Being Debt-Free Isn't Always All It's Cracked Up to Be

[LuxLiving]

Being Debt-Free Isn't Always All It's Cracked Up to Be

http://snipurl.com/cracked


Personally I would rather suffer the few headaches from not owing anyone anything, but as is commonly pointed out in these forums, you can charge items on your credit card and pay them off monthly and not be in long term debt to anyone and still have a decent credit score for the 'industry' to check if you ever decide to jump in whole hog.

Comments from the peanut gallery????

[titi]

The sharks are not interested in those who don't bleed - I mean the guy who couldn't get a mortgage because of being debt free. ) Sure, the ideal loan seeker is somebody who pays late but pays fat interest rates. And the rest are just credit risk?

[tinapbeana]

Debt-Free, Cash Poor
Struggling to stay debt-free or to become debt-free can also lead to problems when you do so at the expense of saving for your future, says Elaine Morgillo, a certified financial planner based in North Andover, Mass. Continuously deferring savings — or dipping into them — to maintain a debt-free lifestyle could lead to serious financial woes come retirement.

"You can't exactly go back and say, 'I'd like to make up that retirement contribution from two years ago,'" says Schatsky. In other words, when tackling debts be sure to tackle other goals, like saving for retirement, at the same time. It may be the best way to ensure that you aren't looking for a loan during your sunset years.

good point, but do we really think this is going to be an actual issue for the bulk of americans?

plus, if you're "deferring savings — or dipping into them — to maintain a debt-free lifestyle ", doesn't that mean, um, you can't actually afford whatever it is you're buying?

[jlvkfyang]

I wish I was debt free.

But like in the article and in the comments of the article, I think that in this day in age, you have to have a Track Record if you ever want to purchase a car, home etc. etc. So having a simple bill charged to a credit card you pay full balance on every month is probably the best way to go.

One of my 2007 goals is to have different cards for different things, and pay them off full at the end of the month. ie. Card 1 - Monthly bills, card 2 - Gasoline purchases, Card 3 - large purchases that may take some time to pay off. Everything else will be with the Green!!

[LuxLiving]

Well, tinap, that would depend on the size of your savings and possibly your age I suppose - ex: a retiree who is dipping to buy a car w/cash might well be able to afford the dip. And that may be exactly what the money was put aside for.

I dip in quite regularly to savings - but it's savings for that item...I SAVE all year to pay my taxes, insurance, gifts, etc. and then dip in and get the money out and then spend it - so my terminology for 'savings' is different from my 'investments'. I have to watch my semantics here....savings for what? For savings sake? What do we save money for anyway because in the end it is designed to be spent so to speak. I invest for long term and I save for short term goals...and to me these are different things.

YMMV.

[tinapbeana]

Originally Posted by LuxLiving

I dip in quite regularly to savings - but it's savings for that item...I SAVE all year to pay my taxes, insurance, gifts, etc. and then dip in and get the money out and then spend it - so my terminology for 'savings' is different from my 'investments'. I have to watch my semantics here....savings for what? For savings sake? What do we save money for anyway because in the end it is designed to be spent so to speak. I invest for long term and I save for short term goals...and to me these are different things.

we're on the same page, lux. i save for taxes, insurance, gifts, medical, car, vacations, etc. when one of those items comes up, i have funds allotted and no issues pulling the money out.

but, what about the computer i want to buy? it's only $300, a great deal, and i have 'money' in my savings account right now. granted, that money is scheduled to be spent in june for insurance, but couldn't i just 'borrow it' and pay it back before june? DH would say yes, i would say no.

similar situation to borrowing retirement money to put a down payment on a house, just a smaller scale. then again, a house is (hopefully!) an appreciating asset while a computer is out of date the instant you buy it...

[LuxLiving]

I knew we were - just tap-dancing for the new kiddies to watch!

No dipping for unplanned for items. Bad hubby!! I have one of those computer geekazoid husbands that likes to upgrade a bit too often if KWIM? As a matter of fact a bit of software just came in the mail today that we had to shuffle to pay for. grrrr!

[baking23]

Originally Posted by LuxLiving

Being Debt-Free Isn't Always All It's Cracked Up to Be
http://snipurl.com/cracked
Personally I would rather suffer the few headaches from not owing anyone anything

I completely agree with that, I have no debt and that it how I intend it to stay. Apparently those of us that actually never pay interest are called deadbeats!!! I still think the laugh's on them!

[Aleta]

I think that most of us get lost on what savings are. I know that I did. I save for the same things = car insurance, Xmas, gifts, car maintenance, house maintenance, taxes, property taxes, etc. I call those expenses escrowed funds, not savings. Now, if after paying any of those particular funds for instance car insurance and I have money left over in that fund; I can move it to a savings fund. To me, a savings is for specified items like a boat, car, trip, or a wedding, etc. I call them escrow funds because that is what the mortgage companies call them when they prorate your money for the next year.

My husband used to have the same problem with the definition of savings until we changed certain funds to escrowed funds. Now, he sees those funds differently. Usually, an escrowed fund will be pain within a year. Hope this may help some out there.

[PRICEPLUS]

I like being debt free. It may be a hassle but not asbig a one as being in debt!

[simpleyme]

I consider debt free as having everything paid for including the mortgage

you cannot tell me that's not good LOL
It must be killing the banks that people with the power to borrow a ton of money (and pay them huge interest) are refusing to do so

[cschin4]

I think the article is alot of baloney. The Financial Industry has a stake in making people believe all this. They try to create a "fear" that you will not be able to get a loan, etc. Lenders trip all over themselves to give loans to anybody and their brother. If you have income and assets, you will be able to get a loan if and when you would need one. The "you need to carry debt, cc's, etc" or you are SOL only serves to perpetuate the high interest loan-sharking industry. Live within your means.

[cschin4]

Your W2 and your bank account is your "track record".

[Ima saver]

Well I am almost completely debt free and I love it. I do agree, I use my savings to pay for any unexpected things that come up, home maintenence, car repair, etc.