So I was thinking the other day after talking to one of my friends about wanting to buy something. However in order to buy it, I'll put myself about $500 further into debt. First off, I'm not someone with tens of thousands in debt, and doesn't know how to control spending. About 3 years ago had about $20,000 in debt including a car that was being financed. Now the car's paid off and debt is hovering at under $5,000, for someone in their mid 20's that's not at all an unreasonable amount. As of right now I have it planned that the remaining debt will be paid off no later than my tax refund in the Spring. So I would consider myself responsible in that regard, so please refrain from the 'stop being a slacker/POS/irresponsible ect. person and pay your debts' comments. But I was thinking, we only live once, some of the best things in life are memories and you get those by going out to see the world and do things to create those memories. Because when you're old and look back at your life, that's all you have. So should you live with the constant debt of the things you want to do when you're young and capable enough to do it? Or just tow the same line that you're supposed to, work and save up money for retirement? Figured this might turn into a debate, so thought it appropriate to post here. Thoughts??
If you're someone like me who might want to pick up any second and move out of the country or quit my job or start a business, etc you want to stay as flexible as possible. For the lifestyle that I want to live, financial freedom = freedom. Therefore debt = jail, because you usually need steady income to pay debt. Right now I figure I don't need anything. I'm getting the cheapest + most habitable appartment I can afford, plus I'm selling my gas-guzzling car and getting something very small and inexpensive. I figure the more I can save up, the closer I get to doing things I want to do, and the longer I save, the more variety of opportunities I get. Enjoying spending money is good and it's important. But you may want to think about timing more than anything else.
It's all about where the money goes for me. OP says he's paying $500 to get better quality of life. That's fine and it's an American thing to do. Spending your money to reward yourself and a company/product you believe increases personal happiness and improves the economy. The problem is that OP is not paying $500 for the product, he's paying $500 for the product and then 14% interest on it to the credit card companies. I personally have a problem giving money to the credit card companies. So my advice to OP is to either stay disciplined or find a 0% card.
Depends on other stuff. Is your net worth -$5000? Or do you have boatloads in gold (in which case you might want to consider paying off your debt before all else). How stable is your income? And what is your income to debt ratio? If you just got a big raise and $500 is a small part of your new paycheck, then it's not as a big as a deal.
Its taken you 3yrs to pay off 15K, then you should be able to pay off the last 5K in just a few months. Take 1 more year, pay off the last 5K as quickly as possible, then put 6X your monthly expenses in a money market fund that you can access for emergencies, and then you can afford to spend some money on things you want. At your current rate, you should be able to do this in a year or so. You'll be surprised how much money you have left over each month when you don't have any debt at all & all you have to pay is utilities and food. You're young, be smart now so that you can enjoy life later. You're doing so well already, you can delay the gratification for another year.
It's always a constant balancing act between living for today and saving for the future. You have to do both. In the end the judgement is up to you, to find your comfort level. Most memories are made while you are young, but you are old a lot longer than you are young. If you feel that pang of guilt or dread when you consider the expenditure then trust that feeling. If you get exhilaration when you consider an expenditure then you need to capture that if you can rationally pay for it. I've got one of those going right now. My wife and I have done something every year between Aug. 17 the her birthday, and Aug 24 our anniversery (37th). But this year A. is a bad year for passive income and B. we spent a considerable amount rebuilding the family beachouse after Ike. So it may be no vacation for us for the first time ever.
I always liked the quote about interest. You can work for it or it can work for you. If you are in debt, you are working for it. If you are out of debt and saving money it is working for you. I think you will find that you can actually have more fun when you get out of debt, because you are not worried about paying stuff off. If you really want something, you have the disposable income to save for it. Makes life easier.
QFT! It would scare the crap out of me if I knew the total dollar amount I've paid in interest in my life. 12 years ago I said enough and have gone "cash" ever since. The only time I accept an interest payment now is in buying houses. That's it. Of course I had to save/sacrifice a lot to get in a posititon to pay cash but it's well worth it.
My favorite interest quote is, "Those who understand interest, earn it. Those who don't, pay it." I'll echo what Mr. Clutch said, Spend money on experiences, not "stuff." But there is one caveat, if you can afford it. I was in over $10,000 of debt once and the feeling was absolutely horrible. The more things I put on credit that supposedly made me feel better only made me feel worse a month later when I had to pay, PLUS interest. The novelty of the purchase wore off quickly. I finally decided I didn't want to be a debt slave. When I finally made that last CC payment, it was the greatest feeling in the world. That was about 3 years ago, and I have never paid a penny in interest since. You've been disciplined enough to pay down $15000, don't falter now. you say, what's another $500? but that's adding 10 percent to your current debt, not the mention the interest you will pay on that $500. i would pay the $5000 first, then reassess whether you want to buy that certain something. a strange thing happened to me once i became debt free. i didn't want to buy a bunch of stuff anymore and i didn't care what my peers thought. every month i've got extra money which i love putting into the market and making more money and that allows me to pay for EXPERIENCES.
Lots of good comments, thanks. A few things: I've stopped using credit all together about 15 months ago. Looking back now, I was just stupid, I don't live any less comfortably than I do now. My monthly bills equate to somewhere between 65-70% of my income after taxes. I've moved from 20 miles from work to within 3 miles, rent is $250 cheaper, plus the $100-150 a month saved in gas. Move was strictly a financial one. After reading all of the comments so far it seems there's a general consensus to wait just a little while longer (like what was said, I'll have it all paid off in the next 6 months or so anyway) So I'm thinking i'll just grind it out. I guess the biggest things was, hey I'm this close to paying it off, maybe now I should start spending a little more, I can always pay it down again later. But luckily I'll still be young so I can enjoy things later.
Amen. I could have a very expensive sedan if I wanted to spend money on that sort of thing, but I'd rather keep driving an old car with high mileage, one that's been paid off for quite a long time, and spend that money traveling (all of my vehicles are paid for). I'm lucky enough to have an S.O. who loves traveling as much as I do.
I have a similar dilemma from another angle. Currently working two jobs but thinking about quitting the second since we just had our first child and want to spend more time with the family. Problem is of course you're voluntarily giving up a solid job in a bad economy with a new mouth to feed. Reducing revenue and increasing expenses is a bad mix see government; federal. I know we could live off of just the one job but like all young couples you're looking to buy a house, upgrade the car, etc. Hard to balance and of course the wife says now that she would prefer me home rather than go out and buy nicer things but we all know they never really mean that....
QFT. My experience is that even if that's what they prefer, they still want you to offer frequently to buy her something nice to give her the option of turning the offer down. And maybe buy a nice thing occasionally to give her the option of keeping or returning it.
Not entirely related, but this story immediately came to mind: http://swamplot.com/space-expansions-big-upgrades-to-ellington-field/2011-08-12/
It really seems like you should consider how fortunate your position currently is. It's kind of like you are near the finish line of a pretty important event and it's within reach: simply to clear most of your debt. Many people have put themselves into a situation where that - while a reachable goal - takes a lot of work. I think whatever you are looking to accquire, it will be that much sweeter for you knowing you can get it outright, with your debt eliminated.
