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Build Up Debt While You are Young?

So I found a site that was espousing that “… if you have to, you should borrow money when you are young, that way you have longer to pay your debt off…”. Now this site seems to be from the author of a book who thinks this is a valid piece of advice, and when I made the following comment:

“… Your argument seems to be the same as that country and western song that went, ‘… if I’d killed you when I wanted, I’d be out by now…’, but be that as it may, this is possibly the most dangerous advice you can give other than, Smoke while you are young, that way you can recover later in life…”

Surprisingly the author seems to have deleted my comment (don’t blame them really).

How can anyone with a conscience say that this is anything other than dangerous advice? Building up debt when you are young is not the right methodology, and telling young people you shouldn’t live:

“… like a pauper until you are 45 and then go out and buy yourself a BMW because you can afford it then…”

is reckless. Why not tell young folk to eat like pigs, and don’t exercise until you are 45, because your health does not matter until then?

A beautiful hand made clock
Having More Time Does not Necessarily Make Debt Repayment Any Easier

Why not just build up debt? Now the author of this ignominious piece of advice seems to be implying that the borrowing should be for a house or an education (not for a BMW), and I can see the point, but it does seem to espouse that if you have long enough all debts can be paid off, but if you haven’t lived a lifestyle conducive to paying off debt, paying off the debt is that much harder to deal with. (Remember the Top 5 Reasons You Are in Debt).

The concept that with a lot of time, it should be easier to pay off a debt has some truth to it, but the easiest way to pay off a debt in a timely fashion, is to never incur the debt in the first place.

Am I completely missing the point? Is it better to build up massive debt in your youth so you can have it hanging over you in your retirement years?

Feel Free to Comment

  1. @Shane: There’s more to debt than math. Your point of view is reasonable and logical, and it will end up sinking most students financially for many years.

    My kids won’t be getting any student loans if I have anything to say about it.

  2. I didn’t read the original article but I do believe that incurring debt when you are young does make some sense. I am a commerce major, putting myself through school with part-time work and student loans. So the student loans are special in that:
    1) tWhile studying, they are interest-free. I would argue that any student who can qualify would do well to get a student loan. If one can make a lump-sum payment after school ends, you basically have an interest free loan but anyways I digress.
    2) Interest during repayment is tax deductable, lowering the efffective interest rate to a point where it could very well be more profitable to maintain that debt for as long as possible. This of course depends on the interest rate and the borrower’s marginal tax rate.
    However and most important to this topic, it makes more sense to borrow for education when young. If you look at education as an income-generating asset, that is, it will increase one’s income over their working career; it makes much more sense to make that investment earlier and thus maximize that increased earning ability.
    Just my opinion and I am still learning this stuff so I welcome constructive feedback.

  3. Pretty silly advice (the other sites). The biggest problem is that if you build up debt while you’re long, you start bad habits that you’re not just going to stop once you get old enough. If you start getting in debt, you’ll never stop whereas if you avoid getting into debt at all, chances are you won’t start.

  4. I too, wrote a piece on that article. I seen the original article
    on Yahoo Finance and added my own advice as well
    The writer that gave the BMW quote seem like he racked up some debt while he was young
    Anywho, my debt was incurred during my college years, I’m just glad I got rid of it.

  5. Wouldn’t it also be true to invest while your young so you have time to enjoy compounding?

    The argument may be true for income generating assets like a business or positively geared property but accruing debt for consumption is the biggest mistake you can make

  6. Wow. That IS hair brained advice. While I don’t think ALL debt can be avoided (mortgage, student loans for those who don’t get funds from parents etc). Nonetheless, “because you’re young” is inane and foolhardy advice.

    1. Why not just say, “… .life is a drink and you get drunk, when you are young…” (to quote Paul Weller of the Jam).

      Make all your stupid mistakes when you are young, sounds like good advice, but it isn’t (better advice, try not to make those stupid mistakes?).

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