Lifehacker - "Is My Debt Really That Bad?"

[chronohart]

I found this article on Lifehacker.com this morning about how bad debt really is and it left a bad taste in my mouth. They actually use the word "good" to describe mortgage and student loan debt and consider car loans and business debt to be potentially 'good,' as well, saying that some debt is just a necessary evil for most people. I understand their reasoning, but calling any debt "good" is making much too simple a matter of it.

http://lifehacker.com/5897243/is-my-debt-really-that-bad

What do you guys think about the article?

[MrSaturday]

I'd classify the debts a little differently.  I don't know if I'd call any debt "good", but business and student loans at least allow you to leverage the liability into greater income.  Mortgages and auto loans might be considered "necessary evils" in some cases but most of the time they're used for wants rather than needs.

[arebelspy]

Some debt is not just good, but GREAT!

I'd take a million dollars in debt right now at 3%.  Or 10.

I had mixed feelings about the LH article as well.

The DTI calculator was fun, I hadn't run it since picking up my last few rentals (which, btw, lenders usually only count 75% of rental income towards income, but will count 100% of the liability - PITI, so keep that in mind if you have rentals and are looking for more mortgages).

[Dollar D]

I'd take a million dollars in debt right now at 3%.

I made this exact same statement recently but I was willing to pay 5%! Any takers?? :)

[arebelspy]

Hah!  I like you, Dollar D.

I agree; I'd take it at 5%, and likely even higher.

I left it purposefully low to illustrate my point and hopefully avoid arguments from the anti-debt (any debt) crowd.

[shedinator]

I found this article on Lifehacker.com this morning about how bad debt really is and it left a bad taste in my mouth. They actually use the word "good" to describe mortgage and student loan debt and consider car loans and business debt to be potentially 'good,' as well, saying that some debt is just a necessary evil for most people. I understand their reasoning, but calling any debt "good" is making much too simple a matter of it.

http://lifehacker.com/5897243/is-my-debt-really-that-bad

What do you guys think about the article?

I can understand having difficulty with it, but the only think I see in that article that's anti-mustachian (by which I mean "against the teaching of Mr. Money Mustache" is their take on car loans). MMM has argued in favor of "squishy debt," uses a credit card, acknowledges the benefits of leveraging properties with mortgages, etc. While I think rule #1 when dealing with debt is "Cash is King," I see no problem dividing debt into the good and bad kinds. How risk averse you are will factor into how you classify debt, but overall if you will end up profiting from a debt, it's fairly safe to call it a good debt.

[Daley]

Hah!  I like you, Dollar D.

I agree; I'd take it at 5%, and likely even higher.

I left it purposefully low to illustrate my point and hopefully avoid arguments from the anti-debt (any debt) crowd.

I'm hardly a broad representative from the anti-debt crowd, but I figured I'd chime in. Personally, I despise debt in my personal life, view it as a stumbling block for my wife and myself, and as most commonly practiced currently a form of modern enslavement with the general public... but it's a very contextual and specific opinion with exceptions.

Debt itself is not bad so long as you have the assets available to cover that debt at short notice if something were to go sideways (fairly priced real-estate valued higher than the outstanding debt at short sale prices for example), and debt is not bad so long as carrying that debt does not incur a greater financial burden than it resolves long term. Certain forms of debt in the right hands can also be a powerful wealth building tool so long as it is used responsibly and you can cover that cost.

Where debt is evil and cloying and enslaving is when you allow your debt to exceed your total net worth, and so long as you're upside down in that manner, no debt in my book is good debt. Unfortunately, that is the most common form of debt in this country and one of the greatest causes of the overwhelming financial stupidity sweeping through the first world. One should never loan money that they cannot afford to lose, just as no-one should borrow money they cannot afford and/or be willing to pay back.

Myself, I don't have a problem with the concept itself, but the practitioners and holders of the keys to financial lending in this country have left such an unsavory flavor in my mouth the past decade that I'd just as soon do without, but that's my personal opinion and cross to bear in that it's depriving myself of opportunities that I might otherwise have, and I don't begrudge others who do so rationally and responsibly. So if you got the chips to cover that bet if your hand is called and/or the stones to stand behind and deliver every last penny no matter how long it takes, go for it. Otherwise, don't begrudge me for holding the opinion that it's an irresponsible, unnecessary risk.

[Grigory]

The only debt I'll tolerate is the kind that's either interest-free or tax-deductible. That's why I don't have a car debt but I use a credit card (which I pay off in full every month) and still have student loans. (Their interest is tax-deductible and far lower than what I make with my investments.)

[James]

I have $35,000 in student loans at around 3% that I'm paying off over the next year, even though I could take five more years if I wanted.  I realize I'm paying a "comfort tax" to pay it off, that it could gain me a nice profit if I put that in index funds or whatever instead, but I'm ok with that.  I still save around $40,000+ a year on top of paying that off, so I decided I can afford the comfort tax and pay it off.  But I can certainly understand why others wouldn't and have no problem with that.  I might very well kick myself in 5 years for being short sighted, but I've made much worse mistakes I'll have to live down first...  :)