Can one who is accustomed to paying cash for everything can become accustomed to living with
some debt, year in, year out?
Here is an example. I always pay cash. The only debt I accept without problems is real estate, because I am building equity and I know long term that I cannot lose. Of course, short term, the housing boom gives me an additional security because I can always resell higher than what I purchased.
(I will add that in the current housing boom, my tentation is to do like Troy did in The Apprentice and earn a quick profit, repeatedly, by dolling real estate up and selling it as quickly as possible. Verrrrrrrry tempting. As long as you have a good salesman friend who can help you get rid of it quickly.)
My experience with tenants has been that cash flow is the name of the game. Banks won`t bother you if you pay monthly. Some even accept you use your margin of credit to make your R.E. payments.
So, ultimately, it
s not how much debt you have, its how much profit you make from it. If you have a Reasonable Expectation of Profit (REOP) you should not any problems with the taxman either.
So debt can be viable, especially if one factors in the price of lost opportunities or failure to act on a good deal.
But outside of R.E. ?
On one hand, I see people with loaded credit cards and they seem to have no problem living with it. I reason they have confidence in their lifestyle and that they will always find a way to make the ends meet. Worst case, there`s always some time of insurance or bankruptcy mechanism that can kick in.
On the other hand, paying cash has some advantages. But even Donald Trump borrows. I am most probably too much of a perfectionist, insecure, or have never been able to find a good reason to accept debt.
So, what helped you accept debt as a fact of life?