What would you say is a conservative/liberal debt to income ratio.

I have read banks generally don’t like to lend more than 40% of gross income tied up in payments.

People balk when Dave Ramsey says 25% of net at 15 years for an home and 0 other debt.

Is it reasonable for a mid age pilot earning 25k-35k a month gross to have 10k-14k a month tied up in payments to a bank for toys or a mortgage or vacation home.

 

Aware. And thrilled to have been born here, and to be able to raise my kids right where they were born, in a land of safety and prosperity. Happy to pay my taxes, and don’t see any other nation doing it better than my own.

 

I absoulutey agree with your overall point, but I would also point out it's not so much that your house is worth more, it's that the dollar is worth less.

 

I actually liked Tenet, though not nearly as much as his other work. Inception is a masterpiece.

FWIW, Sonic spelled it Tenat. 3x.

 

Yeah Dave's advice on this is unrealistic for most people that aren't high income earners. Look at the average/median home price and then compare the average/median income and one will quickly see that the numbers don't work.

 

People like to say Dave Ramsey's advice is outdated or doesn't work, but we just paid off our house in our early 40s and it has absolutely worked for us. The key is being able to stay humble and say "no" to the consumption culture. We are still in our regional airline house that's nice but definitely not a "major airline captain" mansion. All kids have a room and walk to good schools and we have great neighbors. We followed Dave's advice, took out a 15 year mortgage and made extra payments along the way. So now no payments other than taxes and utilities and the peace of mind is real.

And yes I understand math and interest rates, and we have plenty invested outside of our primary residence already.

Of course the best decision I've made so far was marrying a great woman who's frugal and happy without needing all the new shiny things.

 

In my case once off the B scale at Delta I was probably never near 40% of gross. The B scale years I probably exceeded it. My main home we paid cash for from equity of our prior homes. The vacation house I could pay off and have the cash set aside but the money market account is paying 5.11 as of a month ago. Mortgage rate is far less not to mention the property has doubled in value since 2018. I can thank all the Floridians fleeing their summer heat for that!
How much money you want tied up is really a personal choice. As long as I could fully fund my tax deferred options and save another 5% I did not care. During the bankruptcy I sold one of my favorite toys but could have kept it. Wife wanted the cash in the bank.

 

The last paragraph bears emphasis. Just don’t tell my wife I said that 🙂

Similar demographic (slightly older) and situation as you. Agree on the peace of mind vs. math piece. It is real. Scoop’s book rec (Die w/ Zero) merits a bump.

To the poster a few posts back asking if $15k/mo of “payments” is reasonable, I’d say no. Yes, it can be done and sure you can spend that if it makes you happy.

But IMO that’s far too much FIXED overhead. If you’re talking VARIABLE burn rate (travel/food/whatever) that could be cut way back at the first glimpse of the black swan - different story. Skipping the next ski trip is much easier than unloading the McMansion in a down market.

It will come sooner or later. In my “short” time in the industry:

- EAL strike/shutdown (Dad)
- 9/11-> BK
- Age 65
- 2008
- COVID (which mercifully was quick and atypically mild for pilots in general)

 

A lot of his advice is great, but some of it isn't. Again, most people in the US are unable to do a 15 year mortgage and still have it less than 1/4 of their takehome pay. Most of us here are in a position that we can. But that's not the average American.

 

Another component of the equation is that the debt is worth less thanks to inflation. This is one of the reasons leveraged real estate investments have such a big impact on wealth. Unleveraged real estate is a great hedge against inflation. Smartly leveraged real estate has a multiplier effect equivalent to the leverage ratio.

100% equity = inflation hedge
50% equity = hedge + gains equal to inflation
25% equity = hedge + gains equal to 3x inflation