debt, everything else, doesn’t mater how low it is, I pay them off. It’s not the low interest rate, but they all have some payments that you have to pay. They will add up to something.

getthatmarshmallow
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Re: Almost a pathological fear of debt, to my detriment?

Post by getthatmarshmallow » Fri Jan 12, 2018 1:28 pm

Part of personal finance is mathematics, but part is psychological. There's no set rule on what should outweigh what. It's not bad to want to be debt-free, even if the math says otherwise, because it's a plan you can live with happily.

The only thing I'd worry about, if I were you, would be overly fearing taking out a mortgage. If you're in an area where a housing is affordable, perhaps think of the mortgage as a complicated way of paying rent to yourself?

epictetus
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Re: Almost a pathological fear of debt, to my detriment?

Post by epictetus » Fri Jan 12, 2018 1:33 pm

i would suggest just go with the way you are.

most of the people who have a problem with debt have too much , not too little.

very few people end up saying "i didn't reach my financial goals because i had too little debt" :happy
Focus on what you can control

RRAAYY3
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Re: Almost a pathological fear of debt, to my detriment?

Post by RRAAYY3 » Fri Jan 12, 2018 1:37 pm

as long as your still living your life, there is nothing wrong with choosing to be debt free. it should be commended, not reprimanded.

now, if you are eating dog food for dinner and never spending a dime on entertainment just in order to avoid debt - that would be an issue. if you can enjoy life, live within / below your means, and invest consistently - you're doing better than most people I know.

[ i have so many people in my family who are the exact opposite and almost brag about how much money they waste / debt they owe ... it's mind blowing. ]

book lover
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Re: Almost a pathological fear of debt, to my detriment?

Post by book lover » Fri Jan 12, 2018 1:43 pm

Debt is compounded interest in reverse. If you can avoid it except for a mortgage, I say that there is nothing wrong with that philosophy.

123
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Re: Almost a pathological fear of debt, to my detriment?

Post by 123 » Fri Jan 12, 2018 1:46 pm

I've only used credit cards for their convenience and always paid them off in full every month. I've always paid cash for cars. The only debt I've ever carried is a mortgage and that was for about 10 years (we paid it off early).

Fear of mortgage debt would seem to be the biggest thing that would have an adverse effect on you. When I got my mortgage I did not look at it as debt but as a mechanism to pretty much "lock-in" the majority of my housing costs for the next 30 years. It was the long-term cost savings that made me get one.
The closest helping hand is at the end of your own arm.

bogglehead125
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Re: Almost a pathological fear of debt, to my detriment?

Post by bogglehead125 » Fri Jan 12, 2018 1:50 pm

Toons wrote:
Fri Jan 12, 2018 12:35 pm
"like my car loan"

No,
Free the Mind,
Remain Debt Free.
Do Not Be A Slave To The Lender


:happy
If the loan is 0.9% APY, the OP is winning to inflation, FDIC-insured CDs, ST treasuries, AND would retain more liquidity in brokered fixed income products. I think there’s room to consider investor psychology and comfort, but “Do Not Be A Slave To The Lender” is a ridiculous sentiment when the lender is giving you free money at a negative real interest rate.

If someone offered to loan me money at 90bp APY I would do as much size as they offered and probably start going to church.

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whodidntante
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Re: Almost a pathological fear of debt, to my detriment?

Post by whodidntante » Fri Jan 12, 2018 1:52 pm

All things being equal, taking a loan leaves you with more liquidity and worse cash flow. But a loan can itself be a profitable investment, if the rate you pay is less than inflation. And then you have opportunity cost of selling investments to buy an asset which you can estimate as the expected return of the investment +capital gains taxes, costs that the loan will defer.

I am also debt averse but with these low rates I have overcome that to a great extent. I'll happily resume my debt aversion when the environment changes.

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Ged
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Re: Almost a pathological fear of debt, to my detriment?

Post by Ged » Fri Jan 12, 2018 2:10 pm

I'm like you. I hate debt. Never had any except a mortgage. It's perfectly reasonable to be leery of taking on that obligation. The future is uncertain. Even if the interest rate is low.

However owning a home is more compelling to my psychology than avoiding having a mortgage.

