Taking Debt to Your Grave Now Acceptable?

https://www.newyorkfed.org/microeconomics/hhdc

If the world economy is to be re-written on the basis of what payments you can make at the end of the month, then I firmly believe that a life well -lived will leave a lot of creditors holding the bag. Not so much because the creditors deserve it, but because they  made the game what it is today.

Its always interesting to see threads like this, simply because I'm always curious as to how many people may or may not realize how bad it is out here for someone living with debt and how bad it can be for them.

Also, when wasn't taking debt to your grave acceptable?  If my brother dies I'm not gonna assume his debt just because.  He gets that.  If the creditor doesn't want to be left holding the bag then they should have been more careful of the chains they forged in life.

honestly, how many people are going to the grave with a negative net worth?  And of those, what % are only because of last minute emergency medical costs?

I don't see it as a debt problem as much as I see it as a spending problem. It doesn't really matter how much you make if you spend beyond your means, either way you end up broke in the end. Your spending/debt behaviors earlier in your life compound later in life, good and bad. An accurate way to view debt is you are borrowing your future income to buy something today. Not always a bad thing, if it is a sound investment like a house or an in demand degree. But just like any financial decision, you need to take the emotions out of it and look at it as a math problem. A mortgage on a house that you can afford is an appreciating asset that you can live in and use as a tax write off. A mortgage on a house you can't afford often leads to high interest credit card debt and default, not a good investment. A student loan for a degree that leads a high paying career is a good investment. A loan just to "go to college" where you end up four years behind with similar pay to no degree and massive debt is not a good investment. 
 

I wish I had figured this out earlier in life, but glad that I figured it out when I did. I still had time to correct course and build wealth instead of debt.

But life is all about choices. As long as you aren't asking me for money, I don't care if you live like a rock star in your 30's and end up broke in your 60's. And I won't feel bad for you. Maybe you did it right, and enjoyed your youth more as a trade off. Just don't tell me that my success is not fair when I chose a more frugal life and built wealth. 

Over the past few years, I've seen the trend where people are taking 30 years mortgages much later in life (40s and 50s). I'm hoping that's separate from the "minimal down payment" trend, but in all fairness it's up to the lender to assess their ability to pay.

My goal is to have our house paid off by the time we're nearing retirement, and eventually downsize to something a little more manageable from a maintenance perspective. We live in a house that was custom-built for the original owner. We love our house, but because of the way it was built, it's not cheap or easy to maintain, which is something I want  to keep in mind as I get older.

dj06482 (Forum Supporter) said:

Over the past few years, I've seen the trend where people are taking 30 years mortgages much later in life (40s and 50s). I'm hoping that's separate from the "minimal down payment" trend, but in all fairness it's up to the lender to assess their ability to pay.

In my late 30's, I put 20% down and took a 30-year loan. My mortgage interest rate is lower than the return on my long term investments and I can claim that interest on my taxes. So...

Put me in the camp of no substantive debt. But I managed that by having two sets of wealthy grandparents willing to pay for my schooling at a state university as long as I covered my room and board. I feel very fortunate to have had that. I know how unusual that is, and don't know how the vast majority of people got by.

Disclaimer: I'm not meaning to offend anyone. Just a personal account

A lot of people think it's not possible to live in America without mountains of debt. 
It's possible, just not easy.

25 years ago, my wife and I knew we'd have a family. We didn't want a day care center to raise our kids, we wanted to raise our kids.
What did that mean? It meant that, unlike a number of our friends and especially our parents’ friends we weren’t going to have a large house and a cabin in northern Michigan, no boat, no ATVs and weren’t going to take epic vacations.

So, what’s a family to do? I kept working hard as a technician at a dealership, Mrs. Boost raised our kids. We had a small home in a decent area. We took smaller, more modest vacations that centered around family time and made do without a boat and such.
I changed jobs a few times to get more salary and better bennies over the years and we sold our first house at a nice profit, then our second house at a small profit (didn’t know we were RIGHT on the brink of the economic downturn of 2008).
That led us to a more affordable, safer, and family friendly area (Fenton, MI). We had our mortgage, and no other debt. Eventually we took a small loan to buy a used minivan because our old one succumbed to the tin worm. 

Then the downturn hit home. I was laid off. The house was worth 51% of what I owed on it. Nearly 2 years of no work, unemployment jerked me around relentlessly, the Bridge Card (basically, food assistance) was a yo-yo. They’d give us money one month only to say they overpaid us the next and take the money back, and on and on. It was rough. I told my wife I had ONE goal. I didn’t want to lose the house because I wanted my kids to have a stable home, not bouncing from rental to rental as we found our footing. So, I flipped cars, repaired cars, flipped audio gear, my wife started a home-based business. We were sent foreclosure papers but managed to keep the wolves at bay.

