How much debt do you think is "ok"?? If any!

tomahawk

Hi, first post on here. Just wondering with the cost of living, mortgages, car costs (purchase, insurance, tax, and servicing etc.) it feels impossible to have no debt at all. So do people feel there is an acceptable level to have? (for example paying off HP on a car if it's within your monthly budget)

If so how much do you have?

I have £200 left on HP for a sofa.
£3500 on a credit card (I pay around £100-£200 off a month then something comes along that puts a bit back on eg. car service/repair)

My wife and I could do with a newer car (cheaper to run, tax etc) but is getting £5000-£6000 on HP a sensible idea? I feel very lucky compared to most people who have much higher debt but I have something inside me that just wants me to have as little debt as possible, and any that I do have, to be justified to a degree.

Anyone else in a similar position? What are peoples thought on this?

Thanks

Mara_uk7

Doesnt it all really depend on whether you earn enough to afford the repayments comfortably, Do you have a savings cushion in case one of you loses your job ?

HappyMJ

tomahawk wrote: »

Hi, first post on here. Just wondering with the cost of living, mortgages, car costs (purchase, insurance, tax, and servicing etc.) it feels impossible to have no debt at all. So do people feel there is an acceptable level to have? (for example paying off HP on a car if it's within your monthly budget)

If so how much do you have?

I have £200 left on HP for a sofa.
£3500 on a credit card (I pay around £100-£200 off a month then something comes along that puts a bit back on eg. car service/repair)

My wife and I could do with a newer car (cheaper to run, tax etc) but is getting £5000-£6000 on HP a sensible idea? I feel very lucky compared to most people who have much higher debt but I have something inside me that just wants me to have as little debt as possible, and any that I do have, to be justified to a degree.

Anyone else in a similar position? What are peoples thought on this?

Thanks

You should do a SOA (statement of affairs) before and an SOA after and see if it really does save money.

Sometimes purchasing a newer car will save money but you need all the figures to see if it's worth it or not.

HeadAboveWater

I don't have any debt. I've a £50 overdraft which I don't use. No credit cards. No store cards. No loans. No HP. Nothing.

Don't have a mortgage either - OH bought the house before we met.

And it feels soooooooooooooooo good!! All my money is my own

It's now a case of 'if I haven't got the cash, I do without' (other than a possibility of buying a house together with OH down the line)

JimmyTheWig

I think no debt would be ideal.
But there are times when debt is justified.
E.g. you could save up to buy a house outright, but it would take so long that the cost of houses would have shot up in the meantime. So getting a mortgage is (often) justified.
Likewise you could save up to go to university without going in to debt. But the chances are that you'll be earning more after graduation than beforehand, so it (often) makes sense to get into debt as a student.
Cars, again, are arguable. There are situations where you _need_ a car (e.g. to get to work) and so it could be argued that that is worth borrowing money for. A more expensive car might then be cheaper in repairs, so might be worth paying the extra interest. But best, if you can, to save up and buy outright.

But something like a sofa I'd say (sorry OP) there is no need to get into debt for. You can, often, get sofas for free. Might not be ideal, might not be the colour you want, but perfectly useable. So I'd say no debt for these.

Cornucopia

This is about lifestyle change - moving from being constantly in debt to using debt strategically for particular purposes where it makes financial sense to do so.

Or to put it another way: if you spend 25% of your income through revolving credit of some sort, you are losing a third of its value (or more). That's not sensible in the long term.

exarmydreamer

I will only use O% deals, knowing that I will pay it off before the end date, (don't like owing any money so try to pay off early)
.
We have no credit cards or store cards, we have an overdraft for £1500, that is authorised but don't really use it, (it's there as an extra emergency fund). We overpay our mortgage, which is our only debt.

We used to have 30K worth of debt, never again. Cash is king, 0% is good if you can afford to pay it back. Budget and save is best for us.:)

poppasmurf_bewdley

You are living beyond your means because you have a credit card with £3.5k on it, and you think it's a good idea to spend £5-£6k on a newer car just to get cheaper road tax and running costs. You can't even afford to buy a sofa unless it's on credit.

How much would you save by spending £5-£6k? £500? £1000? These are the economics of the mad house.

SailorSam

I don't like having any debts, there's the obvious biggie that we all need ... the mortgage. But that's finished now. and there have been times over the years that i've had to borrow, But mostly i don't borrow.

lazer

The only good debt is debt that will save money in the long run

eg:Mortgage - save on rent over a lifetime
0% debt - as the money is better off in savings gaining interest

IMO anyhting else is living beyond your means - credit cards, overdrafts etc are all ok if used correctly and for your benefit without incurring more interest costs than you are saving.

If you can afford debt repayments and want a new sofa that will cost £50 a month, amke sure you can still afford that £50 if you lose your job. Repayments are fine when you are woprkign, if something happens and you lose your job the repayments generally make life hell and leave you with no money for essentails.

foxgloves

Well, we've had lots of debt & we've had no debt, so I'm going to try & answer this question....
Before the LBM struck, our debts (excluding mortgage) at their highest point totalled around £30k, made up from 2 car loans, 3 credit cards, overdrafts, 2 general loans & 2 overdrafts. We never thought of ourselves as 'in debt' as we could meet all our repayments each month & if we wanted to buy anything, we just had it, never budgetted, never saved & never got into trouble. We both worked & earned decent money. I believed that loans, etc, were only 'Debt' if one became unable to pay them.
Then the LBM struck!! I wondered why we never had any spare money for savings & happened to add up the amount we were paying to service debt each month. Realised this would free up lots of spare money to start some savings & an emergency fund. Started snowballing our debts from that point.
Now debt-free (from May 2011). I can now see the benefits. Having no debt has meant we can save a regular small amount, we now have an emergency fund for car repair bills & nasty surprises & we now save up for things like holidays & bigger purchases. I have since taken a redundancy so we have dropped to 1 income. If this had happened while we had all the debt, we would have been in big trouble. It's the change in circumstances that can be so devastating for people with lots of loans & hopefully the current dire economic situation is making people more aware of the desperate need to avoid credit/save where possible. So on balance, I feel more secure avoiding credit altogether, even though this means budgetting hard to save up for big purchases such as replacing the car. I expect other people will have different views based on different experiences, but that's mine.