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Debt is a Four-Letter Word

Remember when interest rates were 0.5%? Those days are gone. All that debt you built up, is now coming home to roost. Debt was always a four-letter word.

I am astounded that I had not written something with this title before (in fact, I was positive I had). As has been said previously, there is no such thing as Good Debt, but I guess the word Debt as a social obscenity was missed. But make no mistake, Debt is a four-letter word.

I was happy to see noted financial expert Preet Banerjee using this sentiment in a presentation to financial writers. Given the low interest rates we have lived through, folks have no idea the impact that a quadrupling of the prime rate (to say 8%) might have on folks. Could you live with the Interest portion of your mortgage payments to Quadruple?

The explanation that resonated with me (from Preet) was you are not borrowing money from the bank. You are borrowing it from your future self (and you had better hope the future is successful).

Debt is a Four Letter Word
Debt is a four-letter word (thanks to myownadvisor.ca for the image)

The numbers do not lie. Every dollar you borrow today, future you have to repay, with interest on top of it. Currently, interest is low, but how much longer will this last? Look at your Mortgage statements. Does it tell you how much interest you pay off for each payment? If it does triple that, ask yourself, “Can I afford this?”. If you want to figure it out yourself, try my Mortgage Payment Calculator.

I will not touch the levels of consumer debt (i.e., Credit Card, short-term loans, auto loans, etc.). The amount out there right now makes me shake my head.

Other Debt Posts from Me? I can’t put them all here. The post would go on for pages, but here are a few of the latest.

Feel Free to Comment

  1. Hi,

    The book that transformed my view of money (and work) is “Your Money or Your Life” by Vicki Robin, Joe Dominguez, and Monique Tilford. Highly recommend it.

    rob…

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