We came out of that just fine. In fact, during the downturn we managed to widen our driveway and remodel a bathroom and entryway in our house by trading a truck I didn’t need for that work.

We were able to ride out the storm because we had very little debt. I didn’t fall into the trap of ‘college is necessary for any job worth having’ trap. We also ignored the banks advice to ‘buy as much house as you can. You should make it hurt, you’ll grow into the mortgage’ and other garbage that this society tells young people.

Today I’m at the bottom end of what I see on the chart for the middle class. We’re doing fine. Our only debt is our hose and a credit card that we use for specific things for specific reasons.  It has a balance in the hundreds that is paid off every month.

Debt can be a tool for those that know how to use it (not I) or a bottomless pit for others.

Toyman! said:

Steve_Jones said:

Then go to trade school, start a business, etc. There are plenty of ways to make money without College. 

This needs to be reiterated over and over.

You really don't have to play by their rules. 36 years ago I dropped out of HS, got married, and got a job digging ditches. Now I work for myself and make a pretty comfortable living. The total outlay for schooling was $0 beyond the cost to get my GED. School opens many doors, but the lack of it doesn't close all of them. 

My brother's company is desperate for linemen. Starting pay is $36/hr and tops out at $60+. Foremen make $75. There is money to be made. You just have to get out of the rut and go find it. 

That's similar to my story.

In grade 9 they told us, in your future you will not be able to get a job without a college education. I quit part way through grade 10.  I bummed around a bit, mostly labour jobs but started an automotive apprenticeship shortly before a bad recession, and lost that. But I found work, worked my ass off and was rewarded for that effort, everywhere I went. I've said it here many times and it's still true, companies value hard work and dedication, and they will reward it. 

I'm at the end of my career now and working part time for a company that rewards that more than anything. My supervisor is 31 years old, was a production employee, has little mechanical experience, but knows how to make things happen, and is an excellent supervisor. And my apprentice started out like me in automotive, and has the kind of work ethic I used to have.

That apprentice is 25. He just finished his first semester of schooling, and will crack six figures this year.

In reply to frenchyd :

I have suggested many students to join the military/reserves/ROTC. What is actually becoming more expensive and regardless if tuition becomes free is housing. Yes most school will/does require students to live on campus and pay for a food plan.Unfortunately most that graduate High School/GED spend their first year of college learning things that should have learned in grade school. Hence why most have to take a 5th year to graduate, costing $$$. I have attended many college/fairs and the military tactics on recruiting are too old school to net them a big population, they are really missing out. I also think the High School standardized state test should be replaced with the ASVAB.

Steve_Jones said:

93EXCivic said:

Steve_Jones said:

Javelin said:

Steve_Jones said:

Another one of these threads, wonder if it'll be any different from the last 100 just like it?

As far as College goes, there are plenty of cheap ways to get a degree, I've never seen a regular job posting that says "Must have degree from X school", it's usually a have a degree Y/N option.

 

There are millions of jobs that are MUST have degree, mine included. That said, there is a range of majors that work (usually with some extra coursework if it's not the exact match degree) and while they do not specify which school or type of school, they do specify that it has to be accredited by a certain accreditation.

I know there are plenty of jobs that need a degree, however I have never seen any that say "must have degree from University of X" or " No public University degrees need apply". There are expensive ways to go to College, and less expensive ways to go to College, both ways end up with a degree. Just like everything in life, if you choose the more expensive option, that's on you.

The problem is even the cheap ways are too expensive imo.

Then go to trade school, start a business, etc. There are plenty of ways to make money without College. 

I get that there are other ways of making money and a good living and those absolutely need to be encouraged more especially trades. BUT we still need doctors, teachers, engineers, etc that do need a college degree. We need those people if we want to continue to be a successful nation and saddling people with debt in order to get those jobs isn't good for our nation.

There is a very poignant story in here about the federal Guaranteed Student Loan and Pell Grant programs and the subsequent rise in the cost of college education, but it doesn't agree with the politics of this forum, and half the people don't want to hear it anyway.

And regarding debt and retirement. The idea that somebody would enter retirement with debt, including a mortgage is absurd to me. That was always the goal, pay off the house, then you can think of retirement.

My situation is similar to Dukes, except my kids didn't go to college or university, so we kept that money. But I can retire any time, should be able to maintain my lifestyle til 90, at which time there should be about half a mil left for the kids to split. And we did that on one paycheque. We decided early on that she would stay home with the kids, and budgeted accordingly. I know, you can't do that today. That's what they said in the 80's, 90's, and 2 decades ago when I talked about it on this forum. Somehow we managed to do it, but not without making sacrifices

Well, if you die with debt, then whatever your estate has settles that debt.  So house gets sold, etc, etc.  If that's not enough to cover the debt I'm not sure what happens, I suppose it just gets discharged?

