Is "Debt Free" all it's cracked up to be?

UsernameAlreadyExists

I am currently debt free.

This is due entirely from an inheritance in December last year.

I have an offset mortgage current account which was at tracker rate (3.65% on a 50% or less LTV?) whilst in "debt", and the moment I went into credit it earns me 0.10% interest.

So I opened an ISA and dumped the max (£5640?) in there which assured me of 2% return. I've since had an email that they're dropping that figure as of June. Hmmm.

I've dumped the rest into an Ing Direct Savings account which is also 2% - for now.

I am losing money.

I don't care, as my house is on the market and I am planning to jump the ladder a little so I can live "above my means" and enjoy a nicer place.

I've decided that "debt free" is bad ... because you're burning money on nothing, whereas being in debt is better ... because you are living in a better environment/situation than you would otherwise be in.

I am actually beginning to genuinely worry about my pending old age. I am 40yrs old now, so have 20-30 years of working life left with income (yes, I have pensions setup, but they may be worth !!!!!! all if the market is collapsed when I retire). When the income stops ... then what.

What do others think?

Robin_TBW

ISA rates drop every year, as do all savings account.

You'd rather be in debt? Go ahead, I'll take any funds off your hands if you want.

UsernameAlreadyExists

I think you've missed the point of my thread :P

I am about to spend ... but on what will be my own new house. Not you. Sorry

At the moment, I have surplass ... and it's losing. I don't like this at all.

The interest rate being so low is quite scary for me right now. I've never found inflation quite so depressing before.

kerri_dfw

This thread seems quite idiotic.

The majority of people on this part of the forum would love to be debt free, the whole reason they're here is because they are living above there means. If you want to go and get a bigger house and keep up with the Jones's then go and do it. But you may well then find yourself back here in a few years time stressed out about trying to work out how you're going to pay for x, y, z. There are people on here that have no idea how they are going to feed their families next week, even after a year + of trying to tackle their debts.

2% interest on your savings is good, because you have savings. If you compare that to 4-39% of interest YOU pay the banks for debt.

Live within your means

UsernameAlreadyExists

Perhaps I should have put it in a different section - "the arms" maybe?
I wholly accept that -39% is a massively different situation and I apologise to any that are offended, but it doesn't detract from my original point. 2% is not "good". 2% is losing spending power. At the moment I perceive having savings as a bad thing. Sorry, but that's the way it is for me

ghostmadlittlemiss

There's none of them available at the moment but maybe you could look into index-linked bonds with NS&I when they start selling them again. They rise above inflation so you wouldn't be losing money.
Kayleigh

Delree

If you don't like the return on savings invest the money in assets or higher return vehicles.
To somehow suggest it's better to be in debt because your savings may inflate away is twisted logic.

Candy0107

I've got a Barclays monthly saver which is at 3.25%. There should be a load of.accounts on comparison sites.

Candy xxx

R_P_W

So are you saying that being in debt, lets say £5000 as a loan @ 9% APR is better than having £5000 in savings earning 2%?

If you are then I'd love to know why

ValHaller

UsernameAlreadyExists wrote: »

At the moment I perceive having savings as a bad thing. Sorry, but that's the way it is for me

You are right, savings are a bad thing given you are paid a low interest rate. But debt is even worse because you pay a high interest rate.

Goodness, what are you going to do? Get all upset about low savings rates and get into debt in protest?

LannieDuck

You should be posting in the Savings and Investments section. Yes, interest rates are rubbish at the moment and it's hard for people to find places to put their money that are i) safe and ii) beat inflation. But it's not always like that. It's a particularly difficult time atm. A lot of people (myself included) are investigating S&S ISAs as a result. May or may not be for you, depending on your tolerance of risk.

Investing in your mortgage sounds like a very sensible plan. Much better to have your money paying off an asset like that than paying interest on a debt.