In particular I'd REALLY feel uneasy about raising a family in a rental.

delamer
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Re: Almost a pathological fear of debt, to my detriment?

Post by delamer » Fri Jan 12, 2018 2:24 pm

You have a spouse. Your spouse gets equal weight in decisions about taking on/paying off debt.

If you find that you are in conflict with your spouse about debt because s/he wants to take on reasonable amounts of low interest debt (like a 15-year mortgage for 50% of the value of a home), then your fear could become to your detriment.

2015
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Re: Almost a pathological fear of debt, to my detriment?

Post by 2015 » Fri Jan 12, 2018 4:00 pm

Lynx310650 wrote:
Fri Jan 12, 2018 12:41 pm
aristotelian wrote:
Fri Jan 12, 2018 12:36 pm
Do you have a mortgage? That is probably the biggest way you can safely leverage debt. Unless you plan to go back to college, anything else is too short term and likely high interest, so using debt to invest could easily backfire. I would just enjoy the debt free lifestyle.

Sure, you could churn 0% interest credit card balances for 1% CD arbitrage plays, but is it worth the time, effort, and risk of a missed payment?
No, no mortgage. The crazy home prices in my HCOL area is the biggest reason, but I must admit that my fear of debt has something to do with it as well. Even at historically low rates, I just hate the thought of being beholden to a payment for 30 years. One of my financial dreams/goals is to be able to comfortably pay for a home in cash in about 10-15 years and just live in that until death.
Many people in my HCOL area saw their dreams flushed away during the real estate meltdown ten years ago because they were over leveraged in personal real estate and suffered a job loss at the worst possible time. Lots of foreclosures.

I haven't had debt of any kind for over 20 years and never regretted it for an instant. I weathered many a storm as a result of being debt free.

MathWizard
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Re: Almost a pathological fear of debt, to my detriment?

Post by MathWizard » Fri Jan 12, 2018 4:05 pm

If your worst problem is fear of debt, I'd say you are doing well.

I'd also say that you are almost assuredly better off than someone who loves debt.

lightheir
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Re: Almost a pathological fear of debt, to my detriment?

Post by lightheir » Fri Jan 12, 2018 4:14 pm

I too, hate debt.

I will counterpoint the good advice above, that there is a small percentage (and it is SMALL!) that can use debt to their advantage, and leverage their way to big money. People starting businesses, and getting lucky with real estate are just two of the examples, and I know folks who have done both and basically retired before age 40 as a result of their big bet. Of course, that could swing the other way, and then you're toast.

I also do strongly believe that debt handling greatly differs for personal vs business. Many (?most) retail businesses run largely on debt. Even a big shop like Brooks Brothers, nearly went under when the banks started calling in their debts during the last recession, since their annual income is hugely debt-driven. But as an individual, it's very different, and probably worth avoiding debt as much as possible except for very special circumstances.

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Pajamas
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Re: Almost a pathological fear of debt, to my detriment?

Post by Pajamas » Fri Jan 12, 2018 4:27 pm

Use of debt can work to your advantage or harm you. Maybe you could look at your avoidance of it as neutral. I don't see it as a problem, personally. There are lots of things I could do that would be to my financial benefit or detriment. Not doing them at all doesn't have any affect on me and just maintains the status quo.

MP173
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Re: Almost a pathological fear of debt, to my detriment?

Post by MP173 » Fri Jan 12, 2018 4:29 pm

I do not think there is anything wrong with not wanting debt. Now, if it causes issues in your life, then that is a problem.

My father graduated from HS in 1929, my mom was 10 years younger. They were both influenced deeply by the recession. Their behavior affected me as I observed how they lived. We simply didnt have debt nor did we have credit cards. I thought that was normal.

During the last 27 years my income has been variable, fairly steady, but still variable based on sales commissions. I took my parents behavior and modified it somewhat by basing my lifestyle on a low water mark of variable income. When large paydays occurred, often that was used to help pay down debt or make large down payments (cars). I paid of two mortgages very early and learned to finance cars for 36 months and then make 2x payments. I want as low fixed costs as possible in my life. I am sort of obsessed with it, but it has worked out ok.

Ed

deikel
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Re: Almost a pathological fear of debt, to my detriment?

