The concept of debt

[Flubber]

Originally posted by Cort Haus


It's the combo of consumption vs income, and whether the debt is a valuable investment (eg; house, education) or just self-indulgent decadence (toys & lavish treats).

BUt sometimes I like self-indulgent decadence-- Heck I just bought 24 NHL tickets-- Its not a necessary but I wanted them.

I paid with my credit card and within 10 days I paid off my credit card to avoid all interest charges

Thats actually why I like credit cards. Used correctly you can have a fair bit of credit ongoing without EVER paying interest charges

[DanS]

Originally posted by Cort Haus
If you're not going to repay that debt very quickly - which heavy debtors probably won't, then there'll be interest to pay - so its more expensive and hence worse.

Considering the time value of money, it's no more expensive.

[Flubber]

Originally posted by DanS
Match the debt to the life of the asset. If you buy a car that will last you 10 years (many modern cars do), then it would be just fine to finance the car on a 10 year loan.

I don't do that. I match my debt to my"comfortable ability to pay" so that I pay off cars long before their useful life is over.

Oh and I see no reason my CIvic won't last way more than 10 years. The only reason I can see we would get rid of it is if we just say "screw it lets get somethinng new" in a fit of consumerism. I actually quite like the Accord

[DanS]

Many people don't do that, but that's the optimal way to do it. It gives you a clearer picture of your actual financial position. Most people (such as yourself) can afford to do it suboptimally, so it's no big deal in any event.

[Flubber]

Originally posted by DanS


Considering the time value of money, it's no more expensive.

Absolutely true but that is importing a business finance concept into personal consumer behavior. I'm not saying its inapplicable but the reason many people stretch out debt is to make the payments more manageable and to allow more reckless consumer spending.

[MOBIUS]

Originally posted by Flubber
Is it a good investment -- hell no-- but you could criticize it as consumption with marginal value over other possibilities whether or not debt is incurred. The interest rates you can get are very small-- heck the highest interest rate I pay on ANYTHING right now is less than 5 %.

Why pay someone interest, when they could be paying you interest?

These last few years apart from a little hiccup or two have seen remarkably good returns in the stock markets!

[MOBIUS]

Originally posted by Flubber
BUt sometimes I like self-indulgent decadence-- Heck I just bought 24 NHL tickets-- Its not a necessary but I wanted them.

I paid with my credit card and within 10 days I paid off my credit card to avoid all interest charges

Thats actually why I like credit cards. Used correctly you can have a fair bit of credit ongoing without EVER paying interest charges

Hey, nothing wrong with that!

Credit cards are GOOD - as long as you have the discipline to use them correctly...

[Flubber]

Originally posted by MOBIUS


Why pay someone interest, when they could be paying you interest?

These last few years apart from a little hiccup or two have seen remarkably good returns in the stock markets!

Yes and thats part of the reason I invest my income and will take a small debt to buy a car. MY earnings on my investments generally exceed the interest you pay on something like a car

[Flubber]

Originally posted by MOBIUS


Hey, nothing wrong with that!

Credit cards are GOOD - as long as you have the discipline to use them correctly...

I get paid twice a month and I clear my card EVERY payday-- its a very simple system

[MOBIUS]

Originally posted by Flubber
Oh and note that I drive an 8 year old Civic so I am not exactly a big car-whore. But in 4-5 years or whenever the reliability is not sufficient, I'll probably get a car, likely new or newer.

My Fiat Brava is 9 years old now, 7 when I bought it 'new'. But it looks good, is reliable and still has low mileage at 67k.

All the cars I've ever owned have been reasonably reliable despite their relative ages, and that includes the three that cost me £125 or less - of which ironically I had two stolen and sold the third for more than I bought it, including cannibalising the good tyres for my next car!

I doubt I'll be going back to those kinds of cars now but I also doubt I would ever buy new unless I was filthy rich as depreciation in the first few years is completely crazy!

[MOBIUS]

Originally posted by Flubber
Yes and thats part of the reason I invest my income and will take a small debt to buy a car. MY earnings on my investments generally exceed the interest you pay on something like a car

Exactly why my mortgages are interest only with the balance of what I would expect to pay on a traditional repayment mortgage being ploughed back into investments.

[Caligastia]

Originally posted by DanS


Considering the time value of money, it's no more expensive.

So, credit card companies don't make a dime off you?

[Arrian]

Credit Cards

Credit Card Debt (carrying a balance)

-Arrian

[Cort Haus]

Using credit cards for short-term cash-flow management isn't the same as running up the kind of debt that the OP had in mind, I expect.

[Provost Harrison]

Or 0% periods can be quite handy