Personal Finance

Debt stays the same.. but assets increase.. is this ok?

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  • May 22nd, 2018 6:15 pm
[OP]
Sr. Member
Jul 17, 2006
939 posts
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Debt stays the same.. but assets increase.. is this ok?

Hi folks.. just wanted some outside feedback on my families finances. I have three kids. Wife and I both work. Basically, over the last 10 years our debt level has not dropped (still in the 200k mark, this is including mortgage and vehicles). Our assets have gone up considerably (house value has doubled, we both have good work pensions).. some RESPs for the kids (probably not as much as I should have).. but the overall debt has not decreased.

It always seems every time I pay a chunk off, another expense comes up (new vehicle, braces, house shingles, home maintenance, hockey fees.. parents here know the drill). Is this something I should be concerned about? We make all payments and such on time.. that's not a concern.
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Deal Expert
Aug 22, 2011
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tomincanada wrote:
May 17th, 2018 10:13 am
Hi folks.. just wanted some outside feedback on my families finances. I have three kids. Wife and I both work. Basically, over the last 10 years our debt level has not dropped (still in the 200k mark, this is including mortgage and vehicles). Our assets have gone up considerably (house value has doubled, we both have good work pensions).. some RESPs for the kids (probably not as much as I should have).. but the overall debt has not decreased.

It always seems every time I pay a chunk off, another expense comes up (new vehicle, braces, house shingles, home maintenance, hockey fees.. parents here know the drill). Is this something I should be concerned about? We make all payments and such on time.. that's not a concern.
Yes, you should be somewhat concerned.
Other than your home, nothing else is appreciating; especially not the vehicles.
[OP]
Sr. Member
Jul 17, 2006
939 posts
91 upvotes
vkizzle wrote:
May 17th, 2018 10:25 am
Yes, you should be somewhat concerned.
Other than your home, nothing else is appreciating; especially not the vehicles.
The pensions and RESPs are appreciating as well. But I appreciate your feedback.. I may need to make some adjustments.
Deal Expert
Aug 22, 2011
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tomincanada wrote:
May 17th, 2018 10:27 am
The pensions and RESPs are appreciating as well. But I appreciate your feedback.. I may need to make some adjustments.
Yes, but you can't tap into those now!
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Nov 26, 2014
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Quebec
tomincanada,

I am in similar situation as you. Married, 2 and 5 years old kids. Without counting mortgage debt, we have been carrying a 25k debts for 4 years that doesn't go up nor down. In 7 months we will be done paying 650$ / month for our SUV that will be ours and in perfect condition. I am counting in that money to reduce my debt.

Thanks to the MBNA 0% thread on this forum, my debt doesn't cost me much because of that! When I need to do a transition between two MBNA (promo ending and new application), i'm using my 6% LoC for 1-2 months.
Deal Addict
Mar 21, 2010
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I'd say exclude the mortgage from your calculation. Mortgage aside, assuming that as you have been paying it down, if your total debt remains the same, what's been going up? My concern would be if your unsecured debt is going up because you are spending more than you are making, basically - you can't count your house as an asset to offset this as you can't sell your house in order to support your living expenses. So ignore the house, both as a debt and as an asset, and look at what is happening with the debts and assets that you can control.
Member
Aug 20, 2015
306 posts
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Toronto
tomincanada wrote:
May 17th, 2018 10:13 am
new vehicle, braces, house shingles, home maintenance, hockey fees
These expenses shouldn't come to you as a surprise. In an ideal world you should be actively saving for these things while paying off your debt.
[OP]
Sr. Member
Jul 17, 2006
939 posts
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Manatus wrote:
May 17th, 2018 10:53 am
I'd say exclude the mortgage from your calculation. Mortgage aside, assuming that as you have been paying it down, if your total debt remains the same, what's been going up? My concern would be if your unsecured debt is going up because you are spending more than you are making, basically - you can't count your house as an asset to offset this as you can't sell your house in order to support your living expenses. So ignore the house, both as a debt and as an asset, and look at what is happening with the debts and assets that you can control.
Good way for me to reframe my thinking, thank you.

Basically what happened is we got a HELOC and used it to do some home improvements.. and we bought a new vehicle a year ago (50k)... and that has offset the part of the mortgage we have paid off.
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Aug 22, 2011
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tomincanada wrote:
May 17th, 2018 11:14 am
Good way for me to reframe my thinking, thank you.

Basically what happened is we got a HELOC and used it to do some home improvements.. and we bought a new vehicle a year ago (50k)... and that has offset the part of the mortgage we have paid off.
That's the viscous cycle and it will be hard to get out from!
[OP]
Sr. Member
Jul 17, 2006
939 posts
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vkizzle wrote:
May 17th, 2018 11:21 am
That's the viscous cycle and it will be hard to get out from!
The HELOC is like my "one ring" I love it and hate it at the same time.

