Debt attitude

posted by Jeff | Thursday, September 8, 2011, 11:00 PM | comments: 0

I suspect that I'll spend a lot of time this month reflecting and writing about the last two years. When I think about how things have changed in that span of time, one of the things that stands out is the change in my views on debt. They are radically different.

The first real change actually came a couple of years earlier, in 2007 probably, when I nuked most of my personal credit card debt. In 2008, I cured the business as well. Ever since I got my first credit card in college, back when they'd give you a $300 credit limit, and only if you were at least a junior (I think it was 1993), I just kind of bought whatever I wanted. I definitely had a comfort level I pushed, but I just let revolving debt pile up. I nuked it once in 2000, when I sold, but just fell back into old habits.

In 2009, after that long stretch of being job-free, I racked up quite a bit of debt since I lost my job the day after my honeymoon ended. We moved to Seattle with at least $26k between my personal cards and the business (which was paying me my "salary"). Naturally my focus was to obliterate that as quickly as possible.

I also became more sensitive to long-term debt. I've always been sensitive to car debt, and I think people who make themselves car poor are morons. People who think their car represents status are double morons. But I realized the same thing applies to houses, too. As the mortgage crisis unfolded, it was clear that part of the problem was the people who bought more house than they could afford. While I didn't do that, it sure would be nice to have a mortgage that was easy to stomach in uncertain times.

When we moved, we had two to worry about, since Diana's house wasn't sold either. I realized that, especially with declining values, owning a house was a lifestyle choice, not an investment. As I mapped out a future in Seattle, it was important to me that we not get into a house for less than 20% down if at all possible, since it was likely a house would probably cost between $400k and $500k.

What it really comes down to now is security. Despite the tough couple of years in the job market, I was never in any serious financial danger, but the stress of it all definitely took its toll. Now I want to work toward a future where a significant portion of my house is paid for outright, with cash. I want to live in a world of sub-$500 mortgage payments (not counting property tax).

I think I can get there. It will depend a lot on how work goes, and where my career takes me, but I feel like it's more possible than ever, in part because I'm not paying on any revolving debt. As long as house prices don't increase dramatically, I think I could get there in five, maybe even four years. I'm talking about pool and palm tree lifestyle. It seems possible.

I don't want to imply that all debt is bad, by the way. Student loans are helpful. Sensible mortgages are essential. Revolving credit is fine if you're promptly paying it back. But when things suck, cash is king. Keep more of it.


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