<p>Of course if your family of 2-3 is making 150K+ you better not have any debt at all, yet your contribution to the thread is more than wellcome.</p>
<p>Some of my friends who’ve never been to the states b4 get shocked when they learn about the way of life in the US and how much debt most people are willing to bear (and I agree with them) in order, not to survive, but to “ease” their already-eased lives – to: (examples)</p>
<p>1) buy houses (there are many,many, many alternatives to buying with a mortgage withe very few exceptions if any) and yes I’m being dead-serious.</p>
<p>2) buy new cars (and there are also other alternatives to this)</p>
<p>3) fancy food, fancy entertainment…etc</p>
<p>Those frinds of mine come from an area of the world where asking others (even big companies) for “stuff” you don’t need and/or didn’t earn is a ‘bad manner and mortifying’ as said.</p>
<p>I, personally, don’t think it’s a “bad manner” or “embarrassing,” it’s just an unclever thing to do. Even college loans, I find them unnecessary in many cases.</p>
<p>There is much to be argued and elaborated on, but I’ll stop by saying that contentment is priceless.</p>
<p>Sometimes debt has to be created as a strategic tool. Example, if you have a consistent high and climbing income, and only one item of debt reporting on your credit reports, the way the CRA algorithms work, it will actually REDUCE your credit score, which in turn impacts your ability to get the best possible interest rates on mortgages, car loans, etc. Having a high income and little or no debt scores as a higher risk rating by lenders. </p>
<p>What lenders like to see - and what provokes a high credit score - is a mix of debt - credit cards, mortgage, and car note for example, with a long history of on-time payments.</p>
<p>Here’s what happens if you don’t take on a mortgage to buy a house:
You lose the advantage of a mortgage interest and property tax deductions and you pay more taxes.
The money you try to put aside to buy a house earns interest/dividends, which are taxed.
You will pay almost as much money for a rental as you would need to pay towards a mortgage.
While you are trying to save to buy a house, the cost of housing continues to increase and purchasing a house remains out of reach.
You lose.</p>
<p>^^ Exactly. And if you don’t have at least ONE revolving credit card reporting on your CRA, lenders look at you as an anomoly, assign you a higher risk score, so you get stuck with a higher interest rate, in spite of the fact that you may have higher income than most people. Plus the CRAs calculate your credit score lower, which also gets you to being forced to pay a higher interest rate.</p>
<p>"Some of my friends who’ve never been to the states b4 get shocked when they learn about the way of life in the US "</p>
<p>Unfortunately, it is our culture. American’s live with debt because we cannot wait to “have”. A big portion of our economy is driven by this impatience. It is put in our heads at an early age to buy now, pay later. Credit is our national drug and we use on a regular basis, myself included. We even finance our wars on credit.</p>
<p>Well, this credit is also what allows us to leverage our entrepreneurship in a way that almost no other country can. </p>
<p>The only difference between us and the Japanese, for example, is that most of our debt is private, not government-directed. If you look at the debt-to-revenue ratios of companies worldwide, Americans are not that rare in terms of our leverage, we just don’t do it through governments like a lot of the world does.</p>
<p>“Here’s what happens if you don’t take on a mortgage to buy a house:
You lose the advantage of a mortgage interest and property tax deductions and you pay more taxes.
The money you try to put aside to buy a house earns interest/dividends, which are taxed.
You will pay almost as much money for a rental as you would need to pay towards a mortgage.
While you are trying to save to buy a house, the cost of housing continues to increase and purchasing a house remains out of reach.
