Should some people live in Debt ?

[Turbo29]

Sure, but if the other estate assets are minimal, why not (ethics aside)?

In the case described, it doesn't sound like heirs would be getting anything anyway.

-ERD50

Why do ethics have anything to do with it? The banks know that a certain percentage of cardholders will die with little or no assets to pay off card balances and they build that into their business model.

I would also point out that broke cardholders dying with large balances have probably had those balances for a long time paying ~20% or more interest on those balances. In many cases the banks have gotten their money back many times over.

The cardholder agreement requires that you pay at least the minimum payment... while you are alive and able to.

 

[ERD50]

Why do ethics have anything to do with it? The banks know that a certain percentage of cardholders will die with little or no assets to pay off card balances and they build that into their business model.

I would also point out that broke cardholders dying with large balances have probably had those balances for a long time paying ~20% or more interest on those balances. In many cases the banks have gotten their money back many times over.

The cardholder agreement requires that you pay at least the minimum payment... while you are alive and able to.

No argument from me - I should have stated that differently - more like "any discussion of ethics aside..." I was trying to avoid getting into an ethics discussion.

But that's OK, no problem.

-ERD50

 

[DrRoy]

I'm sure you are talking about overspending, running up debt, etc... However I've seen the other side first hand. My dad was the poster child for the ultimate saver all his life. When he died I'm "guessing" his annual spend was 25 to 30k a year. (give or take a few k) He and mom did "nothing" the last ~20 years of their lives, even though they could have. No Internet, no cell phone, no travel, house was in disrepair, one older/cheaper car, etc.

Oh, and they died millionaires and zero debt. So not spending (or not enjoying life a little) can be a bad financial habit too.

I don't have that problem. We spend plenty, but have the NW to cover it. Required WR <2%. I was wired to save since I was a kid, but now we are enjoying the $. Remodeled the house, and extensive travel.

 

[daylatedollarshort]

We do spend money on our house and modern conveniences, but it does seem to be a product of marketing that the more you spend the happier you will be, which isn't really supported by actual happiness research. In fact excess materialism is linked to depression. The longest running study on happiness from Harvard researchers (84 years and counting) found that social connections were the most important happiness factor. On brain wave studies, the happiest person found so far is a Buddhist monk, so I doubt he is spending a lot on consumer goods. At least I'm pretty sure he is not spending a lot on designer clothes.

 

[Koolau]

Sorry, late to the discussion. I've often spoken of my BFF who is half a mil in debt at 78. I've known him for 50 years and his philosophy has always been to spend every dime he makes and then find a way to borrow more. How he gets approved for CCs, mortgages and car loans/leases over the years is beyond me, but he does. He has always paid on a mortgage and then taken out loans on his primary residence whenever values have risen enough to allow it.

Right now, he has a new pick up, a new Camaro and a race Corvette (1000+ HP.) He does have a relatively good cash flow with two SSs and pension (his DW, age 75, was a nurse.) I'm guessing he takes in about $80K/year.

A couple of times over the years, I've tried to council him. I've suggested that he would have much more money to spend if he didn't pay so much interest. He agrees, but can't seem to put off his wants for even a few months. A couple of times, he has shared with me that, if he had my condo, he would borrow on it to get MORE toys. He can't understand why I own 10 to 20 year old cars.

He has admitted a couple of times that his life of debt has been somewhat stressful - trying to figure what bills he must pay, which bills he can put off, what to refinance, how he can buy the next gadget for his car, etc. By the way, his DW is almost as bad as he is in terms of spending (she loves to shop - just to buy more stuff.)

If the philosophy is "He who dies with the most toys is the winner" then he will beat me for sure. YMMV

 

[Rocky mtn high]

For most people the saying is true. “I owe, I owe, so off to work I go”

 

[ShokWaveRider]

Not having ANY debt for the last 30 years ....... priceless.

 

[Koolau]

Not having ANY debt for the last 30 years ....... priceless.

Agreed. Almost 50 years since any debt on a depreciating asset (aka car.) I have had mortgages, but not recently. Very liberating.

 

[athena53]

Sorry, late to the discussion. I've often spoken of my BFF who is half a mil in debt at 78. I've known him for 50 years and his philosophy has always been to spend every dime he makes and then find a way to borrow more. How he gets approved for CCs, mortgages and car loans/leases over the years is beyond me, but he does. He has always paid on a mortgage and then taken out loans on his primary residence whenever values have risen enough to allow it.

Right now, he has a new pick up, a new Camaro and a race Corvette (1000+ HP.) He does have a relatively good cash flow with two SSs and pension (his DW, age 75, was a nurse.) I'm guessing he takes in about $80K/year.
<snip>

My Ex was like that and I joked that he got more credit card offers in the mail than I did, with higher credit limits.

I'm in a flame war right now on FB in an AARP Foundation thread on seniors barely subsisting on SS in retirement. I'm mean, judgmental. etc. (even though I acknowledged that many people lack marketable skills, have Bad Stuff happen, etc. that really does impact their ability to save). How dare I imply that some people's "retirement plan" is "spend every dime including whatever credit lines you get, then rely on SS in retirement and whine when it isn't enough".

