Is it that bad to be in debt to have a decent quality of life?

[Gemini1992]

I know this probably sounds insane but I'm starting to wonder if being financially responsible is worth it?

I have always been a spender, not necessarily debt but wouldn't have had much left at the end of the month. I started getting my finances sorted last year as I want to buy a property so currently saving for a deposit. As I'm sure many can relate to it's a long slog, I've no gifts coming my way so it saving every penny I can which means I don't have much of a social life any more, no holidays etc.

I see some of my friends who have big mortgage, car loan, holiday loans but they do have what I can at least see on the outside a comfortable life.

I grew up in poverty and worked really hard to get to a position where I earn well over the average wage but due to the economy this doesn't go as far as it used to.

I know people say debt is bad but I am starting to think, you only live once, might as well enjoy it. No use being 80 and having a load of cash from being frugal. When I say debt I mean debt that you can still afford to pay back but just allows you to have what you want sooner rather than scrimping for years.

Have I lost the plot?

If you put things on credit to build a house deposit it will count against you when you apply for a mortgage as you're not really saving, just shuffling the money around. As soon as you're in your property you can take out as many car loans and credit cards as they'll give you, so long as it doesn't impact you coming to remortgage 3-5 years down the line but I wouldn't do it before then.

You be smart with debt in the way that you don’t have to pay interest on it, I had to borrow £6k or so when a loft conversion went over budget due to rising material costs and complications, have paid off half of it and moved it to new 0% deals so it only ever goes down.
using credit effectively gives you a better rating than never using it at all too.

i also think life’s too short not to enjoy it so wouldn’t mind putting things like holidays on a credit card as long as I can still pay it off at 0%

Imo debt isn't inherently bad, as long as repayments are manageable. I think for specific one-off expenditure where you've calculated what you can afford to pay back and in what time frame it's fine.
I don't think it's healthy to use debt to fund a whole lifestyle.
I also think some forms of debt are worse than others. For example, cars on finance is a mugs game as far as I'm concerned

I am very financially risk averse and its something I am trying to improve on, as after all some level of risk is good!

However, I will never ever forget asking my mum how credit cards worked when I was a teen, and her explaining in a very balanced way how credit cards can be very useful in x and y circumstances and all about different types of debt (mortgage, student loan etc) She then followed it up by reminding me about a lady who used to come into our school who used a wheelchair after a horse riding accident, and pointed out that a lot of people think things like that will never happen to them, and live life like they will always be lucky enough to walk, talk and earn money, but not everyone gets so lucky and disability and illness can come for us all, so its probably better to not get into huge debt for things you dont need, on the basis that you could lose the ability to work unexpectedly. It has stuck with me all those years in many ways, not least to not take good health for granted. So while I might play around with my overdraft a bit too much, overall I've lived like i needed a backup plan should things go tits up, which has served me well.

Which is fine when its flowing in.
When prices go up.. or 'something' happens its easy to end up on the skids.

I’ve been in debt, it’s a millstone. You still have to pay that which reduces your income for other things and your ability to save.

We have friends (a couple) with a similar household income to us, and we're the same age.

They are always drowning in debt. We have none, apart from our small mortgage. Our lifestyles outwardly look the same.

We pay £500 a month for the mortgage on our 4-bed detached house, because we bought our first place in 2010 and refurbished a couple of houses to climb the property ladder. In the same town, they pay £1600 a month rent for a smaller property in less good condition.

We have £350k of equity built up in our home. They have none. They could also be turfed out on their ear by their landlord at any minute, and there is a severe shortage of rental properties in our town, so they'd have to relocate.

We have a tonne of savings. They have none. If one of their cars urgently needed to be replaced, they'd be screwed. It would be a minor inconvenience to us.

When we're retired, we can either stay put, and won't have to make mortgage payments out of our pension. Or we can downsize and release a chunk of cash to live on. They will have to find rent every month for the rest of their lives.

And right now, because we have no debt, we don't have monthly repayments or interest payments to make, so our monthly outgoings are lower overall. If one of us loses our job, we can comfortably keep going on only one salary. I've just dropped a day at work, because I can. They can't- they desperately need the money.

It's still the best option in this country to own property and avoid debt.

I have been on both sides. Huge mortgage and credit card debt, 2008 hit and interest rates shot up. The mortgage repayment doubled almost overnight, and as the economy tanked, so did the industry we worked in. Having huge outgoings, falling income and debt collectors turning up is a very uncomfortable place to be.

It might not be particularly exciting, but living within your means is a much less stressful way to live. Having a savings cushion to protect you from life's unexpected costs gives you a bit of wriggle room when things go pear-shaped.

You don't need things to give you quality of life.

Very simplistic but worth remembering: if you take on debt you end up having less money to spend on yourself over your life because every borrowed pound you spend now is spending from your future money not just the pound that you have to pay back but also the money for the interest.

It's simplistic because inflation means sometimes it's better to buy now at today's prices than save up and have to pay tomorrow's prices (the interest should in theory make it neutral but in reality doesn't always), and there's a non-monetary value buying now and enjoying the thing for longer (or in the case of travel, more able to do while younger) that you may consider justifies the cost of the debt. And of course borrowing to invest (including in education or starting a business) could mean you earn more overall than the cost of the debt, although there is risk there.

So broadly, think of debt like any other purchase: you are buying the ability to spend money now rather than later and that itself costs money. So the question is, is the money you'll pay on interest buying you something more worthwhile than other ways you could spend it?

Affordable debt is ok. Isn’t that what most of us do for years without paying anything significant off our mortgage? Being ‘sensible’ hasn’t worked out for me as long covid took my savings very quickly.

I understand your thought process and temptation. Debt can be manageable but it does ultimately reduce the money you have each month for life. Currently have a £5000 car loan and some small credit card debt. I'd rather have the £150 a month in my account.