The Money Mustache Community

Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: Half-Borg on November 24, 2016, 09:01:01 AM

Title: How deep was your deepest hole?
Post by: Half-Borg on November 24, 2016, 09:01:01 AM
Hello fellow mustachians,

I'd like to know, what's the most debt you had at a single point in your life.
Mortage and student loans don't count.

I would also appreciate a comment why.
Title: Re: How deep was your deepest hole?
Post by: Half-Borg on November 24, 2016, 09:02:26 AM
I myself have always been kinda responsible, I just mismanged a bit right after landing my first job and had to borrow 500 from mom. Paid back after the first paycheck hit the bank.
Title: Re: How deep was your deepest hole?
Post by: KMMK on November 24, 2016, 09:05:17 AM
Had a car loan. Dumb purchase.
Title: Re: How deep was your deepest hole?
Post by: somers515 on November 24, 2016, 09:24:04 AM
Key here being mortgage and student debt don't count.

Does it count if you have a credit card and pay off the balance in full when the statement comes?  Then I'd have to adjust my answer to try to remember what my largest credit card statement was because I'm in debt until I pay it off.  Right?
Title: Re: How deep was your deepest hole?
Post by: Paul der Krake on November 24, 2016, 09:32:58 AM
I can sort of understand not counting mortgage, but no student loans?
Title: Re: How deep was your deepest hole?
Post by: JAYSLOL on November 24, 2016, 09:46:09 AM
Very low interest loan of $9k for used vehicle purchase 4 years ago (pre MMM for me), but I paid it off early in just over a year and have had no other debt (other than a $1k or $2k on credit cards which get paid in full and on time). 
Title: Re: How deep was your deepest hole?
Post by: Janie on November 24, 2016, 09:48:52 AM
I can sort of understand not counting mortgage, but no student loans?

I don't understand not counting either really. I've only ever had mortgage debt (paid now).
Title: Re: How deep was your deepest hole?
Post by: doneby35 on November 24, 2016, 10:03:10 AM
Just mortgage, since it doesn't count, then no debt here, but it's still debt to me until it's paid off.
Title: Re: How deep was your deepest hole?
Post by: Saskatchewstachian on November 24, 2016, 10:16:20 AM
First internship in school and I started making really good money. Of course as a 20y.o the first thought was "my car is getting old I should upgrade it before it starts getting expensive to fix."

So what did I do you may ask, well I bought at $30,000 car of course!!! Atleast it was at 0% financing but still.... Not one of my best purchases.
Title: Re: How deep was your deepest hole?
Post by: patchyfacialhair on November 24, 2016, 10:17:37 AM
Voted more than 10k due to a prior car loan, but I don't understand why student loans are not counted. It's not like there's a tangible asset to back those up, like a mortgage and its home. At the end of the day it's a debt that needs to be paid back.
Title: Re: How deep was your deepest hole?
Post by: Half-Borg on November 24, 2016, 10:38:41 AM
With student loans and mortages ranging in the 100k all consumer debt would just be noise.
The question could just as well be: how big is your house and what did you study?
Title: Re: How deep was your deepest hole?
Post by: SeaEhm on November 24, 2016, 10:39:45 AM
I can sort of understand not counting mortgage, but no student loans?

I don't understand not counting either really. I've only ever had mortgage debt (paid now).

Maybe the OP doesn't care to know mortgage debt because that varies by location much more than consumer debt. 



If I take out a $10k loan on a car worth $12k? Does that mean I took on debt?
Title: Re: How deep was your deepest hole?
Post by: Half-Borg on November 24, 2016, 11:13:19 AM
Maybe the OP doesn't care to know mortgage debt because that varies by location much more than consumer debt. 


If I take out a $10k loan on a car worth $12k? Does that mean I took on debt?
Yes and yes
Title: Re: How deep was your deepest hole?
Post by: GetItRight on November 24, 2016, 01:02:41 PM
>100, since when I was younger there were a few times I carried a small CC balance for a few months. I don't understand why you wouldn't count student loans though. It's a loan backed by absolutely nothing, no asset at all. A mortgage or car loan you'd hope the asset is at least approximately the value of the loan, so that's not exactly a "hole" in most cases. In any event, >100,000 would be my answer if including student loans.
Title: Re: How deep was your deepest hole?
Post by: Zikoris on November 24, 2016, 01:18:15 PM
Back in the day when I basically didn't have any savings, I used my credit card to get me through three months of unemployment after quitting a job that was killing me (6am start time, heavy commission/quota pressure, lunatic management). It was seven years ago, so I don't remember the exact amount, maybe $2000 or $3000, and I got it paid off soon after getting a new job. New job turned out to be worse than the old one, but in different ways (unhealthy work environment, hard labour, lunatic coworkers). Argh. It all worked out eventually.