I'm happy to be with kindred spirits on this site. I know I started out on third base with a college degree in a STEM field that my parents paid for, but no level of income is so large it can't be blown on toys and luxuries. My debt right now is a $55K balance on my mortgage, fixed at 3% interest.

 

[Chuckanut]

Sorry, late to the discussion. I've often spoken of my BFF who is half a mil in debt at 78. I've known him for 50 years and his philosophy has always been to spend every dime he makes and then find a way to borrow more. How he gets approved for CCs, mortgages and car loans/leases over the years is beyond me, but he does. He has always paid on a mortgage and then taken out loans on his primary residence whenever values have risen enough to allow it.



Right now, he has a new pick up, a new Camaro and a race Corvette (1000+ HP.) He does have a relatively good cash flow with two SSs and pension (his DW, age 75, was a nurse.) I'm guessing he takes in about $80K/year.



A couple of times over the years, I've tried to council him. I've suggested that he would have much more money to spend if he didn't pay so much interest. He agrees, but can't seem to put off his wants for even a few months. A couple of times, he has shared with me that, if he had my condo, he would borrow on it to get MORE toys. He can't understand why I own 10 to 20 year old cars.



He has admitted a couple of times that his life of debt has been somewhat stressful - trying to figure what bills he must pay, which bills he can put off, what to refinance, how he can buy the next gadget for his car, etc. By the way, his DW is almost as bad as he is in terms of spending (she loves to shop - just to buy more stuff.)



If the philosophy is "He who dies with the most toys is the winner" then he will beat me for sure. YMMV

He seems like a pretty smart guy. He knows the system will finance his profligate behavior and stick others with the bill upon his passing. All perfectly legal. Bernie Madoff should have been that smart.

 

[Music Lover]

Sorry, late to the discussion. I've often spoken of my BFF who is half a mil in debt at 78. I've known him for 50 years and his philosophy has always been to spend every dime he makes and then find a way to borrow more. How he gets approved for CCs, mortgages and car loans/leases over the years is beyond me, but he does. He has always paid on a mortgage and then taken out loans on his primary residence whenever values have risen enough to allow it.

Right now, he has a new pick up, a new Camaro and a race Corvette (1000+ HP.) He does have a relatively good cash flow with two SSs and pension (his DW, age 75, was a nurse.) I'm guessing he takes in about $80K/year....

I've told this story before too. I have a friend who built a house that cost too much and was barely able to make the payments. After 10 years of stress he realized that he couldn't afford to retire on a reduced income. So he sold the house and was lucky enough to make a profit (maybe $100k) that allowed him to clear up his debt.

He moved into an apartment and immediately leased an $85,000 car, then he retired early taking both an age and number of years penalty. He gets a small pension of $2100 a month, rent is $1400, and the car lease is $450 a month. He's left with $250 a month for everything else that he subsidizes with the proceeds from the house sale.

 

[W2R]

Oh, absolutely. Some people should.

JUST NOT ME!!!
If you knew me IRL, and knew how worried I get about money, and how stressed and guilty and worthless I feel if I get even a casual call from a bill collector, you would agree. I should never live in Debt! I'm constitutionally unsuited for it.

Luckily I have no debt, not even a mortgage, and I plan to keep it that way. Well, other than an Amazon credit card that I pay off in full automatically every month.

 

[Koolau]

I've told this story before too. I have a friend who built a house that cost too much and was barely able to make the payments. After 10 years of stress he realized that he couldn't afford to retire on a reduced income. So he sold the house and was lucky enough to make a profit (maybe $100k) that allowed him to clear up his debt.

He moved into an apartment and immediately leased an $85,000 car, then he retired early taking both an age and number of years penalty. He gets a small pension of $2100 a month, rent is $1400, and the car lease is $450 a month. He's left with $250 a month for everything else that he subsidizes with the proceeds from the house sale.

Heh, heh, he could charge $1000 month to his CCs and never catch up to my friend in 25 years!

 

[Music Lover]

Heh, heh, he could charge $1000 month to his CCs and never catch up to my friend in 25 years!

That's true, your friend takes it to an entirely different level. But I guess the mindset is similar...some people just don't mind spending more than they make. Others, like many people here, wouldn't be able to sleep at night if their expenses exceeded their income.

 

[Turbo29]

Back just before the 2008 financial crisis a coworker refinanced his house, used the money to purchase points in his pension, retired with the higher pension, and then walked away from the mortgage.

Being that this is a non-recourse state he got away with it. (It's my understanding that technically the bank could have pursued him for the amount of the refinance above the original purchase price but due to quirks in the law and legal process, most banks just let it go.)

 

[Koolau]

Back just before the 2008 financial crisis a coworker refinanced his house, used the money to purchase points in his pension, retired with the higher pension, and then walked away from the mortgage.