Post by deikel » Fri Jan 12, 2018 5:04 pm

not trying to be too picky but it is pathological if either you run afoul of the law (not the case) or you perceive it as an issue (which you don't) or it otherwise hampers you socially (which does not seem to be the case).

Its worthwhile remembering that there are societies and cultures that are more aligned with your choice and perceive debt as bad no matter what - living on credit is a foremost US American invention....

What you are most likely asking though is if you should have leveraged since the current stock market is so great...the answer to that no one give give you now, but we will know in a decade or so :-)

Also, its clearly not hampering you since you do take credit on when it seems useful (to get an education, to finance a car you need ect) - so clearly you can use credit for its useful purpose, you just prefer to pay it off as fast as you can

The debt you describe is good if the inflation is high (which it is not currently) or the investment you leveraged into is doing great (which they are currently, but that may change).
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cherijoh
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Re: Almost a pathological fear of debt, to my detriment?

Post by cherijoh » Fri Jan 12, 2018 5:23 pm

Lynx310650 wrote:
Fri Jan 12, 2018 12:41 pm
aristotelian wrote:
Fri Jan 12, 2018 12:36 pm
Do you have a mortgage? That is probably the biggest way you can safely leverage debt. Unless you plan to go back to college, anything else is too short term and likely high interest, so using debt to invest could easily backfire. I would just enjoy the debt free lifestyle.

Sure, you could churn 0% interest credit card balances for 1% CD arbitrage plays, but is it worth the time, effort, and risk of a missed payment?
No, no mortgage. The crazy home prices in my HCOL area is the biggest reason, but I must admit that my fear of debt has something to do with it as well. Even at historically low rates, I just hate the thought of being beholden to a payment for 30 years. One of my financial dreams/goals is to be able to comfortably pay for a home in cash in about 10-15 years and just live in that until death.
Where do you stand with respect to retirement savings? Unless you managed to max out your retirement plans at the same time, your decision to pay off $15K in student loans @1.5% was short-sighted IMO. And if you are funneling all your money into a taxable account to pay for a house in cash in 10 - 15 years, I am going to guess that you are shorting your retirement funding to do so. BAD IDEA in my opinion.

Trying to save up for a down payment on a house while paying rent at the same time is tough enough - trying to save the entire cost of a house while paying rent is darned near impossible. Rent vs. own calculations are highly location dependent, but your statement about not wanting to "be beholden to a payment for 30 years" struck me as very short-sighted since unless you are living in your parent's basement for free, you are currently beholden to a landlord for a rent payment! :oops: If you continue to have a debt phobia you could end up a lifetime renter.

We've had some of the lowest interest rates in decades which gives a huge advantage to anyone who purchased an appropriately-sized house in the past few years with low interest financing. If interest rates increase back to historically normal levels, then these mortgage holders will have the best inflation hedge that exists - one of their largest monthly expenses will be fixed in nominal $$. Rent, on the other hand, can continue to rise unless you live in an area with rent control.

I live in a modest "starter home" that I initially purchased with a 30 year loan, then subsequently refinanced with 15- and 10-yr loans as interest rates dropped. (I paid it off in less than 22 years). I put 20% down and my initial PITI was a little more than the rent on an apartment with the same square footage. I imagine a rental house (if i could have found one in this area) would have been more than my all-in house payment. By the first time I refinanced, apartments cost more than my all in-house payment. Now rental costs are outrageous as housing demand is outstripping supply.

I am happy that I took on debt to purchase a house, but I didn't go overboard on the house or do a cash out refinance which is what caused so many people to wreck their finances during the recession.

TwstdSista
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Re: Almost a pathological fear of debt, to my detriment?

Post by TwstdSista » Sat Jan 13, 2018 6:20 am

The husband and I are like this, too. We try. We really, really do. We get a car loan, make 6-8 payments, the get sick of it and kill ourselves to pay it off. We've even tried with 0% interest deals (furniture, appliances, lasik) -- no dice. Can't make it more than a couple of months.

So we gave up. Paid cash for our last two cars and we now put the smaller stuff on our 2% back credit card (which we also pay off every month).

Not having payments is glorious!

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Re: Almost a pathological fear of debt, to my detriment?

