Challenging a Common Assumption: You Don’t Have to Borrow Money to Get the Things You Want
In The “Good Debt” Lie, I pointed out that ALL debt is risky. Labeling debt as “good” or “bad” makes it dangerously easy to eliminate thought from the equation when deciding whether or not to take on debt.
While I expected at least a few people to argue that some debt “really is good”, I was a little surprised to see comments that flat out said you couldn’t do certain common things at all without going into debt.
At first I thought maybe the comments were because we (as a society) are just so used to going into debt for certain things that we assume they can’t be bought or done without it.
But then I thought back to the days when I struggled (and often failed) to literally save even a single dollar a week. I had a goal of saving $52 a year on what was a reasonably decent household income (for the time!) of about $22,500 per year, and came nowhere close.
If you’d told me then that I could buy even an “inexpensive” condo or a car after saving up the money for it, I’d never have believed you. I’d probably have snorted “yeah right” and moved on.
I mean, how could I save up say, $32,000 for a condo or $8500 for a car when I couldn’t even hang on to an extra dollar for more than a week? The condo would have been more money than we made in an entire year, and the car would have been about 37% of our gross pay. The idea would have seemed ridiculously impossible.
And, in fact, I did borrow money to buy a brand new $8500 car back then. Sadly, it didn’t even occur to me to do otherwise. I was just proud that I “only” took out a four year loan instead of the five year ones they were typically handing out.
Paying cash instead wouldn’t have been impossible at all though, had I known then what I know now — and I had I been willing to wait a longer than than 6 weeks or so I spent looking for that car. (Which turned out to be nothing but expensive trouble, by the way.) We’re not talking more than a lifetime of waiting either, like I would have envisioned on a save-$52-a-year-at-best rate.
I’ll tell you what I did wrong tomorrow, and then present realistic ways to pay cash for large items if you’d rather do that than go into debt.