You lose.”</p>
<p>Actually houses are frequently a pretty crappy investment. Unless you live in one of a few dozen large metropolitan areas with fairly rapide growth it can be a downright aweful investment relative to say the stock market. Buy or sell a house and the vigorish is very high. Maintenence costs are high and rarely if ever mentioned when people tell you how much they “made” off their house. As for the tax avoidence there are a lot of other ways to avoid taxes that leave you a lot more liquid.</p>
<p>May parents who happened to live in the middle of the rust belt bought their house for $17,500 1955 dollars, pored thousands and thousands more into the house in repair cost plus the taxes over the years. It fetched $44,000 1998 dolars minus vigorish and interest on the mortgage - granted that mortgage was something like 3%. So what was the net gain?</p>
<p>If my folks had lived in LA or SF or Washington or Atlanta or Miami the numbers would have been much different. But which is the exception and which the rulle? In 1955 our part of the Rust Belt was a booming place.</p>
<p>As for debt I would rather lend money than owe it all things being equal. I’d rather suffer the vicissitudes of the stock markets than the real estate markets. My stock broker isn’t nearly as greedy as the local real estate brokers for one thing:-) We are starting to see people who bought houses with those sub-prime balloon mortgages walk out of their houses and leave the key in the door poorer but wiser than when they made that can’t lose real estate investment.</p>
<p>Sorry about the decline of the rust belt. For many parts of the country houses have doubled in value over the past 10-15 years (or less). I guess I could have put my money in the stock market, but then I would still need to pay almost the same amount of money for a rental - and also face the prospect of moving frequently. In the past 15 years, I have spent about $10k in maintenance - new roof, new garage doors, new furnace. I probably have about another $10k in deferred maintenance and remodelling.</p>
<p>I can think of a few alternatives that are used successfully by some people but that won’t scale up well to our society in general (extended families pooling their money, DIY building on the cheap with alternative materials). </p>
<p>I’m interested to hear what else OP has to suggest. Not for me personally (I think my next home will have “nursing” in front of it), but OP might have some tips that help others.</p>
<p>edad - 10K in 15 years you must be very lucky. No washer or dryer or painting? What about the grass, the snow, the driveway, fencing, tree pruning and removal, other landscaping? Not Rotorooter? carpets? Refrigerator? Maintenence on decking? The fact is mosy people woefully underestimate the amount of money they put in to maintaining their property and virtually never count their own time as an expenditure.</p>
<p>I am not saying you have definitely spent more than 10K but I am saying you might be forgetting a few things unintentionally.</p>
<p>“Even college loans, I find them unnecessary in many cases.”</p>
<p>Do explain. Seeing as you used “many cases” I’m going to infer the exceptions are given to the lower class. How about the middle class (remember the AVERAGE income per household in the US is around 44k)?</p>
<p>“Do explain. Seeing as you used “many cases” I’m going to infer the exceptions are given to the lower class.”</p>
<p>By giving up some/most of the “amusement” time/activities. But, again, that’s not the norm in our society today, and not everybody can live this knid of fun-less life.</p>
<p>I think one needs to take a look at the ‘debt’. There’s a difference between borrowing money for investment purposes (buying a house, starting a business, education, etc.) and borrowing money for consumer purposes (buying a car, furniture, home electronics, vacations, etc.). Borrowing money for investments can be wisely leveraging one’s resources whereas borrowing money for consumer purposes can sometimes be foolishly squandering one’s resources.</p>
<p>One of the best things I ever did was to obtain a mortgage to purchase a home in Southern California. This investment in now worth many times more than the value of the loan and has put me in a far better position had I just continued renting. Disclaimer - this doesn’t work as well in all parts of the country (though it does in most) and can’t be relied upon in the short term.</p>
<p>When I consider my neighbors, the farmers of Concord, who are at least as well off as the other classes, I find that for the most part they have been toiling twenty, thirty, or forty years, that they may become the real owners of their farms, which commonly they have inherited with encumbrances, or else bought with hired money and we may regard one third of that toil as the cost of their houses but commonly they have not paid for them yet. It is true, the encumbrances sometimes outweigh the value of the farm, so that the farm itself becomes one great encumbrance, and still a man is found to inherit it, being well acquainted with it, as he says. On applying to the assessors, I am surprised to learn that they cannot at once name a dozen in the town who own their farms free and clear. If you would know the history of these homesteads, inquire at the bank where they are mortgaged. The man who has actually paid for his farm with labor on it is so rare that every neighbor can point to him…</p>
<p>We have a mortgage but carry no other debt. We always always pay off the credit cards monthly. There are vague plans to redo the kitchen someday (depending on the college plans of child #4) but we won’t do it until we have the money saved. </p>