Hello,
This is a really good topic, maybe not in the right forum
After reading the posts, it is clear that people here seem to understand the benefits of saving for the old days. I mean, the evil bankers suck out all of our hard earned money right? Humm.
Well let me tell you, most of it is right, and conservatism is all good. Living debt free is indeed possible, but is it what you really want?
A concept to remember: Interest is the price to pay, the cost, to enjoy something now, rather than later. Now, rather than later.
I spent my early 20s in university, scrounging every penny here and there, and didnt enjoy those years at all. In later 20s, went back to university for my master, and those 2 years costed me more than the 5 first years together. Those were the 2 most wonderful years of my life, living alone in my pad, travelling a bit, good cognac, etc. I didn't go overboard, but lived well. All my good university stories come from those 2 years.
My rule is minor purchases, and luxury items are paid cash. But major purchases are financed. Doesn't make any sense to me to walk for a couple years before buying a car, sorry. (although thats what I did..., but I always had a motocycle....) Or play a crappy guitar for 10 years before getting a major rig. I mean, I'm pass 30 now, and my 20s are never coming back. And no, I don't regret visiting Europe with my buddies.
That was for spending. What about investing?
There is a concept in finance called: Financial leverage.
To really simplify thing consider two buddies. They both have 100K$ cash, and want to buy a rental property. Buddy A is dead afraid of debt, but not Buddy B. Remember this is a simplified model:
Buddy A buys a property 100K$ cash. He is debt free and has a revenu of X. Lets say 1K$. He now enjoys a extra 1K$ net worth per month.
Buddy B puts 25% down, (4x25K$) on 4 properties, he borrows the rest (4x75K$) from the evil banker. He now enjoys a extra 4K$, minus interests on debt, net worth per month. He still has to repay the principal of course, but it's in is net worth now.
Think about that concept really hard. Interest is the cost for enjoying something Now, instead of later. It goes for spending and investing. You have to draw the line as where and when is too much. You have to optimize your enjoyment of life.
I mean, it's been proven that living in an apartment for all your life instead of buying a home and investing the difference is better financially. But all those years in an apartment with noisy neighbors, old shaggy carpets, and white walls all around! For my entire life? Nop, not for me.
I'm working toward my target net worth, I have made investments in consequence, I continue to do so, and its going good.
I have lived like a cloistered monk in my early 20s, and for me, no, its not worth it. I enjoy myself now, with debts, within my means, to the maximum of my abilities.
There is no nobility in poverty anymore.
Btw, I'm a risk manager for a bank....
That's my .02$, and yes, I owe part of it....
