Poll: what is your debt to total asset ratio?

[RobbieB]

That's obvious as 126 people here have no debt whatsoever.

None. Zero.

[RobLJ]

<2% actually. I took a small mortgage when I retired to Reno. It's about 25% of what rent would be. Should pay it off, but I prefer the cash, just in case. (3% interest and essentially the equivalent of financing a car.)

[RobLJ]

In accounting terms I suppose this is correct.
Practically, to me (you are free to disagree) it doesn't matter whether I'm paying monthly costs from a credit card, cash in my wallet, a bank check, barter labor or flattery. . . . I get points from the CC I use to travel to check on my Aged Parental Unit every 3 months--not sure how to account for that. I suppose that's debt.
I'll stick with my response, even if it offends definitional OCDs.

I think many here have too much free time on their hands to quarrel about whether paying by check or paying a monthly credit card by check is debt or not. I'm not an accountant, though (DW is). Whatever!

Quote:

Originally Posted by Meadbh In fairness, many people who said they had "no debt" admit to having credit cards that they pay off each month. I would call that current debt. But whatever. I am also surprised at the overwhelming majority of respondents to date who say their debt ratio is <10%. I suspect that if more young people responded, that picture might change.

[dallas27]

Quote:

Originally Posted by GTFan Exactly. That's why zero debt in this poll is always the wrong answer if you go by that argument, even if you pay cash for everything. The only way you wouldn't be lying is if you said you prepaid all your utilities AND taxes upfront before the liability is incurred. And I mean all taxes. Which of course no one does, so we're all answering wrong if you buy that.

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.


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[niven]

Quote:

Originally Posted by RobLJ I think many here have too much free time on their hands to quarrel about whether paying by check or paying a monthly credit card by check is debt or not. I'm not an accountant, though (DW is). Whatever!

I wouldn't be too quick to take an accountant's word on financial matters anyway. Two accountant friends I know and my own brother are not good with their own money - go figure.

[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]

Quote:

Originally Posted by dallas27 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]

Quote:

Originally Posted by dallas27 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]

Quote:

Originally Posted by Meadbh 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]

Quote:

Originally Posted by Meadbh 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]

Quote:

Originally Posted by 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.

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]

Quote:

Originally Posted by 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.

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]

Quote:

Originally Posted by exnavynuke 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]

Quote:

Originally Posted by hesperus +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.