I write about investing but I have over $200,000 in debt

Yes, you read the title of this post correctly.

I’m in debt, lots of it.

I run this personal finance and investing site, and enjoy doing it even though I have over $200,000 in debt.  Debt sucks.

Maybe I’m not much different than you.  We have a house but we don’t own it yet.   The bank owns almost half of it, we own the rest.  My wife and I hope our debts will be gone for good in another 7.5 years.   There are no guarantees in life but we are working on it.

Most Canadians need to borrow money for a house or a car.  Most young adults have a student loan as well.   Borrowing money to pay off appreciating assets is not a bad thing.  In fact it’s a good thing so long as you can make the debt payments on schedule and your borrowing costs are low.  Borrowing (lots of) money to buy depreciating assets or just stuff is wasteful.  It’s even worse if you can’t make any repayment schedule.   Some people don’t have a choice; they are in a financial struggle because of circumstances beyond their control.   I get that.   Taking on this mortgage debt has been our choice.

Mortgage debt limits our cash flow for investment purposes, even with the low interest rates of today.   Debt payments limit our options on how we can spend our time.  Our income could be used to buy appreciating assets like (more) dividend paying stocks or equity ETFs to fund our financial future.   Instead, a good portion of our income services debt.   With debt we pay other people first.

Having a mortgage over $200,000 is pain in the ass.  I don’t like owing other people money.  I suspect that’s because being on-the-hook for something feels like a ball-and-chain.   When we’re debt-free we’ll be shackle-free.   In a debt-free world our income will not be spent making other people wealthy.   There will be no financial obligations to others.   I can spend money earned as I please.   Money earned will provide direct financial flexibility.  Debt doesn’t provide that.

I run this site because I enjoy personal finance, saving and investing and everything in between.  There isn’t anything about debt I enjoy.

What’s your take on debt?   Are you in debt?   How does that feel?

Are you out of debt?  How does that feel?

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57 Responses to "I write about investing but I have over $200,000 in debt"

  1. I’m with you there – I owe around $340k on the mortgage. It hurts cash flow but the rates are so low that it really doesn’t make sense to make it a priority over the RRSP or TFSA. Consumer debt would bother me much more but luckily I don’t have any

    Reply
    1. I’m with you on the debt, and focusing on investing. We’re trying to do both, max out TFSA every year, (just recently done), optimize RRSP and kill the mortgage debt with lump sum payments. Not easy, but the plan is working for us.

      Consumer debt is a killer for sure. Thanks for the comment Dan.

      Reply
  2. I enjoyed reading this as the transparency makes me feel at ease about the reality of my debt. I do not have a mortgage as I live with family but my student loans are currently over $100K and are in deferment as I am currently pursuing my doctorate. I want to begin tackling my debt while I’m in school so we will see how it goes.

    Reply
    1. Hey Rachel,

      Your doctorate is a pricy endeavour but if this is in a good field, your career should be able you back nicely. No doubt other students are in your position, post-grad work or otherwise.

      Thanks for your comment and good luck with the school.

      Reply
  3. Having debt is like starting a business and hiring employees. You’ve got to pay them but if you manage it well then it can end up helping you. If you don’t manage it well then everything goes to them and you’re left with nothing. Managing a business and managing debt well are both very difficult (but not complicated).

    Reply
    1. I see debt management very much like running a business Richard, so good analogy.

      It’s not rocket science but it takes discipline and lots of things get in the way to complicate matters when it comes to killing debt; meaning lots of temptations to spend. Nobody wants you to save and repay debt quickly, especially in this low rate environment. 🙂

      Reply
      1. There definitely are a lot of temptations. Another way debt is like employees is that people who don’t have a lot of experience managing them think more is always better, while people who have managed them often find that it’s not for them and they prefer the simpler way that only depends on their own resources. And in the current economy people will cheer you on when you get more of both 🙂

        Reply
  4. I’ve got 830K mortgage left. (Got bitten by insane Vancouver house prices, that are still going up, btw.)
    It is scary as hell, that is why I do a lot of lump sum payments.

    I thought lump sum would bring my payments down (like they do in my native country), but here all they do is bring the amortization date forward. (boo!)

    For the next four years the rate is fixed to 3.08% but I dread what could happen to that.

    I agree wholeheartedly with you: only go in debt for a house, and not for things that depreciate, or worse, for consuming.

    Best case scenario I see now:
    Just after I lock in a new term with fixed rate, hyperinflation strikes Canada 🙂
    The dollars with which you repay the debt would be worthless dollars.

    Reply
    1. “I’ve got 830K mortgage left.”

      Wow Bram, I’d probably faint 🙂

      I think you’re smart to do a number of lump sum payments.

      How long do you think it will take you to kill that off?

      How much higher do you think average prices in Van City can go?

      3.08% for the next 4 years is great…if you locked-in.

      I recall my wife and I are around 3.2% with another 2 years to go. I will go variable after that.

