What is your percentage of debt to NW?

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ByThePond
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Re: What is your percentage of debt to NW?

Post by ByThePond »

Homeowner with 0% debt since 2007. It took over 20 years to get there though.
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checkyourmath
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Re: What is your percentage of debt to NW?

Post by checkyourmath »

hudson wrote: Fri Nov 20, 2020 3:27 pm No debt.
I don't think that net worth has much value except to know it....except maybe to the Veterans Administration or the FAFSA people.
When filling out the FAFSA for student college aid, they ask net worth type questions.
When filing for (VA) Veterans Medical Benefits, they ask net worth type questions.
The only reason I asked is because I will eventually be taking out a mortgage. I plan on taking out a 1-2 million dollar mortgage. Home prices are about to take off like a rocket. My guess is probably in the next two years. I know a ratio of debt to NW has no real impact on mortgage amount but it is still more relevant than a lot of other surveys on here.
Casimir
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Re: What is your percentage of debt to NW?

Post by Casimir »

Retired couple with zero debt except for current month's credit cards. Living this way for 8 years and loving it.
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Artful Dodger
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Re: What is your percentage of debt to NW?

Post by Artful Dodger »

2.41%
Sweetbriar
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Re: What is your percentage of debt to NW?

Post by Sweetbriar »

0% debt for years...own home. :)
hudson
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Re: What is your percentage of debt to NW?

Post by hudson »

checkyourmath wrote: Fri Nov 20, 2020 3:32 pm
hudson wrote: Fri Nov 20, 2020 3:27 pm No debt.
I don't think that net worth has much value except to know it....except maybe to the Veterans Administration or the FAFSA people.
When filling out the FAFSA for student college aid, they ask net worth type questions.
When filing for (VA) Veterans Medical Benefits, they ask net worth type questions.
The only reason I asked is because I will eventually be taking out a mortgage. I plan on taking out a 1-2 million dollar mortgage. Home prices are about to take off like a rocket. My guess is probably in the next two years. I know a ratio of debt to NW has no real impact on mortgage amount but it is still more relevant than a lot of other surveys on here.
Thanks checkyourmath!
I'm not an expert. Maybe annual income and or taxable holdings?
Doctor Rhythm
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Re: What is your percentage of debt to NW?

Post by Doctor Rhythm »

checkyourmath wrote: Fri Nov 20, 2020 3:32 pm
hudson wrote: Fri Nov 20, 2020 3:27 pm No debt.
I don't think that net worth has much value except to know it....except maybe to the Veterans Administration or the FAFSA people.
When filling out the FAFSA for student college aid, they ask net worth type questions.
When filing for (VA) Veterans Medical Benefits, they ask net worth type questions.
The only reason I asked is because I will eventually be taking out a mortgage. I plan on taking out a 1-2 million dollar mortgage. Home prices are about to take off like a rocket. My guess is probably in the next two years. I know a ratio of debt to NW has no real impact on mortgage amount but it is still more relevant than a lot of other surveys on here.
You seem to have a lot more certainty about the markets than most here would claim. As a homeowner, I hope you’re right, but I remain militantly agnostic.
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beernutz
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Re: What is your percentage of debt to NW?

Post by beernutz »

checkyourmath wrote: Fri Nov 20, 2020 10:18 am 0%

I am a renter with no student loans or credit card debt. The only reason I ask the question is because all markets are headed towards all time highs. The debt machine provides a lot of opportunity. My guess is there is probably an ideal percentage somewhere between 5-25%.
1.7%

Just a car loan (Ford was offering 1.99%) and a mortgage with 3 years until it's paid off where P is 90% of P+I.
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Rudedog
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Re: What is your percentage of debt to NW?

Post by Rudedog »

Zero debt. I'd never borrow to invest.
palaheel
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Re: What is your percentage of debt to NW?

Post by palaheel »

To answer your question, less than 10%, depending on how you measure net worth. It's all mortgage.

