Debt? Who has it?
Now, I have to say, I’m flabbergasted by our modern culture of “buy before you can afford it!!” I have never bought anything that I didn’t have the money for. Yes, I have a credit card, but it currently has, and has had, a $500 limit for the last ten years. I only got it because I wanted to buy something online, and that is pretty much all I use it for these days, too.
I was brought up to work hard and save for the things I wanted. When I needed a new car last year because my 1986 Ford Telstar finally died, I used a few thousand dollars of savings to buy a 1997 Ford Fiesta. The thought of getting a car loan terrified the heck out of me. Why would I want to get a loan to buy a new car that would lose tons of value as soon as I bought it - not to mention that I would end up paying craploads more for it than the ’sale’ price, once you calculated interest.
I have one debt in my life - my HECS. For those of you not in Aus, that is the interest-free loan the government gave me to pay for my university education. It gets automatically deducted out of my tax, and will be paid off one day - I don’t really consider this ‘real’ debt, and either way, it was a most important investment.
I know that I’m approaching the time when I’ll have to get a mortgage - the thought of which really terrifies me. But, unless I want to be stuck renting forever, it’s the only way Nick and I will be able to get our own home. And so, it is good debt.
Going into 20% credit card debt to buy a phone/clothes/shoes/furniture/entertainment is bad debt. If you can’t afford these things, you don’t need them. This advice is from a girl who slept on a 2-inch thick foam mattress on the floor for three years because I had it, and didn’t really need a bed.
Make do, save your money, and you’ll be much better off for it.
I have to give thanks to Rhonda-Jean over at Down to Earth for the inspiration behind this post. Check out her post Tightening your Belt.
June 12 2008 11:17 pm | frugal living
June 12th, 2008 at 11:26 pm
I recently came accross your blog and have been reading along. I thought I would leave my first comment. I dont know what to say except that I have enjoyed reading. Nice blog.
Tim Ramsey
June 12th, 2008 at 11:31 pm
[...] Mapgirlâ??s Fiscal Challenge wrote an interesting post today onHere’s a quick excerpt Now, I have to say, I’m flabbergasted by our modern culture of “buy before you can afford it!!” I have never bought anything that I didn’t have the money for. Yes, I have a credit card, but it currently has, and has had, a $500 limit for the last ten years. I only got it because I wanted to buy something online, and that is pretty much all I use it for these days, too. I was brought up to work hard and save for the things I wanted. When I needed a new car last year because my 1986 Ford Telstar [...]
June 13th, 2008 at 8:17 am
I would say you are a very rare individual especially in your age group! Good for you, and keep up that attitude. (Sorry if that sounded patronising - I feel old lol).
I have only fallen into Credit Card debt once - when we went from 2 incomes to 1 when I had Billy. Unfortunately we kept spending like we were on 2 incomes
That scared me so much that I’ve hated them ever since!
You brought back memories when you said you slept on a mattress on the floor for 3 years - ditto when I was at uni!
June 13th, 2008 at 1:51 pm
Hi Jess,
I agree with Kez that you are a rare individual re credit card. These days, especially our younger generation, it’s all a ‘must have now mentality’ & forget that it still has to be paid when the bill comes in.. Unfortunately a lot of the ‘new’ product shine has gone off the item by the time the bill does arrive.
Must admit I use my credit card to pay almost all my bills etc but I pay it off every month in full & on time….until this week!!? Due to a recent family loss I’ve been in a real spin, forgot to pay it & 2 other bills last week & was beside myself when I realised.
Even bigger shock was ringing up to find I’d been charged a late fee plus the accrueing interest…approx $80 for 5 days late. A quick explanation & thankfully these charges were refunded…but I did have to pay my bill right up to date including current items. A lesson learned!
June 13th, 2008 at 4:19 pm
The thing with debt is that if you have it under control it can actually work for you. I have had a loan to buy investments with for a while and this has helped me accumulate probably twice as much return on my investment compared to if I didn’t have that loan.
In the end I think it really depends how you handle your debt and if in doubt talk to a reputable financial advisor first.
We are in a lucky situation where we are about to pay of most of our debt, which is nice feeling as well though.
June 13th, 2008 at 8:53 pm
I think I will also use my credit card to pay my bills once I have a mortgage, like you do, Gaida. That way, we can save interest on our home loan by having all our money offsetting it during the month.
In fact, thank you for the compliment - if there’s one thing I try to be, it’s the exception rather than the rule to a lot about my generation!!
And you’re right Mark - some debt can be good, when it’s well considered, sensible debt.
Kez, it didn’t sound patronising at all
And thanks for visiting, Tim!