I've never owned a car or anything expensive enough to buy on credit.
Title: Re: How deep was your deepest hole?
Post by: marty998 on November 24, 2016, 01:35:45 PM
Investment property debt over 2 apartments - 3 quarts of a million.

Properties are worth 900k so it's not really a hole.

What's that saying? There's good debt and bad debt...
Title: Re: How deep was your deepest hole?
Post by: Mr. Green on November 24, 2016, 02:23:06 PM
Car loans, less than 20k.
Title: Re: How deep was your deepest hole?
Post by: RWD on November 24, 2016, 02:28:50 PM
We have a car loan that started at $28k. But we could have paid cash and didn't because the interest rate was too good. My student loans were closer to $50k which was a more real debt (no collateral, couldn't pay off immediately).

I think a more interesting question would be what was the most negative your net worth has ever been and then you could include mortgage and student loans.
Title: Re: How deep was your deepest hole?
Post by: KelStache on November 24, 2016, 02:31:40 PM
>100 (about $2,000) taken out of a low-interest LOC to pay our vendors a few days before our wedding. It was paid back within a month through our regular paychecks and a bit of gift money.

Realistically we should have saved this in advance but I hate having cash laying around and put too much in our investments before I realized we would be short.  Paid $4.16 in interest haha.

(We also have student loans but that's not counted here)
Title: Re: How deep was your deepest hole?
Post by: Tyn on November 25, 2016, 06:31:51 AM
500 to a pay-day loans company when I was a student.  Of course it seems like an insignificant amount of money now, but at the time it was extremely stressful as it came after a period of bad financial decisions and lying to my partner about it (the relationship was also a mistake, but it took me a while longer to realise that).  In the end I had to borrow the money from my boyfriend's Dad to cover it.  At least I can be thankful that I wasn't approved for a credit card before digging myself into a hole or it could've been a lot worse.

Title: Re: How deep was your deepest hole?
Post by: Metta on November 25, 2016, 07:10:24 AM
We have a car loan that started at $28k. But we could have paid cash and didn't because the interest rate was too good. My student loans were closer to $50k which was a more real debt (no collateral, couldn't pay off immediately).

I think a more interesting question would be what was the most negative your net worth has ever been and then you could include mortgage and student loans.

I also think that would be a more interesting question. Perhaps you could do your own poll. :)

In answer to the question, the most debt I ever had that didn't include mortgage or student loans was $25,000 for a car loan.
Title: Re: How deep was your deepest hole?
Post by: snogirl on November 25, 2016, 07:16:34 AM
45k trying to rescue someone & divorce. Now 4 years later debt free. I used a mix of MMM, Julia Cameron, Dave Ramsey & The Minimalists to put out my hair on fire. Today I am in such a different place, i just quit the soul sucking job I needed due to my previous lifestyle now FIRE (I'm retired Army). My life is right sized & full. Today is full of opportunity for sure!

Sent from my DROID RAZR HD using Tapatalk
Title: Re: How deep was your deepest hole?
Post by: LeRainDrop on November 25, 2016, 01:54:44 PM
I took a $10k car loan because it was only 2.0% interest and I figured I'd rather keep my cash/investments unaffected.  But then I realized the only way to pay was to walk into one of their bank branches in person, which I did for several months, but then decided it was too much of a pain in the a**.  Also, they were supposed to reduce the interest rate slightly if I opened a checking or savings account with that bank.  I opened the account, but those months later, they still hadn't reduced the interest rate on the loan, and I was getting the run-around.  At that point, I said f***-it, and paid off the full balance of the loan.  Besides that car loan (and the mortgage and student loans that the OP exempted), I've never had any debt.
Title: Re: How deep was your deepest hole?
Post by: GuitarStv on November 25, 2016, 02:01:24 PM
Our mortgage was just under 300 grand after a hefty downpayment, but for some reason that debt doesn't count?  We bought our first car new, for cash (still driving it).  Worked through high-school and university to pay for the degree so no debt there.  We pay off our credit card in full every time.  So . . . I guess 0?
Title: Re: How deep was your deepest hole?
Post by: Bracken_Joy on November 25, 2016, 02:12:11 PM
Whoops, I submitted before spotting mortage and SLs don't count. So uh... take off one of the >200,000 ones. Can't find a way to "unvote"