      Reply
    2. Bram,

      Houses can depreciate in price but let’s hope Van goes up forever. Also each 1% increase in rates will cost you about $700/month more in interest costs. That’s scary.

      Pay it down as much as possible and get rid of that crazy debt

      Reply
  5. Mark,

    I hate debt. I currently have about $18k of it myself, all in the form of student loans with interest rates of ~3%. Wish it was all paid off, and one day will be. Other than that, I have no other debt. And I’m hopeful that once the loans are paid off I’ll never owe anyone a dime for the rest of my life!

    From what I understand of the Canadian housing market, you’re in a pretty good spot. I understand mortgage debt up there is pretty high due to expensive housing. Nice job!

    Best wishes.

    Reply
    1. Hey Jason,

      Well, the good sign is, I guess we own more house than our bank does 🙂

      I’m sure you’ll kill the student loans soon enough, and when that is done, you’re well on your way to financial freedom especially with your savings rate and investing discipline.

      Lots of Canadians have considerable mortgage debt so as long as the economy remains good, they’ll be fine. You never know with life which is why no debt is a good thing in my books.

      Reply
  6. Same boat with you here. I also have about $200K left on my mortgage. Luckily I got the 35 year amortization when it was still available so my monthly payments are just $800, which doesn’t hurt my cash flow too bad 🙂 But it would be nice to have my mortgage be completely paid off some day.

    Because after its paid off, I will take out a HELOC on it to invest in businesses with strong earnings and growing dividends, and my loan will be tax deductible 😀 I feel like debt is a necessary evil, sort of like a job. No one really likes it, but we all have one. I don’t really mind carrying a lot of debt because I know my life would be worse off today if I hadn’t borrowed to pay for my education or to buy a home.

    Reply
    1. Hey Liquid,

      I don’t mind having debt, just not $200,000 of it. In a crisis, it would be nice to pay it off. I suppose I could but I would need to sell assets. Not a good idea. So, I will continue to kill the debt and invest. I figure maxed out TFSAs first, (they are), and maxed out RRSPs in a few years we’ll be in good shape but you never know what the future holds!

      Debt is a necessary evil, like a job but that doesn’t mean either have to last forever – right?

      Reply
        1. For sure…hopefully in another 7.5 years, the mortgage is gone and we’ll have a $500k + portfolio, ready to ramp up our savings for retirement 🙂

          Reply
  7. Don’t be too hard on yourself with respect to your mortgage and your current $200,000 debt. It’s not the sort of spending that piles up, one debt on top of another, you know. While housing prices aren’t soaring, inflation is creeping in on rent and at the end of the day you will have a house with a value considerably higher than what you paid. And you have to live somewhere – cardboard boxes don’t count!

    I’m certain you know that short term variable mortgages are the way to go. Especially now with interest rates predicted to stay low for some time. Even two years at the current low rates makes up for any likely increase. So cheer up, friend – you’re fine.

    Reply
    1. Thanks Pursuit.

      No, the debt isn’t piling up, we’re making a dent in it every two weeks but it would be nice if we didn’t owe anyone anything. Housing prices aren’t soaring in Ottawa for sure…inflation will catch up with everything at some point and when it does…hopefully we have our paid off home.

      Yes, well aware of variable rates and we’ll likely renew at a variable rate. As long as we can max out the RRSPs in a few years, we’ll be fine.

      Reply
  8. We paid off our mortgage about 10 yrs ago. That debt retirement gave us re-purposed cash flow to increase our savings by the equivalent dollar amount. This has given us the feeling that we control our own destiny now and, wow, that’s huge. So whatever the % rate they’re paying, my recommendation to anyone with a mortgage would be to make that repayment a priority first.

    Reply
    1. Thanks Peter. You’ve reinforced my thinking…kill debt while money is cheap and also continue to add investments to the portfolio (while money is cheap).

      Having no mortgage in our late-40s will give us a tremendous amount of flexibility…

      Reply
  9. We struggle with paying off the mortgage early vs. investing as well. Our debt is almost half a million – $360K owing on the house at 3.99% locked in for the next 5 years and $120K on a HELOC at prime + 0.5% that we used to buy a basket of dividend stocks years ago. While the emotional side of me would love to pay off the mortgage ASAP, the rational side of me knows that the yield on our dividends is greater than 3.99% so there’s no rush to pay it off since it’s cheap money. That being said though, who knows what the mortgage rate will be in 5 years when it’s time to renew.

    Reply
    1. Great point…the rational side knows the yield on your dividends is greater than your mortgage, so no rush to kill the mortgage.

      I think that’s my only pressure, to get the mortgage to a reasonable debt level and then invest as much as possible before rates go higher. I figure if we can get the mortgage down to about $150 k at time of renewal, that’s pretty good. Who knows what the mortgage rate will be in a few years.

      Thanks for your comment!

