Re: Debt (Was: How much is a FICO score worth?)

BreadWithSpam@[EMAIL PROTECTED]
 wrote:
> "HW \"Skip\" Weldon" <skip5700removethis@[EMAIL PROTECTED]
> writes:
> 
> 
>>An overriding objective of good personal finance is to live within
>>one's means.  By that I mean that there are no unpaid balances at the
>>end of a month - everything is current.
>>
>>I mention this just in case someone thinks that because of our
>>emphasis on FICO scores, it is acceptable to have debt.  For the
>>record, we can make exceptions for younger folks who haven't had time
>>to pay off their home mortgage.  Beyond that, no.
> 
> 
> You seem to refuse to differentiate between good debt and
> bad debt and imply that *all* debt is bad.  It's not.
> 
> The main consideration which distinguishes between good
> and bad debt is the matter of what the proceeds were used
> for.  If the debt was incurred in the course of increasing
> one's wealth - or potential future wealth - it's likely
> to be good debt.  If it was incurred in the course of
> consumption and the purchase of quickly depreciating assets
> (ie. televisions), it's likely to be bad debt.

Admittedly some kinds of debt are bad.  But to say that it depends on 
what you buy is as silly as saying that having debt (with a younger 
folks exception) is tantamount to living outside one's means.  This was 
pointed out to me when I was obtaining opinions from this group on 
getting a HELOC.

If I have $30k left on my mortgage and I buy a car for $30k with cash, 
then I have good debt.  But if I pay off the mortgage and get a loan for 
$30k on the car, then it's bad debt?  What's the difference (all else 
being equal)?

In the same vein, if I'm "older" and I pay cash for a $100,000 house and 
have no other assets, why am I suddenly living outside my means by 
having a $100,000 mortgage on the same house and $100,000 in savings?

-Will

william dot trice at ngc dot com

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