How much debt do you have? Let's talk credit cards and student loans.

[spender]

How much are you in debt ? I'm talking about credit card,students loans etc.
I have 0 debt, from every paycheck I try to save at least 2/3.Whenever I buy plane ticket using credit card I pay at once full amount back.
How about you people ?

 

[mattmns]

Currently 0.

 

[franznietzsche]

How much are you in debt ? I'm talking about credit card,students loans etc.
I have 0 debt, from every paycheck I try to save at least 2/3.Whenever I buy plane ticket using credit card I pay at once full amount back.
How about you people ?

$2250 in student loans.

 

[brewnog]

About £10,000 (GBP), probably around 15k by the time I finish. What's that, about USD 25,000?

 

[Moonbear]

Well, there's the mortgage on the house and about a year's worth of car payments (I'm not disclosing the amounts). Until I bought my car and house, I had no debts, and I continue to avoid having any debt aside from those.

 

[brewnog]

Well, there's the mortgage on the house and about a year's worth of car payments...

I don't have car debts ner ner ne nerr nerr!

 

[franznietzsche]

Until I bought my car and house, I had no debts, and I continue to avoid having any debt aside from those.

I have a credit card, but i avoid using it as much as possible, and always pay it off immediately. Basically i only use it when i have to order something online, that i already have the cash for anyway. Not worth building up debt early in life.

 

[Grogs]

Maybe $150K. I'm working to get it up over $1 million though.

 

[Moonbear]

I have a credit card, but i avoid using it as much as possible, and always pay it off immediately. Basically i only use it when i have to order something online, that i already have the cash for anyway. Not worth building up debt early in life.

I learned early on that you should use your credit card instead of cash as often as is possible -- as long as you pay off the bills right away. It helps you build up a good credit rating, so when you do need to get a loan for something big, like a car and house, you have a good credit history established. I've known people who always paid everything in cash and then wound up needing a co-signer to buy a house, not because they couldn't afford it or weren't responsible borrowers, but because they had no credit history. I know it sounds crazy, but that's the way lenders think.

 

[JasonRox]

I learned early on that you should use your credit card instead of cash as often as is possible -- as long as you pay off the bills right away. It helps you build up a good credit rating, so when you do need to get a loan for something big, like a car and house, you have a good credit history established. I've known people who always paid everything in cash and then wound up needing a co-signer to buy a house, not because they couldn't afford it or weren't responsible borrowers, but because they had no credit history. I know it sounds crazy, but that's the way lenders think.

That's so true.

 

[JasonRox]

Deleted.

I deleted it.

 

[brewnog]

With credit cards, you also get a lot more buyer protection too (if a supplier goes bankrupt, for example, the card company will refund your purchase because they're nice like that). Set up a direct debit, and it's just like using your debit card!

 

[russ_watters]

I have a nasty habit of holding a little credit card debt - but not too much, just $1000 or so. Other than that, just my car (8 months into a 5 year loan). But I'm hoping to go another $150-$200k into debt within the next year.

 

[Moonbear]

I have a nasty habit of holding a little credit card debt - but not too much, just $1000 or so. Other than that, just my car (8 months into a 5 year loan).

Let me guess, cameras and telescope type equipment?

But I'm hoping to go another $150-$200k into debt within the next year.

Ah, the joys of buying a house! I remember that slightly panicky feeling the night before closing on the house, thinking what on Earth am I doing getting myself into that kind of debt when I had never been in debt my whole life! But, it still beats living in an apartment.

 

[member 5645]

15,000 student loans.
1,000 credit card debt (I revolve this. It never goes higher than this number, or I just pay it down, so 1000 I say)
12,000 car loan
------------------

Wooh, another couple of years and I can figure out how to finance med school on top of all this too, wooh!

 

[spender]

Ah, the joys of buying a house! I remember that slightly panicky feeling the night before closing on the house, thinking what on Earth am I doing getting myself into that kind of debt when I had never been in debt my whole life! But, it still beats living in an apartment.

What is the deal here in America with buying a house,seams like everyone must own a house even if person gets into financial black hole for the rest of their life, and if you loose your job you are screwed.
In Europe lots of people just live comfortably whole life in rented aprtments and no one is complaining.

