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wilg

Can you explain in more detail why you don't consider it savings? Maybe it is obvious but I am curious.

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At least to me, it's about how things are ordered in time.

Paying down debt is setting money aside to pay for something you bought at some point in the past.

Saving is setting money aside to pay for something you might buy at some point in the future.

Think of debt simplisticly, as negative savings. If you have debt, your net worth is "below zero". If you have 10k debt and 10k savings, your net worth is still (simplisticly) zero.

So, far from thinking about credit availability or credit worthiness, if you just think of debt as negative savings, you can see debt and savings mutually annihilate (like matter and antimatter), and sum to zero.

Debt is a wonderful, powerful invention -- but for many people who are unaware that debt costs interest, this simple model can help them reason about debt and decide to pay it off rather than letting it linger or taking out more debt.

If I have a personal savings goal, and on a particular month I miss it, do I suffer the same consequences if I instead owed the bank?

Debt is tied to enforcement, often punitive enforcement.

There is an element of freedom buried in these that I am trying to suss out. I am reluctant to use evocative words to describe what lies beneath the obligations of debt, but I sense there is a qualitative difference under the surface.

If you have used debt to buy a deprecating asset (car or almost anything you can buy with credit card, like iphone) you are not saving. In a long run, your asset will cost 0, and you haven't saved a penny.

I thought they were referring to principal payments on a house mortgage.

House mortgage wasn't what I was referring to specifically. I meant more the paying down student loan debt.

Even in this case, your house value can take a sudden plunge. Savings are savings, they are not going anywhere. It's money that sits in your bank account and you always know how many years without work you can afford.

So when I put money every month into an index fund, that doesn't count as savings?

With index fund you can at least have stop-loss order in place. It's hard to set stop-loss order for house.

I agree that your house is in itself not savings and that taking out a mortgage to buy property doesn't count as savings, and one can have long discussion about if and when taking out a mortgage to by house is a sound financial decision. However once you have the house and the mortgage, then paying down that mortgage is savings, just not a very liquid form of savings. You can argue that it isn't the best and most efficient form of saving and depending on what the interest rates are and where you think interest rates are going you might be able to do something better with your money, but that is beside the point.

Yes it boils down to this. People don't count things that increase your networth as savings (or in other words: nothing counts as savings). Therefore everyone's savings is somewhere around $0.

I differentiate between savings and investments. For example, my own savings give me the ability to modestly live for 1 year without work AND without liquidating my investments.

If I had everything invested and nothing saved in bank account, I might get into situation when I need to liquidate my investments ASAP, which could be very unfortunate, timing-wise.

Let's say that instead of paying down $100 dollars a month on the principal of the loan they'd only paid the interest and stuck the $100 in a savings account. Would you consider that savings? Would you consider it better to have $0 in debt and $0 in your savings account than being $1000 dollars in debt and having $1000 in your savings account.

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