good thread!!

 

I went out on a limb 3 years ago and bought my home when I was 22. I moved to a new town after college and bought a 265k home when I was only earning 35-40k/yr. I had 2 roomates to help me with the rent that have since moved. 3 years later - The home is worth 425k - 450k, I owe 195k on it, and my income has about doubled.

So my experiences with debt have been great. If it were not for easy lending limits a few years back, I would not have 50% equity in a property at the age of 25.

 

I consider myself to be debt free...although according to my credit report, I am not. My actual debts are my car, my computer, and the engagement ring. Two of those are credit cards on 0% finance plans. Since I sold my house and moved in with my fiance into hers, I decided to keep the credit cards so that it will reflect on my score.

I had my budget of what I wanted to spend on my computer, and on the ring, and I stuck to it. So now I can take the 14 month payments and pay it off in 10. I keep my one other revolving credit card, and keep a zero balance. Meaning, it is paid off each month. I use that one to rack up the airline miles. =)

Our wedding is in September. And will be paid in cash. This by far, is the the most satisfying thing I have ever done financially. Between her and I, we save as much as we can (without going into hiding) for the wedding. Sure, we'll put it on the credit card to rack up the airline miles, but then it gets paid right away. I tell you...having no debt like that is very satisfying.

After the wedding, our only debt (not including the house) will be my car...which will be paid off shortly after. For us, it is easy to live that way. I think that is key now-a-days. I don't think I could live that way on my own. Without her, I would probably be much further in debt. I tend to take that step back now and ask myself if it is really worth it. =)

 

So lets say this guy could get 0% financing for 5 years on his H3 - the $5k delta over the term would equal an approximate 1.9% interest rate.

Take that same $50k and apply it to something that would yield you a 3.5% return and you would end up with $60k after the 5 year term.

 

Yeah, but after a certain level of affluence, it's worth forgoing the potential gains ($5k) to not have any car payments or debt. I'm forgoing 0% 12-month financing on the fridge and couch I just bought, and taking the money out of my savings (money market account at like 4%) because the small amount of interest I'm giving up isn't worth the headache of more monthly payments.

That's why at low price levels and low interest rates, it's pretty much a wash and comes down to personal preference. Having done it both ways (0% financing and paying cash) for medium ($1k-$5k purchases) I'll say that cash is more satisfying. But the debt is annoying, not dishonorable or unaffordable. I'm foregoing $72 in interest ($1800 at 4%) to not finance my fridge; that's $72 worth of peace of mind and fewer checks to write/remember. But if I had $50k to spend on a new Vette, and could finance it at 0%, you bet your arse I would.