HomeDebtAre you hardcore?

Are you hardcore?

A week or two ago, I wrote an article titled “You’re not debt free if you have debt.” It was a relatively successful post, receiving just shy of 70 comments. I’ve been meaning to address one of the comments left in the article….

My Rebuttal:

Stu, you sir are a Dumb-Dumb head. I can’t really argue with your logic since I see no flaws, but I can call you all sorts of hurtful things, like booger face, so I feel better about myself.

Even though I pay my credit card off in full each month, it’s still a debt. We’ve talked about “good” debt, and “bad” debt, but we haven’t talked about how YOU specifically use (or avoid) debt in your life. So today, I thought we could do just that. I’ll go first 🙂

Credit Cards:

I, Ninja, will continue to use my credit card as long as I pay the balance in full each month. I’ve made a personal commitment that if I ever miss a payment (yes, even by one day) I will immediately pay my balance off, cancel my card, and switch to a debit only system. Credit cards, if used responsibly, are a great tool.


As for a car, although I don’t plan on buying a brand-new car anytime soon (never say never right?), I would be open to the idea of taking out a loan if I did. The loan’s APR would have to be less than the interest I earn on my personal savings (basically looking for a 0% offer). If I either had to pay $20,000 up front for the car, or could pay $20,000 back over the course of five years, I’m taking the 0% loan every time. Remember, liquidity is king, especially when it doesn’t cost you anything.


Although I am no home owner yet (praise the Lord), I do plan to be one within the next few years. Girl Ninja and I are plugging and chugging away at our goal to save $100,000 before we buy a house. We don’t know if we’ll end up putting $10k down, or $80k, but we sure as heck like the flexibility a big cash pile affords us. Ultimately our down payment amount will depend on our income, purchase price of the house, and interest on the loan (none of which we can predict at this point). I can tell you this though, unlike some PF gurus, I am totally comfortable taking out a 30 year mortgage. I’m also open to the idea of paying it down much, much sooner than that. I don’t have a firm “Our mortgage will be no more than 30% of our net income” policy like you might. All I know is I do NOT want to be one of those home owners that ends up hating home-ownership because it becomes a financial burden.

And that pretty much sums up what debt I personally find tolerable. I’m not a fan of second mortgages. I would never borrow money to invest it elsewhere. I would never take out a loan to start a business. I would never finance a luxury item like a boat, motorcycle, or vacation. I will never take out another student loan again. And I will never co-sign a loan, or lend a substantial amount of money, to a friend as long as I live. Never. Ever. EVER.

How does debt fit in to your life currently (what types of debt do you have)? What types of debts do you plan to continually utilize (auto loans, responsible CC use, mortgage)? What types of debts have you sworn off for good? Anyone sworn everything off?



  1. I have a mortgage, and credit card “debt” that I pay off every month.

    For my credit card “debt”, I would take this over using debit any day. I get 1, 2, or 3% cash back depending on what I purchase with my credit card. My savings account will pay me 0.85% interest on my checking account if I use my debit card 12 times a month.

    As long as I’m responsible, I make more money with my credit card than with my debit.

    I do have a mortgage. This is my first house, and I’ve been in it about 10 months. I’ve also been renting two rooms out for ~$500/month each, so once again I’m making some money on it there. I’m looking to buy some land and have my a house built, which with the help from my dad should have no down payment, and then turn my current house into a rental property.

    Of course I’m also getting married in two years so I have no idea how I’ll pull this off! My car (paid off) should last a while longer, but my fiance’s is on the verge of breaking down 🙁

  2. I’m the same way as you, but with a couple of exceptions. So, I use my credit card for EVERYTHING and I’d only take debt on a car if I got 0% financing, because why wouldn’t I? And obviously I’ll have to take out a huge mortgage. But two exceptions:

    1) I’d take all the loans I could get in order to go back to school. (Keep in mind that I’m in Canada, where even grad school is way, way less expensive.) Why? Because why would I spend my own money when I could borrow someone else’s? Even if I had the money in the bank, I’d still do it because what if I didn’t find a job right away? I’d rather have $20,000 in the bank and $20,000 in loans (paying, what, $300 a month?) than $0 in the bank and no loans and no job. If I got a job right away, I’d just pay it all right back.

    2) I would absolutely take out a loan to start a business, for the exact same reason above. It’s more about managing risk than anything else. If my business were to fail (as most do), I would MUCH rather have $50,000 in loans and a good chunk of cash in savings (to make the payments and also subsist me until I found a new job) than no money, but no loans.

