What's an acceptable amount of debt?

[piffle]

Just from another thread, I was just curious to see differing views on what debt means to most people and what it means to others.
Fir instance if you're asset rich :ie: good equity and little borrowed debt but with a massive mortage is that more ideal, than a smaller mortgage, less equity but more short term debt - credit cards, store cards
Do people pay off cards every month?
Personally I have one credit card that dp has nothing to do with, I regularly F* it up and over spend but claw it back over a few months, this is how I am. I am SAHM but keep all of dd's DLa and child tax credits/child benefit but do all the household spending.
DP pays everything every month, he would rather use his o/d than have credit card interest charged.
I am fascinated truly as he thinks I am abnormal and a spendthrift and I think he is too rigid and boring about money!
I know some people are not comfy talking about this, I'm not wanting to know exact details, just more of a money pysche thing ya know
In other words he's abnormal not me right

He is actually paying it, which surprised me. It is an installment thing.

Actually that thread gives a useful insight into my attitude to debt

Delighted to hear that he is coughng up, bet DH learnt a hard lesson, particularly when the chap buggred off on holidays......

colditz goes ballistic and hysterical, but all is ok with baby now so don't worry

Totally agree with Colditz about financial honesty in relationships. One of the reason my relationship went west, among the host of others.

I think as long as debt isn't costing you a fortune and restricting your life disproportionately, it's fine.

The disadvantage of it is that if your income is servicing a debt, when you suddenly need to buy something unexpected (like when your washing machine breaks down, or you have a lousy MOT) you've got no cushion of savings to draw on. And I think that's to be avoided if at all possible.

Yes I think debt can spiral when all of a sudden, something will break and you have no money spare to fix it (caligula's scenario) then you have to get yourself into more debt to fix it.

Then something minor happens, kids need new shoes all at once or something, but so much of you income is going on 2 debts that they have to go on the credit card. Which means you have so much to pay back on it, you suddenly can't, you get whacked with a monthly underpayment charge, and before you know it you're up to your eyeballs

So does anyone think it is possible to get into debt over a short period (e.g a year) and to manage to pay it back when circumstances shange (e.g. when you return to work).

The people who would be reluctant to get into any debt are you comfortable with your mortgage debt or do you view this differently. If so why?

No, I don't feel comfortable getting into 'short term' debt, b/c it never winds up being short term for me - something always comes up, circumstances change, scenarios like what colditz mentioned come up, etc.

Mortgage is a bit different b/c you're building equity.

But we can't afford a mortgage.

I too have a wee question hoping to find an answer

We have a bit of debt- car, loan, catalogues from our past etc and believe £12,000 would consolidate it all and leave us with 1 monthly payment.

We are b;acklisted well low credit score so are unable to get a loan from the bank or a number of others we have tried. We are not homeowners so can't do that either.

Does anyone have any idea if there is such place that will help us but not rip us off?

I'm with you piffle My dp doesn't pay a penny interest on his credit card where as I pay interest on 2 credit cards, overdraft and I have 2 loans. Whoops it's quite bad actually I get upto my limit so get a loan then think I won't use my credit card then somehow completely out of nowhere and with very little to show for it I'm back upto my limit and have to top up my loan

I think my dp is too rigid with money we manage to pay off more on the mortgage each month, plus pensions and I always pay off a big chunk off my credit cards but he pulls his face at having to buy anything that isn't a necessity.

I just tell him that's part of being a SAHM (I also work part time-childminder so I work from home) I try to eplain to him how much it costs to do lunch with the girls but he honestly thinks I should just go to the chippy he just doesn't get it!!!

Piffle I think we're the normal ones!!

I'm another cheapskate who won't touch debt, but if you want a spiritual sister, Piffle, Look for Peckarollover's thread about the debt mountain she is secretly keeping from her husband's knowledge...

We're in the no debt camp too. Everything goes on credit card (in order to earn clubcard points), but the card is paid off by dd each month. We sit down at the start of the year and do a joint budget, and this is where we plan out all the fun stuff for the year - what we're going to spend on the house/holidays/hobbies.

We've started down the route of private schooling which will get progressively more expensive. This will be easily affordable if I work, but tighter if I don't. This is probably the one area where we would stop making mortgage capital repayments for a while if we had to.

jambuttie I don't know what I'm talking about, but consolidation loans seem to have quite bad reputations.

Have you looked at websites such as Alvin Hall's and motley fool? There is lots of good advice about debt etc. on them.

motleyfool debt page

alvin hall had bugger all so i found this one instead

I would not consider myself in debt tbh, nor out of control IYKWIM
I just coast a little easier than dp
I have £4k limit on my card, I'm not even over £400 so am showing some control

Jambuttie I really wouldn't go the consolidation route. I'd follow Caligyulea's advice and have a look at the Fool Dealing With Debt discussion board. There are loads of people on there who could make better suggestions, but I don't think any of them would say they thought consolidation is a good idea.

I consider mortgage debt to be better than credit card, but only really because the interest rate is lower.

But we certainly don't build up mortgage debt without thinking about it.

