It is quite sensible if the debts are structured and have a fixed payment. However it shouldn't be more than a couple of months salary. Additionally there's usually not an opportunity to overpay (yes there's some exceptions).
So how much debt is "acceptable"?
- Thread starter Dj_Jestar
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I have £4k on a loan used to buy my car, £1.5k on laser eye surgery and 1.5k on my credit card, so in total 7k.
Montly outgoings to pay for all 3 is £320 which leaves me with 1.1k each month to spend on my car insurance, rent etc..
I find £320 fine, but i want to move out next year so i'm concentrating on getting it paid off by the end of the year.
Montly outgoings to pay for all 3 is £320 which leaves me with 1.1k each month to spend on my car insurance, rent etc..
I find £320 fine, but i want to move out next year so i'm concentrating on getting it paid off by the end of the year.
Man of Honour
I'm just about to finish off paying my student loan. And I must admit as a young pup I did go a little wild, buying myself parachutes, motorbikes, and holidays left right and centre. However, I got myself lots of extra jobs for extra income to manage my debts. I did in my later years as I was earning more, get a loan to reconcile all my outstanding loans into one. Which made it much more manageable.
However, getting back into debt scares the hell out of me, as although I have some savings and could dig myself out of a hole, I don't really want to be put back in that situation again.
However, I do understand that debts are acceptable if you're able to pay them off easily, without any fuss on a monthly basis. If I'm honest the reconciliation loan I took out was easily managed and one of the best things I did.
However, getting back into debt scares the hell out of me, as although I have some savings and could dig myself out of a hole, I don't really want to be put back in that situation again.
However, I do understand that debts are acceptable if you're able to pay them off easily, without any fuss on a monthly basis. If I'm honest the reconciliation loan I took out was easily managed and one of the best things I did.
Man of Honour
I hate debt. Apart from a very small mortage, I have no debt.. Maybe the odd occasion i'll use my Credit Card but i've paid it back pretty quick..
Wooh! Seriously, shiny things to not bring happiness! The neuropsychologists are quite clear on this one. If you're miserable, buying shiny things absolutely will not make you happy.
It might be worth you reading this book: http://en.wikipedia.org/wiki/Stumbling_on_Happiness
Is that credit card charging you interest? Seems odd to have a gross household income around the £150,000 mark yet have £2k on a CC
I personally think any amount of casual debt is quite fine as long as it's free or close to it and your net liquid assets exceed £0. With 0% credit cards in somewhat of an abundance, one can effectively spend up and invest/save at the same time. As long as any lock-in periods match up with the promotional interest rate periods, you can make money. If not, you can still get something you want now and pay a year later at no cost. The trouble, however, with the kind of debt that most people get themselves in to, is that they are paying heavily for the privilege of borrowing someone else's money to plug a continually occuring gap, making it progressively harder to escape out of.
I don't agree with them. I love having the shiny things that I do. My PCs are great, I love my phone, I couldn't get by without my Reader.
Is that credit card charging you interest? Seems odd to have a gross household income around the £150,000 mark yet have £2k on a CC
I personally think any amount of casual debt is quite fine as long as it's free or close to it and your net liquid assets exceed £0. With 0% credit cards in somewhat of an abundance, one can effectively spend up and invest/save at the same time. As long as any lock-in periods match up with the promotional interest rate periods, you can make money. If not, you can still get something you want now and pay a year later at no cost. The trouble, however, with the kind of debt that most people get themselves in to, is that they are paying heavily for the privilege of borrowing someone else's money to plug a continually occuring gap, making it progressively harder to escape out of.
combined income is 50K
I had an 8k loan at 18 to pay for my Focus and its first years insurance. That was paid off over 2 years. Since it was a negligable part of my income it was never an issue.
Now we have a 185k mortgage on a 218k house. Mortgage is £1100 p/m for a total houshold income of £4000 a month.
We have credit cards but the only one that ever gets used is the Tesco one which gets paid off every month.
Acceptable debt is any debt that you are responsibly able to pay back as far as I am concerned. Having to pay for example £500 a month when your takehome is £1000 a month is just crazy in my eyes.
At some point my Focus will give up the ghost and it'll probably be replaced with an estate of some kind. If nothing weird happens then I'll probably end up taking a loan out to pay for that over a few years. But again, if i look at our finances and think that its going to be a problem in any way then i'll not do it. You have to be sensible and if you can only take credit if you need it.
I just bought my Sandy Bridge rig and it's all been paid for outright, when i buy a new TV or anything else it'll be the same. We did 20k wortrh of work and buying stuff when we bought the house. All done on the Credit card and paid off with the cash in our account. This was our first house and we have bought absolutely nothing on actual "we dont have the money to buy this" credit.
Thats all because we are both good with money, saved up loads while we had the oppertunity and bought wisely.
I once asked my sister-in-law (18 at the time), what APR Credit card she would take if offered one at 15% and one at 30%. She had no idea so did the obvious and picked teh higher number. She is really bright but like a lot of people are woefully uneducated when it comes to money.