    It’s kind of one of those things where, if you’re an inch from filing bankruptcy, and someone gives you a large sum of money, the last thing you want to do is pay off your credit card, because then that money is gone, when you’re more likely to need it to pay for rent and food.

  3. In the technical sense I have credit card debt also that I pay off every month. I’d rather get the rewards for spending my money than not! As an aside when you apply for a mortgage, the mortgage company does count your balance on your credit card owing (even if you will pay it off on time) as a debt that is added into your calculation. (Or at least that’s the way they roll in Canada)

    I also am down with the 30 year mortgage. We decided with our most recent house purchase that we wanted to keep the weekly payments down so that we would have more flexibility with our cash flow. However that being said we do have a 10 year plan to pay down our mortgage and we are on track with year 1. (I set out my plan in my blog here if you”re interested in seeing it feel free to take that down if you don’t like links in your comments section!)

    • PS I forgot to add that we ended up buying a car with 0% financing for exactly the same reason you mentioned above. The only thing to add is that although we know we were smarter holding our money back to use it against other things that would bear us higher interest, it does weigh on you to know that you still owe vs. having had no debt in one fell swoop.

  4. Meh, this is all pretty reasonable as is student loan debt if you’ve correctly done a cost-benefit analysis on what the extra education would bring.

  5. Hubby and I have sworn off everything. (We’re still paying off the debt we stupidly accumulated over the years, but we aren’t going to incur any more.) I would be willing to negotiate on a mortgage (we have a home mortgage now and want to get that paid off, but hope to move to a smaller home with more land at some point) but I think he is hard-core even on that.

  6. I promise to never take out another auto loan unless the interest rate on said loan is less than what I can earn in a relatively risk free market.
    I promise to never carry credit card debt from month to month. If I ever get back on credit cards from my cash only diet right now, I promise to pay the balance in ful each month and never use the card to take my family on vacation.

  7. I use credit cards as a convenience and pay the entire balance off at the end of the month. If I ran a balance sheet at the end of the month, my only debt would be my mortgage. Would there be some accounts payable for credit card purchases that are not billed to me? Yes!

  8. I’ve pretty much sworn off all debt. I only have a mortgage left and am trying to pay it down aggressively. I will NEVER have a car payment again or any other consumer debt.

    I teach people in my Celebrating Financial Freedom course that debt of any kind is never as good as cash. Even if you have a zero percent financing deal you are putting yourself into a type of bondage that can drag you down because you have to meet that payment every month. Debt is debt whether there is interest involved or not.

    The only debt that I don’t really punch people in the face about is mortgage debt, simply because you can waste a ton of money on years of rent if you had to save up to completely pay cash for a house. But if you’re going to take out a mortgage, you do it sensibly, with a large down payment and the shortest term possible that makes sense for your budget (preferably 15 yrs or less). So to sum it up, yeah, I guess I’m pretty hard core.

    “When you help me with money, you help the world prosper.” – J.M. Dumont

  9. How does debt fit in to your life currently (what types of debt do you have)?
    My wife and I currently have a mortgage, setup on a 15 yr note, and subsidized student loans for my wife’s grad school program. We’re taking half of the “interest free until graduation” money, keeping the loan amount under the average starting sign on bonus for her career, which is 25k. We have the cash to pay it off, but why would I?

    What types of debts do you plan to continually utilize (auto loans, responsible CC use, mortgage)?
    Mortgage is really the only debt I’m comfortable with. Everything else is IMHO a bad financial idea. I find it interesting you would consider a car loan at 0%, even though that would mean you’re buying a new car after this post.

    • I won’t buy a new car, but if I did, I WOULD take out a 0% before paying in full (assuming I had the ability to pay off whenever I wanted)

  10. I love your blog! I want to be super hardcore and we are working our way there. We are working on paying down credit card debt, which we should have gone by Feb. 2012. We currently have a car with a sizable car payment but we are looking to get sell it and get something we can pay off in a year or less. Hopefully this time next year I can say the only debt we have is a mortgage! Thanks so much for the encouragement to “punch debt in the face.” 🙂

  11. I have the exact same beliefs as you on all three debt types. I just go a little further when it comes to 0% loans.

    If I was going to buy something and I have the cash up front but was offered 0% financing, I would take the financing so long as I know I was going to buy it in the first place and I have all the cash up front(or at least 80% of it). Just like you I believe liquidity is king and I would just take the 0% financing offer and put the cash in a savings account and gain interest while just paying the bill every month from the same account until it is paid off.