Regarding some of your other comments,
There is no such thing as inflation.
Buy the biggest home with the smallest salary. Anyone that doesn't have a mortgage is actually taking on massive risk.
Home prices are about to take off like a rocket. My guess is probably in the next two years.
You are assuming a lot about the future. I assume as little about it as possible. I remember the '70s and early '80s inflation. I remember the runup to the housing crisis, when real estate was going up like a rocket, only to come crashing down. Those things weren't fun.
Nothing to say, really.
pseudoiterative
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Re: What is your percentage of debt to NW?

Post by pseudoiterative »

0% debt since paying off student loans 4 years ago. I rent and don't own my own business that could potentially increase profits by employing borrowed capital.

I live in a country which had massive increases in housing prices during the last couple of decades, and live in a city where rental returns on invested capital are low, so I'm pessimistic about the ROI of locking a large chunk of my capital into a dwelling that has a reasonable chance of turning into a capital loss if market prices decline or stagnate. If house prices were to decline substantially so that owning a home appeared cheaper than renting, I'd be open to buying and taking on a chunk of debt in order to do so.

From my perspective the US housing market looks about 40% cheaper than my local housing market.
bighatnohorse
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Re: What is your percentage of debt to NW?

Post by bighatnohorse »

0%
Debt and cash flow would be a more interesting figure.
And perhaps more meaningful.
123
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Re: What is your percentage of debt to NW?

Post by 123 »

0% Zero debt

Debt is generally a drag on the accumulation of net worth.
The closest helping hand is at the end of your own arm.
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catdude
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Re: What is your percentage of debt to NW?

Post by catdude »

Zero debt, own my house
catdude | | All generalizations are false, including this one.
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Toons
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Re: What is your percentage of debt to NW?

Post by Toons »

0


:mrgreen:
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montanagirl
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Re: What is your percentage of debt to NW?

Post by montanagirl »

0%, own home outright
lws
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Re: What is your percentage of debt to NW?

Post by lws »

Zero.
stocknoob4111
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Re: What is your percentage of debt to NW?

Post by stocknoob4111 »

I have a car loan at $6,600 which I can pay off because it represents 0.84% of my **LIQUID** net worth. I choose not to pay it because it's at 0% APR and I have invested that money in VTSAX. I have 13 payments left so not too long before that is gone too.

No other debts, I have not had a credit card balance in longer than I can remember although I do use credit cards often I pay it off each month.

Also, the older I get the more unappealing the consumerism culture looks to me. I am liking minimalism and enjoying more elementary things which don't cost very much.
ColoRetiredGirl
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Re: What is your percentage of debt to NW?

Post by ColoRetiredGirl »

MidwestMike wrote: Fri Nov 20, 2020 2:55 pm
Broken Man 1999 wrote: Fri Nov 20, 2020 10:27 am I have no debt, I owe this months charges on my CCs, but they are always paid off each month...
Me too.
Me three!
Regatta03
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Re: What is your percentage of debt to NW?

Post by Regatta03 »

0.0%... (as of month-ends)

... intra-month it floats between 0.0-1.5% based on Credit Card utilization (until paid-off in full at month-end).
stereotaxis
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Re: What is your percentage of debt to NW?

Post by stereotaxis »

1% of net worth. no mortgage but it is all inexplicably in car loans. it is a behavioral anomaly. my lizard brain thinks as long as I have a car payment, I can't buy any more cars.
eldplanko
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Re: What is your percentage of debt to NW?

Post by eldplanko »

Isn’t the argument that the debt has to provide a benefit... ie low interest mortgage provide stable housing, that interest is the cost you pay for housing stability. If you could borrow below what a safe return was, basic economics wouldn’t work. Anything beyond is speculation and leverage. Can it work, yes, can it work consistently over the long term... probably not unless you have a leprechaun.
Last edited by eldplanko on Sat Nov 21, 2020 9:09 am, edited 1 time in total.
Ron Ronnerson
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Re: What is your percentage of debt to NW?

Post by Ron Ronnerson »

About 29%. I would be fine with it being higher. I am pro-debt at low enough interest rates (anything under 3%).
dh666
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Re: What is your percentage of debt to NW?

Post by dh666 »

Age: 32
NW: 1.15M
Debt: 0

0% ☺️
MrDrinkingWater
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Re: What is your percentage of debt to NW?