Post by kjvmartin » Sat Jan 13, 2018 8:42 am

Lynx310650 wrote:
Fri Jan 12, 2018 12:33 pm
I just cannot stand debt, even when it's arguably to my benefit to hold on to it because of low interest. Last year I paid off my spouse's $15000 student loan balance even though the interest rate was around 1.5%. I tried to hold a balance on my 0% intro APR credit cards, but hated seeing a balance and paid off after 2 months. I purchased a vehicle last year and financed for 5 years at 0.9%, and I am so tempted to just pay that off too although that really wouldn't make much sense.

I've never really held high interest debt, but even super low interest debt is difficult for me. I mean as far as "problems" go, this is very low on the totem pole. Still, I'm wondering if there are things I can do in terms of changing my perspective or just getting okay with at least holding on to SOME debt when it's at such a low interest rate, like my car loan?
Always paid all of my bills on time and pay off my rewards cards in full every month.

My credit score lingered in the high 700s for years. Financed a car - 820. Helps insurance rates, at least.

hulburt1
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Re: Almost a pathological fear of debt, to my detriment?

Post by hulburt1 » Sat Jan 13, 2018 8:46 am

I've been in fear of debt all my life. But The reason I was able to retire at 55 was I had no debt. Had house paid off in 8 years that was 30 years ago.
Paid cash for cars all bought new. I still have 4 cars all bought new all old now. Visa is paid off weekly. Live on 2500 and that's high on the hog.
Now With saving from debt I have 2.5m made $500000 last year in the stock market. I never made more then $40000 a year. debt kills you. If I had not been debt free all my life I would still be working. and not have millions my choice living debt free. If I was still paying off loans I would not have bought 4000 shares of Facebook at $50 a share but would be sending money to the bank for something I bought 10 years ago. Facebook is at 180 right now. You are right fear debt. you will live better and happier in the long run.

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Watty
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Re: Almost a pathological fear of debt, to my detriment?

Post by Watty » Sat Jan 13, 2018 9:20 am

Just FYI,

About a third of homes are owned without a mortgage.

It is just anecdotal but the last time I bought a car, for cash, when I was going through the paperwork I asked the finance guy and he said that about a third of the cars there were bought for cash.

My only concern would be that if you refused to have a credit card that you pay off each month and you occasionally use to keep it active. There are just to many situations where having a credit card and decent credit score is pretty much a necessity.

Debit cards can be pretty toxic so I would not use those instead of a credit card.

I did have some car loans when I was younger when I had to but I have found that once I got to the point where I could pay cash for a car that paying cash helped me save money because I would buy less expensive cars.

Paying off the low interest loans can make sense because it can allow you to then invest your "car payment" in something that might have some risk but should have a higher return

For example if you have the money to pay off the 0.9% car loan you could put that money into something safe that might yield 2% a year so you might clear 1% after taxes or about $100 a year after taxes on a $10,000 loan. In comparison if you paid it off then invested your "car payment" each month you could put that into something that has more risk but is would be expected to return 5% on average. Halfway through the car loan your would have about $5,000 invested which would be earning $250 a year if it got 5%.

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jabberwockOG
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Re: Almost a pathological fear of debt, to my detriment?

Post by jabberwockOG » Sat Jan 13, 2018 9:54 am

In most cases financially independent folks earn interest while poor and perpetually poverty stricken folks pay interest.

DrGoogle2017
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Re: Almost a pathological fear of debt, to my detriment?

Post by DrGoogle2017 » Sat Jan 13, 2018 11:20 am

jabberwockOG wrote:
Sat Jan 13, 2018 9:54 am
In most cases financially independent folks earn interest while poor and perpetually poverty stricken folks pay interest.
This generalization doesn’t work. Not in HCOL, you will be poor forever.

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Re: Almost a pathological fear of debt, to my detriment?

Post by smitcat » Sat Jan 13, 2018 1:08 pm

DrGoogle2017 wrote:
Sat Jan 13, 2018 11:20 am
jabberwockOG wrote:
Sat Jan 13, 2018 9:54 am
In most cases financially independent folks earn interest while poor and perpetually poverty stricken folks pay interest.
This generalization doesn’t work. Not in HCOL, you will be poor forever.
Financially knowledgeable folks have the advantage of deciding when debt is to their benefit. This leads to more 'tools' available to enhance their savings and their lives.

