Be Realistic !! - are you really going to save up first for 'big stuff' ?

Ytaya

If it'll take you a long while to save up for something, well, it'll take you even longer to pay off the debt when the interest is added on! I guess it comes down to whether it's a 'need' or a 'want', how essential it is and how important it is to you. The only bad debt is one you can't afford, when you get right down to it. You just have to decide for yourself what 'affordable' means to you.

beedeedee

This is very old fashioned - but advice given years ago, which still holds true today - never borrow on a "depreciating asset "- only "appreciating" ones! In effect, yes borrow on property ( in the long term this should appreciate), vehicles that will not lose value (thinking perhaps older classics, decent motorbikes, motorhomes etc that do not lose value as soon as you drive them from the showroom etc- do some research), furniture (quality secondhand that you can sell on again - doesn't have to be antique, but research the "good" names in the furniture world - the price goes up), flooring (buy rugs of the finest quality you can find - take advice), the list goes on.....but try hard not to borrow on anything that you can buy for half price from a secondhand shop. This includes white goods (washing machines, fridges etc) clothes (in general), audio/tv stuff - you get my drift ?
If/when things get tight - flog a bit of the good stuff, it'll tide you over till you get sorted. I'm sure someone will pick holes in a lot of this - but it's always worked and I'm glad I took the advice.

moanymoany

I've read all the replies to your post and I agree with those that say don't do it. My mother (we are talking back in the 50's early 60's) was constantly in debt. She couldn't money manage her way out of a paper bag. I was the one sent to the door to say mum 'wasn't in' and would pay next week. What made her think that next week she would be able to pay two weeks payment when she couldn't pay one this week, there would not be any more weekly income.

If you borrow money (and look at the newsletter this week about loans getting more expensive) you will be paying back long after the gloss has worn off the new things you've bought. We are all bombarded constantly about what we should have and what is unacceptable, from furniture, kitchens, bathrooms, clothes, cars, food and on and on and on. We are also told how easily we can get it. 'We want £25,000 - how much will that cost? That cheaply, wonderful, let me arrange it now.' It is so easy to get sucked in.

I've no easy answer. If I had I would be selling it and getting rich. Good luck.;)

steve700

debbycatz wrote: »

However, like a lot of us I guess, some rooms in my house are in a desparate state and badly need re-furnishing. I'd also love a new kitchen and the bathroom suite badly needs replacing.

Having done some sums, it would take me a *very* long time to save up enough for some of the major work that needs doing but I accept I don't have a great deal of disposable income.

I take your point - I got an M&S card, bought £5,000 of traveller's cheques at their Bureau De Change with it (at 1% comission but considered a purchase so 0% interest for 12 months).

Total cost: £5,050 over 12 months but I now have a new kitchen and bathroom.

I_was_a_fool

My view of what is "needed" has changed completely. My kitchen is old fashioned & I used to think I needed a new one. Now Im not bothered, it works perfectly & I do not need a new one.

When I had my babies I bought everything new for them, if I was to do it again I would buy most things second hand.

I would only borrow these days for a house & genuine emergencies (though I am currently saving up an emergency fund )

medman

There are lots of really good replies here which covers most of mine.

A couple of things worth repeating though. The difference between want and need is very important. Even if you think you need something it is often the marketing people that have convinced you. It's OK to borrow for large items if it would cost you in other ways if you didn't have them. A good example is a house, where money paid in rent could be paid in mortgage in stead and you have to live somewhere. A car is a bit different: If you borrow £5K over three years by the time you've paid for it you might want a new one and borrow again which is a permanent cycle of paying interest. You could break that cycle by paying the same amount each month and save up £5K in less than three years. When you pick up the new car you start saving for the next one. It's not easy but to get started you make do with what you have for the next couple of years while you save up.

The second thing is how you borrow: if it's credit cards at 29% then I (now)think that's insane and that's how most of us got here. To borrow over a short period at 7% paying a manageable amount each month is OK for a large item you need.

If you have a modest income then the amount you spend or borrow has to be correspondingly modest.

Good luck

MM

DontDoDebtKids

beedeedee wrote: »

This is very old fashioned - but advice given years ago, which still holds true today - never borrow on a "depreciating asset "- only "appreciating" ones! In effect, yes borrow on property ( in the long term this should appreciate), vehicles that will not lose value (thinking perhaps older classics, decent motorbikes, motorhomes etc that do not lose value as soon as you drive them from the showroom etc- do some research), furniture (quality secondhand that you can sell on again - doesn't have to be antique, but research the "good" names in the furniture world - the price goes up), flooring (buy rugs of the finest quality you can find - take advice), the list goes on.....but try hard not to borrow on anything that you can buy for half price from a secondhand shop. This includes white goods (washing machines, fridges etc) clothes (in general), audio/tv stuff - you get my drift ?
If/when things get tight - flog a bit of the good stuff, it'll tide you over till you get sorted. I'm sure someone will pick holes in a lot of this - but it's always worked and I'm glad I took the advice.

I like this approach - it's easy to get your head around and makes sense.

Personally, I have no problem exploiting the system (e.g. real 0% offers to purchase things for which you have saved up & cashback credit cards) but I will avoid credit in the future and will budget for "capital" purchases - cars etc.

Having just about sold my flat and paid off my mortgage, I will probably have to get a mortgage at some point in the next few years to buy a bigger house, but I plan to have as much cash stashed as possible for when I do.

bandraoi

As I understand it, there are two types of spending - Current and Capital.

The "Current" spending is the money it takes to get you through from one day to the next - food, petrol, clothes. Short term spending where money gets used up.

The "Capital" spending is the money it takes to build your position in life. The money you spend on tuition fees so your salary will be higher in the future, a new kitchen that will improve the value of your house, a washing machine to save you money at the launderette.

It's ok to borrow for the "Capital" spending, but if possible it should be avoided. If it's not possible to avoid borrowing, then the borrowing should be done sensibly -low interest, overpayments allowed that sort of thing.

You should NEVER borrow to pay for "Current" spending.

SunderlandBlackCat

I think so.

I used my debt problems as a driving force to increase my income to the point where I now make about double what I was on when I had my LBM & I'm about to be in a position where I can put most of my salary into savings.

Time will tell if I have the patience to save for something like a car but as that was the only thing I used to buy on credit before my life went wrong I think I'll be able to do it.

I only replaced the engine in the current car with a reconditioned one in October last year so I should have 2 or 3 years of building up savings before I will need to think about it so I will probably have enough to buy a decent one for cash.

Storm

I think that there will be some borrowing in my future, but only for the planned big expenses, and then only if I can't do it any other way. I.e. I will save up so I can get a decent deposit, but then get a mortgage to buy a flat. However, once I'm in the flat unless something is dangerous (i.e. dodgy wiring) or essential (i.e. boiler/cooker) then I will make myself save up before spending out.

As for home improvement being good or bad debt I guess it depends on your particular situation - if you're trying to sell your property & the carpets are threadbare, paint peeling off the walls etc then getting a good credit deal to enable this to be rectified can be justified.

As for DFWs vowing never to get a loan/credit card ever again - for some of us I think it's more the temptation - if I know I've got a credit card with £X of available credit I'm far too likely to use it when I'm feeling down to try and cheer myself up! I don't say I'll *never* get credit again though, more that I won't let myself get into this situation again, where debt repayments are taking a huge chunk of my salary, and even though I earn a decent wage I never seemed to have anything left a week after payday!