ETA: consumer debt assumed at once? $3300 this week for new appliances. We could have paid outright, but there was a $75 visa cash card for going through their 12 month 0% financing. We'll be paying the account off in full as soon as I get it set up.
Title: Re: How deep was your deepest hole?
Post by: Emg03063 on November 25, 2016, 02:30:08 PM
Also voted before reading.  Subtract one $100k plus.  My actual answer would be ~$75k.  Breakdown as follows:

$30k bridge finance loan from the bank of Mom and Dad to cash-in refinance an underwater primary residence at 2.25% (does that count as mortgage debt?)
$28k 5kw solar panel installation on said primary residence (before 65% tax credits)
$10k Foundation sealing & French drain install on another primary residence (accounted for in offer price)
$10k Replaced original 1935 single pane windows in same residence with double glazed vinyl.  (Probably not the fastest payback on energy savings, but the right thing to do for the planet IMO, and I expect to regain in increased resale or rental value eventually).

I probably have about $32k of that left to pay off.  (All under 3% interest).  Hopefully within the year.
Title: Re: How deep was your deepest hole?
Post by: SouthLand on November 25, 2016, 05:20:05 PM
$21,000

My old car died one day out of the blue. That same day I bought a new car.

I didn't plan to purchase a new car, but a lot of things led to me giving into my lesser judgement. The death of the old car was sudden and unexpected. My job demands use of a car. I had no experience shopping for used cars. And my father was on site and pushing me towards a new car, which I let influence my decision making.

I plan to make it the last new car I ever buy.
Title: Re: How deep was your deepest hole?
Post by: JumpJ on November 25, 2016, 08:57:08 PM
$142,132
$85,296 personal loan for a home remodel project
$52,149 was credit card debt for same home remodel project
$4,687 was car loan

Just got out of debt in August after a long, long painful journey that unfortunately included a short sale on the house in 2012.  I lost 100% of that $142,132 as the house sold for $212,500.  Something, something, something don't start a home remodel right before the mortgage meltdown.  Whoops.
Title: Re: How deep was your deepest hole?
Post by: clarkfan1979 on November 25, 2016, 09:33:13 PM
When the economy was kicking ass from 2004-2007, I was in grad school making 15K/year. If I was making 100K like many of my friends, I probably would have fallen for the same trap of buying a bunch of shit on credit that I didn't need. I couldn't afford to take on any debt, so my low income protected me.

I did take on student loan debt, but I partially used the money to purchase a rental house when in grad school. To my knowledge my net worth has never been negative.
Title: Re: How deep was your deepest hole?
Post by: C-note on November 26, 2016, 07:14:47 AM
If you include Home Equity Lines of Credit or Loans (second mortgage) then our deep hole was about $75,000 which covered a major house remodel.  We paid if off in about 2 years.
Title: Re: How deep was your deepest hole?
Post by: boarder42 on November 26, 2016, 07:21:01 AM
always have car loans.   get cheap cars with the loans and usually sell for more... at today's rates car loans are free money. 
Title: Re: How deep was your deepest hole?
Post by: spicykissa on November 26, 2016, 07:45:21 AM
I don't know why student loans wouldn't count--they are a real hole, that can't be discharged in bankruptcy. That's 99% of my >$100,000 vote.
Title: Re: How deep was your deepest hole?
Post by: 2Birds1Stone on November 26, 2016, 08:37:02 AM
Never had debt.
Title: Re: How deep was your deepest hole?
Post by: SeaEhm on November 26, 2016, 09:04:39 AM
If you include Home Equity Lines of Credit or Loans (second mortgage) then our deep hole was about $75,000 which covered a major house remodel.  We paid if off in about 2 years.

HELOCs and Seconds should be counted though.  Thanks for bringing that up.

