Is debt a force of good, or a force of evil?
Bonus #1: Are you in debt?
Bonus #1a: If you are, how does it make you feel?
Bonus #2: If you're not, tell the people in #1 above what freedom tastes like. Maybe they'll be inspired.
August 24, 2008
HousingPANIC Stupid Question of the Day
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54 comments:
evil
no
feels wonderful
Bush shredded the Constitution, so we no longer have that type of freedom, but having financial freedom is the next best thing
I've been in and out of debt. I think it's just a tool so I'm not anti-debt. When I was very young I had credit card debt because it helped me survive - I'm thankful I had access to those funds. Of course I paid them off as soon as possible. Now I have a cheap rate on an auto loan. It hardly costs anything and I get to drive the car I want now.
The key is responsible, conservative, specific-purpose debt vs. reckless, crushing, toxic debt.
Ask Greg Swan whose in debt up to his eyeballs!
No
Independence Is Wealth
“The key is responsible, conservative, specific-purpose debt vs. reckless, crushing, toxic debt.”
Well put. Debt makes me very nervous since it has become commonplace to be caught up in mass layoffs at the drop of a dime in these days of next quarter mentality (that have been going on since circa 1990). Go through a couple of these layoffs and if a major debt load does not concern you I think you have your head buried in the sand. I could read the writing on the wall and that is why I paid off my mortgage on my modest house and have never carried over a credit card balance and subsequently never paid finance charges. I have typically bought used cars and paid them off expeditiously and never bought a toy that I couldn’t pay for with cash.
N/A - It all depends how you manage your debt not whether is "good or evil". Poor management leads to great financial pain & stress; good management yields positive returns.
1-I am not in debt but I once was badly in debt due to education loans, a death in the family and poor debt/money management.
2-Now I am debt free, I the balance of my CC's every month, own my car outright and I rent. I am able to maximize my retirement savings, I have the freedom to do things where with debt I would have to always say no. I am still prudent & try not to waste money and the habits of thrift keep my spending/costs in check. Good luck.
Feels great. Take discipline though.
Bonus #1: Are you in debt?
No.
Bonus #2: If you're not, tell the people in #1 above what freedom tastes like. Maybe they'll be inspired.
Sometimes I ask myself who is really better off. I make good money yet drive a 7 year old Camry and live in a modest home. I see people I know who make 1/2 as much as me driving new BMWs and living in 4000 sq ft homes.
I keep telling myself, one day it will all collapse for these people. But every year I say the same thing and every year their BMWs get shinier and shinier.
I'm starting to think I was the sucker after all.
I am in debt and it doesn't bother me.I have learned that by just keeping cash is stupid.You need to have assets because that is the way our govt gives us free money.All about capital gains and home equity from here boys.I owe 300k on two homes.Lifes a bitch.You need debt to get ahead these days.Go ahead and live your conservative life why the rest of us live it up.you only live once.
My only debt is $10k on a used auto loan. I could pay it off tomorrow if I really wanted. And the interest and principle payment is very small. Still, I'm not entirely comfortable with it.
I carry the debt only because the bullshit credit scoring system punishes you if you have no history of installment debt. I will need a mortgage in a couple years and want the best score I can get. The system sucks.
Debt is not necessarily evil but it is very dangerous. Use with extreme caution.
No debt, money in the bank, independent contractor. I call the shots, I love it. Just spent a year in Europe after selling the house in Orange County before the crash. Now I rent, live in another part of the country and couldn't be happier.
If you manage your debt well, have something for a rainy day, then you should be fine. Live within your means.
I've used debt when needed. I can easily afford to buy cars with cash. But if I can get a 0.9% loan over 48 months, I would be stupid not to take that offer when I can get a 4 year CD paying 4.75%.
Same with a house. I read on HP all these people who want to buy a house with cash. And I laugh at the stupidity. Given the tax deduction a 6% mortgage is really a 3.75% mortgage. A full 1% lower than the above CD.
And also, why have so much money tied up in a house for 30 years? Look at the richest people around and you'll see they all have mortgages, even with hundreds of millions or even billions of dollars in the bank. There's a reason for that.
I have zero debt, pay off my American Express bill every month, drive a paid-off vehicle (yes it has over 100k miles on it, but is Japanese aka dependable).
AND I RENT.
Havng debt keeps me up at night -- been there done that, learned a hard lesson, never again will I jump into that pit.
Being debt-free feels EXHILARATING!
