[Dan_ed]

Well, I'm glad I don't listen to all of that old school financial theory.

Debt is not necessarily a bad thing, if your level of asset value far exceeds your level of debt. But I'd never do this on a credit card. They charge way to much and there are many other ways to finance debt and get a tax write-off to boot.    Just as with the government, I've learned to use what the system allows to my advantage.

Now I do wish that I had known before what I know now about getting great sound without paying a premium for some of those Hi-end names. Live and learn.

[jon_010101]

I buy online with a credit card for safety, but pay it off before any interest accumulates.  If I got, say, a pair of Marantz 9s on a $3000 ebay buy-it-now, I would happily keep that debt on the CC until they were resold. 

Generally, audio has been a reasonably stable investment for me.  My vintage hifi gear has generally outperformed the market for the past 5 years, thanks especially the low cost basis on a few particular items ($70 Craftsmen 500, free Scott 350C, free Dynaco A25s, etc...).

[nathanm]

Credit cards; one of the greatest evils ever visited upon man.  Simultaneously creating and destroying at the same time.  As weak as my will is, I can at least give myself some credit for staying well below the ridiculous credit limit they gave me.  I don't really feel old or wise enough to give advice to young kids, but if I had occasion to I would tell them to NEVER apply for a credit card, throw ALL the offers directly into the trash when they arrive and save your money.  Credit cards are evil, but not the most insidious evil; but that's a political discussion...

Some people I know seem to be happy to run up huge credit card debt, but every time I see that balance I feel the PAIN and GUILT.  These guys seem to not care.  I don't get it.

[kenk]

These guys seem to not care.  I don't get it.

Why worry, just buy buy buy and sell all the gears thru agon or ebay and declare BK.  What a way of life aa aa aa

Beside our economy is depends on people spending, no spending no grow.  My guess is we will be in recession if people stop running up credit cards.

[nathanm]

I'm all for spending, I just have trouble with the concept of spending money you don't have.  It sounds too good to be true, and eventually it IS too good to be true once you realize you've dug yourself a pit.  I dug myself a good pit for about 4 years, then just as I was on way out of it I dug a new one.  Gaddam moron...  The "excellent" score on my credit report is only a minor comfort.  It's kind of like getting a gold star sticker for being reckless and greedy.

[nrenter]

We now have a mortgage, which we pay monthly along with an additional overage of the monthly mortgage amount...

This is the only part of the "debt is bad" philosophy that I don't agree with (Dave Ramsey listeners can tune out for the rest of my posting).

If you have the ability to make additional payments on your mortgage principal, you probably have good enough cash flow to make sure your other debts are being serviced, and therefore have a good enough credit rating to get a favorable APR on a fixed 30 year mortgage.

In general, real estate appreciates in value, and when you figure in the downward pressure inflation puts on the value of your payment over that long of a time (a $1000 P + I payment in today's dollars is not the same as a $1000 P + I payment in 1987 dollars), in many ways, it makes sense to carry a mortgage and put your excess cash flow in alternate investments (depending on your risk tolerance).

What if you need quick access to capital (cash) in an emergency? Your home is one of the most illiquid assets you'll hold. In Texas, even if you do a cash-out refinance, you can only pull out 80% of your home's value. That's a lot of cash that you can't access until you sell your house.

Now this approach requires self control - a lot of self control - and only you know yourself. If you don't have the self control to hold a pile of cash the size of your house (and you think you may blow it on gumdrops and strip clubs) then you should lock that money up by paying off your mortgage. However, if you do have that level of self control, there are better things (IMHO) to do with your cash.

Oh...and I believe in educational debt, too. And that's it.

[Zero]

There was one situation where I agreed to hold onto a piece of electronics and pay for it in increments.  The deal went fine - and the person was very generous about the whole thing, but it was the first time I've ever been in someones debt. It's not a feeling I ever wish to revisit.

[chadh]

Debt isn't bad.  Debt is good.  Personally, I think most people don't use enough credit.  The anti-debt people posting here seem to be forgetting about the extremely generous nature of the personal bankruptcy provisions in the US.

If I spend wildly today, and run up huge debts that I cannot service tomorrow, bankruptcy allows me to walk away from the vast majority of responsibility for my spending.  I obviously face some costs that stretch into the future (in reduced access to credit markets, limited garnishment of wages etc), but generally all of the academic studies show that the costs imposed by going into bankruptcy are far lower than the benefits accruing from the wild and excessive spending that lead to bankruptcy.  Probably the worst thing you can do is to run up only that amount debt that you can service while barely keeping your head above water.  In that case you end up paying for all of your own spending, while still facing serious constraints on your consumption pattern.  Much better to drop a few hundred thousand extra dollars on frivolous purchases, declare bankruptcy, and then walk away from your responsibilities for a few cents on the dollar.

Paying off your debts is for suckers.

One thing to remember, though: you probably will have to sell most of your accumulated assets if you declare bankruptcy.  That means there is not much point in borrowing recklessly to buy $65,000 worth of Halcro monoblocks, or $150,000 worth of Avant Garde trios and a stack of matching basshorns.  You'll be forced to sell them off.  Such a pity.

