Yep - it DOES add up.
That's why we carry NO debt.

(Well, I DO have a car loan, but it is at 0%... I can't see how that counts....)

I do "no debts" also and have most of my life, even when we were young and lived pay day to pay day.

The only interest I've ever paid is on the mortgages for the two houses I've bought in the last 45 years.

It never ceases to amaze me that people simply can't live without that remodeled kitchen/bathroom/etc... Then go out and replace perfectly good appliances, put them on the credit card, because they didn't "match" the new remodel!

And of course, gotta have a new car every couple years, justifying it because it has a "warranty" ROFL!

The interest sure adds up, unfortunately too many people can't add.

don't do debt apart from the house mortgage, but...

there are a lot of us who pay cash for the remodeling and new cars! Not everybody finances up to their nose. It's just the folks you always hear about are the ones in debt!

It's interesting to me that folks do not "count" the house when referring to their debt or the interest they pay. The majority of my debt is my houses. The majority of my monthly interest is what I pay the mortgage companies each month. That interest was included in my original post.

cynic, my addition was functional not cosmetic. No new appliances (or used ones either), no new car (not willing to pay the depreciation costs for the "warranty").

Not drowning in debt, not even financed up to my nose, just considering things. Heck, over half the debt in my name is paid for monthly by my tenants. Still the amount of interest paid on everyday things, including houses... adds up. Just because houses are considered "acceptable" debt, doesn't mean that the interest you pay on those doesn't add up, or that somehow it's "different". It's still paying a lot of money to borrow other people's money.

Debt is a complex thing. Some people hate it and avoid it at whatever cost, and others seem all too willing to get in to more debt. Sometimes for entirely frivolous things.

I've previously been in the first category and avoided debt almost entirely, but I'm now starting to change my opinion on debts. Starting from September 2008, I will progressively collect around 20,000 ($40,000) debt. I'm planning to go to university and this will be approximately the total cost of my student loans. Good news is that they only rise with inflation and will not spiral like other debts. It will also be paid back over a very long period of time, so I don't expect it to have a huge effect on daily life after I graduate.

It's a huge amount of money to me, which is concerning. However, I feel that the important thing in life is getting ahead. Debt can be good for that, it allows you to have something instantly. If the something that debt gives you is going to work really hard for you, hard enough to more than pay for itself and the debt, you would be making a bad choice not to get in to debt to obtain it.

I could stay at work and spend years saving for university before I can go, but I will make far more money with a degree, and I will get it faster this way. I'd also miss out on years of experience in my career, and more experience means better job prospects in the longer term future. I believe this debt will make me far more money than it costs me.

It's similar to getting a mortgage. Renting and saving at the same time so that you could buy outright would cost more, and it would take much longer. A house, when fully bought is also an asset, because then you can live there without paying any rent or mortgage. Taking on a debt so that you can get there sooner and cheaper makes sense.

These are two good examples that could affect most people's lives, but there are many other situations where debts can be good. Large corporations often take on significant debts so that they can quickly capitalise on something which is available to them. Of course, debts can be a terrible thing. I would never take on any debts that I felt were bad for me or my life plans, but I'm not going to insist I spend my whole life debt free when certain debts could be good for me.

momto6 I wasn't referring to you, simply the numbers of people I see doing that. Sorry if you thought it was meant toward you. I fully support functional improvements and reasonable debt, well managed is fine when you're in control. I was talking about others. They just amaze me.

Actually, I'm going to have to start spending some money on some adaptable housing improvements, which used to be known as "handicapped" stuff. Hopefully won't have to go into debt, and I think I'll be doing it a little at a time, in order of priority and pay as I go.

Even with a home mortgage, people should realize they can make additional principle payments and cut the cost down dramatically. Getting an amortization schedule is an enlightening thing. Just an extra $10 a month makes a big difference in the cost since you are not paying the interest for the length of the loan. We need Old Joyful to give a better detail on the amounts but by putting an extra couple thousand dollars toward principle netted me years worth of payments in savings. People get hung up on refinancing which can be costly, and could be better off simply throwing a few extra bucks toward principle.

I worked hard to get there but I carry no debt. House is paid off, car ain't much, but reliable and paid for. I had to replace the roof and facia boards on my house and didn't have to go into debt since I have a nest egg for emergencies. Actually I used the credit card for it because the roofer preferred it and I thought it would be a good idea in case of problems and the credit cards get a cash back bonus (and for gasoline, it's 5% back) and no charge, not even postage since I pay online and pay it off each month. I even paid my property taxes a little early to make sure they were received (so no penalty like a few people I know got zapped with!) I'm comfortable and happy. I don't live in a mansion but I don't need all three bedrooms I have either. I can take a trip and enjoy life a little too. I'd say there's a lot of people far less satisfied in their lives than I am. I do have good health. That's priceless.

Apart from very unusual circumstances, e.g. unemployment over one year, I try to avoid borrowing money for consumption purposes.

This is easier for me than for my younger co-inhabitants of this rather wealthy portion of the earth, for I have had more years in which to develop savings and investments.

I am much more willing to borrow for purposes of investment, to build capital ... though I have done very little of it in the past.

Even now, approaching age 80, I am willing to make such loans seeking to build capital.

This is true also in that, should I make my departure from this life system soon, my offspring-inheritors (apart from some charitable agencies) are not in need of the assets and could let the system operate undisturbed until the economy improved. I will need to arrange with the bank that they will allow my executor to continue the loan without interruption, so long as the loan continues to be fully secured.

Especially since, in the current situation, I can borrow at nearly zero net cost. This is due partly because of certain tax measures in Canada allowing deductibility of interest on investment loans, and tax advantages available for current (recently improved), plus for deferred investment income.

Further, this may be a good time to do so, since there has recently been a market correction.

It may not be the best time, yet, however, for many think that the economic circumstances in the U.S., which so far has been the pre-eminent economic power in the world, are far from ideal these days, and may not be ready yet generally to grow further.

Probably a better idea to make a portion of one's ongoing investment in faster-growing areas of the world.

Since no one knows when the markets hit bottom, it's usually a good idea to make investment purchases several times over what may be the bottom of market prices.

If one uses investment loans, that's a good time to use them, paying them off over a period, especially when one judges that the markets have been growing higher than is justified.

Most of us make savings in small and more or less equal increments over a number of years. If we use cash to invest when markets are low and later while markets are still low make loans for further investment, we can divert some of those savings to pay interest on the loans (in addition to income that the new investments generate), plus pay down the principal, reducing our usual cash investment as the markets grow again.

The idea is to get the loans paid off while the markets grow and over the top, continuing as they decline again.

I do not favour selling many assets when markets seem high ... for who knows how high they may go? I prefer to pay down the loans approaching and over market tops, and while they decline, gathering some cash ready to invest again as the markets get near the next bottom, and over the bottom, making some new loans as might seem advisable.

Making mistakes on occasion a one goes along, but trying to arrange things so that they were not too damaging.

One needs substantial skills and experience to make such plans work well, plus some strong nerves, and willingness to suffer some market drops without, in the ordinary course, losing ione's nerve and selling ... or getting bent out of shape.

A stock that I bought 41 years ago, rather too heavily involved in the U.S. sub-prime mortgage problem that's been turning into something of a debacle, has recently dropped over 35% ... which I find troubling, but am not about to sell it.

I'm thinking that I should buy stock in a different bank, however, as this is not the first unwise deal that this bank has suffered ... they were involved in the Enron collapse a few years ago, also. Selling the long-term bank stock when it recovers some.

Good wishes for making your income and assets work well for you, increasingly so as your knowledge and experience increase.

ole joyful