I doubt that looking at a thick car payment booklet, juggling credit card balances, or writing a huge mortgage check every month can feel anywhere near as good.
Anonymous Hobo writes-
I have no debt, and enough cash in the bank to live for maybe a year. It doesn't really feel good. It feels better than heavily in debt and unemployed, but the only real security in life is being able to stay continuously employed. Being unemployed for any more than a very brief period will wipe out any savings you have accmulated very quickly.
I was able to walk away from a lot of debt in the early 90's. I had a business bank account that I was able to keep (I lost my consumer account when I didn't pay the overdraft.) I made my car payments because I didn't want to ride the bus. I eventually got a secured credit card and after the seven years it all dropped of my record.
These days, with the new bankruptcy law, debt is more dangerous. I'm not sure how much good it will do the banks because you can't get blood out of a turnip in any case, but they will harass people a lot more and a lot longer before they give up.
Realistic mortgage-related debt is okay if it helps you live cheaper than you could rent. Credit card debt, high-interest car loans and home equity lines of credit that don't require actual home improvements are evil. I am not in debt. It's not as if I don't have financial worry though - I worry if I lose my job - how to pay for medical care, if my money will get me through years I might not be able to work etc... I have always been a saver and can't comprehend the mind-set of people that don't understand that they can't spend more than they make. There are exceptions to the rule - like medical catastrophe and divorce. But clearly we need tighter regulations on these cc companies to protect these idiots from themselves and to protect the rest of us against fraud.
Angelo, where are you hiding, bitch?
Pitchforks are being sharpened all over America, Right Now.
You and your people will be in the dock soon, and then, the yard boys get their shot if you make it that far.
Remember, prison is NO Place for Rapists. I didn't say Jail, I said Prison, along side of shit and semen encrusted filthy dangerous animals, like you, but different.
There is still time, Ange. A quick bullet to-the-noodle or a jump from a high place will end all your problems and let the rest of the Family move on.
Think about it, Mozilo.
Anonymous Hobo has it right - the best security is a pile of interesting skills so you can get a job you really like.
My wife and I stalled on having kids, always wondering when our lives would be stable enough. We finally decided that they would never be that stable, and any appearance of stability would be superficial at best. But we did have the security of being pretty good at what we did, and we figured we could always get work. Our kids are now 10 and 5 and we have been employed as much as we wanted during all that time.
Am I in debt? Yep, total of $250k left on three houses (20% of street price, roughly). Could pay it all off now, but the rates are really low and we'd be pulling much of our brokerage accts, IRAs, 401ks, and pension funds. I like a bit of diversification, even if >50% of my imaginary wealth is in residential real estate ;^)
I like old cars, so I'm driving a 24yo car, with a 35yo car as a toy - both quite reliable. No debts there, but I'm rather an outlier on this whole car thing.
Debt is completely neutral, but everyone should see how easy it is to become a slave to debt.
What worked for me (your mileage may vary) is to act like I'm still in college. I had fun in college, without a set of matching furniture, or a new car, or expecting to work only 40 hours a week.
Be careful out there!
The argument goes that you will earn more by not paying the cheap debt, and investing that in higher-paying what; stocks? Granted; big tax advantage too.
What about property taxes? Once you've committed to that 2005 price, it's a long, drawn out battle with the assessor to get back down to earth.
Better to buy cheap assets with expensive money...
Our modest home is nearly paid off; we buy 3/4-year-old Japanese cars cash, no other debts, foolishly saving all the cash we can(and getting slaughtered on inflation) toward another purchase or two once we can discern a bottom.
It ain't next year, Jim. Massive Option ARM resets in 2010; massive sheeple-not-in-trouble awakening to the reality that it's against their best interests to keep paying on an upside-down debt of 100s of thousands. Jingle mail.
That's not even looking at the foreclosure inventory banks are dragging their feet on, or the prolonging effects of Federal meddling.
That's a hoot; the more they screw with it, the longer it takes and the worse it gets.
Most people have debt because after 30 years of conservatism, wages are too low to afford a life without taking on debt.
You can thank republicans for ushering in a new era of feudalism. And yourselves for voting for them.
ENJOY!
I am in debt, a lot, from school.
I do not like it.
If I was not in debt I would not have my business.
In that regard my debt is not that bad.
That being said I do not have consumer debt or a car payment. I also rent.
I AM HP!!!