Chad

[ckoffend]

Nrenter, philosophically it sounds great, realistically and practically when the real numbers are crunched the benefit of running the mortgage to the max (ie.30 years in your statement) and having that extra cash now in the form of reduced payments (presumably to invest elsewhere) plus the tax benefit is more times than not a push when everything is said and done.  Sure one can look at various times in the real estate market where prices rose an unstable or short term levels.  However, these are anomolies and typically are addressed with corrections.  Even with a 6% rate, the tax benefit + the freed cash benefit - the additionally paid interest is not a significant reward when comparing to a 15 year mortgage at the same rate.  

Of course, I also live in an area where real estate values (house values) have dropped an average of 11% over last year and this yea (projected, with one month to go).

I just see too many people overbuying on houses and squeeking into mortgages thinking their house value will skyrocket only to realize 4-5 years later that they are almost upside down and sinking quickly.  I have lived in my house 7 years and owe less than 50% of my initial mortgage amount, 35% of the houes current value and will owe nothing on my house the day my oldest child starts college.  A mortgage is still the one item I feel financing is a good thing, partially because it holds its value with a moderate chance for increased value after deducting for all related costs of ownership in most markets in the country.

Financing audio equipment, $80,000 cars on $150K incomes when the car is worth about $50K as soon as it is driven off the lot, etc. . is not good financial management.  Sure one can "afford" it but that doesn't make it a sound decision.  I am not opposed to spending money on things we love, enjoy, etc. . . I have owned my Porsche, boats, wonderful trips/travel and too much stereo equipment (all of which in terms of stereo equipment I have purchased with cash over the past 18 months - Wilson Watt/Puppys, Mark Levinson and BAT Amplification, BAT Pre, Audio Aero Capitole CDP, etc. . .)

[kenk]

One thing to remember, though: you probably will have to sell most of your accumulated assets if you declare bankruptcy.  That means there is not much point in borrowing recklessly to buy $65,000 worth of Halcro monoblocks, or $150,000 worth of Avant Garde trios and a stack of matching basshorns.  You'll be forced to sell them off.  Such a pity.

Chad

Like i said, sell all your gears first thru agon and ebay and hide the cash

[Wind Chaser]

Debt can't be all that bad.  It's all about management.  Consider the example from my Uncle Sam.

John

[Bioman]

I think this meets the criteria in a round-about-way.
I have two interests, Furniture building and Audio.
A while back I took out a loan to purchase $40,000 in industrial woodworking equipment (furniture building and Audio have both been a life long interest).  In addition to building furniture for the house, I like to build my own speaker enclosures.

[JLM]

Accounting games have been the ruination of all kinds of organizations.  Those who play those games with other's money should be jailed.  Those who play those games with their own money should be slapped hard.

Personal finance seems to be a function of the number of spending priorities.  Each member that generates income will tend to develop their own set of financial goals (usually spending in current Western societies).  There is great power in consolidating those priorities.

Compared to many other past times, audio is not expensive.  When considering (lamenting) equipment depreciation, the question that should be asked is how much enjoyment am I deriving from it, and then compare it to the dimishing point of return phenomenom.

[ecramer]

Ive been thinking about doing something along those lines but my current employment status mandatory overtime, they told me to buy a cot two years a go, with no end in sight, leaves me so little time to do anything. To tell you the truth after milling wood 60 hours a week, i love working the wood but  i really can not get much ambition to come home and mill some more. Just to make sure i have enough to do i bought a RC5-Garnet kit off of Selah Audio 

A while back I took out a loan to purchase $40,000 in industrial woodworking equipment (furniture building and Audio have both been a life long interest).  In addition to building furniture for the house, I like to build my own speaker enclosures.

[mcrespo71]

I sure have gone into debt for audio.  I've done it for both equipment and LP's.  That was a few years ago, but it took me about a year of selling other crap to catch up.  I don't think I want to go through that again, but I count it as a learning experience.

[rockadanny]

I'd go into debt but only if very temporary and with minimal risk.

I'll die owing thousands. It's a pleasent thought.

I hope you're joking.

[BobM]

We're teaching our girls a valuable lesson by staying out of debt. We pay off credit cards fully each month and only took on debt for major investments, like our home and cars (which are now paid off fully).

Recently my daughter parrotted back to me that she couldn't understand buying something that you couldn't pay for, unless of course it was an emergency or something. Love that kid.

Bob

[Dan_ed]

Actually, if you've recently dealt with estate taxes, leaving debt can work in your beneficiaries favor.

Nothing is simple anymore.

[aod]

I can'r sleep if I have a debt.
One debt for my house is more than enough
I don't even have a car for that matter (but in Singapore, a car is a luxury not a necessity)
Now, It's saving big time for the three little girls of mine (all under 6 years of age) and I am 42 !
I got some serious catching up to do ...

(ahem, just bought some power cables acrolink4030 /oyaide plugs and MTB4 distributor.)