Hi all,
I was discussing finances with an old school friend lately and discovered that he had 2 credit cards on the verge of being maxed out, a mortgage, car loan and a family on the way. Both he and his partner have reasonbly stable jobs and moderate incomes and are aged 27-29. After hearing this it really troubled me as to how they can manage these sort of debt levels and also be comfortable living with it over their heads.
I brought this up with a few other friends that are in a similar life position and the results were much the same, large debt levels across a number of loan facilities. I ended up asking them what would happen in the scenario of a recession or sudden job loss and almost all of them had no such contingency.
My personal view on debt is to avoid it wherever possible, I do have credit cards for reward points but they are all fee free and are paid off in full every month. I don't currently have a mortgage since I believe the current economic climate is too risky and current house prices overvalued.
After these discussions with friends I find myself an outcast with my financial position of being debt free, am I the odd one out in my age group (late 20's) or has large personal debt just the become the norm?
I'm interested to get everyones view on what debt facilities you have and the amount that is 'comfortable' for you to deal with.
This person evidently doesn’t know much about compounding interest or finance generally.
Suggest reading Barefoot Investor and Making Money Made Simple for a good understanding of why burdening yourself with this sort of debt for depreciating assets is a bad idea.
Be careful with your mentality about assets being overvalued. There are tonnes of reasons to not get into the markets - but there is nothing more certain than a loss if you are storing money in bank getting rates less than inflation.