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

JimmyTheWig

lazer wrote: »

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

Yes, that's what I was trying to say. Well put!

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

Anything else? Really?
What about student loans?
Or buying a first car to get to work?
Or even, by your criteria, buying in bulk when an offer is on. If the offer price plus interest is more than the regular price it might be worth it.

soontobemrsg

JimmyTheWig wrote: »

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.

^^^This.

I'm about to move and will have no carpets until I can afford to pay for them outright. I drive an old banger which yes does cost more in tax but it's been reliable and passes the MOT every year with minimal work required (usually tyres/brakes general wear and tear stuff).

Don't get me wrong. I have debt (albeit small ones following a marriage break down) and as soon as those are cleared I will be left with what I consider justifiable debt- A student loan and eventually (hopefully) a mortgage again.

missindecisive

I think it all depends just how comfortable you are with having to fork out regular monthly payments for things..especially larger items like cars etc that would take quite a while to save up for.
Personally I don't think that there is anything wrong with buying a car with a loan/finance agreement as long as you can comfortably afford the repayments.
The question you have to ask yourself is....if you lost your income tomorrow how would you pay it?:)

I myself am happy to drive an old banger, I dont owe anyone a penny for it and I have break down cover should I need it (Ive relied on this cover once in the last 15 years). Im not bothered about my car reg or that its not sparking new, the radio is iffy and it creaks but its reliable!)
However, there are some very sad people out there who judge your wealth (or lack of it) on the car you drive..

And yes, ive had a sofa in the past, purchased from DFS on interest free for 3 years. After the first 6 months, it faded and became crappy and I then resented paying for it for the remainder of the term:mad:
So in my book, it all depends on how comfortable you are with it.

JimmyTheWig

missindecisive wrote: »

I think it all depends just how comfortable you are with having to fork out regular monthly payments for things..especially larger items like cars etc that would take quite a while to save up for.
Personally I don't think that there is anything wrong with buying a car with a loan/finance agreement as long as you can comfortably afford the repayments.
The question you have to ask yourself is....if you lost your income tomorrow how would you pay it?

You see, I don't think that's the only question. I think it's a question of how much it costs you.
Borrowing £6000 at 7.1% APR (could be a lot worse) over 3 years will cost £679 in interest.
Saving up £6000 over three years would (at 2% net) gain you £187 in interest.
So by saving up rather than borrowing it you would be £866 better off. That's money you could spend on other things, or put towards an even better car, etc.
If you went into a showroom and they had two identical cars - one priced at £6000 and the other priced at £6866 - which one would you buy? The cheaper one, of course. Why waste that extra money?

I understand that it isn't easy to get into the position of being able to buy a car outright. But if you can get there it saves a lot of money over the years. Because you can then save up for your next car - which if you didn't you'd be paying interest all over again.

Ilona

Welcome tomahawk. When I left school in 1964, my only ambition was to work hard, earn my own money, and pay my own way in life. This I have done. I was taught to save up for anything I needed. My first set of wheels was a battered old van, paid cash, and every car after that has been paid for in cash through saving up for it.

I believe a mortgage is acceptable debt, student loan is acceptable debt, any other debt is merely spending someone elses money. I personally could not live comfortably knowing I have debt. I don't believe anyone should give me or lend me anything at all. If I can't afford it, I don't have it.

The problem is that people can see what everyone else has, big house, flash cars, luxury holidays, and they want the same. I personally don't give a toss what anyone else does with their money, if they earn it, but I do think it is very sad that people get themselves into financial difficulties, because they want the same as Joe Bloggs.

I am happy managing my pension, I can do all the things I want to do, without borrowing. When I get towards the end of my life I shall be looking for ways to get equity out of my house. It is my intention to spend the lot before I go, after all, I came into this life with nothing, and if I go out with nothing it will be a life well lived.

lazer

JimmyTheWig wrote: »

Yes, that's what I was trying to say. Well put!



Anything else? Really?
What about student loans?
Or buying a first car to get to work?
Or even, by your criteria, buying in bulk when an offer is on. If the offer price plus interest is more than the regular price it might be worth it.

They were just example of debt that saves you money

IMO anything else is living beyond your means - meant any debt that doesn't save you money!

missindecisive

quite right jimmy.The thing is lot of people these days want things instantly, so OP another question for you, is are you prepared to wait and save?

MrsCautious

My answer is a bit all over the place but basically I want to say whatever your situation, don't let it stress you too much -- easy to say but I know there are worse things.

I had £3,900 debt until my husband died, it was down from £5,000 loan through my bank, transferred across from a credit card, I never gave it a second thought really as it was being paid off month by month and was costing £637 over three years (I think) -- I had been paying the minimum off on my credit card for 12 months or so and couldn't even tell you what it was for except for helping out friends and family at some point -- this was totally not ok debt and was built up through having my head in the sand, in fact it was totally stupid debt as we had more than enough savings to pay it off sitting in an account that was earning a fraction of the credit card/loan interest -- we sat in front of our bank adviser and said we would take out the loan and not pay it off as this money was separate -- absolutely stupid but I suspect not a million miles from the way some other people think.

My only other debt now is the mortgage but I have the money to pay it off earning more interest in fixed rate savings accounts, that will earn me more in the years before it is due to be paid rather than paying it off now, so I don't count that -- this is a rare situation I know. I will have £3,600 in child tax credit overpayment to pay back from April. I have closed my 3 store cards that I hardly use anyway and opened a cashback credit card paying off the full amount by direct debit every month -- earning me 5 per cent for the first 3 months and the money staying in an account paying 3 per cent so that's designed to help a little.

My perspective is simplistic and influenced by grief -- a little bit of debt that you can pay off in the long run is ok, I am in a position where I never need be in debt again -- and it will never make me happy. I have never bought a car or a piece of furniture on HP but saved up. Now I think, so what? We paid for our wedding without any credit, it just wouldn't enter my head to have something flash we couldn't afford. But I can understand a younger couple may go into debt to create an amazing day and so long as it's a realistic sum they can genuinely pay off, I would find it hard to decry them that even though this may have been unheard of years ago.

I don't know how useful or not my contribution to this discussion is but there you go x I have a great deal of admiration for the determination and discipline shown by people climbing out of debt.

eyeopener2

This is all about a change in attitude for us all in my umble opinion. Personally I think the world would be a much better place without any debt at all, but I'm in debt but if I had my time again......

You want your child to go to university, start saving when it's born.

You want you first car to go to work? Save up by an old banger, save some more and upgrade. Use the bus in the meantime.

You want your dfs sofa again, stick some money away. Save as much of your salary as you can when your young and then a debt free life awaits

A house, save as much as possible, overpay as much as possible and get that paid off asap.

Just imagine not having any payments except utilities, mortgage and bills.

Wouldn't that be great? Is it easy? No it isn't, but try a DMP for 3 or 5 years plus. You can only spend the same money once. As I found to my cost.

Willing2Learn

For me, I consider the risk to be the primary factor. I constantly get loans just to keep my credit file ticking over. But it's money I don't need. Whatever I spend the loan on I could afford without the loan. If I take out a loan I want to know that if I lost my employment or became sick, I could instantly pay off the loan with cash and not be at risk. I learnt this lesson the hard way a few years ago and will never borrow money again using a repayment schedule which uses projected income to calculate affordability - It just hurts too much if personal circumstances change.

(Edit: I suppose the only exception to this rule would be a mortgage due to the potential long-term benefits)