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Rule #1: Do not use debt to fund consumption or purchase assets that historically are not expected to appreciate within 5 years. People are getting into debt t
by 40acres 7y ago
Rule #1: Do not use debt to fund consumption or purchase assets that historically are not expected to appreciate within 5 years.
People are getting into debt to buy cars and go on vacation, this is ridiculous. Buying a house, even if it's a stretch on your income -- is not too bad. You can build equity and there is lots of support, you can even rent out a room. But going into debt to buy a luxury car? Absolute stupidity.
- dnadler 7y agoUsing debt to buy a depreciating asset is fine in a lot of situations, and different people are in different situations. For example, I'd rather have $20k in cash and a 3 year 1% loan for a car than have $0 in cash and no loan. Making hard rules about debt is what gets people into trouble in the first place. We need to spend some time teaching/learning how to reason about debt in order to make these decisions.
- jumbopapa 7y agoYou can make greater than a 1% return on your cash, so yeah that makes sense. Debt can be a valuable tool, but most people aren't using it correctly.
- whatshisface 7y agoBuying cars with debt isn't insane because oftentimes the appreciating asset you're getting is your job.