 

[Moonbear]

What is the deal here in America with buying a house,seams like everyone must own a house even if person gets into financial black hole for the rest of their life, and if you loose your job you are screwed.
In Europe lots of people just live comfortably whole life in rented aprtments and no one is complaining.

You're not in a financial black hole for the rest of your life, just 30 years. If you lose your job, you still have the house to sell, which is better than if you are renting. Houses are good investments, because they usually appreciate in value, so instead of just paying rent and never owning anything, you buy a house and gain equity. Now, it doesn't make sense to buy a house that would require mortgage payments that are higher than you can afford, but I have a 4 bedroom house with a mortgage payment (principle + interest) that's actually a little less than what I was paying in rent for a 2 bedroom apartment, and in just three years, my house has increased in value by about 20% (and I'm in a neighborhood where houses are more stable in value than other areas where homes have doubled in value in the past few years).

 

[franznietzsche]

I learned early on that you should use your credit card instead of cash as often as is possible -- as long as you pay off the bills right away. It helps you build up a good credit rating, so when you do need to get a loan for something big, like a car and house, you have a good credit history established. I've known people who always paid everything in cash and then wound up needing a co-signer to buy a house, not because they couldn't afford it or weren't responsible borrowers, but because they had no credit history. I know it sounds crazy, but that's the way lenders think.

That is actually the only reason i have the card at all. But i still stick to internet purchases with it. Although, its not like i spend much money anyway. Well...not directly at least.

 

[franznietzsche]

What is the deal here in America with buying a house,seams like everyone must own a house even if person gets into financial black hole for the rest of their life, and if you loose your job you are screwed.
In Europe lots of people just live comfortably whole life in rented aprtments and no one is complaining.

House payments are not usually drastically higher than rent payments(the difference you don't typically have roommates splitting a house payment). At least, not in what I've seen. When we rented out our house, we basically rented at what the mortgage payments were (a little higher actually, since property values had gone up in the six years since we bought it). So if you lose your job, you would be equally screwed either way. Well, actually no, you'd be less screwed owning the house, since presumably, if you'd been paying on it for a while, it would be worth more than you owed, so you would profit if you had to sell. Renting, you'd just lose the apartment and have nothing to show for it.

 

[Moonbear]

House payments are not usually drastically higher than rent payments(the difference you don't typically have roommates splitting a house payment). At least, not in what I've seen. When we rented out our house, we basically rented at what the mortgage payments were (a little higher actually, since property values had gone up in the six years since we bought it). So if you lose your job, you would be equally screwed either way. Well, actually no, you'd be less screwed owning the house, since presumably, if you'd been paying on it for a while, it would be worth more than you owed, so you would profit if you had to sell. Renting, you'd just lose the apartment and have nothing to show for it.

All true. Plus, once you buy your house, your payments remain the same for the rest of your mortgage term (assuming you get a fixed rate mortgage). You can also refinance if interest rates go down to lower your payments. That means that when property values keep going up and rent keeps going up every year, your mortgage remains the same, so over your lifetime, you pay far less than if you're dumping that money into ever increasing rent. (Yes, taxes and insurance rates continue to go up, but you're paying for them in your rent too; if the taxes go up, you can bet your landlord will raise rent when it's time to renew your lease).

 

[Grogs]

There's actually nothing wrong, per se, with having debt. Credit is one of the greatest economic tool ever developed, allowing people to buy things they'd have to save up their whole life to buy otherwise. Having a large debt may make you nervous, and that's a good thing. It's a powerful tool and it needs to be treated with respect.

All credit is not created equal though. Paying 26% on a huge credit card bill or 119% on a title loan is a good way to end up bankrupt, but other sources of debt may not be bad. For example, if you're paying 0% on your credit card bill, there's no** reason to pay it off before the initial period ends. A home mortage is even better: It's a relatively low interest rate; it's attached to something that has value (i.e., the house); and you can deduct the interest, depreciation, and upkeep from your taxes, offseting a large part of the interest you pay into the house. If you look at some of the richest men in America like Donald Trump or Bill Gates, I suspect you will find they have millions or possibly billions of dollars of real estate debt.

