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

Cynical_Monkey

I get what the OP is saying and he/she does have a point... That's not to say I'd rather be in debt than have savings by any stretch of the imagination!

On day 1, he could have bought 3951 loaves of bread for £5000 - After 365 days of having that money in the bank, he can now only buy 3,777 loaves of bread thanks to low interest rates and inflation.

On a side note, I'm sorry to hear about your loss UsernameAlreadyExists

tpl

I'm really glad of low interest rates, so I can currently afford my mortgage. Low interest rates are good for people with debt, not so good for people with savings. What to do? Forget the whole capitalist regime, and stick to local and bartering economies might solve the problem? Though that won't happen unless the global economy completely and utterly collapses.

And yes, definitely a bad choice of forum to pick for such a topic, but hindsight is a great thing! : )

exarmydreamer

It sounds like the fatty that lost loads of weight but couldn't 'see', themselves as a lot slimmer. The OP, misses the debt hanging around their neck. As the Op has said they have had debt all their life and is used to it. Now they are in unknown territory and it is frightening them, (they have money burning in their pocket).

Sorry about your dad but you really picked the wrong thread to come on, better off going over to the savings thread for some advice. I, by the way prefer to pay off my mortgage early, rather than save but have an emergency fund as funerals are not cheap or planned in advance and you never know what is going to happen in future..

Cornucopia

As someone "a bit older", there really does seem to be a worrying attitude to debt these days.

When I was a child, unsecured debt was "a bad thing". It wasn't that easy to get, but even the simplified arrangements like "Hire Purchase" were deemed something that most people would avoid, if they could.

Credit (or more accurately debt) has become more and more easily available to the extent that people now get into difficulty with it in a way that few people did back then. Yes, people had their HP tellies taken back, when they missed payments, but that was about the extent of it.

Whilst I like the flexibility of credit cards and personal loans, I think that as a society, we were better off the way we were before. If you wanted something that you couldn't afford, then you were most likely to save up for it.

I can't help feeling that we've been tricked into taking on a vast amount of consumer debt to keep the economy booming, and that's now back-fired.

jamesd

Being debt free isn't necessarily a wonderful objective. Being free of debt that's costing too much normally is. Once you've done that, you get to the what next point. As you have.

First thing to know is that inflation is a friend of the debtor and an enemy of the saver and investor. Next thing is that money can be really inexpensive if via a mortgage or 0% credit card deal. Provided you have sufficient savings and investments it's entirely fine to borrow money at competitive rates and use that money for investments or improved quality of life, notably for long-lasting and low depreciation property like housing.

If not investing, you should learn about investing. That can pay a significantly higher rate than savings accounts and mortgage interest and is expected to do so based on how things have done so far.

My objective isn't to be debt free. It's financial independence - meaning being able to live as well as I need to for the rest of my life if I couldn't work again - and early retirement.

So do have large amounts of savings and investments to get you enough security for your taste, but also consider what it's costing you and whether more spending might be appropriate. A nicer home is fine if it adds value to your life, though do consider the increased costs you may face.

Don't leave yourself without an ample and very generous emergency and long term sustaining pot of money but beyond that, it's lifestyle and retirement planning or early retirement time.

Reaper

Saving should be for a purpose. Emergency fund, comfortable retirement etc. It is not an end in itself. Personally I still have plenty of objectives that need saving up for but if the OP doesn't then fair enough.

On the other hand I am very debt averse. The idea of paying somebody else interest just because I am too impatient to wait is alien to me. Why have jam today when you can have cake tomorrow?

Buying a bigger house has been suggested. It is hard to be sure but potentially that could turn out to be an investment rather than expenditure. On the one hand house prices might fall if interest rates ever go up, but equally we might be heading for big inflation in the future which as jamesd says favours those with debts. It could be a re-run of the 70s where big mortgages turned into little ones. I'm too debt averse to try it but it is a valid strategy.

talexuser

I would see the point of a better house 30 years ago. Since then we have had negative equity periods and particularly in the present mess it is not risk free that the expensive house would keep pace with inflation or sell at a high price in the future. So although you might have the advantage of living there for some years, you might have a nasty surprise when trying to sell up, downsize, and pay off all the debts. Look at the many people who took out endowment mortgages - they looked so good at the time to turn out to be a disaster in paying off the mortgage, shortfall in amount and then negative equity on top.