I totally agree we need more craftsmen/women and not everyone needs to or should go to college.  That being said, going to college is still a pretty big deal in unlocking most of the higher paying professions.  You're not going to become a lawyer/doctor/engineer/IT person etc, etc without going to college. 

I was one of those people who went to an expensive college and graduated with a pretty useless degree in history.  Once I figured out what I wanted to do I went back to take all the pre med classes at my local state school, then went to dental school.  In retrospect I wish I'd gone to the state school to begin with, still had a history major but also do the pre med stuff.  But that wasn't where my head was at the time, you need to let people make their own path and sometimes that's not a traditional path.  Nothing wrong with that.

I don't have a problem with debt, it's hard to run/own a business and not have some sort of revolving debt going on.  My wife and I play it really conservatively though, really the only debt we have is on properties, our business buildings and our house.  House will be paid off in 5 years, my building will be paid off in another 8.  I staged that so both will be paid off when I retire, which is really the key to me retiring. 

I wish I hadn't spent my entire 20's in school, but I did.  I didn't have really any money to put into a 401k at the time, then being active duty for the next 5 years didn't help.  It's all worked out tho....

Duke said:

There is a very poignant story in here about the federal Guaranteed Student Loan and Pell Grant programs and the subsequent rise in the cost of college education, but it doesn't agree with the politics of this forum, and half the people don't want to hear it anyway.

 

Not even sure if this is political unless you are talking about lobbyists for the banking industry supporting it. Dump more money into the system and the colleges will find a way to spend more. Luxury dorms, on campus lazy rivers, rock star salaries for big name professors and so on. The colleges get more money, banks make more money. Everybody wins but the students. 

In reply to 93EXCivic :

There are over 2200 colleges that offer degrees in education (to become a teacher), there are close to thousand that offer engineering degrees. There are a 154 medical schools. As a former teacher (People leaving the profession is not debt related) I have no sympathy for a teacher having debt, they choose the wrong college, there are so many cheaper options and specific grants that apply to them. I am not a engineer, but have worked for two schools that have really good engineering programs, one costs $45k a year the other cost $15k year, you can make a choice. None of the graduating students had issues finding a job. Medical school you don't have a choice you have a minimum $250k for 4 years, plus add your undergraduate, it's year around so add your living expenses on top. However there are probably 2200 or more people that apply for medical school and they only accept 50-100. US needs nurses desperately, so if you don't get in you can become a nurse and the two hospitals that I recruited from paid off employees debt and paid for continuing their education for a bachelors and Masters. If Student loans and Pell grants were as tough to get as a business loan, US when never have a labor shortage or shortage in degree oriented jobs.

In reply to Snowdoggie (Forum Supporter) :

The educational cliff in 2 years is going to close schools, and all these fancy dorms and lazy rivers are going to look like a abandoned malls. Covid has started the process there have been many closes and I know of 3 schools that consolidated into 1.

I wonder how many of us in this thread grew up middle class or upper middle class or higher vs how many of us grew up in poverty. The knowledge of how to do college the right way and parents who can steer their kids in a more logical direction and can even plan with 401k's and leaving your kids money. When you live in poverty, resources do not allow for such planning nor does it allow for access to certain knowledge. Of course, there are people who do well out of that environment (I'm an example of that). But, hardly anyone can get to even upper middle class without debt. 

My kids are so privileged. They'll be able to go to college without much worry. Their parents will leave them money and property. They never went a day without electricity, running water or had to worry about homelessness. That gives them a lot more time, energy, and resources to plan for their future. They will start their adult life with so much available to them. Maybe I should introduce some artificial hardships into their life to build character lol.

I know this thread is centered towards people who have the opportunity to plan for retirement to this level. But, lets keep all of this in mind when we ask why some people take certain routes through life. 

Duke said:

There is a very poignant story in here about the federal Guaranteed Student Loan and Pell Grant programs and the subsequent rise in the cost of college education, but it doesn't agree with the politics of this forum, and half the people don't want to hear it anyway.

I think I've read that book before. Something about mice and cookies.

yupididit said:

My kids are so privileged. They'll be able to go to college without much worry. Their parents will leave them money and property. They never went a day without electricity, running water or had to worry about homelessness. That gives them a lot more time, energy, and resources to plan for their future. They will start their adult life with so much available to them. Maybe I should introduce some artificial hardships into their life to build character lol.