If it doesn't come up in the exams it doesnt get taught. Thats something that needs to change if the next generation are going to learn to be better with their money than the generation before me who remortgaged every 5 years to go to Florida and buy a new car.
Now we have a 185k mortgage on a 218k house. Mortgage is £1100 p/m for a total houshold income of £4000 a month.
We have credit cards but the only one that ever gets used is the Tesco one which gets paid off every month.
Acceptable debt is any debt that you are responsibly able to pay back as far as I am concerned. Having to pay for example £500 a month when your takehome is £1000 a month is just crazy in my eyes.
At some point my Focus will give up the ghost and it'll probably be replaced with an estate of some kind. If nothing weird happens then I'll probably end up taking a loan out to pay for that over a few years. But again, if i look at our finances and think that its going to be a problem in any way then i'll not do it. You have to be sensible and if you can only take credit if you need it.
I just bought my Sandy Bridge rig and it's all been paid for outright, when i buy a new TV or anything else it'll be the same. We did 20k wortrh of work and buying stuff when we bought the house. All done on the Credit card and paid off with the cash in our account. This was our first house and we have bought absolutely nothing on actual "we dont have the money to buy this" credit.
Thats all because we are both good with money, saved up loads while we had the oppertunity and bought wisely.
I once asked my sister-in-law (18 at the time), what APR Credit card she would take if offered one at 15% and one at 30%. She had no idea so did the obvious and picked teh higher number. She is really bright but like a lot of people are woefully uneducated when it comes to money.
If it doesn't come up in the exams it doesnt get taught. Thats something that needs to change if the next generation are going to learn to be better with their money than the generation before me who remortgaged every 5 years to go to Florida and buy a new car.
It's a tough life Neil sometimes... all I can suggest is don't bury your head in the sand and let it mount up. If you do think things are ticking over a little bit worse month to month then have a proper look at your finances, and work out how you spend all of your money and then work out how to make savings.
Soldato
Everyone around me has always been in debt for as long as i have acknowledged such things, i aim to never be in debt but accept that sometimes it's mildly unavoidable.
2 years ago i took out a finance agreement on a new comptuer, buy now pay in 12 months, i paid within the 12 months as expected.
Now the only debt i have is about £700 in to my overdraft which, the moment i get a tenant in my flat, will dwindle to nothing within 2 months and i'll be back to happily being able to spend money again on the finer things in life...and save some. This is the furthest i've ever been in debt, but i have 2 credit cards and a big over draft as backup just in case anything ever goes wrong, i don't like using money i don't actually have.
2 years ago i took out a finance agreement on a new comptuer, buy now pay in 12 months, i paid within the 12 months as expected.
Now the only debt i have is about £700 in to my overdraft which, the moment i get a tenant in my flat, will dwindle to nothing within 2 months and i'll be back to happily being able to spend money again on the finer things in life...and save some. This is the furthest i've ever been in debt, but i have 2 credit cards and a big over draft as backup just in case anything ever goes wrong, i don't like using money i don't actually have.
Soldato
put it this way if you are in debt between 1k and 15k then you wont be alone, lots of people manage money in this way. for me i just finished paying off a 5 year 10k debt from when i was a silly boy in america going VERY wild!
i now have no debt apart from the mortgage. I fully intend to keep it that way now.
i now have no debt apart from the mortgage. I fully intend to keep it that way now.
Associate
Good catch Neil!
Associate
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lifes too short to worry!
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Probably not before it needed a repair for something. According to Clarkson anyway.
That was tongue in cheek, and I actually meant the opposite of they are not miserable being in debt with/because of their shiny things.
However, I would still like them too For me it should be 2x wages for a mortgage and 3x joint wage. 10 years ago I'd say you should easily go higher than that but in those days my gas and electric for a quarter came to £90 instead of £90 a month.
There are also all the add ons people have that few did 10 years ago. Multiple Mobile phones, broadband, tv packages etc.
For me there needs to be a change in thinking that if you have to plow more than 3x your wages into a house you should be looking at other options, but that of course needs a change in the way the government flogged off all the council houses.
For other loans I'd borrow perhaps 15% of my wages over 3 years and no more.
There are also all the add ons people have that few did 10 years ago. Multiple Mobile phones, broadband, tv packages etc.
For me there needs to be a change in thinking that if you have to plow more than 3x your wages into a house you should be looking at other options, but that of course needs a change in the way the government flogged off all the council houses.
For other loans I'd borrow perhaps 15% of my wages over 3 years and no more.
Soldato
Like the OP I'm in the ZOMG DEBT IS BAD mindset.
Credit card gets paid off in full every month and the only debt I've got is the poxy student loan.
Car was bought with cash and so will the next one.
Obviously I'll end up with a mortgage, but for now I'm avoiding any form of loan/debt.
Credit card gets paid off in full every month and the only debt I've got is the poxy student loan.
Car was bought with cash and so will the next one.
Obviously I'll end up with a mortgage, but for now I'm avoiding any form of loan/debt
.
Soldato
So far as I'm concerned none except that which is owed unto me!