I lived my entire life without debt

[etc]

Zero debt, ever. No credit cards, no bank loans for anything, no auto loans. I always thought - If you want something, save your pennies until you have enough. I always borrowed from myself, from my emergency fund. At zero percent interest loan you might say.

Now however, rapidly approaching the age of 5-0, I am having deep second thoughts. The debtors, those who deeply borrowed all their lives, have come out far ahead, the ones who borrowed half a gazillion for their real estate purchases, and the real estate market was vastly inflated by easy credit policy..

I have friends who own $500K homes and I rent. < sigh >

My zero credit life never got validated. I have zero debt but also no significant assets. Four vehicles, some stuff. Just stuff. Kind of sad really. I did have some significant gold - precious metal investments but lost almost everything in a lengthy, expensive divorce. It lasted for almost 8 years.. yeah, I gained full custody of my son, I think 1 or 2% of men have full custody, but it was a deeply damaging process I will probably never recover from.

But I still won't recant. I still do not want to go into debt. Although in the last few years I did get a few CC - and only use them to build my credit history. When I first applied for one, they were amazed - I did not have bad credit but no credit. No entries in the system whatsoever. The bankers were amazed, asked me if I lived in the woods my while life.
The first time I asked for a CC I was denied, because I never ever made banks a single penny. No interest payments. I have a solid economic understanding and am solvent. If I charge on CC, I pay it off the next day.

My ex on the other hand, declared bankruptcy and has 5-7 CCs, all behind and banks trust her more than me. She is flooded with CC offers. She is making them money with all their 22.9 APR. I was denied, initially despite my debt load to income ratio was very good. Banks want delinquency and do not want debts to get paid on time so they can collect interest.

I really never understood the concept of going into debt. It doesn't save you any money. You end up paying more for exactly the same stuff.

I get the concept of I need "something" now. Maybe it's a legit need. You get a new job and do not want to drive in your 1998 beater in front of the building. Need a new car. But credit does not help you to get a new car, it actually hurts you as you overpay. If you can get into a $700 / month payment plan for a new/newer vehicle *now*, you could have started setting aside funds 6 years ago so by now you would have enough to buy things with cash. It's a sign of inability to plan or unwillingness and in the end you have to pay 30% of the total spent in interest payments.

It's just like realizing in 7 years you will need a nice shiny new/newer vehicle so might as well start saving. It's either that or go to debt peddlers, these charlatans.

It's much worse with real estate. Interest payments consume a huge chunk of the whole thing. And if nobody borrowed and actually saved for 20 years before buying, real estate would be much cheaper and affordable. In fact it's easy credit which drove RE prices into the stratosphere. I remember the 1992 election well. One of the major planks of the winning party was economy, easy credit and they did in fact fulfil that promise, made credit far easier to get and as a result, RE prices began to grow at a very fast pace, there was a huge increase from 92 to mid 90's and then again mid 90s to 2000.. and so on.

 

[troutpool]

"Neither a borrower nor a lender be."

 

[Monocrom]

Despite the headaches that come with it, it's usually best (overall) to live a debt-free lifestyle. Though I will say that if someone is young, having some debt can benefit them later down the road. Love my car. But I wouldn't have been able to afford it at the time had I not taken on some debt. Some. Now she's mine, free and clear.

Don't be upset that you don't own a house. Life Insurance is the biggest scam out there. (Told to me by a newly retired Claims Adjuster while he was pounding back a few at the local watering hole.) Though I'd say Property taxes on houses comes in at a close 2nd. Hate to know what your friends pay annually on theirs.'

That very popular show "Extreme Makeover Home Edition," I had no clue that there were major issues with the families who were gifted new homes through the show. Two of the biggest ones after their houses were demolished and new ones put in their place.... Significantly higher bills for all utilities, and massively bigger property tax rates. The homes put up were bigger and better than the old ones they demolished. We're talking such huge increases that many of the families had to move out, and the new houses foreclosed upon.

There's a very popular YouTuber who does videos detailing stories of employees, and clients he's had to deal with as one of the owners of a septic company. Yup, another thing you have to deal with when you own your own house after having spent decades in debt paying on it. Something goes wrong, those things are not cheap to fix.

Also, no offense intended. I think I saved the most amount of money by not getting married. It's not the marriage part that's expensive. It's the divorce part that is. I thought about it.... I make a commitment to another human-being who at any point in the future could decide to leave me for any number of reasons. Most of them, not valid and no where remotely reasonable. Plus, having been born with a certain set of private parts, I not only have to give her half my possessions. Which she's not obligated to reciprocate. I then get to pay her thousands upon thousands of dollars every month, for several years, for the privilege of having her leave me. Oh, and that sum increases substantially more, for a longer period of time if we had a child together.

Yeah........ How about screw that mentally diseased nonsense! No! Actually, hell no!

If you're a man who wants a shoulder to cry on, get in your vehicle. Drive down the expressway. Pull over onto the shoulder, and cry your eyes out. That's the reality we live in.