My wife just loves it because it makes the house nicer and she doesn't look at finances :)
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Mar 21, 2010
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tomincanada wrote:
May 17th, 2018 11:14 am
Good way for me to reframe my thinking, thank you.

Basically what happened is we got a HELOC and used it to do some home improvements.. and we bought a new vehicle a year ago (50k)... and that has offset the part of the mortgage we have paid off.
The danger with that is that it's easy to justify - yeah, I can spend $50,000 and it will increase my house value by $70,000, why wouldn't I - but at the same time, you can't actually get "paid" until you sell the house, which you can't really do if it's your family home. In the meantime, you're still paying for it. So in that sense it's no different from buying a big screen TV, you're doing it because you like it, not as an investment. It's up to whether you can afford it as a luxury or not. I don't think you're in serious trouble but just be wary that you don't get used to having the debt, i.e. that as you pay things off you feel free to buy more things because you're okay with having that level of debt.

I'd say let the mortgage do its thing, and just focus on keeping down the level of your other debts. Don't let them rise up to compensate for the mortgage going down.
[OP]
Sr. Member
Jul 17, 2006
939 posts
91 upvotes
Manatus wrote:
May 17th, 2018 11:30 am
The danger with that is that it's easy to justify - yeah, I can spend $50,000 and it will increase my house value by $70,000, why wouldn't I - but at the same time, you can't actually get "paid" until you sell the house, which you can't really do if it's your family home. In the meantime, you're still paying for it. So in that sense it's no different from buying a big screen TV, you're doing it because you like it, not as an investment. It's up to whether you can afford it as a luxury or not. I don't think you're in serious trouble but just be wary that you don't get used to having the debt, i.e. that as you pay things off you feel free to buy more things because you're okay with having that level of debt.

I'd say let the mortgage do its thing, and just focus on keeping down the level of your other debts. Don't let them rise up to compensate for the mortgage going down.
Ok, thank you. I appreciate the time you took and advice you gave. I think you are right on all counts.
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Dec 11, 2003
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tomincanada wrote:
May 17th, 2018 11:14 am
Good way for me to reframe my thinking, thank you.

Basically what happened is we got a HELOC and used it to do some home improvements.. and we bought a new vehicle a year ago (50k)... and that has offset the part of the mortgage we have paid off.
What home improvements did you do? Don't list the stuff that you had to fix (eg, shingles). If you had to replace an appliance, maybe next time look for a cheaper one. If you remodeled something, could you have waited?

Another thought off the top of my head. Why did you choose a car that was 50K? Could you have gotten something cheaper? Say, 35K? Or even used? If you went the used route there could be some vehicles that are 2 years old and still in excellent shape/condition.

For me, if I need to save money it would start with second guessing my purchases. Do I really need it? Can I get a lower model? How is the used market on that item?
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[OP]
Sr. Member
Jul 17, 2006
939 posts
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ds2chan wrote:
May 17th, 2018 11:36 am
What home improvements did you do? Don't list the stuff that you had to fix (eg, shingles). If you had to replace an appliance, maybe next time look for a cheaper one. If you remodeled something, could you have waited?

Another thought off the top of my head. Why did you choose a car that was 50K? Could you have gotten something cheaper? Say, 35K? Or even used? If you went the used route there could be some vehicles that are 2 years old and still in excellent shape/condition.

For me, if I need to save money it would start with second guessing my purchases. Do I really need it? Can I get a lower model? How is the used market on that item?
I could have definitely chosen a cheaper vehicle. We have 3 kids so we definitely needed a decent sized vehicle (large SUV and/or minivan) and I drove around a shit car forever so I guess I just wanted something nicer for a change. The house stuff.. about half of it was more or less necessary.. the other half.. well.. I could have waited. It's one of those things like Manatus mentioned.. I didn't stress too much because it increased the value of the house.. but that's not money I am going to see for a long time.

I am done with the home improvements.. And our vehicles are good for a while.. I think I can start to chip away at my non mortgage debt.
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Nov 26, 2003
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It is difficult and many people have been there - you think to yourself, I deserve to drive a nice car, we make enough money, etc. The reality is your debt has not gone down because you're financing a lifestyle you can't actually afford with debt, and you're running on a cashflow treadmill.

Trust me, something will come up and you'll find a way to justify the expense if you maintain your current frame of mind.

If getting out of consumer debt is important to you, then you need to make wholesale changes that begin with your whole state of mind.

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