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Ask Dave

Why Is Mortgage Debt Different From Other Kinds of Debt?

Lex needs help explaining to his wife the difference in taking on debt to buy a car and having a mortgage. Dave helps him with this, and explains his view on debt.

QUESTION: Lex and his wife are on Baby Step 3. They live in Portland, Ore., after moving to America seven years ago. They are saving up for a car, but his wife wonders what the difference is between borrowing a small amount to buy a car and borrowing to buy a house. They have about $3,000 left before they can buy the car they want. Dave explains his take on these types of debt.

ANSWER: For one thing, cars go down in value. The second thing is I don’t really like borrowing on a house, but I tolerate it because it’s a much larger purchase.

Don’t misunderstand. I recommend you pay cash for a house, too. I don’t like debt of any kind. But I’ll put up a small, 15-year, fixed rate mortgage where the monthly payments are no more than a fourth of your take-home pay. Still, I want you to get that kind of thing paid off fast, as well.

The best way to have a high-quality life financially, the best way to build wealth is to not be in debt. It stabilizes your life. And if you can’t learn to delay pleasure, then you’re not going to win with money. That’s the bottom line. Personal finance is about controlling the person in your mirror.

Every one of us has that 4-year-old kid inside us; that little kid in the grocery store who’s throwing a hissy fit because he or she wants that cereal. That kid’s name is Immaturity, and he or she doesn’t want to delay pleasure. What your wife’s asking is a normal request, but it’s also a sign that we have to address the kid that’s inside us — and tell that kid no!



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