[seem_2211]

I mean it's "smart" and "efficient" but it's also fragile. The simplest way to manage your finances is to avoid debt wherever possible (especially consumer debt). Very hard to go into bankruptcy when you don't owe anyone anything!

The "smartest" way to manage your finances is to use credit cards that give you points and pay you back via a few hundred dollars worth of free flights a year. But there's a bunch of opportunity costs associated with pursuing that route, and a level of diligence that frankly most people do not have.

The best thing about debt is that it lets you move really really quickly - if you don't have $2k for that furniture set, you can just finance things and pay it off over 2 years. But that's the worst thing about debt as well - you now have a monthly obligation that's going to be a line item expense for the next 24 months. If you'd spent 12 months saving up for that furniture set and paid cash, the day you buy the goods is the day your financial obligations start and end.

I am not opposed to debt entirely, and think it can be a great strategic lever (I used a credit card to finance my initial move to America which has done wonders for my income and my career, far exceeding the interest costs that I paid). However I think for most consumer purposes it's less of a help and more of a hindrance. Take the new 84 month car loans. That's 7 years! That's a long time to assume that your life will have no material changes, or that nothing will go wrong.

[Jetrel]

Yeah, this is smart.

The most dangerous thing about debt is the tacit assumption you can keep making money as a functional adult. Full stop.

If you pay attention to the life stories of everybody who lives around you, that's actually a very dangerous assumption - it's about as dangerous and unreliable as a farmer assuming he'll never, ever, have crop failure. Some really informal guesstimation for me actually gives kinda comparable rates - 1/10 or 1/5 chances of it blowing up, every year. Just this very year, in fact, I've watched it blow up on half of my coworkers as they got laid off in the pandemic. They may have to default on their mortgages - loans that assumed the "working adult" party would just go on uninterrupted.

Yikes.

Debt can be useful, but man, people really need to only "sail out of sight of land" with a damn good reason. Don't just do it casually to pay for routine things like houses and cars.

[seem_2211]

Yeah that's 100% the truth. You also have to assume that multiple things happen at the same time - what happens if you buy a house two weeks before you get laid off at work and that's swiftly followed by your wife finding out that she's pregnant. Suddenly having 6 months worth of cash in the bank gives you a TON of breathing room.

The more we specialize, the more life becomes fragile, and the smaller the gains become. A Formula One car is incredibly fast, but the amount of attention and money each car requires is orders of magnitude higher than say a Ferrari road car, which is comparatively simple to manage.

[projektfu]

Spending a large amount at once can also be fragile. They say many families don't have a few thousand set aside for emergencies. If you have a few thousand and spend it on a dining room all at once, you won't be able to handle an emergency even if your income would have easily handled the monthly payments.

Obviously, it's preferred to have both the thousands saved as well as the thousands needed to buy a new car or furniture, but one might not be able to delay forever.

[ogre_codes]

> If you have a few thousand and spend it on a dining room all at once, you won't be able to handle an emergency even if your income would have easily handled the monthly payments.

Just as a single purchase can wreck your short term budget, a purchase spread over multiple months can wreck your long term budget. If that same family has an emergency that causes them to go into debt, they are now saddled with 2 debt burdens and can't pay rent/ make car payments/ eat.

If buying a choice dining room set will wreck your ability to handle an emergency, you are almost certainly better off not buying it either way. There are plenty of options for buying inexpensive furniture that isn't going to threaten your emergency funds.