      Reply
  10. I’m 61 years old and am really, really, really sympathetic to the younger generation with the price of housing these days. We live in Calgary and when we bought our house back in 1981,the bad news was that our interest rate was 20%. The good news was that our house only cost $110k. We’re still in the same house as we live quite a simple life. I get to joke that we are in our starter home, our family home, and now our retirement home.

    We paid off the mortgage in 1992 and really piled up the savings after that. The house was the only debt that we’ve ever had.

    Best of luck to all of you. Those are some mind-boggling mortgages.

    Ciao
    Don

    Reply
    1. You said it well Don, our generation with houses got a rough ride from a buyers perspective…prices have really shot up in the last decade or so. Then again, 20% interest is no picnic!

      I hope with the house we are in, we’ll stay for another 15 years until our early 50s. Then we’ll have a decision to make since that’s when we might be able to retire. Downsizing is an option but we’re not sure yet. There is something to be said about staying where we are since we love the house and location.

      We’ve got $200k left for the mortgage debt but at least we own more house than the bank does. That’s the upside.

      As for Bram’s mortgage, that blew my mind!

      Reply
  11. We have $250K of mortgage debt, targeting to be paid in 4 years with frugal living. The sad part is that it should only be $17K right now, but we added consumer debt from a maxed out HELOC and other credit card debt on to our mortgage. Lesson is don’t live beyond your means. I’ve got the T-shirt.

    Reply
  12. Like you, we have mortgage debt; we just bought our house a year and a half ago and while we love living here and love being home owners, one thing that we DON’T love is the mortgage debt. We changed our payment frequency so we can pay it down more quickly and save on interest, and we’ll be increasing our payment substantially when we are back from our honeymoon and/or the wedding is over.

    Reply
  13. I couldn’t agree with you more. Having a mortgage truly is a pain in the ass. My wife and I are lucky, after 10 years of payments we plan to aggressively pay off our 56K mortgage by early 2015. The extra cash flow will provide a much needed boost to our investment portfolios!

    Reply
    1. Mortgages are a PITA for sure 🙂

      I’m sure all the extra cash flow will really help the investment portfolio! I wish you well on your debt-free journey for early 2015, sounds great to me.

      Thanks for the comment.

      Reply
  14. Both house prices and stock prices (even dividend stocks) can go down, a lot. Keep that in mind as you weigh debt payment vs investing. Repayment pays back with surety.

    Reply
    1. I hear ya Greg…debt repayment is a guaranteed return. This is why I balance debt repayment with investments right now, I prefer a balanced approach. Thanks for the comment.

      Reply
  15. I think we were the same way Mark to be honest. We didn’t like to owe money to anyone hence paying off the mortgage last month. It’s a good feeling knowing that all that’s left is to worry about monthly bills, investments and maintenance on the house. It really depends on what goals someone has. Some like to invest all the way to the bank, others like to pay off the mortgage or like us we did both at the same time. You’ll be there before you know it!! Mr.CBB

    Reply
    1. It must be a great feeling knowing you have no debt.

      We hope by killing debt and investing at the same time, we’ll be in a good place in another 7 years (debt-free, own our home and have a good start on our retirement savings). Time will tell if we made the right choices.

      Reply
  16. No one like debt. That much is obvious. However you do have control over how much debt to take on in some ways. We bought a small modest townhome back in ’98. Paid off the mortgage in ’07. We often talk about upgrading to a bigger home as our growing family seemingly requires it. We have so far resisted the temptation, mainly because not having a mortgage gives us so much more freedom. Our savings is growing nicely, and being a single-income family it is even more paramount that we are more diligent with our finances.

    Reply
  17. Great title. You got my attention. While any debt, as you say, “sucks” I find that if you have a plan and are able to manage it properly it can be overcome. By looking to reduce debt and increase investments that yield cash you are really burning the candle at both ends which is great. Keep at it and don’t despair. This is a marathon and not a sprint.

    Reply
  18. I initially had mortgage debt (like everyone else) but managed to scrimp and save to pay it off.Then felt I just wasn’t doing enough sitting in a paid off house so remortgaged it to buy into a rental property, these are not as favorable for interest rates, so worked on paying down that debt for years until I could transfer all the mortgage onto our principal residence as finance rates are way more favorable. Onto a 3rd property now (another rental property)
    I think the interest rates @ 18% (when we started) where brutal compared to todays rates cash flow is the determining factor, and if your paying a lot on interest in your investments at least its deductible here in Canada. In the US I think they can claim interest on their principle res?

    Reply
  19. Mark, you dug into the archives for this one!

    You know my take on debt- “life begins when you’re debt free”.

    Good luck with eliminating that anchor. You’re wise to save and also pay down debt quickly. That was my strategy and it worked.

    Reply
    1. I did, didn’t I?

      Well, I recently negotiated <2% for my next mortgage term so I’m pretty happy about that. That means I can keep my existing payments the same and kill more debt in the process.

      Reply

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