Are You In Debt?

[Captain Ice]

Are we debt free? Yes, excluding the mortgage

If you include the mortgage, that will probably be paid off in the next 60 days *

How did we get this way? By busting our asses. Years ago the wife and I made some very stupid mistakes. But we stopped and changed our behavior and worked and worked and worked to pay down the debt. At times that meant picking up extra hours or a second job. Was it painful? You bet your ass. Regardless we did it.

We went against the conventional wisdom of concentrating on paying off the debts with the higher interest rates. Instead we based our payoff schedule on the size of the debt. We paid off the smaller amounts first. As each of those were paid off we were able to shift that money we had been spending on the smaller debts to the larger debts. The end result is that we wound up still beating the interest monster and we had a much more visible set of metrics that we could see and feel accomplishment with. That feeling helped to keep us dedicated to our goal.

Sounds like somebody has been listening to Dave Ramsey. Sorry about the house though - that sucks. Any chance of buying another in the neighborhood?

 

[Holdfast]

Talking of paying off vs not paying off the mortgage, I plan on not quite paying off my home mortgage. Nothing to do with deductions; that argument is spurious economic illiteracy.

Rather that the deal I have is remarkably good and I can't see myself ever getting those terms again, at least until the next major credit bubble! I want to be able to transfer these terms across as and when I borrow more to buy a new place in 5 or so years time. That means I can't let it pay off completely on my current home, because the terms would expire and the a new mortgage would not be as competitive.

Bizarrely, therefore, I'm actually in a position where I'm paying off capital on the mortgage at a faster rate than I ideally want to, even though there's no any interest at all on the loan (it's an offset mortgage, and the net amount of the loan is negative).

 

[GMac]

Nope - just paid off my credit card bill for this month.

GM

 

[MetalPants]

Yes, I am in debt. This past year having bought my new home, I had to buy certain things, and also I let myself slip in financial discipline. Back on track now to pay off the debts, and pay off the mortgage.

All the same, it is nice to know that with my payment schedules, my 30yr mortgage ought to be payed off in 10 years or less.

 

[Wynterhawk]

No, thank God. I learned early on in my credit card days that I needed to pay off whatever debt right at the end of the month. None of this paying off bits here and there. Fortunately, I haven't run into any catastrophic events where I couldn't afford to do that.

 

[propita]

There's no reason to deliberately arrange a tax refund for yourself unless you're just really bad with money.

I adjust my withholding every year to try to get it as close to balance as possible. I'd rather have the dough in my paycheck than get a fat refund on my interest-free loan to Uncle Sam.

We found out that Hubby's changing jobs, or working two jobs, results in our either owing around $4K or getting refunded around $4K. Since his second jobs are per diem, they don't always take taxes--or they take FULL taxes (every tax imaginable).

We learned to play it safe and make sure enough is taken. We hate being surprised and owing thousands--much rather GET the money.

One thing we learned when Hubby was in school for 7 years: Being really careful with money at the start REALLY pays off later. Now, we can enjoy and even be a bit wasteful. A bit. We're still pretty careful.

 

[Amaris]

If possible, it's the best way to live.

That's really silly. Saving up hoards of money and sticking it in a bank or under a mattress isn't a particularly good use of money. A savings account will merely keep up with inflation, while keeping it in either a checking account or a mattress will actually cost you purchasing power as inflation chips away. Credit A) allows you to get what you want/need now, by promising a piece of your future earnings (which will be worth less due to the same inflation eating into your bank account) and B) frees up past income for investing, hopefully in something that has a higher rate of interest than what you're being charged.

Even Apple Inc, which seems to be able to print money, still takes out loans. Warren Buffet owes somebody, somewhere money for something. Credit, more than any single invention (possibly excepting the steam engine) has built the modern age, which has generated insane standards of living in this country despite recent cutbacks.

Then again, you're bargaining your income against the future, in a time when economic uncertainty is rampant, and purchasing power is fluctuating from one day to the next. Being in debt should not be desirable, but the whole system is gamed to make it that way because you get to be a money factory constantly supplying income to your lender. It's a sunshine system, and it hurts you more than it helps you.

 

[cultcross]

I don't know if you are aware but the student debt payment system is changing and the rates of interest will be changing, so you might want to look into how much you will be paying each year.

They can't change an existing loan, it's sold on the terms at the time of sale, not some new ones they made up later. Just as I wasn't affected by 'Top Up fees' as an existing loan holder. There are some major changes likely ahead for new students but if they think they can shoehorn those of us already in the 'system' into the changes, what's the phrase? They'll be hearing from my lawyer
Besides, the amount I pay now is frankly an embarrassment. I spend more on orange juice. So I wouldn't be too cut up if it went up a bit. I won't pay it off before its written off anyway so the interest level is irrelevant. For all practical purposes, it's a 15 year graduate tax not a loan repayment.

The 'change' was already in the existing agreement, they are simply moving the rate of interest to more of a commercial rate. If you took out a loan between 1990-1997, the interest rate is shifting from -0.4% to 4.4%, if you took out a loan after this, then it's Base rate + 1%.

Oh the interest rate shoots up all the time, it nearly quadrupled not long ago. It's supposed to change with inflation but I can't help but notice it never drops with inflation.
But that doesn't affect the amount I pay every month and it's hardly a huge sum. If I were to lose my job or be otherwise unable to pay through disability or long term sickness, payments stop, so it's not hanging over my head in that way. As it is, I will likely be paying it until write-off day anyway - especially as I intend to have a career break for sprog rearing - so the total amount might as well be a gazillion pounds for all the difference it will make.

 

[Tribbles]

No, thank God. I learned early on in my credit card days that I needed to pay off whatever debt right at the end of the month. None of this paying off bits here and there. Fortunately, I haven't run into any catastrophic events where I couldn't afford to do that.

Same for me when it comes to my credit card. My parents didn't have any credit cards until I was an older teen, and I didn't get one until I was 21 or 22. I've always paid the balance in full at the end of each month. My husband does carry a small balance on one of his cards, but we are both very careful not to get in over our heads in that regard. We have friends with nicer televisions and furniture and homes, but neither of us are comfortable spending a bunch of money we don't actually have!

We do have a mortgage and car payments, and I have student loans, unfortunately. Congratulations to those of you with no debt; I maybe know two older couples who are debt-free, and that's it.