I’m going to get this right out in the the open. Debt is bad.

Now I know some of you are already thinking, “yeah, but what about my home equity line of credit, that isn’t so bad. I took that out to make a home improvement which is contributing to the overall value of my house.”

Others might be thinking, “yeah, sure it’s bad but it’s just a way of life. How else can I afford a brand new car every few years? Carrying a car note is a part of my monthly expenses.”

Last but not least, some of you are thinking, “well, my home mortgage isn’t bad, heck, the interest is a great tax write-off!”

For all of these scenarios (and more) taking on debt just increased the price of what you wanted so you could have it now. You are taking money away from your future self. So yeah, I’ll say it again. Debt is bad.

Now for those that know me, you probably know that I’m a realist and some debt might be worth taking on. For example, I believe that taking on a responsible mortgage is okay. Now, it’s still debt. You will wind up paying way more for that house when you factor in the amount you pay for the interest of the loan. But it isn’t nearly as bad as credit card debt, student loan debt or most car loans.

So how do we pay for big ticket items without taking on credit card debt or even a car loan? In the rest of this article I’ll cover some strategies of how to buy expensive items without feeling irresponsible or ignorant.


Living your dream without debt!

The average American family is in debt to the tune of $131,000 with home mortgages, student loans, cedit cards and car loans, according to nerdwallet.com. But it doesn’t have to be that way!


Learn the power of time

I’ve been enjoying taking my son skiing to our local non-profit mountain. Lift tickets don’t cost very much, he skis free and we always pack some snacks. (Okay in full disclosure, my son is such a picky eater he wouldn’t eat much of the lodge food anyway, so the brown bag lunch is a requirement for us.) So we have this hobby we like doing together. It’s great. We spend quality time outside, we have fun and we are making some great memories. But recently I’ve been really wanting a new pair of skis. I bought my current pair about five years ago and I picked them up used. Now while they aren’t like the ancient skis my dad used to have with old cable bindings, they aren’t too fancy either.

Like most people, when I get this inkling of an idea, I head to the internet for research. How much would a new pair of skis cost? What kind should I get? After narrowing it down to a pair of “all-mountain” skis I was almost ready to hit the buy button. I was picturing myself hitting the slopes and hopping onto the slide box and doing a 180 at departure and skiing away backwards (because my new skis would be “twin tip” so I could easily ski forward or backward).

But I didn’t hit the buy button. Instead I thought about how the current skis I have still do their job. They get me down the mountain and I still have a ton of fun.

Certainly though, someday I’m going to want a new pair of skis. So how am I going to get there?

Here is where time is your friend. I need to start setting aside some number of dollars each month that are for my new skis fund. I’ll have to prioritize this with the rest of my family’s finances. After enough time, that money will be there and if I still feel a new pair of skis needs to be had, then I can buy them, guilt free and debt free.

This story about skis is just one example. Delaying gratification works for any purchase. You can save up enough cash to buy a car. In fact, chances are you should be saving money for your next car purchase right now. So when your current car dies, you won’t be in a scramble to get a new one, and by scrambling, I mean taking out a car loan.

Hunt for value

Sometimes you can get big ticket items at a pretty good discount. I know for many new skis might not quality as “big ticket,” but we can still apply the same thinking. Before I go out and buy those new skis, how might I be able to save on them? Well in doing some research I learned every year there is a local (and popular!) ski swap. A ski shop not far away has skis on consignment and if I decide I want brand-new, there are always stores like Sierra Trading Post that usually have a pretty good discount.

If you need to buy a car, there are numerous tactics for negotiating the price down. So many tactics in fact, I won’t turn this into a car buying guide. Instead though, consider whether you really need a new car. Cars depreciate faster than a lead-free sinker in loon habitat. As soon as you drive that brand new car off the lot, you lose up to 11% up of the value. It’s hard to argue you got a good deal when that happens.

So instead of buying a brand new car, think about buying a car slightly or even moderately used. Depending on your budget and tastes you can still get close to exactly what you want and save some serious money.

Home buying tips

I’m not going to argue that everyone should pay cash for a house, that just isn’t realistic for a lot of want-to-be home owners. Now, if you have the cash to do it, I won’t tell you not to either. It’s just that most people can’t afford an all-out cash purchase.

So this section isn’t so much on how you can buy a home without any debt, it’s more about some tips and ideas to make buying a house more affordable.

Avoid PMI

Private Mortgage Insurance is insurance you must buy if you don’t have 20% of the cost of the home for a downpayment. So, let’s say you are looking to buy a house for about $300,000 and you have $45,000 saved for a downpayment. If you can just save up another $15,000 and get your downpayment to that magical 20% number you’ll avoid PMI. If you don’t do that, the PMI for your loan could end up being $3,000 a year.

Loan Term

It’s almost standard these days to think of a home loan as being for 30 years. But most lenders often offer other terms as well, like 15 years. If you can afford a loan with a shorter term you’ll end up saving a ton of interest.