Post by MrDrinkingWater »

grabiner wrote: Fri Nov 20, 2020 1:31 pm <SNIP>
If having a mortgage, or keeping your low-rate student loans, allows you to contribute more to your 401(k) and IRA for permanent tax benefits, that is usually a good deal.
<SNIP>
I like this response to the OP the best.

I think the OP could reformulate his question to ask what we think is the best ratio of debt to Gross Worth, if one is going to choose to have debt. I think it is good to see these kinds of questions and to help people understand what advantages can gained from taking on good debt and the risks they will need to manage in doing so. If we can help others avoid taking on the disadvantages of bad debt, we've really done our job.

I'm really impressed that we have so many who have paid off their mortgages and own their homes free and clear.
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22twain
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Re: What is your percentage of debt to NW?

Post by 22twain »

Now, in our late 60s, our house is paid off, so we have zero debt except for credit card balances which are paid off every month.

Just after we bought our house 32 years ago, in our mid 30s, we had maybe about $80K total in bank and retirement accounts. The house was worth about $70K, so our net assets were about $150K. We owed $60K on the house, so our net worth was $90K. The desired ratio was therefore 60/90 = 67%.

If the OP really meant total assets instead of net worth, then the ratio was 60/150 = 40%.
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parisinthespring
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Re: What is your percentage of debt to NW?

Post by parisinthespring »

Portfolios $1m. Home $1m. Mortgage 300k. So debt as %age of NW = 17.6%. As a %age of total worth = 15.0%. I don't pretend to be very financially sophisticated but I have very much appreciated the leverage that a mortgage has given me, enabling me to buy a home for far more than I could have afforded if I had had to pay cash, while providing tax benefits at the same time. Even with the recent limitations on tax deductions, it is still worthwhile. And over the years my monthly cost has actually gone down as interest rates fell and I refi'd. But even if it had stayed the same, I would be better off than if I had remained a renter having to make increased payments each year. I think, used judiciously, a mortgage is a good debt to have. In my case it enabled me to purchase in a VHCOL area and build substantial equity. I am not in a hurry to pay it off as I don't necessarily want all that much money tied up in one property and I also prefer to keep my savings invested in the market; my plan is to sell when I retire in a few years and use part of the equity to buy my retirement home in a lower COL area with no mortgage.
chipperd
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Re: What is your percentage of debt to NW?

Post by chipperd »

checkyourmath wrote: Fri Nov 20, 2020 3:32 pm
hudson wrote: Fri Nov 20, 2020 3:27 pm No debt.
I don't think that net worth has much value except to know it....except maybe to the Veterans Administration or the FAFSA people.
When filling out the FAFSA for student college aid, they ask net worth type questions.
When filing for (VA) Veterans Medical Benefits, they ask net worth type questions.
The only reason I asked is because I will eventually be taking out a mortgage. I plan on taking out a 1-2 million dollar mortgage. Home prices are about to take off like a rocket. My guess is probably in the next two years. I know a ratio of debt to NW has no real impact on mortgage amount but it is still more relevant than a lot of other surveys on here.
So what will your percentage be once you take out a say, 1.5 million dollar mortgage?
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Firemenot
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Re: What is your percentage of debt to NW?

Post by Firemenot »

Debt < 20% of NW. Almost all housing debt. I have a trivial amount of car and student loan debt that I chose not to pay off due 0.99 and 1.60% interest rates, respectively. Early-mid 40s.
eldplanko
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Re: What is your percentage of debt to NW?

Post by eldplanko »

checkyourmath wrote: Fri Nov 20, 2020 3:32 pm
hudson wrote: Fri Nov 20, 2020 3:27 pm No debt.
I don't think that net worth has much value except to know it....except maybe to the Veterans Administration or the FAFSA people.
When filling out the FAFSA for student college aid, they ask net worth type questions.
When filing for (VA) Veterans Medical Benefits, they ask net worth type questions.
The only reason I asked is because I will eventually be taking out a mortgage. I plan on taking out a 1-2 million dollar mortgage. Home prices are about to take off like a rocket. My guess is probably in the next two years. I know a ratio of debt to NW has no real impact on mortgage amount but it is still more relevant than a lot of other surveys on here.
I lost you at “home prices are probably going to....” If you’re certain of this, then you should be leveraged to the hilt, sounds like a sure thing. Best of luck on your endeavor!
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quantAndHold
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Re: What is your percentage of debt to NW?