I struggle with this, too. My dad was a minister and I am the youngest of 5 so things were at best tight money-wise around the house. Mom only worked when she could. They did great for what they had, don't get me wrong I always had fresh food on the table and a great childhood, but my kids have a plenty I never knew. I don't want them to feel insecure about housing or food, but I want them to know that is a thing and understand what unmet needs mean to people. How do you teach that without being cruel or exploitive of those in need?

yupididit said:

I wonder how many of us in this thread grew up middle class or upper middle class or higher vs how many of us grew up in poverty. The knowledge of how to do college the right way and parents who can steer their kids in a more logical direction and can even plan with 401k's and leaving your kids money.

Heck, I grew up reasonably privileged. I still didn't know how to do college the "right" way. If I'd known at 18 what I know now, I would definitely have done some things differently.

It's really easy for me to look back at the stupid things I did 20 years ago and shake my head at how stupid I was. It's even easier to look back at what *other* people who are 20 years younger than me are doing and shake my head at how stupid they are.

yupididit said:

I wonder how many of us in this thread grew up middle class or upper middle class or higher vs how many of us grew up in poverty. The knowledge of how to do college the right way and parents who can steer their kids in a more logical direction and can even plan with 401k's and leaving your kids money. When you live in poverty, resources do not allow for such planning nor does it allow for access to certain knowledge.

Big emphasis on this. I grew up pretty solidly middle class, but the recession circa 2008 kicked our asses. I was the first in my immediate family to get a bachelor's degree. My parents were smart and set up prepaid college plans for us with the state so that we could afford to go to state colleges, but they didn't know all the ins and outs of college admissions, how to game the system, etc.

Meanwhile, I was in school with Ivy-League-bound kids whose parents were doctors and had tons of connections and were paying out the nose for SAT prep classes. I felt woefully underprepared. I took the admissions tests mostly blind, scored moderately well, chose a private college and took on a bunch of loans. I worked three jobs during college to save up to pay off my loans early (I did), burned myself out to graduate in 3 years to avoid paying for a 4th, and graduated with no career prospects because I had been told that if I just worked hard and got that degree everything else would fall into place.

Also, because I was so burnt out from trying to graduate without debt, I had come to hate my major so much I could no longer stand the idea of any career that would utilize it. My internship in my minor had given me severe panic attacks, so that was a no-go, too.

I ended up becoming an SAT tutor for a new generation of rich kids for a while (and on the side I shared as much information as I could with the kids I knew who couldn't afford tutoring). Then I fell into a career in Digital Marketing, a field that didn't even fully exist when I started college but taught me enough unique skills to be useful to GRM when they decided to bring me onto the team.

My point is, I didn't have a plan, and a lot of people had even less of a plan and even less luck than I did. There are a ton of people who have all the advantages, and many times more people who are navigating the system blind and getting robbed before they even know which direction is up. And those debts often stick with them for decades or until death.

In reply to dculberson :

I started telling my oldest son stories about how we had to scramble for meals or sometimes didnt have running water/electricity. Or we'd go to our friends house because they had food to eat dinner. 

In reply to trigun7469 :

Did you read my experience earlier in this thread on my own costs of engineering school? Short story with "Full tutition" scholarship and in state tutition for 3 years of 4 years, it still cost me $50k to go to engineering school over 4 years.

My dad finished three years of college. It took my mother till she was 40 to get a BA degree, but in her generation she could teach with only two years of college and dad could start from the bottom at a big company with only three years and work his way up into management. My parents told me that college was sacred. That there was no way I wasn't going to go. That you save for college, borrow for college and do whatever you have to to go to pay for the best, most expensive college you could possibly get into. But they came from a generation where there weren't as many college degrees around and a degree from the right school actually was a ticket to a rainbows and unicorns future. Now not so much. My dad actually forbid me from working on old cars, bought me a new set of golf clubs and told me that blue collar jobs were for chumps. I was supposed to get that degree and get an management position with a big company and that was the only way to fly. Learn to play golf. All important deals are made on the golf course. Get used to three martini lunches. Go to Casinos and they will treat you like a king. Dean Martin and the Rat Pack was what you aspired to. Of course dad was wrong. And dad also died leaving my mother in so much debt that she had to move in with me.

My sister rebelled against my parents, never went to college, married a couple of alcoholics, took a lot of money from my Dad and ended up dying of complications from methamphetamine use when she was age 40 and married to a drug dealer. I also rebelled against my parents by working as a mechanic for a restoration shop after finishing a University of California BA and starting a fourth college degree in automotive technology at a local community college later on in life.

And I ended up with three college degrees and an Eagle Scout badge, and spent most of my life selling the golf clubs he kept buying me for money to get race car parts.