Let's talk about Debt!


Yes - TJ is right. When used properly, debt isn’t a bad thing. I just know what happened to me and the downfall of having a mortgage be so easily accessible. Of course, that may be different now. And, to his point, there is a BIG difference between getting in at the top and getting in at the bottom…and you have to know which one you are investing in. TJ was lucky to get in at a good time - I wasn’t! I was young, dumb, and had cash to blow… I am so looking forward to this post!! :slight_smile:

But back to the main point, is it necessary. No. It is useful (when done right), but not necessary.


Please, hijack away! Thanks again, and looking forward to your post @_TJ.


After having rid ourselves of a number of debts over the last couple of years, I now value excess cash flow MUCH more, and would advise avoiding debt as much as possible. Having debt just limits your flexibility too much.


It’s possible to utilize debt to increase your cash flow :wink: So it’s not necessarily an either/or situation.

I think most will agree that there are certain types of negative debt that should be avoided at all costs, and be something you only turn to as a last resort. Other than that, I’m relatively ambivalent towards debt, and have no qualms of taking it on when it suits my overall strategy. Such as when getting an education, or buying a home.

The takeaway should be that not all debt is created equal.


You are certainly correct that all debt isn’t equal, and education and homes are two places I would find it acceptable.
That said, I don’t like the answer being “home and education debt is OK”, because then people think we’re saying $100k in debt for a communication degree is a good idea, or that a $500k house on a $70k salary is smart. Clearly not.


Can’t disagree with any of that!


As promised. The entirely opposite example of using leverage.



Even though we lived very cheaply, we couldn’t work enough hours at entry level jobs and take classes. Once we both started our careers, it was all paid off very quickly.

Hey, that’s me and Mrs. Vigilante today! And I can’t express how fantastic it has been, for the last year and a half or so, to actually be moving forward rather than stagnating…like I was for the better part of a decade due to law school, several part-time jobs that couldn’t keep up with the costs of it, and difficulty finding legal work after graduation. Now, even though I’m still deep in debt, I feel so wealthy after having lived through that, and it feels great!


Thanks for sharing TJ. Seems like it worked out alright for you! Definitely the right circumstances happened to be aligned. I’m not sure that’s easily repeatable but if it was, I would definitely be buying a house/condo if I knew that were the case. In the meantime, my dividend portfolio will be my focus. Unless the housing market collapses again… then that’s another story!



If you’re a dividend investor, you would need to see the housing market collapse, while not seeing your dividend stocks collapse at the same time. In 2008, everything went down.

No kidding that the right circumstances had to be aligned. I’m sure there are some markets where the price is right, or at least good enough. Definitely not around here. Yet people continue to buy…


Agreed, all forms of investments were definitely rock bottom in '08. If that scenario were to repeat itself, I would still be focusing on dividends than real estate for a variety of reasons - of which half have little to do with financials and moreso with lifestyle, career, & flexibility choices. :smiley:


I would tell my younger self to wait. Don’t use cc. Save, save, save. Learn as much as possible about finances. Maybe lean towards real estate investing but to be careful.
You can argue both sides of good vs bad debt. Debt is debt, period. If I hadn’t been in as much debt over the years, all that $$ would’ve grown exponentially and I might be semi-retired today. If money is not going out then it stays put, then you can put it to work for you.

My 2 bit worth…


Timing markets is a tough thing, even when it comes to real estate. A couple of years back most of the national media and their “experts”, and everyone else, were saying that we were in a local real estate bubble about to burst. I didn’t particularly mind, as we were buying a home to live in for the long haul, so the short term fluctuations don’t really matter in that situation, even if buying right before a pop might sting a little on paper.

Less than two years later, the house next door which is more or less identical with a little lower standard sold for a 40% increase compared to what we bought it for. These days all you can read about is that nobody can see the price growth in the close to medium future :sweat_smile: Of course, the price increase matters as little as a hypothetical decrease would have done to us, because we’re still owning to live.

The point is rather to show that if we had followed the conventional wisdom at the time, and waited for a bubble to pop, we wouldn’t even be close to be able to afford what we bought two years back. Instead we bought something we could comfortably afford at the time. Today, we wouldn’t have been able to afford the same unit. In other words, timing markets is a difficult exercise, and the same goes for real estate.


I would tend to agree with that assessment in general. If you buy something that you want to stay in long term, the price in the near term is irrelevant…unless you see an unexpected gain and make a different life decision because of those gains. The easiest solution is to just not too much house in the first place. The logic sort of applies to the broad stock market funds too, who cares what the price of your existing holdings in your 401k are trading for tomorrow if you’re not going to sell them for 30 years? You can’t know the selling price 30 years from now, which is the only price that matters after you have ownership of the security.

I still think that there are times when you can take a calculated risk that is more likely to swing in your favor than the typical crapshoot with real estate. 2009-2010 out here being an example. Same with stock market in 2009. It could have kept going down, but it’s not goign to go to 0. If it gose to 0, there’s some sorto f global catastrophe beyond the financial markets. If my condo went from $135k to $60k instead of going up from $135k to $210k, then I would probably still be living in it or perhaps renting it out. You of course also have the option to walk away in a non-recourse state if you don’t have much equity in it and it seems like a lost cause going forward.