The more I write about personal finance, investing and my financial independence journey, the more aware I become of this:
I hate debt.
In short, here’s how I feel about debt:
1. It is for the most part, “normal”. It may be necessary to borrow money (for a house, for a car) but I think it must be done wisely. We’re trying to keep our home, car, insurance, heat, hydro and other monthly expenses to less than 50% of our net income. I’d feel better if it was lower. “Normal” is not living with thousands of dollars in credit card debt year after year. Maybe some folks are in that position because they have no other choice. Life happens and it can be very difficult sometimes. Emergencies occur and even after they subside, you never know what the future will hold. Others, well, they’ve simply made poor choices. Part of the reason I have this blog is I don’t want to be in the latter group. Personally, I can’t handle credit card debt. “Good debt” is an affordable home, an affordable car but I think everything else is up for debate.
2. It can be easily abused. Like alcohol or tobacco products, there are dangers and consequences that can come with a life of excess. Everyone has probably had a bad New Year’s Day (after a great New Year’s Eve). I have. Like my parents told me many years ago, most things in life are best enjoyed “in moderation”. I firmly believe that, it makes sense. When it comes to money, I believe the same is true. You need to live, you need to enjoy but not in spending excess.
3. It can be scary. Having a mortgage weighs on me a bit. I should be used to it because my wife and I are now in our third home together, I know the drill. I simply don’t like the fact our bank owns 75% of our new house. A house, while an investment is also a major expense. Geez you’ve got to heat it, put water through it, pay taxes on it, maintain it and the latter can be costly. For example, we just installed a second sump pump in our home this month and before that, just after we moved into the home in December, our toilet went. Maintenance costs and emergency items add up but are a part of life, those types of expenses will never go away even when the bank doesn’t own our home. Cars, are not an investment at all, actually they can be very expensive. Don’t get me wrong, I want a nice car just like most others but I would never go into huge debt for it. For our next car purchase, my wife and I will want to make a decent down payment on it. I don’t want a huge loan for our car, a small one will be just fine thank you. I guess that’s why I still drive a 2000 Mazda Protégé; my car runs great and gets me from A to B quite nicely and safely although its starting to show its age (kinda like me :). I’ve got a buddy in Toronto who owned a Dodge Neon for many years because he was a) frugal and b) didn’t see the need for a shiny new car to get him around a few downtown blocks when he wanted to. I’ve got another buddy in Toronto who bought a new car recently but he kept his budget top of mind like he always does. He always buys things well within his financial means. I must say I respect their savvy ways. All this to say I don’t think you have to be frugal all the time you just have to make smart choices.
As much as I enjoy writing about investing, dividend-investing or passive management strategies (and communicating with you about it) I’m not a fan of debt. It concerns me and I’m trying to get out of it. Slowly but surely, we should, step-by-step and one small goal at a time.
“Success is a journey not a destination” – Arthur Ashe
How do you feel about debt? Does it ever play on your mind?