It partly depends on definitions. I mean do you have some savings as well as occasionally borrowing on a card?
Personally I'm a very cautious type and apart from mortgage, I have only ever been in debt overall when a student.
I would say acceptable debt is debt you can afford to service without exceeding your income. I prefer to save up rather than buy on credit because I think paying interest is a waste of money.

We do have savings, not a lot but that because we plumbed it all into our house that we bought last year, we own a new car and motorbike outright though
We have savings as we're saving for our wedding

We are the opposite way round than you piffle. We started to build up some debt earlier this year - childcare for two taking a bigger cut out of our income but we were just spending as before so our overdraft was creeping up plus we had £700 on an interest free credit card (DD's christening plus Christmas presents). We came within £20 of exceeding our o/d limit and incurring big charges, really reined in lived on nothing for 10 days and then since July have reined it all back so no o/d and paid off the card. So what does DH do? Get a new interest free card and buy two golf clubs at £200+.

We have no loans or car debts though. Just £50 a month for the buy now pay later suite with a year to run.

We have some friends who will not buy anything unless they have the savings for it. They were given 40K by one of their parents so there Mortgage is tiny (and they live in London). Their attitude to money is totally different to mine and cannot understand ever getting into debt. They aim to save every month but recently haven't been managing and the tension is causing great rifts in the relationship.

I don't know if it's a coincidence but they are very tight as well. When we visit them for a meal for example there is not enough for 2 people never mind 4. On the otherhand when they come to us we cook up a storm and every scrap is eaten.

Their attitude to money is so rigid that I think it affects their ability to enjoy life. They have lots of arguments as she is sometimes embarrassed by their tightness. Also I think they are the victims of short term economics e.g they won't buy a bigger place, even though they can easily afford it, as they cannot stand the idea of being more in debt. There current home is very overcrowded and they do not seem to see that a bigger place not only would add to their comfort but would probably be an investment.

Because of their no debt policy their parents seem to be under the impression that they struggle and are always giving them money. Personally I would be happier with a bit of debt than living life like this.

Eaney thats the anil on the head, I think perhaps dp's inability to live in the moment and mine being a little more caution to the wind is an issue. Somewhere in the middle is the right balance.
What happens is that I get more conservative and careful and he never changes
I'd like him to come a little my way sometimes.
I mean he bought his motorbike with his bonus money, when had he been as sensible as he expects me to be, would have been better on the mortgage, for our wedding or for redoing our kitchen or both.
It feels a bit like if he wants it, it's ok, but if I want it, I'm being silly.

Eaney
I know people like you describe. I can't say I'm friends w/them, however. Friendship is about sharing, and I find folks who are that tight-fisted aren't very good at sharing much. I mean, you can cook a meal for 4 pretty cheaply. Many of us do this daily, in fact!

piffle I wouldn't be happy about that. He seems to have treated his bonus like it was his - whereas I would suggest it is family money.

I probably fall somewhere between Mr and Mrs Piffle. I aspire to Colditz-esque control over my money, because it makes so much more sense and I like having control over my life. Recently I finally paid off all my debt other than mortgage and I feel really good about this. Have started to save, which gives me a nice warm fuzzy glow.

However, despite planning my monthly budget carefully, it is usually shafted by unexpected (and unglamorous!) expenditure, such as emergency trips to the dentist, sudden dry cleaning needs etc. So I end up with a small overdraft each month. Crazy.

With a foot in both camps, though I think I can make some observations:

1. Financial honesty in a relationship is so important. Largely because it is money which will get you to many of your goals in life, so if you aren't talking about your finances, you may be unintentionally undermining each other's life plans.

2. Proper planning and control of your finances isn't about living on cabbage peelings, it's about all the fun of working out what you want to do in life, what your priorities are, and how you're going to achieve them. From time to time, if things go off the rails a bit, you might decide to live on cabbage peelings for a few weeks to straighten them out. Or get a temporary job/sell the car/whatever.

3. Debt might be a useful tool to get you what you want in life now, but you must be clear that getting it now costs you money (in other words, you won't be able to do something else you might want to) and if you're not really, really careful, can cost you a great deal more than you expected. I've learnt that the hard way.

And Jambuttie, please don't get that consolidation loan (pleading emoticon). Do look at Motley Fool's discussion boards and particularly the 'Dealing with Debt' one, where there are loads of tips for reducing debt without all the extra costs and stresses of consolidation loans.

Good luck!

I have read this thread with interest. My DH and I have the same attitude to money and we have got into big debt with credit cards not all to do with enjoying ourselves but also because DH was out of work for five months at one stage. We have now got everything on interest free credit and intend to throw all spare cash at the debt to clear before the interest rate cuts in. Having said that as some of you have said, that's all very well until the car goes wrong or whatever. Once its repaid I dont think we will ever ever get into that kind of debt again because it is so hard to recover from (and so expensive in terms of interest).

Having said that I dont consider our mortgage as debt it's more an investment but then we have only got 7 years until it is finished and we do have lot of equity in our house.