The difference between expenses & debt

I'm no accountant. So my definition of expenses vs. debt isn't textbook by any means. But it works for me.

If you owe someone or something money, and there's an interest rate attached to it, it's "debt." If there's no interest rate attached to it, it's an "expense."

Interest that you owe is like an untreated financial tumor that's growing 24-7-365. It has no sick days and takes no time off. To me, it's kinda how Roger Ebert described the relentless T-1000 in Terminator 2: "...he doesn't get disturbed and he doesn't get discouraged. He just pulls himself together and keeps on coming." The only way to kill off debt is radiation treatments in the form of regular payments way above the minimum.

Expenses, of course, are more or less essential. That's not to say that some can't be minimized or that we don't have our silly splurges that we'd rather get a do-over on. But stuff like utilities, groceries, and rent are going to be a regular part of civilized living. ("What about mortgage payments?", you say. More on that in a bit.) Just as importantly, I pay them as soon as they're due, so there's no interest accruing on them. Chronic interest payments are a chronic disease just as lethal as eating junk food everyday or smoking over the long haul – it's gonna catch up with ya!

The one type of debt (ie, outstanding money that you owe that's accruing interest) that's acceptable is a mortgage on your primary residence. One of the reasons being that your residence is very likely to appreciate in value over the long haul. So even though your making interest payments, they're at least on something that's probably increasing in value at a greater rate. But the mortgage has to be reasonable. Something like a 15-year fixed interest loan with monthly payments equaling 25% or less of my take-home pay (Okay, I stole that from Dave Ramsey). I don't own a home yet. But when I make the plunge (hopefully in late 2021), it has to be in that ballpark (with at least a 20% down payment) or I'm not doing it. It's not worth it otherwise.

Besides mortgages, avoid "financing" (the PR-friendly way of saying "plunging yourself into debt") like the bubonic plague. Don't buy things with a credit card unless you can pay off them by the time the statement balance is due. If the credit card has an introductory 0% APR for a fixed amount of time, make sure you're methodically paying off the balance so that it's $0.00 by the time the real APR kicks in.

Same goes for student loans and cars. Avoid taking out loans on either. It's the surefire way to ensure you will never begin investing money at a young enough age where compound interest has enough time to do it's money-printing, freight-train, compounding thing.

In my personal situation, I finally became debt free in 2017. Like an idiot, I "financed" my education and spent basically 14 years getting myself out of that hole. Now that I no longer have that millstone around my neck, life is a lot less stressful. And I regained a measure of serenity.

Ahhh, debt – the gift that keeps taking.