**No financial reason. If you suspect you may spend the money before the grace period ends, that's a good reason.

 

[Mk]

Where's tribdog? I figured he'd post like crazy over here? Maybe he's too busy throwing up from the gum?

 

[tribdog]

I owe about $180,000 in hospital bills, no joke, which I will never pay. I just hope they don't show up someday and put the knife back in.

 

[franznietzsche]

I owe about $180,000 in hospital bills, no joke, which I will never pay. I just hope they don't show up someday and put the knife back in.

That would be bad if they did so.

Funny, but bad. Well, funny in a rather morbid sense.

I'll stop now.

 

[Mk]

Man, those scapels are mad sharp... I remember in biology, cutting through my glove farily deep into my finger, but the incision was like as thick as a paper cut.

 

[russ_watters]

Let me guess, cameras and telescope type equipment?

And computers/parts, an Ipod, etc. Yeah, I'm a gadget guy. (next up - GPS and a pair of binoculars with an integrated digial camera)

Quick note about my credit card: I have USAA, which is a military-only credit union and a really good deal. I pay 9% on my credit card. (and get this - they refund me other banks' atm fees! )

What is the deal here in America with buying a house,seams like everyone must own a house even if person gets into financial black hole for the rest of their life,

As usual, spender, you are falling for popular perceptions that are not reality. The reality is, especially with today's interest rates, that owning a house is typically slightly cheaper than renting one of the same size. My roommate owns the 3bedroom, 2 bath condo we live in and it costs ~$1000/mo (mortgage and condo association fee) vs roughly ~$1200 if he was renting it. And with owning, in a relatively short period of time, you own something (equity is basically an inverted loan to yourself).

...and if you loose your job you are screwed.

Wrong. If you lose your job, you are in a better position than someone who is renting: you own something you can sell to get money to rent something. If you're renting and you lose your job, you're screwed - you have no money to pay your rent.

And after ~30 years, you end up with pretty extreme financial independence: once you pay off your mortgage, your cost of living drops dramatically.

 

[ray b]

And after ~30 years, you end up with pretty extreme financial independence: once you pay off your mortgage, your cost of living drops dramatically.

I avoided that trap
I never wanted to pay 3 times the cost of a house via time payment traps

every thing I own , like my dad taught me, was paid for in CASH inc houses
cars boats ect
I lived in a trailer THAT I PAID CASH FOR intill I could afford a boat to live on and only got a house when I could pay for it

so not a single time payment EVER
esp as the banks want you to pay for INSURENCE an other RIPOFF

 

[Monique]

In Europe lots of people just live comfortably whole life in rented aprtments and no one is complaining.

Indeed, but many of my friends are buying their own house now. I don't know if I will, here in Holland you pay tens of thousands of euros over the actual value.. on the other side: the interest is at its historical lowest point.

I don't know if they ever will (house prices are over-rated since WOII), but I think that the house prices will drop in the near future.. I hope.

 

[Moonbear]

And computers/parts, an Ipod, etc. Yeah, I'm a gadget guy. (next up - GPS and a pair of binoculars with an integrated digial camera)

That's what I figured. You like the expensive toys. Like the old adage, you can tell the men from the boys by the price of their toys.

Quick note about my credit card: I have USAA, which is a military-only credit union and a really good deal. I pay 9% on my credit card. (and get this - they refund me other banks' atm fees! )

Aww, gee, wish I could get my hands on one like that. I just opt not to carry a balance. It's funny, because that makes me a good customer, but don't good customers cost credit card companies money? Afterall, they aren't making any profit from interest on my account. I've never understood how they can make any money from good customers who don't carry a balance. Or maybe that's why they keep raising my limits, in the hope one of these days I'll be tempted by that to spend beyond my means.

