My view on debt
The more I write about personal finance, investing and my financial independence journey, the more aware I become of this:
I hate debt.
But, it seems like an necessary evil to help get ahead.
Let me explain, this is my view on debt.
1. Debt 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 of course. “Normal” to me 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 – it causes me anxiety and stress.
“Good debt” can be considered an affordable home that should appreciate in value.
Everything else for debt is up for debate.
2. Debt 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 life but not occurring debt in spending excess.
3. Debt can be stressful. Having a large 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, If you borrow money for a car you’re going into debt to buy a depreciating asset. Let that sink in for a bit…
Debt can be stressful knowing you need to pay others first. I’d rather flip the tables over time.
My view on debt summary
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 is actually a stressor in my life. I’m trying to get out of debt to fulfill some retirement dreams in the coming years. 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?
I’m like you. I don’t like debt either. Many years ago when credit card interests were really high, I think that was in the 70’s, our credit card balance was $5,000, I had the opportunity to work over time off and on. I was not making much money then but I decided to try to pay off the balance of the credit card by making a payment of the minimum payment plus the interest charged times two. It took 5 years to pay that credit card off. Now we pay off the credit card balance monthly. This has greatly increased our credit rating
This last year we, with our neighbour, we had to replace our fence. This fence was costly $8,000. divided by two ($4,000) Thanks to dividend investing we were able to pay that off in four months. Thanks to your website and your knowledge. dividend investing is working for us. Only wish we started doing this when I was 30, but better late than never.
Thanks for your had work and advice.
Thanks for your kind words, Sharyn – kudos to your dividend income stream 🙂
“Now we pay off the credit card balance monthly. This has greatly increased our credit rating.”
No doubt – perfect!
I think folks that like to spend, cannot ration themselves to spend less, might find 2023 a very difficult year.
I hope you have a great 2023 – see you around the site!
@MY Own Advisor – I'm with you on leveraged investing. That's still debt, until profits are realized and the LOC's paid off! The Oracle of Omaha had a good comment when he said "you're still going to make a lot of money in the market (with smart investing) without leverage"