Temporary debt to get a vehicle that you really want? Worth it! Temporary debt to start a business that you have experience in when you worked at similar businesses for other people? Could be worth it. Everything else? No. Stay debt-free.

 

[Monocrom]

"Neither a borrower nor a lender be."

Heck, be a lender.
Those scumbags make massive amounts of money on interest rates.

 

[idleprocess]

The economy is structured around being banked and using credit. This can be used for dumb things like paying 26% APR on largely disposable consumer goods. Buying the grandest house you can possibly afford or buying something modest. You can buy the shiny-est hottest car you can afford on at a usury rate for 8 years or you can buy less car than you could afford on a 3 year 0% APR note.

I've tried to live the smarter side of this. I've mostly not carried balances on my CCs, primarily using them simply as a means of payment rather than financing. Going to pay off the mortgage in a touch over 15 years. Bought my first new car on that sweet 0% APR rate. Attended university in my 30s without borrowing anything (employer's education benefit was helpful for that first degree, less so my second but I was cash on the barrelhead for my share of that journey).

But I've also faltered or made emotional decisions. Ran a credit card up to the limit during a period of unemployment many years ago - that took a year to manage down. Another string of surprise expenses and stupid inattention saw a significant amount pile up again, taking some six months to clear. Should have bought a cheaper automobile when I bought the present daily driver but ... I just wanted the present vehicle so I ended up with a larger, longer note.

 

[etc]

If you're a man who wants a shoulder to cry on, get in your vehicle. Drive down the expressway. Pull over onto the shoulder, and cry your eyes out. That's the reality we live in.

Ha, that's funny.

Vehicles are a great example of what can be bought with cash. You can adjust what you buy up and down based on budget. If you want something now, should have started making payments -- to yourself 60 months ago. It's exactly like dealing with the bank minus the interest payments. If all you have is 5K, that will do. 15K gives you more room. And even 50K is not any more difficult to save on your own than making payments to the bank -- plus the interest of course. It's 50K plus 10K in interest.

 

[etc]

The economy is structured around being banked and using credit.

The sad reality is that no credit-zero credit people like myself are excluded from major economic activities like financing a really large purchase like a house. Because we never financed any smaller purchases like a car.
It's been kind of good but also kind of bad.z

Our only option is to take my own advice and take years and save enough to buy something. It's difficult because you are the only one doing it and the instant credit people outbid you. If everyone did what I do, everyone would win because banks and interest rate would be irrelevant. Would you rather pay $10 dollars for a car or $15? I am talking about in gold coin obviously.

 

[M@elstrom]

Zero debt, ever. No credit cards, no bank loans for anything, no auto loans. I always thought - If you want something, save your pennies until you have enough. I always borrowed from myself, from my emergency fund. At zero percent interest loan you might say.

Now however, rapidly approaching the age of 5-0, I am having deep second thoughts. The debtors, those who deeply borrowed all their lives, have come out far ahead, the ones who borrowed half a gazillion for their real estate purchases, and the real estate market was vastly inflated by easy credit policy..

I have friends who own $500K homes and I rent. < sigh >

Rent is always dead money, a house loan permits for the building of assets and as you have to pay rent anyway why not pay off YOUR loan and not your landlords, additional to which equity loans are a cheaper rate (than comparable loans) and loan redraw is even better for urgently required purchases (like a replacement vehicle), doing so keeps your repayments to one entity.

The biggest "speedhump" to this approach is inequitable divorce laws.

I too avoid CCs and thus have a poor credit rating (but no defaults), go figure? 🤣

 

[idleprocess]

Our only option is to take my own advice and take years and save enough to buy something. It's difficult because you are the only one doing it and the instant credit people outbid you.

In terms of automobiles, I too am feeling outbid by the stupid prices people are now willing to pay. Sticker on vehicles - new and used - has outpaced inflation by a considerable margin for many years now starting well before the pandemic.

 

[Monocrom]

In fairness, when you rent, you don't have to worry about property taxes going up simply due to greedy politicians. And, you don't have to worry about the septic system on the property. (Assuming there's a lease contract in place that spells out the individual responsibilities of the renter, and the landlord.)

Once saw a Neo-hippie being interviewed by a reporter after a hurricane devastated a local area. Relatively young guy, long hair, shorts and sandals. Hawaiian shirt. Sitting on someone's porch (believe it belonged to a buddy), trying to chop open a coconut with a machete. Had some interesting things to say about property ownership. He advised against it. House he was renting got decimated. He had very few worldly possessions and managed to save all of them. He felt sorry for his landlord. That guy lost everything when the rental property was demolished. Neo-hippie lost nothing. Why own something expensive that can so easily be taken away from you? Neo-hippie had a good point.

 

[Monocrom]

In terms of automobiles, I too am feeling outbid by the stupid prices people are now willing to pay. Sticker on vehicles - new and used - has outpaced inflation by a considerable margin for many years now starting well before the pandemic.

