Poll: what is your debt to total asset ratio?

[HFWR]

I don't consider my CC balances as debt. Since I pay in full every month, I call it "float"...

 

[gayl]

So are those 92 voters accountants who are taking the term 'debt' literally or posters who carry debt month to month? FWIW: I don't consider property taxes & earthquake ins as debt even though they're paid in full each DEC 10th

 

[antmary]

Zero, except for cc paid off monthly. The feeling of being debt-free is priceless.

 

[hesperus]

zero debt

 

[exnavynuke]

I'm at 30%, but it's only the mortgage which will be paid off before I go into semi-retirement in ~9 years. No car loans, no student loans, no CC debt etc.

 

[GTFan]

This is a very strange view. Debt is generally defined where interest rates are in affect. A monthly service that 0's out each month with no financing charge is hardly considered a debt by reasonable people.

Debt has nothing to do with the interest rate, there's plenty of people that buy cars or furniture at zero percent interest. Same for borrowing money from your family.

Debt to most consumers is getting a loan that's paid back over time. Charging stuff on a CC and paying it back when the monthly bill comes is not debt under that understanding, just like it isn't for utility bills or taxes due. But strictly speaking it IS debt because you owe another party for goods or services rendered. Or you have a tax liability that has to be paid, so you owe the gov't. before the tax due date. And legally it will be treated as debt if you fail to pay.

We just don't think of it that way because you don't obtain a formal loan with monthly payments, even though that's really what you're doing informally from month to month.

 

[Meadbh]

This is a very strange view. Debt is generally defined where interest rates are in affect. A monthly service that 0's out each month with no financing charge is hardly considered a debt by reasonable people.

Interest rate has nothing to do with the definition of a debt. When I started my first real job my parents lent me a thousand pounds, interest free, to buy a car. I was indebted to them but paid off my debt within six months. Many years later, I helped out a colleague at work with an interest free debt. I made it clear that I expected the money back, but would not be charging interest. In Japan, you can borrow money at negative interest rates, but you are indebted until you repay the principal (or most of it).

 

[Meadbh]

This thread has certainly reinforced for me that basic financial concepts are foreign to many people, even those who are successful in life.

 

[Nemo2]

This thread has certainly reinforced for me that basic financial concepts are foreign to many people, even those who are successful in life.

Or that people can arrive in the same place via different routes.

 

[exnavynuke]

Interest rate has nothing to do with the definition of a debt. When I started my first real job my parents lent me a thousand pounds, interest free, to buy a car. I was indebted to them but paid off my debt within six months. Many years later, I helped out a colleague at work with an interest free debt. I made it clear that I expected the money back, but would not be charging interest. In Japan, you can borrow money at negative interest rates, but you are indebted until you repay the principal (or most of it).

I completely agree with your definition of debt as it matches exactly what I was taught getting my degree as well (I only have the one degree though).

However, I also understand that "debt free" in the common vernacular is used as, and understood as, not having loans or carrying a balance on a credit card or having other similar types of debt, and not to mean there is no balance owed on any account.

So while it is correct to say that no one is debt free in this country (everyone owes someone something, even if it's just property taxes or utility bills etc), using the common vernacular understanding of the word is also acceptable in normal conversation.

You're free to call up Dave Ramsey every day and explain to him that neither he, nor any of his callers, are "debt free" no matter how many of them call up to shout it through their phones, but people will similarly be free to think of you as the person who responds to "can you help me?" by saying "I can.. do you want me to though? The correct way to ask what you were tying to say is 'will you help me'" etc, which is to say by rolling their eyes and saying "everyone knew what was meant, why ya gotta be like that".

 

[Shanky]

I am surprised by the number of folks with no Mortgage. As a financial strategy a fixed rate 2.75% Mortgage makes sense unless you believe your portfolio cannot match that return over a 15 year period. I do understand it if one is stuffing money in a mattress and gets no return at all, or locks themselves up in long term low rate bonds.

 

[Danmar]

I am surprised by the number of folks with no Mortgage. As a financial strategy a fixed rate 2.75% Mortgage makes sense unless you believe your portfolio cannot match that return over a 15 year period. I do understand it if one is stuffing money in a mattress and gets no return at all, or locks themselves up in long term low rate bonds.

At least in retirement, having a mortgage increases your financial risk. You may reasonably believe you can do better than your mortgage interest rate, but in retirement, you may not be willing to make such a bet.