Post by quantAndHold »

checkyourmath wrote: Fri Nov 20, 2020 3:32 pm
hudson wrote: Fri Nov 20, 2020 3:27 pm No debt.
I don't think that net worth has much value except to know it....except maybe to the Veterans Administration or the FAFSA people.
When filling out the FAFSA for student college aid, they ask net worth type questions.
When filing for (VA) Veterans Medical Benefits, they ask net worth type questions.
The only reason I asked is because I will eventually be taking out a mortgage. I plan on taking out a 1-2 million dollar mortgage. Home prices are about to take off like a rocket. My guess is probably in the next two years. I know a ratio of debt to NW has no real impact on mortgage amount but it is still more relevant than a lot of other surveys on here.

If you had this much insight into home prices, wouldn’t you have bought your house about six months ago? I mean, you already missed a lot of appreciation.

“Ideal” levels of debt depend on your personal financial situation and job prospects, and aren’t that easily generalizable. My answer, as a retiree with no income, will not be relevant to your situation as someone who apparently has enough income to afford a $2m mortgage.
SimplicityNow
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Re: What is your percentage of debt to NW?

Post by SimplicityNow »

We have no debt and I can't imagine any reason we'd take on debt.

Markets being or heading to all time highs is irrelevant. That could change tomorrow and for how long, no one knows.
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zarci
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Re: What is your percentage of debt to NW?

Post by zarci »

Age: 28
NW: 200K
Debt: 170K

85%

I'm surprised by the low number of people that report a significant debt burden.

Is this due to the older population of this board? Do people here simply pay of their home first? What's going on here?

In my mind most people were paying down the mortage until their early fifties.
Marseille07
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Re: What is your percentage of debt to NW?

Post by Marseille07 »

zarci wrote: Sat Nov 21, 2020 11:20 am Age: 28
NW: 200K
Debt: 170K

85%

I'm surprised by the low number of people that report a significant debt burden.

Is this due to the older population of this board? Do people here simply pay of their home first? What's going on here?

In my mind most people were paying down the mortage until their early fifties.
I didn't go for an expensive property, prepared lots of down payment then got 15-year fixed and paid off in 2.5 years. I know there are lots of people who advise against this but I think it was a good move tbh. I'm in the Bay Area and my COL was 1.2k/month after that.
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ruralavalon
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Re: What is your percentage of debt to NW?

Post by ruralavalon »

There is no such thing as inflation.
Buy the biggest home with the smallest salary. Anyone that doesn't have a mortgage is actually taking on massive risk.
Home prices are about to take off like a rocket. My guess is probably in the next two years.
In my opinion those are outrageous comments/predictions.
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ruralavalon
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Re: What is your percentage of debt to NW?

Post by ruralavalon »

zarci wrote: Sat Nov 21, 2020 11:20 am Age: 28
NW: 200K
Debt: 170K

85%

I'm surprised by the low number of people that report a significant debt burden.

Is this due to the older population of this board? Do people here simply pay of their home first? What's going on here?

In my mind most people were paying down the mortage until their early fifties.
Now age 75, retired almost 10 years, no debt for many years before retiring.

Many of us reporting zero debt had mortgages earlier in life.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
NancyABQ
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Re: What is your percentage of debt to NW?

Post by NancyABQ »

0.6% (of portfolio -- I don't calculate my net worth, but I suppose it's 0.5% if I include my paid off houses)

I took a 0% car loan a few months ago. I don't normally do that, but it seemed reasonable at the time. My decision was not related to market conditions. I could pay it off at any moment if I choose to.

Age 58 and could retire any time.
Last edited by NancyABQ on Sat Nov 21, 2020 12:21 pm, edited 1 time in total.
hudson
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Re: What is your percentage of debt to NW?

Post by hudson »

zarci wrote: Sat Nov 21, 2020 11:20 am Age: 28
NW: 200K
Debt: 170K

85%

I'm surprised by the low number of people that report a significant debt burden.

Is this due to the older population of this board? Do people here simply pay of their home first? What's going on here?