Though, when I make large purchase, like furniture, I wait for the no interest for a year type financing. I know it's a better strategy to wait until the end to pay it, but I'm more comfortable just paying a little bit every month so I don't get caught short at the end. Of course, it's rather funny that now I'm applying for new jobs, so need to start thinking about getting the house looking good to sell hopefully in a few months, so I'm suddenly stepping up the furniture purchases, all so I'll have to move it, but I know I'm not going to get top dollar for the house if I have it furnished with card tables and folding chairs...it's amazing how much something like decorating can add to the selling price of the house, even though I'm taking it all with me! Well, I also have picky taste, so it really has taken me two years to find a coffee table I like (just bought one yesterday...yay!). Meh, I'll stop rambling now.

 

[russ_watters]

I avoided that trap
I never wanted to pay 3 times the cost of a house via time payment traps

every thing I own , like my dad taught me, was paid for in CASH inc houses
cars boats ect
I lived in a trailer THAT I PAID CASH FOR intill I could afford a boat to live on and only got a house when I could pay for it

so not a single time payment EVER
esp as the banks want you to pay for INSURENCE an other RIPOFF

That's pretty rare to be able to do that - most people just rent and pay 3x the purchase price for an apartment they never own.

Though, when I make large purchase, like furniture, I wait for the no interest for a year type financing. I know it's a better strategy to wait until the end to pay it, but I'm more comfortable just paying a little bit every month so I don't get caught short at the end.

Yeah, me too (except for electronics, not furniture) - I'll get a credit card for that, pay it off in 4 months, then cut up the card.

 

[Moonbear]

Yeah, me too (except for electronics, not furniture) - I'll get a credit card for that, pay it off in 4 months, then cut up the card.

Too bad you already have a girlfriend...this could have worked out well, I've got the furniture and you've got the electronics; no arguing over whose couch to keep and which stereo to sell...lol!

 

[russ_watters]

I have not yet referred to her as my girlfriend.

 

[Moonbear]

I have not yet referred to her as my girlfriend.

What does that mean? Men are so difficult to keep up with, they have all these different code words and their definitions of girlfriend and dating and relationship and love are so different from women's definitions of those terms. I think we need a male to female dictionary to help us translate! (The men could probably benefit from the female to male dictionary too.)

 

[tribdog]

you are the LAST person who needs to be pipping with comments like that

 

[russ_watters]

What does that mean? Men are so difficult to keep up with, they have all these different code words and their definitions of girlfriend and dating and relationship and love are so different from women's definitions of those terms.

We've gone out five times over about 2 months and things are going well, but the word "girlfriend" implies a commitment. We're not there yet.

I was only being half coy.

 

[Moonbear]

We've gone out five times over about 2 months and things are going well, but the word "girlfriend" implies a commitment. We're not there yet.

I was only being half coy.

I never knew it was possible to be "half coy."

I'm still really sure men and women define these things differently, but you tell me. To me, if you say "girlfriend" implies commitment, and you're not there yet, that means you're still open to dating other people in the meantime. I guess I would use the term boyfriend or girlfriend to mean exclusivity, not necessarily commitment (you might still break up, but until or unless that happens, you're not seeing anyone else). Does that difference make sense to anyone else but me?

 

[franznietzsche]

you are the LAST person who needs to be pipping with comments like that

QFE.


*10char*

 

[member 5645]

I avoided that trap
I never wanted to pay 3 times the cost of a house via time payment traps

every thing I own , like my dad taught me, was paid for in CASH inc houses
cars boats ect
I lived in a trailer THAT I PAID CASH FOR intill I could afford a boat to live on and only got a house when I could pay for it

so not a single time payment EVER
esp as the banks want you to pay for INSURENCE an other RIPOFF

That's one way to do it.
Me? My liquid cash works better as an investment and easily outpaces the interest rate on anything I owe on.
Locking up cash into something you are going to be in regardless (ie a house) isn't always the most financially smart move.
However, there IS the trade off of ease of mind. Still impressive, good job

 

[member 5645]

What does that mean? Men are so difficult to keep up with, they have all these different code words and their definitions of girlfriend and dating and relationship and love are so different from women's definitions of those terms. I think we need a male to female dictionary to help us translate! (The men could probably benefit from the female to male dictionary too.)