Do you really need it?

Try this exercise. Walk around your house or apartment and look at the stuff you have. For each of the larger items, think about when you bought it and if you are still using it. Be sure to poke through your closet and look in your garage and basement. How many things can you find that you haven’t used in years, if ever. That’s a lot of money spent on things without much in return. I know I’ve been guilty – I’m looking at you QVC popcorn maker! And of course since I use Banktivity, I also know that purchased the  popcorn maker for $99 five years ago, ugh!

My point is, many people that are struggling with credit card debt realize they’ve bought a lot of stuff they don’t need or even use. So when you start eyeing your next big ticket item, regardless of how big or expensive it is, think long and hard about whether this is just going to be another one of “those purchases” – you know, the kind that ultimately end up invoking buyer’s remorse or worse, debt.

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17 comments on “Paying for Expensive Items Without Taking on Debt

  • IGG could help facilitate this with Banktivity if they included a Savings Goal feature similar to what Windows Quicken has. This is a great tool to help save for long term goals and avoid debt.

    • Yes I’m pretty sure banktivity has this future. What banktivity doesn’t have is a proper training videos on how to use the app.

      I enquiried many times about webinars should be recorded and uploaded on YouTube so everyone around the world can watch it . Because I’m not waking up at 4am in the morning to watch the webinar!

  • I remember microsoft money had a feature for debt repayment based on the snowball method, it was a nice feature back when I needed it!
    I know banktivity has something similar just not as easy to use.
    Some debt isn’t that bad. A .99 percent auto loan, or a 2.875 15 year mortgage. I make my minimums on those and invest the rest. Our savings rate is over 45 percent toward investments so I feel my debt is very responsible.

    • There were a few other thing mentioned but that’s one of them. Basic fiscal responsibility (TAANSTAAFL) which was obviously neglected (or never learned) by so many 10 to 15 years ago, and wasn’t taught when I went through high school 50+ years ago.

  • Anyone who is super serious about getting rid of debt for life, must go to the Dave Ramsey website. What an inspiration! He has a book, wallets, classes and DVD’s that are filled with humor and reality. I now have an emergency fund for my family and he teaches you how to do it and gives you the tools.

  • Debt is always bad. First goal is to buy your car for cash. Typically car loans have high interest rates. Second goal is to buy all cars for cash. Third goal, buy your house for cash
    I have used these principles and now I am totally debt free – 20+ years.

  • I thought these ideas were all common sense for the people smart enough to manage their money. I don’t agree that a 30 year mortgage is bad, I would rather get that and pay extra to pay it off in 15 years. This way in the event of a loss of employment/other financial emergency, you have the flexibility to make a lower payment until the crisis passes.

  • I set up a separate savings account for large purchases and just set aside a fixed amount every month and then use that fund when needed.

  • Take advantage of no interest credit card offers. Space your payments out during the interest free months and be sure to pay off the balance in the specified time.

  • Being debt free is a strategy that works for some but I couldn’t disagree more that debt is *always* bad. Irresponsible debt may be but debt as another finance tool, when used properly, is a very good thing. We could totally afford to pay off our mortgage but of course we didn’t. Instead we invested it (of course we have an emergency fund) and over the past couple of years we’ve been able to get 15%+ returns on that money and the house is appreciating as it would if I had paid it off. That’s leverage.

    I would agree with some of the other comments that we really don’t get good financial education when we are young. Teaching kids how to use credit cards and be consumers is not financial education. A sound program that teaches time value of money, how to allocate budgets and how not to get sucked up into the consumer spiral would make a lot of sense.

  • Along these lines, a method that has helped me when I was younger was when I realized I would always have a car payment. Once the first loan was complete, I kept saving the money I would have paid toward the loan. By the time the next car was needed, I generally had enough to pay the majority or completely for the next one. Since I had already adapted to the cost of the loan, it was relatively easy to just keep paying it to myself.

    Just my thoughts.

  • Never pay credit card interest (often 22.99% or even higher). If you can’t pay the bill in full each month you should not make the purchase unless truly an emergency. With a 30 year mortgage one extra payment per year shortens the loan to about 22.5 years. You should pay attention to current rates (bankrate.com is a good place to start) and also avoid typical savings accounts that pay practically nothing. You can get FDIC insured accounts with no minimums or monthly requirements that pay 1.6% currently. Consumers Credit Union pays 4.59% on up to $20,000 in a checking account with 12 debit purchases and $1000/month on an associated VISA card. That has been the best deal for months according to Kiplinger’s Financial magazine.

  • since I was a single mom for many years, i created a tiny savings plan, since my income was totally tapped out. Even as a nurse I had a medical needs kid, and that was my major luxuray expense. I hid $20 a week in an envelope in a clothing drawer. Steady. Every week. That was my money for gifts, and surprise events. $20 a week is $1000 in a year. Or put in an IRA. *o*
    Not elegant, but it works.

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