I am with boarder and am not scared of some debt (mortgage and car loan)

I ended up paying off my student loan early with investment money because the nearly 7% interest rate wasn't too great in my opinion.

I carried a few thousand on credit cards before for a few months because I didn't want to have a small amount in my savings after paying it off.  Looking back it was a foolish mistake.  However, I was young and let emotions completely override logic.
Title: Re: How deep was your deepest hole?
Post by: 2Birds1Stone on November 26, 2016, 10:03:45 AM
always have car loans.   get cheap cars with the loans and usually sell for more... at today's rates car loans are free money.

Can you elaborate on this? I understand that 0-2% APY is free money, I mean the first part of your statement.
Title: Re: How deep was your deepest hole?
Post by: boarder42 on November 27, 2016, 06:47:51 AM
always have car loans.   get cheap cars with the loans and usually sell for more... at today's rates car loans are free money.

Can you elaborate on this? I understand that 0-2% APY is free money, I mean the first part of your statement.

as long as rates are where they are just like my mortgage i will always have a car loan.  you can get a car loan on a car you already have typically from credit unions.  i see no reason to not have one.  now my mortgage being fixed at 3.25% for 30 years we'll likely never see that again.  so i will likely only have that mortgage til we sell or for 30 years unless math makes sense to REFI. 
Title: Re: How deep was your deepest hole?
Post by: 2Birds1Stone on November 27, 2016, 07:16:27 AM
always have car loans.   get cheap cars with the loans and usually sell for more... at today's rates car loans are free money.

Can you elaborate on this? I understand that 0-2% APY is free money, I mean the first part of your statement.

as long as rates are where they are just like my mortgage i will always have a car loan.  you can get a car loan on a car you already have typically from credit unions.  i see no reason to not have one.  now my mortgage being fixed at 3.25% for 30 years we'll likely never see that again.  so i will likely only have that mortgage til we sell or for 30 years unless math makes sense to REFI.

Very interesting, so hypothetically if I were to own a car valued ~$16-17k you would get a loan for that amount from a CU, invest it, and make payments?

Does the loan have any other costs associated with it? (higher level of insurance coverage, financing costs, etc)
Title: Re: How deep was your deepest hole?
Post by: boarder42 on November 27, 2016, 07:27:13 AM
you have to carry full insurance.
Title: Re: How deep was your deepest hole?
Post by: icemodeled on November 27, 2016, 07:29:16 AM
Largest debt was a car loan we took right after getting married. It was about $15k. We paid it off in half the time and vowed never to get another car loan again. Plus we paid way to much! It's a good vehicle, have been using it 6 years with very minor issues.
Title: Re: How deep was your deepest hole?
Post by: bugbaby on November 27, 2016, 07:34:52 AM
I had 35k cc debt, though most was to pay for grad school living expenses. (At the time also had 175k student loan and some 20k personal loan). Paid it all off, bought and paid off a house then 'retired' briefly abroad (for 2 yrs) . Now back in US to restart work and just took out 14k car loan and 6k cc. (20k debt currently)

Sent from my Nexus 5 using Tapatalk

Title: Re: How deep was your deepest hole?
Post by: Villanelle on November 27, 2016, 08:00:24 AM
$0 on my own, and about $5000, IIRC, which I married in to and was quickly paid off.  It was CC debt and a car loan that DH racked up in college and shortly thereafter.  Thankfully, he married a woman who was wise with money and showed him The Way.  ;)

We also once had a car loan for about $15,000 because we got a loan at .09%, and I knew it made sense, but I couldn't stand it and paid it off after a few months.  I don't really count that though, as we had the cash to pay it and the loan was taken out strategically.

Everything else has always been for the purchase of property. 
Title: Re: How deep was your deepest hole?
Post by: Bracken_Joy on November 27, 2016, 08:06:22 AM
always have car loans.   get cheap cars with the loans and usually sell for more... at today's rates car loans are free money.

Can you elaborate on this? I understand that 0-2% APY is free money, I mean the first part of your statement.

as long as rates are where they are just like my mortgage i will always have a car loan.  you can get a car loan on a car you already have typically from credit unions.  i see no reason to not have one.  now my mortgage being fixed at 3.25% for 30 years we'll likely never see that again.  so i will likely only have that mortgage til we sell or for 30 years unless math makes sense to REFI.

