When Will You Celebrate "D-Day" (Debt-Free Day)?

[Valmy]

Poors. 

Someday I shall ascend to the wealthy class and then I shall um....



no longet be mocked by Ed Anger I suppose.

[DGuller]

I can see how for people near retirement age being debt free can be a good thing, but for people in their twenties it usually means they either have very rich parents or are lazy layabouts who have accomplished nothing.

I can't tell you how many thirty-somethings I know who are enslaved to their mortgages right now, after following that same logic.

Being enslaved to a mortgage has one upside - it can work as a sort of forced savings, making your average spendthrift young adult save money they would, if left to themselves, blow. I know lots of happy thirty-somethings with no mortgage who live paycheque to paycheque and find themselves 40-somethings without any savings. They could have taken all that cash they saved by not having a mortgage and saved it in another form, but most people don't. 

Not that I think real estate is the best investment out there ...

It seems like a bit of a drastic move.  I find it easier to just allocate higher percentage to 401k.  That allows me to save passively without being tied down by a major lifestyle decision.

[Admiral Yi]

401k is probably more illiquid than a house.

[DGuller]

401k is probably more illiquid than a house.

Not sure whether that's true, but if it is, then it's a feature, not a bug, if the objective is forced savings.

[Admiral Yi]

Not sure whether that's true, but if it is, then it's a feature, not a bug, if the objective is forced savings.

But a 401K forces your forced savings into retirement savings.

[katmai]

Let's see should be debt free by Nov of 2013, but then thinking i need a new car as of 4 cars have the newest is 1993

You still driving that little 4 cylinder hoopdie you brought to Pennsylvania that one time?

nope, but it is still sitting in my driveway.

[Malthus]

Poors. 

Someday I shall ascend to the wealthy class and then I shall um....



no longet be mocked by Ed Anger I suppose.

I'm sure as long as there is Languish, there will still be mockery. 

[Malthus]

It seems like a bit of a drastic move.  I find it easier to just allocate higher percentage to 401k.  That allows me to save passively without being tied down by a major lifestyle decision.

Certainly, for those with the discipline to save in other ways, there is no need to set up a forced savings mechanism. Saving on one's own has the benefit of not tying all of one's savings to one thing.

Many people lack that discipline, though.

[Valmy]

Many people lack that discipline, though.

There are alot of great ways to save for those of us with no discpline.  Automatic drafting or paycheck witholdhing into mutual funds or retirement every month requires no discipline and is my preferred method since I pretty freaking undisciplined.

Trying to stick money in a savings account is a pretty tried and proven way for me to NOT save money

[Malthus]

Many people lack that discipline, though.

There are alot of great ways to save for those of us with no discpline.  Automatic drafting or paycheck witholdhing into mutual funds or retirement every month requires no discipline and is my preferred method since I pretty freaking undisciplined.

Trying to stick money in a savings account is a pretty tried and proven way for me to NOT save money

That's a good method - I do something similar myself (I have an automatic transfer of funds into a savings account).

Thing is, these methods lack the gun-to-the-head imperative of a mortgage. They require *some* discipline, if not as much, because (aside from retirement savings which in Canada at least has tax implications) if you want, you can take that cash out and spend it.

So good methods for those with at least *some* self-discipline.

You can think of it as a hierarchy from most disiplined to least:

Most: I will deposit my pay into my chequing account and, on my own, divvy it out into various payments and savings. Look, I have a budget on my spread-sheet ... !

Medium: I have set up an automatic withdrawal from my account into savings and retirement, and I live off the rest. I have a rough idea of what I spend on stuff, but budgets are for accountants and other such lowly creatures.

Low: I have a mortgage and so I can't spend every single dime. But at the end of the day, I have equity.

None: savings? What's that? I'm on my way to get a payday loan, there's a party tonight! 

[Iormlund]

When I said enslaved I meant that they are tied to a very expensive mortgage for up to 30 years (often around half household income).

When coupled with huge unemployment that's not at all good. If you are lucky your wage will be frozen. If you're not you might see a drop in salary or downright lose the job.

You can't sell the place if you find a job in other city - and even if you did, you won't get enough to return the mortgage. You can't toss the keys at the bank. And Hod help you if you break up with your significant other. My generation used to live with their folks through their 20s to save enough to afford a flat. Now many have to let that same flat to meet payments, and find themselves living with their parents again.

[Valmy]

When I said enslaved I meant that they are tied to a very expensive mortgage for up to 30 years (often around half household income).

Yeah this is what I thought.

[Malthus]

When I said enslaved I meant that they are tied to a very expensive mortgage for up to 30 years (often around half household income).

When coupled with huge unemployment that's not at all good. If you are lucky your wage will be frozen. If you're not you might see a drop in salary or downright lose the job.

You can't sell the place if you find a job in other city - and even if you did, you won't get enough to return the mortgage. You can't toss the keys at the bank. And Hod help you if you break up with your significant other. My generation used to live with their folks through their 20s to save enough to afford a flat. Now many have to let that same flat to meet payments, and find themselves living with their parents again.

I'm amazed that (a) anyone would be dumb enough to take out a mortgage for "half their income" (I assume you mean their monthly payments are half of their income), or (b) that a bank would lend out that much.

Now, obviously that isn't a good idea. For one, mortgage rates are at a historic low, they can only go up, and if they do and your rate isn't fixed you are truly fucked. For another, even if that wasn't true, half your income is way, way too much. The usual limit I've heard is around 30% of one's gross income, and even that is too much in my opinion.

That being said - the fact that some people are borrowing way, way too much isn't really a critique of borrowing at all, is it? That's like saying pencils are bad because some people stab themselves in the eye with them. 

[Valmy]

I'm amazed that (a) anyone would be dumb enough to take out a mortgage for "half their income" (I assume you mean their monthly payments are half of their income), or (b) that a bank would lend out that much.

I know lots of people whose mortages are half their income and they are actually pretty intelligent people in most ways.  It just amazes me.  However they are mostly single people who are in that situation...still that strikes me as a disaster waiting to happen.

Ours is 28% and frankly I think that was too high.  The final one I will shoot for more like 20%

[The Brain]

I seem to get money every month and it seems to accumulate over time.