Afty
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Re: Almost a pathological fear of debt, to my detriment?

Post by Afty » Sat Jan 13, 2018 1:32 pm

What do you feel you are missing out on by not taking on debt? Maybe a half percent in forgone interest on a relatively small amount? Not worth the mental effort or potential for error, e.g. forgetting to make a payment, IMO.

itstoomuch
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Re: Almost a pathological fear of debt, to my detriment?

Post by itstoomuch » Sat Jan 13, 2018 1:39 pm

a little bit. Maybe. Depends on what you have and what you goals are.,
I need to increased FICO score fairly fast. I increased by credit cards from 1 to 3. And keep a small balance on a couple of cards. Pains me to pay the interest but I hope I can get a better mortgage rate on a much bigger amount of bucks.
Rev012718; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax TBT%. Early SS. FundRatio (FR) >1.1 67/70yo

DrGoogle2017
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Re: Almost a pathological fear of debt, to my detriment?

Post by DrGoogle2017 » Sat Jan 13, 2018 2:14 pm

smitcat wrote:
Sat Jan 13, 2018 1:08 pm
DrGoogle2017 wrote:
Sat Jan 13, 2018 11:20 am
jabberwockOG wrote:
Sat Jan 13, 2018 9:54 am
In most cases financially independent folks earn interest while poor and perpetually poverty stricken folks pay interest.
This generalization doesn’t work. Not in HCOL, you will be poor forever.
Financially knowledgeable folks have the advantage of deciding when debt is to their benefit. This leads to more 'tools' available to enhance their savings and their lives.
I’m not sure one has to be savvy. My 22 year old, non savvy person, told me she’s given up her emergency fund, going to contribute fully to Roth IRA, instead of half as she told me last year. I now figure why, she was approved a large credit card from PenFed recently, she has every intention of pay her balance off every month, but instead of having her emergency savings earning zero interest, she wants to invest her money. The credit card serves as the emergency fund. It was no prop from me. I offered to lend her money to contribute to Roth IRA, but she refused.
Plus the credit card saves charges when she travels overseas. Last year, she paid nearly $200 on overseas transactions. PenFed didn’t approve her of a credit card because she wasn’t earning much. It’s called leveraging off your future income. She was shocked they approved such as large amount. But both of my kids have built very good credit history. They are more conservative then I am at the same age.
Last edited by DrGoogle2017 on Sat Jan 13, 2018 2:18 pm, edited 1 time in total.

smitcat
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Re: Almost a pathological fear of debt, to my detriment?

Post by smitcat » Sat Jan 13, 2018 2:16 pm

DrGoogle2017 wrote:
Sat Jan 13, 2018 2:14 pm
smitcat wrote:
Sat Jan 13, 2018 1:08 pm
DrGoogle2017 wrote:
Sat Jan 13, 2018 11:20 am
jabberwockOG wrote:
Sat Jan 13, 2018 9:54 am
In most cases financially independent folks earn interest while poor and perpetually poverty stricken folks pay interest.
This generalization doesn’t work. Not in HCOL, you will be poor forever.
Financially knowledgeable folks have the advantage of deciding when debt is to their benefit. This leads to more 'tools' available to enhance their savings and their lives.
I’m not sure one has to be savvy. My 22 year old, non savvy person, told me she’s given up her emergency fund, going to contribute fully to Roth IRA, instead of half as she told me last year. I now figure why, she was approved a large credit card from PenFed recently, she has every intention of pay her balance off every month, but instead of having her emergency savings earning zero interest, she wants to invest her money. The credit card serves as the emergency fund. It was no prop from me. I offered to lend her money to contribute to Roth IRA, but she refused.
That sounds very knowledgable and savvy to me - YMMV

Selu Gadu
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Re: Almost a pathological fear of debt, to my detriment?

Post by Selu Gadu » Sat Jan 13, 2018 3:36 pm

AAA wrote:
Fri Jan 12, 2018 1:11 pm
I'm like you. When I had a mortgage, I prepaid principal each month and then when the balance got down to a certain level I just paid it off. Do what makes you comfortable, even if there's a financial advantage to do otherwise.
+1 We retired debt free and it has been key to successful retirement for us both. :D
De Gustibus Non Disputandum Est. Quantum Mechanics can't be all that tough, after all it isn't rocket science!