Very interesting, so hypothetically if I were to own a car valued ~$16-17k you would get a loan for that amount from a CU, invest it, and make payments?

Does the loan have any other costs associated with it? (higher level of insurance coverage, financing costs, etc)

Yeah this is very interesting. Never had considered this. I know people talk about using HELOC to invest, and there's all the debate around that.

Are there loan origination fees or anything?
Title: Re: How deep was your deepest hole?
Post by: lhamo on November 27, 2016, 11:57:32 AM
Last year we bought a new car.  (I would have preferred used, but DH wanted new).  By accepting the dealer financing option, we qualified for a $2000 cash back offer (which we put toward the down payment).  I paid the loan off with the first payment, paid around $80 in interest. 

Never had student loans.

Highest mortgage was just under $300k on a property valued at the time at around $800k. 
Title: Re: How deep was your deepest hole?
Post by: WootWoot on November 27, 2016, 06:28:43 PM
By the time I was 23, I was $10K in the hole in credit card debt. STarted working at 18 and running up the bills. Also had a $1,800 car loan for a vehicle I should have easily been able to pay cash for, since I was living with my parents. Big, big mistakes.
Title: Re: How deep was your deepest hole?
Post by: Jaguar Paw on November 27, 2016, 08:07:20 PM
Bought a new Mustang when I had 4 months on my new job at 22 years old. Everyone else was buying new cars so it seemed like the right thing to do. I hadn't found a site like this and wasn't quite yet frugal. Luckily I quickly realized that debt was stupid and borrowing for much other than a house is not fur me
Title: Re: How deep was your deepest hole?
Post by: bugbaby on November 28, 2016, 12:09:27 AM
I was in 35k CC and 20k personal loan debt (mostly for grad school expenses) , in addition to 175k student loan. Was so miserable. Paid it off 2yrs ago. Now I've 14k car and 6k CC .

Sent from my Nexus 5 using Tapatalk

Title: Re: How deep was your deepest hole?
Post by: SeaEhm on November 29, 2016, 06:39:46 PM
Bought a new Mustang when I had 4 months on my new job at 22 years old. Everyone else was buying new cars so it seemed like the right thing to do. I hadn't found a site like this and wasn't quite yet frugal. Luckily I quickly realized that debt was stupid and borrowing for much other than a house is not fur me

looks at username

that's punny
Title: Re: How deep was your deepest hole?
Post by: SwordGuy on November 29, 2016, 08:49:42 PM

$55,000 to buy a 10% stake in a small software consultancy.   It went belly up but I still came out ahead on the deal.
$16,000 replace my car with the last new car I bought.
$16,000 replace my wife's car with the other last new car I bought.  (Bought them on the same day in the same deal.)=======
$87,000

Also had $114,000 mortgage.

Paid all that off.

==============

Last year I had a $180,000 mortgage for our new home and a $55,000 HELOC I used to buy rental #3 and also for part of the down payment on the new house.   We're down to $41,000 on the HELOC and refinanced the mortgage to a 15 year from a 30 year, so it's about $179,000 at the moment.

Don't like that much debt, but we own a total of 5 homes (6 this coming Monday).  2 are income producing, 2 will be income producing within 3 months, the 5th will be flipped in about 2 years (or sooner if we finish it faster than anticipated).



Title: Re: How deep was your deepest hole?
Post by: AZDude on November 30, 2016, 08:57:50 AM
Probably right around $20K, if you count a new car loan and some relatively modest credit card debt.
Title: Re: How deep was your deepest hole?
Post by: CheapskateWife on November 30, 2016, 09:05:25 AM
$35K on a used Winnebago.  Our interest rate is incredibly low compared to our taxable market returns, so we decided to leave assets in the market and pay a little interest. 

One of our best tools for deciding where to put extra cash is an amortization calendar for both the house and the RV.  At the current interest rates, our extra cash reduces more interest on the RV than the mortgage, but that is going to flip once we get the balance down on the RV.  The amortization calendar helps us make those decisions for "best bang for the buck" on debt repayment.

So we have debt...and I'm not ashamed!  I have enough invested assets to wipe out all my Debt but am leveraging the credit to maximize our invested earnings.  That might seem in opposition to the MMM ethos but frankly, it just feels like good business.
Title: Re: How deep was your deepest hole?
Post by: Slee_stack on November 30, 2016, 10:13:11 AM
Didn't vote as the rules don't make any sense.

