Happy Father’s Day! Louise from Our Odyssey dropped a line the other day to share a story of how her father taught her about debt.

When I was fresh out of college in June of 1985, my Dad gave me $500 to buy furniture and as an apartment rental deposit.  This was an interest-free loan and we were both lax about setting up a payment schedule.  Nothing was in writing.  He said, “Pay me something monthly.”  I paid him about $50 for two months, then skipped a few months and forgot about it.  In December, he decided to forgive the rest of the loan as my Christmas present.  Wow, $400!  I thought I was getting a great deal. Of course, the money was already gone, but still, I was happy.
 
About a year later, with a good job but not a frugal lifestyle, I had no savings but wanted to buy a small condominium to live in. At that time, a one-bedroom condo in the San Francisco Bay Area cost about $80,000.  I would need about $8,000 as a down payment.  I asked my Dad if I could borrow the eight grand from him.  He laughed out loud and said, “You missed 4 payments on a $500 loan and now you want to borrow over 10 times that amount?  Sorry, no.  You’re a lousy credit risk.”  I was shocked!  I couldn’t deny the truth of it, though, and so I didn’t buy a condo.
 
I vowed that no one else would ever call me a “lousy credit risk.”  My Dad still loved me, but banks would not be so forgiving.
 
Three years later, that condo was worth $160,000 and I had spent close to $25,000 in rent (approx. $700 per month for a one-bedroom apartment).  That $400 Christmas gift cost me over $100,000.  Ouch! 
 
My new husband and I again approached my Dad to borrow money for a down payment.  But this time we were armed with our (good) credit reports from Equifax, bank statements, and a written promissory note with fair market interest rate and loan payment schedule.  My Dad willingly loaned us the cash, we paid him off in three years (every month, never a late payment), and I’ve been a home owner ever since.
 
I am eternally grateful that I learned this hard lesson early and from someone who cares about me.  Thanks, Dad!

Great story. If you’ve got some time, Louise’s blog is a great read. Our Odyssey tells the story of how she and her husband retired, bought a bus to call home, and began a nomadic existence. Learn all about this experiment in their FAQ.

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