Dottie57
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Re: Almost a pathological fear of debt, to my detriment?h

Post by Dottie57 » Sat Jan 13, 2018 3:56 pm

Lynx310650 wrote:
Fri Jan 12, 2018 12:41 pm
aristotelian wrote:
Fri Jan 12, 2018 12:36 pm
Do you have a mortgage? That is probably the biggest way you can safely leverage debt. Unless you plan to go back to college, anything else is too short term and likely high interest, so using debt to invest could easily backfire. I would just enjoy the debt free lifestyle.

Sure, you could churn 0% interest credit card balances for 1% CD arbitrage plays, but is it worth the time, effort, and risk of a missed payment?
No, no mortgage. The crazy home prices in my HCOL area is the biggest reason, but I must admit that my fear of debt has something to do with it as well. Even at historically low rates, I just hate the thought of being beholden to a payment for 30 years. One of my financial dreams/goals is to be able to comfortably pay for a home in cash in about 10-15 years and just live in that until death.

Someday you may be at a place where you want your own home. For housing, you generally have either rent or a mortgage payment (until paid off) so you will have a payment in any case

DrGoogle2017
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Re: Almost a pathological fear of debt, to my detriment?

Post by DrGoogle2017 » Sat Jan 13, 2018 4:06 pm

Rent is a form of debt, how come nobody fears it. It’s a fact of life that you need to live somewhere, preferably not your parent’s basement. So paying rent means you are paying the landlord’s interest in the property, worse yet, it keeps rising. At least with mortgage, it’s fixed. The only thing might be rising is property tax, HOA, and insurance.

flyingaway
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Re: Almost a pathological fear of debt, to my detriment?

Post by flyingaway » Sat Jan 13, 2018 5:43 pm

The first thing in my life is to pay off any debt, even if there is no interest.

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Earl Lemongrab
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Re: Almost a pathological fear of debt, to my detriment?

Post by Earl Lemongrab » Sat Jan 13, 2018 5:45 pm

I've never been bothered by debt, let alone afraid of it. It's a tool, that I have used effectively from time to time.

One of my goals ten years ago when I revamped my financial life was to get emotion out of it. Ironically, what I was always afraid of was my money. I was scared of screwing it up and losing it. So I spent a lot of time researching, reading on what investing is and isn't and how develop a sound portfolio. That helped me over that fear.

With debt I think it helps to look at it in the grand scheme of your financial picture. That includes what debt can and can't do for you. What the things are about debt that make you fearful and how you can see how real those fears are and how you can operate safely.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

TonyDAntonio
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Re: Almost a pathological fear of debt, to my detriment?

Post by TonyDAntonio » Sat Jan 13, 2018 5:52 pm

Lynx310650 wrote:
Fri Jan 12, 2018 12:33 pm
I just cannot stand debt, even when it's arguably to my benefit to hold on to it because of low interest. Last year I paid off my spouse's $15000 student loan balance even though the interest rate was around 1.5%. I tried to hold a balance on my 0% intro APR credit cards, but hated seeing a balance and paid off after 2 months. I purchased a vehicle last year and financed for 5 years at 0.9%, and I am so tempted to just pay that off too although that really wouldn't make much sense.

I've never really held high interest debt, but even super low interest debt is difficult for me. I mean as far as "problems" go, this is very low on the totem pole. Still, I'm wondering if there are things I can do in terms of changing my perspective or just getting okay with at least holding on to SOME debt when it's at such a low interest rate, like my car loan?
Phone into the Dave Ramsey show. He'll make you feel like a rock star

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jabberwockOG
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Re: Almost a pathological fear of debt, to my detriment?