There's no difference to $50 or $500K in debt if your assets offset accordingly.

Paying cash for a NEW car is just as much 'hole digging' as taking a loan on one.

Is robbing Peter better than robbing Paul?
Title: Re: How deep was your deepest hole?
Post by: AZDude on November 30, 2016, 10:46:06 AM
Paying cash for a NEW car is just as much 'hole digging' as taking a loan on one.

Not really. The hole if you pay cash is simply the value of the car minus the value you paid. A NEW car will lose like 20% of its value, allegedly, so the hole is 20% of the total price.

$30,000 car * 20% = ~$6,000 hole.

If you finance that $30,000 car because you have no savings, then all sorts of bad things happen. You lose cash flow(something like $300 to $500 a month, depending on interest rate, down payment, loan length, etc...), you probably pay interest, etc.

If you pay cash for a car and lose your job, you could immediately sell it and buy something cheaper(or buy nothing and go carless). If you finance and lose your job, you might be unable to pay the gap and are thus stuck with the car or the car gets repossessed and you get a credit ding.

It is not even close to the same.
Title: Re: How deep was your deepest hole?
Post by: honeybbq on November 30, 2016, 10:52:08 AM
I had about 10k in credit card debt when I graduated with my Ph.D. Part of it was planned and I didn't really worry about it.

I spent a month in Australia before I defended.
My roommate moved out about 6 months before I sold my condo and I decided not to replace her.
I was moving and needed to rent a uhaul to move 1500 miles, etc.

On the plus side:
- I sold my condo and made ~25k
- I had a 6 figure job waiting

I have never had a car loan, and only 1k in student loan debt that I used as a downpayment on my condo.
Title: Re: How deep was your deepest hole?
Post by: sol on November 30, 2016, 10:59:15 AM
I married into a few thousand dollars of debt for a car loan.  She had the money in the bank to pay it off, but had just never considered life without a car payment before.

At one point in college my research job paycheck was withheld because I hadn't paid a $1k tuition bill and wasn't a legal student anyone.  I borrowed it from a guy in my dorm who owned a chain of hotels, so I could pay the bill, so I could collect my paycheck, so I could pay him back.  It took about a week, and it was one of the more horrible feelings I've experienced in life.  And he didn't even charge me interest.
Title: Re: How deep was your deepest hole?
Post by: PoutineLover on November 30, 2016, 11:27:08 AM
Oops I just clicked on the poll before reading the post. My student loan debt was 33,000 but other than that I've never had debt. I don't count using my credit card, since it's paid every month.
Title: Re: How deep was your deepest hole?
Post by: Dicey on November 30, 2016, 11:46:06 AM
I borrowed $6k from my 401k. Used it for a condo that doubled in value in less than four years, so not a bad move financially, BUT:

What I despised about it was how easy my employer made it seem. No one explains that you borrow pre-tax money "from yourself, lol", pay the loan back with post-tax money, and get taxed again when you withdraw the money in retirement. All the while, your money is out of the market and not working to your benefit.

This was disclosed, but was the worst of all: you had to pay it back within 30 days  of leaving the company. That means you cannot leave the company for a better opportunity while you have this debt. I was shocked at how indentured I felt every second I had that loan. I killed it within a year, but hated every minute of carrying that debt, even if it was "to myself". No, just No.

Take heed, grasshoppers.

Oh, and I totally concur with boarder42's approach to super-cheap (used) car loans. Though I never had one for over 10k, so it wouldn't change my survey answer.

Edit: Autocorrect can be a sneaky sonofabitch.
Title: Re: How deep was your deepest hole?
Post by: ender on November 30, 2016, 12:19:46 PM
We have had $6k on credit cards periodically.

I had a car loan at one point of around the same amount until I realized I could just pay it off, so I did.

Paying cash for a NEW car is just as much 'hole digging' as taking a loan on one.