In my mind most people were paying down the mortgage until their early fifties.
Good question zarci,
I carried a lot of debt for many years...credit cards, mortgage, vehicle loans, a home equity loan, and college loans for my children. Around age 50, I said, "No more!" My wife and I focused on clearing all debt. When that was done, we agreed that if we wanted something, we would save up for it first....so it's been years since we had any debt. I'm now 73 and retired. Cash and Carry! :)

Bottom Line: Older....yes. When I was younger, I had to borrow to get by.
Last edited by hudson on Sat Nov 21, 2020 12:22 pm, edited 1 time in total.
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retired@50
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Re: What is your percentage of debt to NW?

Post by retired@50 »

checkyourmath wrote: Fri Nov 20, 2020 3:32 pm
hudson wrote: Fri Nov 20, 2020 3:27 pm No debt.
I don't think that net worth has much value except to know it....except maybe to the Veterans Administration or the FAFSA people.
When filling out the FAFSA for student college aid, they ask net worth type questions.
When filing for (VA) Veterans Medical Benefits, they ask net worth type questions.
The only reason I asked is because I will eventually be taking out a mortgage. I plan on taking out a 1-2 million dollar mortgage. Home prices are about to take off like a rocket. My guess is probably in the next two years. I know a ratio of debt to NW has no real impact on mortgage amount but it is still more relevant than a lot of other surveys on here.
Depending on your current income, the mortgage amount mentioned above might be a bit large. Typically, spending around 2.5 - 3.0 times annual income is about the right price for a house. If you're planning on spending more than 4 times your income for a house, you're likely going to be carrying a heavy mortgage load that will push other optional expenses out of your budget. In other words, you'll be "living for your house" and not much else.

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hightower
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Re: What is your percentage of debt to NW?

Post by hightower »

checkyourmath wrote: Fri Nov 20, 2020 3:09 pm
hightower wrote: Fri Nov 20, 2020 11:05 am Not sure that your question makes much sense because net worth means that you've already subtracted your debts from your assets??? So, to ask what your percentage of debt to NW means you're calculating your net worth, then adding your debt back to your calculation??

Your networth is really the key figure to keep in mind. NW = assets minus debts

My networth is somewhere in the 750k range. My assets are well above 1 million dollars, but I have a 380k mortgage. Hence how I get to a NW of 750k. I carry no debt currently other than our mortgage. I may have temporary debt on my name for convenience sake, such as a new furnace that I paid for with a 0% interest offer just so I didn't have to liquidate any investments. It will be paid off quickly (2 months) with my regular income.
I am just trying to get a better understanding of what people use as a ratio. NW worth can be deceptive because housing has appreciated so much over the last couple years. I actually expected the ratio to be higher but it seems like most people that responded to this post have already paid off their mortgage.
Sure, the value of your home is a bit of a guessing game and is a moving target when calculating networth, but so is the stock market if you think about it. Or any investment really. Except cash. But, you can't just hold all cash obviously. So, NW is definitely a worthwhile estimate of how well you're doing financially. The most important thing is to see it's trend over time. You should be improving each year slightly, except for maybe during a housing or stock market crash.
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Re: What is your percentage of debt to NW?

Post by H-Town »

zarci wrote: Sat Nov 21, 2020 11:20 am Age: 28
NW: 200K
Debt: 170K

85%

I'm surprised by the low number of people that report a significant debt burden.

Is this due to the older population of this board? Do people here simply pay of their home first? What's going on here?

In my mind most people were paying down the mortage until their early fifties.
The key thing about building wealth: have zero debt (or as little as possible).

I'm in early 30 and I already paid off my mortgage. Why? I buy much less house than I can afford. I make good money and I didn't buy the house that my colleagues would go for at my current comp. It allows me to supercharge my portfolio. I can actually hit my FI goal in a few years.
Time is the ultimate currency.
Buckrodgerz
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Re: What is your percentage of debt to NW?

Post by Buckrodgerz »

No debt since I retired 10 years ago. Make payments to yourself into an investment account. As an ex banker, I see people get into trouble when their debt payments exceed 35% of their income. Dave Ramsey probably has the best basic debt control advice.
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MrBobcat
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Re: What is your percentage of debt to NW?