Post by jabberwockOG » Sat Jan 13, 2018 11:05 pm

DrGoogle2017 wrote:
Sat Jan 13, 2018 2:14 pm
smitcat wrote:
Sat Jan 13, 2018 1:08 pm
DrGoogle2017 wrote:
Sat Jan 13, 2018 11:20 am
jabberwockOG wrote:
Sat Jan 13, 2018 9:54 am
In most cases financially independent folks earn interest while poor and perpetually poverty stricken folks pay interest.
This generalization doesn’t work. Not in HCOL, you will be poor forever.
Financially knowledgeable folks have the advantage of deciding when debt is to their benefit. This leads to more 'tools' available to enhance their savings and their lives.
I’m not sure one has to be savvy. My 22 year old, non savvy person, told me she’s given up her emergency fund, going to contribute fully to Roth IRA, instead of half as she told me last year. I now figure why, she was approved a large credit card from PenFed recently, she has every intention of pay her balance off every month, but instead of having her emergency savings earning zero interest, she wants to invest her money. The credit card serves as the emergency fund. It was no prop from me. I offered to lend her money to contribute to Roth IRA, but she refused.
Plus the credit card saves charges when she travels overseas. Last year, she paid nearly $200 on overseas transactions. PenFed didn’t approve her of a credit card because she wasn’t earning much. It’s called leveraging off your future income. She was shocked they approved such as large amount. But both of my kids have built very good credit history. They are more conservative then I am at the same age.
Extremely financially sophisticated and savvy? Seriously? Using a credit card and going into debt to pay for a real financial emergency because the "financially savvy" person has no liquid cash savings at hand (i.e. an emergency fund) is the exact opposite of having an emergency fund.


Almost every one I have met in my life that wants to explain how smart they are managing and leveraging debt ends up looking pretty silly and working for a long long time... Usually they never get the chance to understand the freedom, peace of mind and FI that having no debt produces.

DrGoogle2017
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Re: Almost a pathological fear of debt, to my detriment?

Post by DrGoogle2017 » Sat Jan 13, 2018 11:36 pm

jabberwockOG wrote:
Sat Jan 13, 2018 11:05 pm
DrGoogle2017 wrote:
Sat Jan 13, 2018 2:14 pm
smitcat wrote:
Sat Jan 13, 2018 1:08 pm
DrGoogle2017 wrote:
Sat Jan 13, 2018 11:20 am
jabberwockOG wrote:
Sat Jan 13, 2018 9:54 am
In most cases financially independent folks earn interest while poor and perpetually poverty stricken folks pay interest.
This generalization doesn’t work. Not in HCOL, you will be poor forever.
Financially knowledgeable folks have the advantage of deciding when debt is to their benefit. This leads to more 'tools' available to enhance their savings and their lives.
I’m not sure one has to be savvy. My 22 year old, non savvy person, told me she’s given up her emergency fund, going to contribute fully to Roth IRA, instead of half as she told me last year. I now figure why, she was approved a large credit card from PenFed recently, she has every intention of pay her balance off every month, but instead of having her emergency savings earning zero interest, she wants to invest her money. The credit card serves as the emergency fund. It was no prop from me. I offered to lend her money to contribute to Roth IRA, but she refused.
Plus the credit card saves charges when she travels overseas. Last year, she paid nearly $200 on overseas transactions. PenFed didn’t approve her of a credit card because she wasn’t earning much. It’s called leveraging off your future income. She was shocked they approved such as large amount. But both of my kids have built very good credit history. They are more conservative then I am at the same age.
Extremely financially sophisticated and savvy? Seriously? Using a credit card and going into debt to pay for a real financial emergency because the "financially savvy" person has no liquid cash savings at hand (i.e. an emergency fund) is the exact opposite of having an emergency fund.


Almost every one I have met in my life that wants to explain how smart they are managing and leveraging debt ends up looking pretty silly and working for a long long time... Usually they never get the chance to understand the freedom, peace of mind and FI that having no debt produces.
It’s only temporary. She is getting a big bonus a month later. She is not borrow on credit card. But the fact that she has access to large credit limit eases her mind a bit. May you need to read a bit more carefully before you start lecturing people.

Perhaps you shouldn’t generalize so much base on who know or met in life. I know people who have leveraged and didn’t end up so badly. I’m FI and I still have mortgage, it’s not even a requirement to be debt free. As long as my income covers my expenses, that’s all it matters.
I have real freedom too, freedom of doing anything I so choose, so let’s not paint everybody what a broad bush. Honestly I read it a lot of the Dave Ramsey followers here and I have to chime in. Debt is a tool. Use it wisely.

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