Think Of It As Renting

Tim is calling because his son needs braces. He's supposed to pay 25% up-front and then make a payment each month for two years. Is this a debt, and should he prepay it?

QUESTION: Tim in St. Louis is calling because his son needs braces. He's supposed to pay 25% up-front and then make a payment each month for two years. Is this a debt, and should he prepay it? Dave explains why he wouldn't.

ANSWER: Our kids got braces at a point that we were just so anti-debt that I just paid for it in advance. I have run into some things since I did that. I knew a person who did that, and the dentist passed away. Now they've prepaid for work that'll never be done.

It's almost like you're renting something here. That's okay, because you really don't want to buy them. Today, I probably wouldn't prepay it. I did and got like a 10% discount or something, so if it's a two-year program, it's not a lot of risk, but you could hypothetically lose some of that money.

Yeah, this is more like renting, and I wouldn't suggest you prepay your landlord if you were a renter for two years. This is not debt. You sign a contract when you rent an apartment, and that's not debt. You're a renter. That's a more accurate metaphor for looking at it. I think I would do it the way you're doing it. I think you're wise.