 

[exnavynuke]

I am surprised by the number of folks with no Mortgage. As a financial strategy a fixed rate 2.75% Mortgage makes sense unless you believe your portfolio cannot match that return over a 15 year period. I do understand it if one is stuffing money in a mattress and gets no return at all, or locks themselves up in long term low rate bonds.

From a purely financial prospect, investing with an expectation of returns exceeding mortgage rate interest is the "smart" thing to do as it maximizes net worth. However, paying off a mortgage also gives a larger cushion between "income" and "bills" which can significantly reduce a person's "financial stress". Peace of mind can be worth a lot of money to many people.

 

[hesperus]

From a purely financial prospect, investing with an expectation of returns exceeding mortgage rate interest is the "smart" thing to do as it maximizes net worth. However, paying off a mortgage also gives a larger cushion between "income" and "bills" which can significantly reduce a person's "financial stress". Peace of mind can be worth a lot of money to many people.

+1
and it makes for a much simpler balance sheet.

 

[Nemo2]

+1
and it makes for a much simpler balance sheet.

But, if you don't take out a mortgage where do you input the interest payments that you haven't got to pay because there isn't one? It's all soooo confusing.

 

[B0bL0blaw]

I might have the highest ratio in the thread! 50.87%


Breakdown:
Debt = 550k = 110k student loans + 440k mortgage
Assets = 1.1M = 650k house + 300k retirement accounts + 125k taxable brokerage account + 25k savings account


Age 34

 

[Meadbh]

I might have the highest ratio in the thread! 50.87%


Breakdown:
Debt = 550k = 110k student loans + 440k mortgage
Assets = 1.1M = 650k house + 300k retirement accounts + 125k taxable brokerage account + 25k savings account


Age 34

And you may well be the youngest respondent.

 

[B0bL0blaw]

And you may well be the youngest respondent.

That's what I'm telling myself so that I don't feel too bad about being the outlier!

 

[Meadbh]

That's what I'm telling myself so that I don't feel too bad about being the outlier!

You have a positive net worth of over half a million dollars, and you are at the peak of your human capital.

 

[B0bL0blaw]

You have a positive net worth of over half a million dollars, and you are at the peak of your human capital.

Tell me more... Ha! Yeah I'm not down in the dumps about my current financial status, just appropriately humbled by the degree to which I am currently leveraged!

 

[dallas27]

Debt has nothing to do with the interest rate, there's plenty of people that buy cars or furniture at zero percent interest. Same for borrowing money from your family.

Debt to most consumers is getting a loan that's paid back over time. Charging stuff on a CC and paying it back when the monthly bill comes is not debt under that understanding, just like it isn't for utility bills or taxes due. But strictly speaking it IS debt because you owe another party for goods or services rendered. Or you have a tax liability that has to be paid, so you owe the gov't. before the tax due date. And legally it will be treated as debt if you fail to pay.

We just don't think of it that way because you don't obtain a formal loan with monthly payments, even though that's really what you're doing informally from month to month.

Of course you are right, but i couldn't disagree with you more. You are splitting hairs into the monthly minutia of service on credit. While mathematically you are more right than me, you would be wholly unwelcome in a reasonable discussion at a party with average people, and your "rightness" has no impact on any of them. Pick your battles better, yolo, and this is hardly worth your time.


Sent from my iPhone using Early Retirement Forum

 

[Amethyst]

I disagree. At the party, he/she would be over in the corner splitting hairs with me and (assuming he/she is not too serious/earnest about everything) we would be enjoying ourselves.

I like hearing outlier points of view when they have logic to back them up.

you would be wholly unwelcome in a reasonable discussion at a party with average people,

 

[DrRoy]

0%, not counting CC paid in full every month.

 

[rodi]

Interesting about the property taxes - here in CA I think you PREpay the property taxes... so if you go to sell, before the end of the year, you get a pro-rated refund.

Insurance is also pre-pay for the year. So those would not be debts if you pay the taxes and insurance in full when they are due.

Now the utility bills... there's an argument to be made that pre-billing usage is a liability.

 

[exnavynuke]

I might have the highest ratio in the thread! 50.87%


Breakdown:
Debt = 550k = 110k student loans + 440k mortgage
Assets = 1.1M = 650k house + 300k retirement accounts + 125k taxable brokerage account + 25k savings account


Age 34

If you moved here, you could buy a nice 4/3 house on 1/4+ acre for $210k (paid with current equity) and change your situation to 110K student loans and 450k assets in accounts..... COL matters