You people are some major fools and tools. The key to wealth is using other people's money (OPM) provided that the debt is used as leverage into appreciating assets. This is how nearly everybody became wealthy from nothing. Something all you HP'ers will never know while living in your mom's basement and using a dial up connection to save your dimes. Keep it up fools. The world needs a steady supply of baristas and you are all good candidates. In the meantime I'll be living it up and using your fecklessness as a parable while mentoring other successful people through their life.
Fools.
The use of debt is the secret to building wealth. If things go south, walk away. There are no debtors prisons anymore. All upside and no downside, it's the opposite of living in mom's basement like all you HP'ers do.
#1. No
#2. What freedom tastes like-
I had a lot of debt a long time ago. Never again if at all possible. Life is so much better without debt. It just seems quite bizarre that something as convenient and valuable as renting (in terms of providing freedom) now costs about 1/2 that of buying a home in this are. Trust me, I've poured over the numbers now for decades- I would've bought if it really was a good deal compared to renting. I rent and save so much compared to the average total spent on mortgage payment, taxes, HOA dues, insurance, maintenance, etc. The tax credits people talk about don't really make a large enough dent to defray the costs of homeownership, and the credit just makes your taxes more complicated. Then some people say I'm paying the landlord's taxes. Perhaps I am paying his taxes - but obviously only a small part of it. :-)
A few weeks ago, the landlord proactively replaced the aging water heater. I didn't have to pay for it. I didn't have to help install it. All I did was bring out water for the installers because it was a hot day. That's it. Renting allows me to live two blocks away from work. So I save a ton on gas. I don't even really need a car that much, so my paid off car may last many years longer than most cars. If my employer fires me, with savings on hand I'll have some time to find another job. I'll easily find an apartment close to that employer, whether its in Alaska or Florida. It just doesn't matter anymore. I guess I'm kind of a new-age American gypsy / nomad who can't find any good financial reason to settle down anywhere and buy a home. As long as this country does not make rational decisions, I see no reason to change. If America wants to force its workers to move so often to find jobs, how can it expect to save its housing market? Housing in America seems doomed. The bailouts won't work. But it is nice to know that freedom still exists. Renters are free.
No C-21 commercial or government rhetoric about about the benefits of owning a home will ever sway me. They are like sirens singing beautifully, but actually calling people over to hazardous shores. Those who heed their call get shipwrecked before setting foot on island, and they never see any benefit to buying homes there. Whereas renters remain free to explorer the sea -and look for better deals elsewhere.
1. 450k of debt.
2. not bad at all.
net worth around 2 mill and i rent.
1. 450k of debt.
2. not bad at all.
net worth around 2 mill and i rent.
"I carry the debt only because the bullshit credit scoring system punishes you if you have no history of installment debt. I will need a mortgage in a couple years and want the best score I can get. The system sucks.:
save save save and put a big down payment down. then pay off your mortgage early so it doesn't matter what your interest rate is.
you're paying car loan interest to avoid paying housing loan interest?
War is Peace.
Debt is Wealth.
Libertarianism means Choice.
What can I say. Its a mad, mad world out there.
well, you guys could mail bomb their email address with seat requests; they'd have a sell out crowd of no shows and then-- on the day of the event, they'd see nobody and feel like those homes without people living in them.
just deposit the money in the bank and let them print up 20 times more dollars than the amount of your deposit and thus enable that twenty dollars to compete against your dollar in the house bidding process and every other process and viola the house prices are 20 times higher.........duh....... ........ debt dollars sabotage
so you thus have devalued your dollar and must borrow to compete with those 19 extra debt dollars
friends of casy, you say you are "mentoring" people with a "secret" and that secret is OPM (Other People's Money; that's a phrase that's been in common usage since before you were born.)
Riiiggghhhhttt...
Finding the fleeceable is never really difficult, is it?
As a businessman, I know it as a necessary evil. There is no way we could have achieved our present level of technological progress and standard of living without access to operating debt markets.
People who think we can live without debt or a working debt market need to visit Haiti.
RE: Are you in debt?
Personally? Yes, I have a few hundred dollars in credit card debt and a few thousand dollars owing on a 0% down, 0% 60-month car loan. The credit cards get paid off at the end of every month, but there is no incentive to pay off the car loan early because it is interest free. Even so, I have the ability to pay off all of my debt and have money left over.
But what about my debt obligations as a US citizen? The "official" debt of the United States is only around $10 trillion as of August, 2008.
But what about the REAL debt figure, one which includes future expenses such as Social Security, Medicare, government pensions, infrastructure repairs, the new prescription drug benefit and upcoming wars?