You are not girlfriend/boyfriend until you've had "the talk".
Oh the stories I could tell about assumptions made without such communication

 

[Monique]

That's one way to do it.
Me? My liquid cash works better as an investment and easily outpaces the interest rate on anything I owe on.
Locking up cash into something you are going to be in regardless (ie a house) isn't always the most financially smart move.

I think so too, when you buy a house all your money is gone. When you invest, you are flexible what you do with your money.

 

[Polly]

And with owning, in a relatively short period of time, you own something (equity is basically an inverted loan to yourself). Wrong. If you lose your job, you are in a better position than someone who is renting: you own something you can sell to get money to rent something. If you're renting and you lose your job, you're screwed - you have no money to pay your rent.

And after ~30 years, you end up with pretty extreme financial independence: once you pay off your mortgage, your cost of living drops dramatically.

Ever heard of "negative equity asset"?

 

[Polly]

QFE.


*10char*

Just out of curiosity, what does it mean?

 

[Moonbear]

I think so too, when you buy a house all your money is gone. When you invest, you are flexible what you do with your money.

I don't think that's true. Maybe for some people who buy a huge house that requires all their money (we call them "house poor"), but I look at it as I was going to be spending that money on a place to live either way (rent if not a house), so I wouldn't have had that cash anyway. By buying a house, that cash is going toward actually owning something so I can stop paying at some point in my life (like when I retire and have to live from savings). Then again, I'm in a house that I know I won't spend the rest of my life in, so I'm not dumping money into it for things I might do if I was going to live here a long time. Instead, I just do the required maintenance so everything stays in good working order, and some small improvements that will increase the ability to sell the house (like updated colors of paint).

 

[brewnog]

I'm with moonbear on this one. Investing in bricks and mortar has got to be a good thing. Either you buy a house in which to live, in which case you have a home and aren't paying rent (aka dead money), or you buy to rent, and you'll make more off your tenants that you pay on the mortgage, have an income, AND have a house at the end of your mortgage period which has essentially bought itself.

 

[Moonbear]

I'm with moonbear on this one. Investing in bricks and mortar has got to be a good thing. Either you buy a house in which to live, in which case you have a home and aren't paying rent (aka dead money), or you buy to rent, and you'll make more off your tenants that you pay on the mortgage, have an income, AND have a house at the end of your mortgage period which has essentially bought itself.

One of my step-sisters (the one I get along with) did quite well for herself with this strategy. She bought a duplex (house divided into two side-by-side apartments), lived in one side and rented the other side. As rental (and home purchase) prices increased in the area where she lived, she was eventually able to charge enough rent for the rented half to cover the mortgage for the entire property. That mortgage got paid off early, and she moved herself into a nice big house with 3 acres of land, including a horse pasture, and enough room for her growing family (at the time, two teenaged kids and one "oops" on the way...not "oops" as in unwanted, just "oops" as in unexpected). The rent from the duplex then paid (still pays) her mortgage on the new house. So, she owns one house free and clear of any debts, and a second house that her tenants are paying for. The reason is that the cost of rent will always reflect prevailing market prices in the area (if the price of houses goes up, landlords can charge more for rent), but landlords are still paying the same mortgage based on market prices when the bought the property. They might just break even initially, but 10 or 15 years down the road, that mortgage is substantially cheaper than the rental prices. Even in the short term, rent is going to cost more than a mortgage because the landlord is going to charge enough to cover the mortgage, insurance, taxes (which you'd also pay owning the house), anticipated repair costs (which may or may not end up being needed), plus include something over that to keep it profitable.

 

[russ_watters]

Ever heard of "negative equity asset"?

Sure. It takes time to build-up equity, which is why a down-payment is usually required. If you don't give a down-payment, you start with negative equity (instead of zero or positive) and the bank charges more interest because there is more risk to them. But this doesn't really have anything to do with the discussion: I certainly would not suggest that someone should put themself into that situation.

Moonbear - I've looked into that situation and damn, would that be sweet. With my gadget-buying, I don't know that that'll happen, but for a while I might be able to have a condo and a roommate and enough left-over money to double-up on a payment every now and then.