The pandemic just made it 10x worse.
Frickin' lunatic prices and the lunatic individuals happy to pay the fiance rates to get those vehicles! Seriously, the only places you have any chance of fiancing anything reasonable is to walk onto the dealer lots of some Dodge, Jeep, or Mitsubishi dealerships and try getting a deal on their least popular models. It'll take several hours of negotiating. But it's still possible. Then you get to drive away in a brand new piece of unreliable junk that'll hopefully be trouble-free for at least the first year of ownership. (But don't count on it.)

 

[M@elstrom]

Once saw a Neo-hippie being interviewed by a reporter after a hurricane devastated a local area. Relatively young guy, long hair, shorts and sandals. Hawaiian shirt. Sitting on someone's porch (believe it belonged to a buddy), trying to chop open a coconut with a machete. Had some interesting things to say about property ownership. He advised against it. House he was renting got decimated. He had very few worldly possessions and managed to save all of them. He felt sorry for his landlord. That guy lost everything when the rental property was demolished. Neo-hippie lost nothing. Why own something expensive that can so easily be taken away from you? Neo-hippie had a good point.

Renters are fully exposed to all housing crisises... currently here there is a significant shortage of accommodation available due to many factors including Government policies and taxation, decline in investment of infrastructure (public housing), increased population (immigration) and natural disasters like floods & fires, the end result is a hostile housing market moving towards short term lease arrangements, lack of tenure would be stressful for young families and elderly alike.

 

[Monocrom]

Renters are fully exposed to all housing crisises... currently here there is a significant shortage of accommodation available due to many factors including Government policies and taxation, decline in investment of infrastructure (public housing), increased population (immigration) and natural disasters floods & fires, the end result is a hostile housing segment moving towards short term lease arrangements, lack of tenure would be stressful for young families and elderly alike.

Sorry, forgot that you're in Australia.
The situation here with renters is very different.

 

[rwolfenstein]

Isn't that always the irony? You need to establish debt to get a mortgage and they wont give you loans if you have paid for everything with cash and were responsible?

 

[BillBond]

IMO it is OK to get a loan on big ticket items such as a car, boat or house.
I have always paid them off as early as I can.
Paid my last house off in 13 years, my car in 3 months.

It also helped when you could deduct interest on income taxes.

 

[PewPewPew]

If you want to play the credit game but live within your means, get an account at a credit union, not a bank. If there's a toy you want to buy, get a small personal load from the credit union when you have the amount in your savings. Use savings to pay off the loan within 1 or 2 months in full. The credit report only shows "DEBT" and "Paid in Full". I have had excellent credit without owning a credit card my entire life.

I've never owned a new car. Every vehicle I've owned has gotten me to work, vacations, to home. Even with major repairs is still cheaper to fix a used car than make a payment every month on a new one. Best advice I can give is don't try to compete with the Joneses. Find happiness in simpler things that appeal to you, not what is being sold to you thru popular culture. HGTV is an example of popular culture that's being sold to you as what you should be trying to do.

Debt is poison, get rid of ALL debt as soon as you can. There is NO such thing as good debt. It's only good for the banks.

 

[ledbetter]

Basic Econ 101 is that debt is the basis of Capitalism. Bonds, Stocks, and paper money are all debt instruments. If you don't understand this or believe in it, you are living in the wrong time and place. If you don't know how to use these instruments to your advantage, you will be excluded from its benefits.

 

[bykfixer]

My pop borrowed money twice in his 82 years. Once was to buy the house he paid off 20 years early. The other to finance an installation of a car alarm because the total interest would be less than the interest lost by pulling the money out of the bank that quarter (back when savings paid decent interest).

 

[Kestrel]

I've always leveraged my capital investments (beginning with student loans for an engineering degree), and have come out far far ahead. Same story with most of my friends; albeit to a lesser degree.
That included obtaining extra leverage during my divorce, enabling the retention of not only every asset that had been 'mine' (i.e. investments and collectibles), but also one of our two houses plus a rural property that had been jointly owned.

With the mortgage paid off in a year and a half, I will most likely be financing a commercial building in the few years before my retirement. That will certainly keep me occupied during retirement, lol.

I have never been leveraged on the purchase of things that depreciate - i.e. automobiles, for example.

Debt has magnified the power of my working capital tremendously over the past 30+ years.
Not to say that it hasn't been difficult along the way - I have been forced to have a very disciplined lifestyle, for example.

 

[idleprocess]

Rent is always dead money, a house loan permits for the building of assets and as you have to pay rent anyway why not pay off YOUR loan and not your landlords

This. While the interest cost of the typical mortgage paid over the entire term is significant, you do end up with equity - and eventually ownership - of your home and can reduce your cost of housing to maintenance, taxes, and insurance.

In fairness, when you rent, you don't have to worry about property taxes going up simply due to greedy politicians.

Not directly via a line item, but it's absolutely passed on to you via increases in rent come contract renewal time.

And, you don't have to worry about the septic system on the property. (Assuming there's a lease contract in place that spells out the individual responsibilities of the renter, and the landlord.)

You might not get the bill for the plumber but it's either built into the margins on rent or - like a tax assessment bump - will be part subsequent rent increases in the future.