Post by MrBobcat »

zarci wrote: Sat Nov 21, 2020 11:20 am Age: 28
NW: 200K
Debt: 170K

85%

I'm surprised by the low number of people that report a significant debt burden.

Is this due to the older population of this board? Do people here simply pay of their home first? What's going on here?

In my mind most people were paying down the mortage until their early fifties.
For the most part I think it's absolutely due to age. I bought my 1st house (of 3, been in the current one 22 years) when I was 25 didn't get done paying it off mortgages till I was 51. That being said it's mostly people with the bogglehead/dave ramsey mindset that pay it off by their early fifties as it's been my experience that most people carry a mortgage right up to and into retirement. Anyway just anecdotal as I don't know the actual figures off the top of my head.
Triple digit golfer
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Re: What is your percentage of debt to NW?

Post by Triple digit golfer »

Our only debt is a $305k mortgage.

Our net worth, which I consider to be the sum of the value of retirement accounts, brokerage accounts, savings, checking, 529 accounts, and home equity is around $1.025 million.

So I guess about 30%.

I don't see how this is relevant to anything, really.
Triple digit golfer
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Re: What is your percentage of debt to NW?

Post by Triple digit golfer »

zarci wrote: Sat Nov 21, 2020 11:20 am Age: 28
NW: 200K
Debt: 170K

85%

I'm surprised by the low number of people that report a significant debt burden.

Is this due to the older population of this board? Do people here simply pay of their home first? What's going on here?

In my mind most people were paying down the mortage until their early fifties.
That is totally reasonable for somebody your age. You are worth $200k. That's good. Presumably you could pay off your debt, liquidate assets, and have $200k in cash, ignoring things like taxes and whether you could actually access the money easily.

At a young age, I am more concerned with my ability to pay and ability to save money. How much is my debt as a percent to my income, how much cash do I have left over, how much am I saving and building net worth, what is my human capital. Those things are more important than the number at any point in time. Maybe when I'm 45 or 55 I'll feel differently. At 35, I am happy knowing that I can easily make my mortgage payments, I'm hitting my savings goals, and on track to where I want to be.
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NewMoneyMustBeSmart
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Re: What is your percentage of debt to NW?

Post by NewMoneyMustBeSmart »

I'm at 16% including house - with no debt to invest (although it's implicitly so).
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mike@jb
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Re: What is your percentage of debt to NW?

Post by mike@jb »

0%
CC’s paid off every month.
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Re: What is your percentage of debt to NW?

Post by HMSVictory »

My percentage of net worth in debt to NW is zero. I have no debt whatsoever.
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howard71
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Re: What is your percentage of debt to NW?

Post by howard71 »

12% - Only debt is a mortgage just refinanced for 30 years. Pay cash for everything else unless I get a good zero-finance deal. I'm retired.
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grabiner
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Re: What is your percentage of debt to NW?

Post by grabiner »

MrDrinkingWater wrote: Fri Nov 20, 2020 8:52 pm
grabiner wrote: Fri Nov 20, 2020 1:31 pm <SNIP>
If having a mortgage, or keeping your low-rate student loans, allows you to contribute more to your 401(k) and IRA for permanent tax benefits, that is usually a good deal.
<SNIP>
I like this response to the OP the best.

I think the OP could reformulate his question to ask what we think is the best ratio of debt to Gross Worth, if one is going to choose to have debt. I think it is good to see these kinds of questions and to help people understand what advantages can gained from taking on good debt and the risks they will need to manage in doing so. If we can help others avoid taking on the disadvantages of bad debt, we've really done our job.
Note that "good" and "bad" debt, as personal finance advice, are only relevant to the decision whether to take out the debt. "Good" debt is debt that allows you to pay for something important (a college education, or a home) that you wouldn't otherwise be able to buy; you get a lot of value out of making the purchase.

But once you have taken out the debt, whether it is good or bad to pay down depends only on the rate, the term, and any alternative use for your money. Changes in the alternative use (such as changing bond rates, or becoming able to max out your 401(k)) may make it desirable to pay down debt now when it was better to keep the debt in the past, or vice versa.
Wiki David Grabiner
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