Being that this is a non-recourse state he got away with it. (It's my understanding that technically the bank could have pursued him for the amount of the refinance above the original purchase price but due to quirks in the law and legal process, most banks just let it go.)

Yeah, it never ceases to amaze me what some folks will do to game the system. DW hired a guy we went to HS with to w*rk for the family business. He had lost his j*b and needed a place to get back on his feet (his words.) He eventually asked to buy some items from her that he believed he could sell at a profit. He promised to pay her back from his weekly pay. As soon as he got the merchandise, he quit and never paid DW back. He then declared bankruptcy (IOW, he had been planning his "escape" for some time as bankruptcy is not a spur of the moment thing and not usually entered into for the $1000 or so he owed DW.) No good deed goes unpunished. Lesson learned. YMMV

 

[SecondAttempt]

I'm responding to the subject and not the meat of the original post.

I think, to those who are responsible, debt can be a great tool. I paid off my mortgage before I was 35 and it felt great. Then over the course of the next several years I realized that my excellent credit could be leveredged in a very real sense to increase my net worth while improving my lifestyle. We bought a condo that we stayed at twice a year in our favorite vacation spot, near where I now live, and operated it as a vacation rental for 10 years before selling it for a little more than we paid for it. It was a financial home run.

In fall of 2020 I refinanced the house I live in at 2.75% for 30 years. I have enough cash and other investments to pay it off if I had to. But at this point I get to use hundreds of thousands of dollars of someone else's money very cheaply. I get an email at least daily from my mortgage comany telling me I should refinance and a US mail letter about twice a week saying the same and how much cash I can take out. No thanks.

So, for the last several years I have carried a relatively high debt load, though low compared to my income and ability to service it, and it has proven to be a useful tool for me personally. I have kept my risk low by always having enough liquid assets that I could pay off the debt tomorrow if I had to.

I find it hard to argue that anyone SHOULD live in debt. But I think some, maybe many, people CAN live with debt and use it as a positive tool.

 

[dixonge]

why is it some people don’t realize how bad their position/decisions are until they are literally out of money?

So many factors. Childhood and education, desire for social status, etc.

Whenever they have a unexpected expense, (dental, car problems, etc.) they either need to borrow money or resort back to the CCs.
So in reality, they just don’t have the resources to dig themselves out and any attempt to help financially, would be like throwing money on a dumpster fire.

A sobering thought as my brother and I are looking at a similar situation w/ our parents. To avoid the whole dumpster fire scenario, this last round of assistance prompted me to do a bit of a 'takeover' of their finances. Looking through bank and credit card statements is horrifying. Cards w/ $175 annual fees. Over $1000 in overdraft fees in two months.

I know this situation isn’t new and we all know someone like this, but would people in this situation be better off using the system, in a way, by paying the minimum amounts due. This way they can try to maximize available finances to live on ?

Better off? Only if they actually stop using the cards. Damn near impossible once you get sucked into the credit vortex. It is acceptable only if you enter a genuine iron-clad debt payoff program (think debt snowball, not some consolidation outfit).

 

[ShokWaveRider]

No debt, no worries.

 

[Badger]

I had a close friend that made an excellent income but spent it all on new cars, clothes, dining out, lots of guitars and amplifiers, alcohol and later drugs. Later he lost everything including his wife, job (alcohol related), house, an inherited house, cars, inherited classic/vintage Italian cars, etc. He just couldn't figure out why life became so difficult and why his spending/debt plans weren't working. He wound up trying to live on $1k/month SS in a rented room in someones house.
Eventually he used his father's gun on himself to get out of the problem.
I don't think I would like that kind of stress knowing I would be affecting my wife's future too.

Cheers!

 

[old medic]

. Later he lost everything including his wife, job (alcohol related), house, an inherited house, cars,... He just couldn't figure out why life became so difficult and why his spending/debt plans weren't working.
Eventually he used his father's gun on himself to get out of the problem.

Didn't realize you knew my Dad...

 

[Timeisprecious]

There really are many programs out there for seniors and low income households, but they can only get the benefits if they know about the programs and apply. Social Security, government programs, Medicare / Medicaid, Golden Girl style roommates and public transportation with senior passes, senior center activities, and free lunches would still allow for a fairly normal lifestyle in major cites in our state even for broke seniors.

+1

 

[Timeisprecious]

Didn't realize you knew my Dad...

Wow - I'm so sorry, Medic!

 

[Major Tom]

As with many threads on this mighty fine forum, I have nothing to add that hasn't already been said. It is endlessly interesting to me how people's attitudes towards money can differ so much - and for many different reasons. Doubtless there will be another thread on this subject before too long, and I will find it to be equally engaging reading.

 

[Badger]

Didn't realize you knew my Dad...

I'm sorry to hear that. I tried to set an example for my friend but he was only interested in short term gratification. Once he was in dire straits I tried to help with hours of research developing lists of links to government programs to help him (medical, housing, food, etc.) as well as lists of no cost things to do but he was not interested. I guess by then he was too embarrassed and proud.
I don't think I will ever understand that extreme kind of thinking.

Cheers!