 

[Moonbear]

Moonbear - I've looked into that situation and damn, would that be sweet. With my gadget-buying, I don't know that that'll happen, but for a while I might be able to have a condo and a roommate and enough left-over money to double-up on a payment every now and then.

It was a pretty nice way to do things. Once the mortgage was paid on the duplex, of course she didn't need to move anywhere right away, so could save up more toward an even larger downpayment, but more importantly, she had the luxury of time to shop around for another house and wasn't being pressured by someone else closing on one house to buy another, or needed to get out of an apt before the lease ends. She got a pretty good deal on the house she's in. If she had to find something quickly, she'd have had to pay a lot more for comparable houses in the area (that also means if she sells that house, it will be at a substantial profit...even before NJ propery values started going up so ridiculously fast).

I prefer living roommate-free, but when I bought the house I'm in, I figured with the extra bedrooms I don't need, if I was ever in a bind, I could take in a roommate to offset the mortgage.

 

[Monique]

What is the interest you have to pay when you're paying off a house in the US? I agree if you get rid of your mortgage soon, it's a good deal.

Otherwise you're just paying a lot of money without owning anything. I know friends that have a huge mortgage and only pay the interest.. house prices are at its peak, they risk losing value on the house, not owning a brick of it, while having put money into it for years.

 

[Zantra]

One of my step-sisters (the one I get along with) did quite well for herself with this strategy. She bought a duplex (house divided into two side-by-side apartments), lived in one side and rented the other side. As rental (and home purchase) prices increased in the area where she lived, she was eventually able to charge enough rent for the rented half to cover the mortgage for the entire property. That mortgage got paid off early, and she moved herself into a nice big house with 3 acres of land, including a horse pasture, and enough room for her growing family (at the time, two teenaged kids and one "oops" on the way...not "oops" as in unwanted, just "oops" as in unexpected). The rent from the duplex then paid (still pays) her mortgage on the new house. So, she owns one house free and clear of any debts, and a second house that her tenants are paying for. The reason is that the cost of rent will always reflect prevailing market prices in the area (if the price of houses goes up, landlords can charge more for rent), but landlords are still paying the same mortgage based on market prices when the bought the property. They might just break even initially, but 10 or 15 years down the road, that mortgage is substantially cheaper than the rental prices. Even in the short term, rent is going to cost more than a mortgage because the landlord is going to charge enough to cover the mortgage, insurance, taxes (which you'd also pay owning the house), anticipated repair costs (which may or may not end up being needed), plus include something over that to keep it profitable.

That's a good strategy. The next logical step in that plan would have been to leverage the equity in the duplex to purchase another rental property, then repeat until she has enough passive income to completely support her.

 

[Moonbear]

What is the interest you have to pay when you're paying off a house in the US? I agree if you get rid of your mortgage soon, it's a good deal.

Otherwise you're just paying a lot of money without owning anything. I know friends that have a huge mortgage and only pay the interest.. house prices are at its peak, they risk losing value on the house, not owning a brick of it, while having put money into it for years.

Interest rates vary. They hit some lows around 4.5 or 5% about a year ago, and I've seen them as high as 8 or 9%. But, even if you buy when the rates are high, if you see them drop (usually most will advise it's worthwhile if they drop a full point) you can re-finance (get a new mortgage) at the lower rate. The amount you're paying in interest vs principle varies over the life of the house. In the first years, you're paying a higher proportion toward interest and less toward the principle, but as the principle decreases, so does the interest portion. There are some unscrupulous lenders who will make loans where someone pays only the interest (they make it look good by offering very low interest rates): never take one of those loans, that's not going to get you anywhere, and if that's the only way you can afford the house, then you are better off renting because you're still getting nowhere and the lender still owns your house no matter how long you're paying into it.

There are times when it makes more sense to rent than to buy. If you plan to live somewhere less than 5 years, renting makes more sense; if you don't have money for a downpayment, renting something small and saving up toward a downpayment is a good strategy; if you don't have a little extra money as a "cushion" for unexpected repairs, you're better off renting; if you are completely inept when it comes to household repairs, unless you can afford to hire someone to do everything, you should rent so the landlord is responsible for repairs.