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Brian writes in:

I was at a local car dealership looking for a replacement for my truck. I only have about $8000 in savings so I knew I would have to take on some debt to buy. The dealer offered to sell me a new F150 for a good price and a 0% loan for 36 months for $589 a month car payments. This seems awesome and I am looking for any problems with it.

Over the last few months, I鈥檝e received a few emails like Brian鈥檚, where individuals were strongly enticed by 0% or other extreme low interest loans. Are they a good deal? Should they sign up for these loans before making a purchase?

The problem with such loans is that they don鈥檛 eliminate what I consider to be the chief problem with all debt. Yes, they have spectacular interest rates and, yes, they鈥檙e often sold as being 鈥渇ree money.鈥�

However, all debt 鈥� including 0% debt 鈥� has a strong negative impact on your future cash flow. By signing up for this debt, Brian, you鈥檙e agreeing to pay $589 a month for the next thirty six months.

That means, for each of the next thirty six months, you鈥檙e going to have to come up with $589. It doesn鈥檛 matter whether money is tight that month. It doesn鈥檛 matter whether you have a job or not. None of that matters. Come up with the $589 per month or they鈥檒l repossess your truck. Add on top of that the vehicle registration costs, the insurance costs, and the maintenance costs and you鈥檙e marking off at least $700 a month for this new vehicle each month.

That鈥檚 a pretty big responsibility to throw onto your future self. For the next three years, you鈥檙e making a commitment to $700 a month without knowing what the future may hold.

Does your future hold steady employment 鈥� or is a pink slip around the corner? Will your health be perfect in three years? In three years, will you find yourself in a situation where an F-150 doesn鈥檛 meet your needs?

Even if everything goes perfectly, there will still be months when $700 from your monthly budget will really hurt in the form of missed opportunities. Some will simply jump on board those opportunities anyway in the form of credit card debt, further mortgaging their future self.

If I鈥檝e learned anything over the years, it鈥檚 that . Our future selves are unreliable for the reasons I listed above: job loss, change of heart, illness, life changes, and so on.

Debt is always a challenging choice because it relies on that inherently unreliable 鈥渇uture self鈥� to pay it off. The fewer commitments you put on your future self 鈥� and the more commitments you just take care of today 鈥� the easier you鈥檒l find your life getting as time goes on. That means more freedom in the future, not less. That means a greater ability to go in whatever direction life leads you, not less.

I won鈥檛 say explicitly that a debt-free lifestyle is the best choice. There are times where debt is the preferred option or the only option. For example, if you鈥檙e living in a situation where the cost of renting housing is comparable to that of taking out a mortgage to purchase a home, the purchase may be the better choice.

In most situations, though, debt merely allows you to put big burdens on your future self in exchange for something you don鈥檛 need today. Brian, do you really need the shiny new 2011 F-150? Or would a used model work for now, putting less of a burden on your future self, while you save up the cash for the vehicle you really want down the road?

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