Quote:
Originally Posted by HockeyIlliterate
I can agree with this statement, to a degree.
I realize that I'm making quite a presumption here, but by taking on the debt, you must now service the debt, and the service of the debt likely requires you to either (i) become (or stay) employed at a job that pays at a particular wage or higher; (ii) reduce the amount of discretionary income that you receive from your investments; and/or (iii) increase the level of risk that your investments undertake in order to maintain the same net income, after giving effect to the amount required to service the debt in order to "break even."
There are, quite possibly, knock-on side effects as well, such as increased property taxes (because the house that you have now is more expensive than the house you previously had, and thus the property tax is higher on the new house as well), increased maintenance costs (either because a more expensive house might have more expensive fixtures that cost more money to maintain or because the house is in a more expensive area and thus contractors charge more because, rightly or wrongly, they believe that the clientele can afford the increased charges), and/or increased lifestyle expenses (because living in a more expensive area may subject one to a greater "keep-up-with-the-Jones" feeling, thus causing one to increase their conspicious consumption expenses).
I guess my main point is that I'm a big proponent of living below one's means, keeping one's options open, and not being obligated or beholden to anyone. I tend to believe that having debt doesn't allow one to maintain those tenets or ideals as easily as not having debt does (or would). That's all.
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I understand what you are saying here, but I can assure you I am not living beyond my means. I could afford a larger mortgage than I took on, but I went with a mortgage, and home, which was well within my ability to do so, and had minimal impact on my financial situation. In return I have vastly improved my quality of life, thus, in my case the impact of reasonable ammount of debt I took on, is FAR outweighed by the advantages it has provided for me.
You started by pointing out that "The right house" doesn't necessarily come with debt, which is true. But to defend this point, you are saying that taking on debt makes it difficult for one to live within their means, and that is no more universally true than your advice to avoid debt. Too much debt can, and will, do that, but a reasonable ammount of debt is not necessarily a detriment to doing that.
The way I saw it I had three options:
1) stay in the burbs debt free
2) take on a modest mortgage in the inner city and enjoy a greatly increased quality of living (as I see it)
3) take on a crippling mortgage in the inner city, and erase any increased standard of living by reducing my financial ability to take advantage of my new location
My point is, that your comment that debt should be avoided isn't true in all circumstances.
Of the above choices, #3 is obviously stupid, and if someone is predisposed to make that choice, then they absoultely shoud follow your advice.
Of the remaining two choices, #1 follows your advice, but in my case #2 has made me much happier, and has had minimal impact on my fiancial situation. In my case, debt is an important and manageable tool in obtaining the quality of life that best suits my goals/desires.