Jegersmart

UsernameAlreadyExists wrote: »

What I have got is a hole in a bank account that's leaking money. It's called inflation and poor interest rates. This can only be combatted with "risk"/"investment".

I've been in "debt" for my entire working life ever since I took out my first mortgage in fact.

I know where you are coming from, but most people on here will never be able to debate something objectively because a lot of people always need to relate something back to themselves and their own situation - which then causes annoyance, fear, envy and so on.

I am of a similar age and in a similar situation but I suspect our backgrounds are different. What I decided to do many years ago was to take charge of a large proportion of my assets and look at ways of increasing my returns through activities other than leaving my savings in a savings account. These activities are numerous and varied, but it does help that I work in financial/commodities markets and have the interest and expertise (maybe) to do so.

On a related note, I also think it absolutely vital to "invest" in one's happiness and quality of life. Not everything can be measured in £/$ or percentage returns. Whether this means buying a Lamborghini, or a larger house or a £20k holiday or whatever only you can decide - certainly I know that the cars that I own and have owned have given me immeasurable pleasure but are not an investment in money terms of course!

People on the MSE forum are very varied in background, knowledge, "wealth" and all the other factors that you find in any society. I am personally very inspired by people with open minds, and I also follow with deep respect some of the "save £12k, £1k or whatever threads" that are floating around because the people saving £3.45 a day or whatever have a lot of spirit and fight in them to persevere and "improve" their lot. One has to remember that money is not the only thing that makes the world go round though!

I can see that to some people your post is an incendiary one, but really through lack of objectivity in my opinion. One could argue that you seem very lonely although debt free? But as I say, a lot of people will always relate something back to themselves - they can't help it.

The only advice I can really give you is that you are the one that needs to take responsibility for your life and the decisions you make. Whining about low savings rates is probably not going to cut it in any shape or form, only you know what your life is like and where you need to "invest" - whether it is in love, family, cars, wine, equities or something else. Take charge and get going!

All the best

J

JohnRo

For me it's about managing your wealth and that obviously involves looking at how you store it. Clearly storing wealth in central bank monopoly money wealth transfer tokens is not a good investment in the current environment. Borrowing monopoly money to purchase other assets (as opposed to consumption) is possible (as per jamesd's post) if you can afford to service the debt and are confident those assets are the right way to store your wealth for a future where monopoly money is absolutely guaranteed to be "worth" even less than today. For some that's gold, for some it's property and for some its equities or some form of all these, and others.

The trick imho is to invest in other assets that then provide you with the income you require to live on rather than relying on huge paper piles of increasingly worthless monopoly money and rigged interest rates in a rigged currency market to try obtaining the same result.

Soubrette

Cynical_Monkey wrote: »

I get what the OP is saying and he/she does have a point... That's not to say I'd rather be in debt than have savings by any stretch of the imagination!

On day 1, he could have bought 3951 loaves of bread for £5000 - After 365 days of having that money in the bank, he can now only buy 3,777 loaves of bread thanks to low interest rates and inflation.

On a side note, I'm sorry to hear about your loss UsernameAlreadyExists

But that's not necessarily true - thanks to some amazing technological advance, loaves of bread are now cheaper and even including the effects of inflation he can now buy 10000 loaves of bread because they now only cost 50p each

Or

Thanks to having an amount of spare money he is able to invest in bread and bought at day one prices but had then delivered his loaves delivered for a year so inflation had no impact on the amount of loaves bought because he was able to stock pile at the lower price.

Or

Unions have miraculously strengthened and people are getting payrises that are more than the rate of inflation. Money is worth less but he has more of it.

Just focusing on just inflation to decide that saving is not worth it is bizarre because so many other things affect what your money is 'worth'.

Interesting debate OP and I too would like to add my condolences for your loss.