Debt free - Yes or No

[Pippa]

I think that most of us PO's realise we should get out of debt, to save our skin and so that we can be unleashed from the current capitalist system and campaign for change.

How many people are free Would love to say "I'm free" but sadly would be lieing

[mikepepler]

We're debt free, but we don't own a house. I think I'd rather have it that way though, as there's no way I could have paid in full for a house by now (or soon) even if I'd got one straight after Uni.

[RevdTess]

I dont think anyone can count themselves debt-free if they dont own their own residence. I have 60% equity in my house and no other debts but I wouldn't dream of considering myself debt free until I have the deeds in my clutching fingers...

[Pippa]

I dont think anyone can count themselves debt-free if they dont own their own residence. I have 60% equity in my house and no other debts but I wouldn't dream of considering myself debt free until I have the deeds in my clutching fingers...

Do you count your equity stake as the difference between the original purchase price and the current valuation? If you were to sell today that would be fine but house prices are likely to fall. If or when they do how many of us will find ourselves in the negative equity trap once again?

[tristan]

What about student loans? I have ?15k's worth after 3 fun years (I am paying for my masters degree out of my own pocket - outrageous) but student loans are only paid off out of PAYE if you earn more than ?16k/year. Will the slave-creating debt collectors come after me in in Matt Savinar's apocalyptic post-peak scenario? Should I move to Mexico?

[RevdTess]

Do you count your equity stake as the difference between the original purchase price and the current valuation?

No, I count it as the size of my current mortgage relative to the original purchase price (or current valuation if I felt optimistic). In my case right now they're not much different.

[mikepepler]

If you have a mortgage you're in debt - there's no two ways about it. I may be biased of course, not owning a house, but my view is that the flexibility that renting offers could be useful in the next few years. This is because if one or both of us lose our jobs, we are free to get out of the contract at a month's notice and move, maybe to a cheaper house, maybe to where we can get work, or maybe to stay with relatives of friends. If, on the other hand, we owned a house and had a mortgage, would would be unable to move quickly, would be unable to avoid the commitment of making mortgage payments and would also have the risk of negative equity. Not to mention all the associated costs when you sell and buy a house...

Given that the economy could start to run downhill soon, I'd want to be in a *very* secure job if I was paying a mortgage. A good example of the flexibility I have through renting is that I was able to quit my job and study for a year to get into renewable energy. If I'd bought a house near Oxford, I'd have no spare cash around to pay for a year off, and the mortgage payments would far exceed my rent, not to mention all the other general running/maintenance costs that are not my problem as a tenant.

Of course, there would be some advantages to owning a house, such as being able to do a lot more to make it energy-efficient, etc., but I wouldn't want to be living in the South, as I'd want to be away from some of the urban sprawl, nearer to family in the North West, and, above all, somewhere where there's enough rain to grow food!

We have some money saved up, so if there was a big enough crash in the housing market and we still had jobs, we might consider buying, but only if the mortgage (or loan from family, etc.) could be paid off within 5 years or so. Otherwise the risk is just too high, and I'd rather have the flexibility.

[aliwood]

No debt

No income either

Ah well, could be worse.

[ToY]

Managed to get completely out of debt this year.

Down side ? you tend to have loads of loose change all over the place when you back to paying in cash, and there is always the suspicion that many of those who have handled cash have not washed their hands after going to bog (so wash your hands after bagging up your bucket of coins for the bank).

Upside ? junk mail substantially decreases when you?re not in debt. You have more money. You feel more at peace, sleep better and both look and feel healthier, and you come to realize just how nagging and debilitating your prior debts were (excluding mortgages ? they tend to make people more content). You enjoy little treats and gizmos when you pay for them outright (especially after a bit a saving) and can live in the ?present? rather than having events and pleasures tainted with the feeling of future impending doom or a painful financial reckoning.

My feeling, in relation to a ?Peak Oil? crunch, is that people are kidding themselves if they think a financial collapse will null and void their debts. I think if you?re in substantial debt at the start of the ?Peak Oil? crunch, it is highly likely you will end up jobless, homeless and possessionless in short order. Economic depression brings institutional brutality ? look at history.

What do I know? I don?t even have a 40inch Plasma TV.

[dr_doom]

I've got a 12k student loan outstanding, but also a similarly sized stash of gold buried somewhere. Which more or less cancel each other out which makes me debt free I guess.

Don't own any property which I don't consider a particularly bad thing at the moment. My rough plan is to get out of london as soon as when/if the shit really hits the fan. A few of my relatives live in remote rural areas which should be a good bet for survival.

I expect large swathes of housing will become close to worthless when peak oil becomes advanced. 90% drops against physical gold are definitely a possibility. Question is, whether they will still be practical places to live.

[Ballard]

Sold detached house with garage, bought same sized semi without, result is a tiny mortgage (to be paid by end of next year). With savings (gold) equal to the debt.

I recommed this route, what's the worst that can happen?, I 'll lose my job, and spend more time at the allotment.

Can't wait

[GD]

Just broke through the barrier this month (wahey!). I addition to a weight being dropped off my shoulders, the fact I'm not servicing it any more is equivalent to a 2K pay rise!

Even though I don't own a property I consider myself debt-free. If things go pear shaped quickly, there's still parents / in-laws / grandparents to move in with.

[Neily at the peak]

I've just read Stephen Leeb's The coming economic crash. He predicts spiralling inflation and rising property prices.


Neil

[GD]

I've just read Stephen Leeb's The coming economic crash. He predicts spiralling inflation and rising property prices.
Neil

How does that tie in with peak oil? I mean, if property prices are related to how people can afford to service debt, won't inflation (+ higher interest rates) reduce what people can afford?

[Neily at the peak]

yes and no. Peak oil drives up the cost of all building materials, which means either property prices will go up or there will be less houses built which adds pressure to supply and demand. He doesn't go into a lot of detail as to why he thinks that property will go up, however the whole of the book is based on $200 dollar or more crude. He also thinks that we are in for a re-run of the 70's due to high energy prices. Inflation tends to diminish debt. He also suggests that for other economic reasons governments will not be able to rise interest rates significantly and that in fact they won't want to keep inflation down due to their own budget deficits. I am personally not convinced that it will be that simple. The book is well worth a read, it is an easy read and not that academic. For me it has just confirmed many of my opinions, so I am bound to think it is good book aren't I.


Neil