  12. It’s been a while since I bought a new car, but last time I did, I believe the offers went something like this:

    Option 1: 0% loan.
    Option 2: $2,000 cash back.

    If that’s still the typical deal, it’s better to pay cash and get the discount on the car purchase price (option 2) than it is to get the 0% financing, in my opinion.

  13. Credit Cards: I use credit cards for everything. I get points and rewards for free stuff so why not? I am responsible about it meaning I pay it off in full every month. I did get burned about it once while I was on an extended overseas trip I became delinquent about the my credit card bill (over 21 cents…nope not joking). I thought my credit card was paid in full and I didn’t check my credit card at all while I was away (I didn’t feel it was safe to check it in internet cafes and I mean I didn’t charge anything on it so I figured there was no need). I went ballistic when I opened my bills where I was identified as a delinquent. That was a dumb mistake but that didn’t change my preference on credit cards over cash and debit.

    Car: I would definitely save up for the car first. If I can get a way better deal paying cash (I have never purchased a brand new car but I have been told you can get some serious discounts if you pay cash) I would still pay cash. However, if the cash price is pretty much the same as 0% financing then I would go for 0% financing.

    Home: mortgage debt is necessary. I will always take out the longest amortization possible because it gives me flexibility. I hope that my financially situation will always allow me to put a lump sump into the mortgage each year if I want to. However, if my financial situation worsens, I want to still be able to cover the mortgage and bills each month. I guess I am more comfortable carrying mortgage for a longer period of time (as long as it’s by the time I retire).

    I am okay with getting a getting a second mortgage if it’s buying a rental property where I know it will generate a positive cash flow.

  14. I bought a house for 126k – Went and found a 5% convention loan where I could suffer a penalty to avoid PMI.

    PMI -FREE, but at the time the rates were around 5.00% — So my penalty was around .5% — My rate = 5.5% (deductible from tax).

    Oh but it gets better. I just refinanced last week:

    Current Rate: 4.25% on 30 year
    Closing Costs TOTAL: $199
    Appraiser on House: $42,000 above what I have in it

    I’ve completely rehabbed this house though, so don’t think this is the norm. My monthly payment for a 3 bedroom / 2.5 bath / 2 car-garage and giant kitchen = $886 and we are in a higher tax city because of good schools.

    Rental would cost around – $1100 for the same, but if I was renting I would cheap it out and get a $750-$800 place.

    I take pride in my home which can be costly. Monthly cost of house? I’de say $180 + $100 in a fund for disaster

    So lets call it $886 + 280 = $1166 a month with a small deduction as well.

    You wanna hear something really Ninja-ish?

    I live in a town with no city tax and even though my federal POD is in a major city — I can reclaim ALL my city tax when I work at home (2.1%) and I am forced to pay my city tax (0%) — Yes that is correct, I’ll be getting my $1200-ish or so check for WORKING AT HOME!.

  15. We are debt free — assuming our use of CC lets us be classified as debt free. We use the CC but pay it in full avoiding interest costs (we were pissed when we missed the due date a couple of months ago by a day and had to pay charges — haven’t done that in years).

    We did get a mortgage for our first and second homes (still in the second), but boy it felt *so good* when we paid those suckers off! We made the mistake of buying a new car — did it years ago with the 0% financing. Now we stick to used cars…..maybe when we’re in our 60s, we’ll go back to buying new instead of used…..and it will be done in cash. Trying to stick to the “save up your money FIRST before you buy” mantra.

  16. We were pretty hardcore savers, to the point we “suffered.” Now we are reversing that trend a bit to try to enjoy all that we have saved. Quite an adjustment from saving all the time but I believe we are on the right track to getting that balance figured out. Your laptop post was helpful reminding me that life is not all about hoarding cash.

  17. My wife and I have a mortgage, two auto loans (one of which was pre-marriage), one student loan, and one zero interest financing from Mor for half our furniture when we bought our house. We also utilize a credit card the same way Ninja does… just for the miles.

    For now, I approve of and agree with having any zero interest debt (who cares if you pay cash today for stuff or the same amount of cash over the next year?). I also am fine with one car loan at a time (just a personal preference, I know its not frugal, but I like new cars). And I will most likely always have a mortgage (no intentions of paying it off sooner than 25 years, but no intentions of living in the same place for 25 years). Every other form of debt can take a hike as far as I’m concerned!

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