For what it's worth, we just bought a new car and we paid about the same that 2015/2016 model years with miles on them cost. Not all new cars are created equal when it comes to digging a hole.
Title: Re: How deep was your deepest hole?
Post by: ambimammular on December 01, 2016, 05:47:23 AM
So I mis-answered. I always try to answer before I read the comments so I don't bias myself, and consequently, I put student loans and mortgage in the debt category. Other than those the biggest debt was a car loan for 4000. They wouldn't let us pay it all with a credit card (for the rewards/travel points). We went home and weighed out the flexibility of drawing it out and investing vs just paying it all off. 4 months later I was over it and we sent them a check.
Title: Re: How deep was your deepest hole?
Post by: Slee_stack on December 01, 2016, 11:54:15 AM
Paying cash for a NEW car is just as much 'hole digging' as taking a loan on one.

Not really. The hole if you pay cash is simply the value of the car minus the value you paid. A NEW car will lose like 20% of its value, allegedly, so the hole is 20% of the total price.

$30,000 car * 20% = ~$6,000 hole.

If you finance that $30,000 car because you have no savings, then all sorts of bad things happen. You lose cash flow(something like $300 to $500 a month, depending on interest rate, down payment, loan length, etc...), you probably pay interest, etc.

If you pay cash for a car and lose your job, you could immediately sell it and buy something cheaper(or buy nothing and go carless). If you finance and lose your job, you might be unable to pay the gap and are thus stuck with the car or the car gets repossessed and you get a credit ding.

It is not even close to the same.
Unfortunately you missed the point.  I'm unsure why folks don't accept the context of this forum.  I am not talking about broke idiots buying cars they can't afford. This is the MMM forum!!  Its moving assets and liabilities around. 

If you have $1M in assets and you buy a NEW $30k car with cash or you take a loan for that $30k, there is zero difference.  You either end up w/ $970k left earning money plus a vehicle (with a 15% loss off the lot) worth $25K.  Thats a new NW of $995K.

Or you can take a loan at a low loan rate that most mustachians (ie not broke idiots) will get.  That means liability of $30k at X% (usually 2% nowadays even on used cars) plus untouched $1M earning money.  What's the NW total?   Yup, $995k.  EXACTLY the same. 

The ONLY difference is that $30k now sits in liability at X% while an additional $30k sits in investments at some other rate (hopefully higher than X!).

Its called opportunity cost.  You are wasting money (ensuring a loss) buying the NEW car either way, that's a constant.  Where will you bet the $30k will do better?  Thats the only question.

Similar applies to Investment properties.  You take a loan (liability) for several $100k presuming that you will have a positive return on that loan.  You shift a cashed out asset to real estate that (hopefully) produces a better income stream.  Does that put one 'in the hole' several $100k? Heck no!  The poll is useless.   If all my money is in cash, stocks, or rental properties, the only difference is asset type.

As an example I have a used car loan for $7000 at 2%.  And yes I could have sold after tax mutual funds instead and just purchased the car out right.  I am simply wagering my funds will net me a better return over the next 3 years than 2% (+ancillary costs...insurance...etc).  They may not. 

Regardless, my NW at time of purchase dropped by transactional costs (title, tax, etc.). That is the actual 'hole'.  I am not suddenly in a $7000 hole just because I have a liability added to the balance sheet.


Title: Re: How deep was your deepest hole?
Post by: redbird on December 01, 2016, 12:11:37 PM
$10,000 for a car loan. I had it with my bank so the interest rate was low. I paid it off in only about 2 years. The loan was for 5 years, so I avoided a bunch of interest that I could've had at least. This was about 15 years ago. All cars since I've paid for in cash.

Since we're excluding mortgages (I used to own a house - not currently), that's the only debt I've ever had. I have never had student debt (work partly paid, I partly paid out of pocket) and never got myself into credit card or other debts.
Title: Re: How deep was your deepest hole?
Post by: Vic99 on December 01, 2016, 02:20:32 PM
Car loan, 4 years, 0% interest.
Title: Re: How deep was your deepest hole?
Post by: robartsd on December 01, 2016, 02:37:05 PM
Reading the topic, I thought this would have been lifetime negative net worth. Ignoring mortgage (~150k), and student loans (~30k), the only other significant debt for me has been a (pre-MMM) auto loan (~13k). We could easily pay off the remaining balance of the auto and student loans now, but the rates are low enough that I don't choose to. We did pay off student loans with rates around 6% before saving a down payment for our house. Our current highest rate is 3.75% fixed on the mortgage.