When these items are factored in, the REAL debt figure is more in the neighborhood of $100 trillion -- and getting bigger by at least $1.25 billion per day and maybe as much as $12.5 billion per day, if the REAL debt figure is used.
This debt is the result of attempting to fund government pyramid schemes which were unsustainable from the start. The US government debt pyramid will collapse in exactly the same way that the real estate pyramid scheme is collapsing now.
Within the next few years we will see how the US government handles this problem. Unfortunately, the US has destroyed its manufacturing base and has nothing of real value to sell to the rest of the world. Shuffling paper and creating borrow and spend debt bubbles will no longer work.
Here are the options:
1. Will the government declare bankruptcy and stop writing checks for entitlement programs, such as Social Security, Medicare, retirement, unemployment, welfare, infrastructure maintenance etc.?
2. Will the bankruptcy dodge involve inflating US fiat currency out of existence so that old debt and entitlements can be paid off with dollars worth less than 20% of their 2008 value?
3. Will bombing and destroying the countries that have the most US debt on their books be the answer?
My guess is that the "solution" will involve all three scenarios.
RE: If you're not (in debt), tell the people what freedom tastes like. Maybe they'll be inspired.
Whether or not you have personal debt, you are still on the hook for somewhere in the neighborhood of $33,000 if you use the official government figures and around $330,000 if you use the real figures.
V.L.
I have 10 years left on a 15 year mortgage. I wish I could have bought the place for cash, but it was not possible.
Other than that, I have lived my life without debt. I was fortunate to have parents that paid for my college, but I put myself through law school, working days and going to school at night and graduated DEBT FREE. WOO-HOO!
My 3 kids and the cost of raising them is my biggest challenge to staying out of debt but so far so good.
"...The key to wealth is using other people's money (OPM) provided that the debt is used as leverage into appreciating assets..."
Undoubtedly true, but why the huffy sneer about it? Something going on there psychologically, and it sure as shit ain't altruism.
For proof of the above, consider what would have happened to Casey had he pulled the trigger in 2000-2002, and sold into 2005-6.
He'd be retired and crowing like this guy.
I did the Casey scenario back in 2001 but in a legitimate way. My debt was for a product that I hoped would make 15% profit upon completion. So then comes the housing boom and now I'm looking at 500%.
It could have gone either way though, you just never know. My house was on the line along with pretty much everything else I owned.
Let me tell you it's tough to go to work the next day after staying up worrying all night. But, that's what it takes to get ahead.
It worked out though thanks to
many factors including my hard work and tenacity. But without the debt money available the opportunity never would have been available.
Debt is good when it is used to purchase income-producing assets that generate positive cash flow, for example, a $1,000 mortgage on a place that you rent out for $1,500.
Debt used for personal belongings (including the house you occupy yourself) is stupid.
My rule is: If you can't pay cash for it, you don't deserve to have it.
Given the tax deduction a 6% mortgage is really a 3.75% mortgage. A full 1% lower than the above CD.
Apples and oranges. After taxes that 4.75% CD is really a 2.97% CD.
My attitude is only because of the number of sheeple on this board who are crowing about the evils of debt. HP'ers are so extreme it's not funny. C'mon people, debt is not so bad if you use it the right way. It's a tool. Just like a saw. If you use it the right way you won't cut your finger off.
The number of sheeple bleating against debt got me fired up. I've done just fine using OPM, I'm 35 and have a net worth of 1.6 million USD.
-FOC
Debt is bad, but it has been the Republican policy to debt finance the country's spending. This policy was promoted by the nuttest and most senile president we ever had-- Ronald Reagan. Bush insisted on the same policy and now even us who manage to save have only cheap ass dollars in our accounts. Save for a rainy day; ignore the republican piss that has been soaking us for the last 30 years!!!
I think debt is a good thing because it lets the next generation make bold bets on their talents. thankfully the bankruptcy laws are being toughened so the bets which folks make are more rational. consumer debt, like credit cards, are like porn and not the type of debt i'm talking about.
I'm 35, have worked full-time 2 years of my life, and I have almost 400 grand in the bank. I am a maniac saver and Ebay seller. To say it is great to be as free as I am is an understatement. Next step, I'm sending a couple hundred grand to Switzerland, just to cover my ass a little.
No debt at all for over 20 years. The real freedom comes from not having to take shit from some asshole boss. I love the look on their face when I walk in and throw my keys on their desk and say fuck you, I'm out of here! Then moving on to a better higher paying gig in a new city.
Now get back to work, (and keep your mouth shut) you have bills to pay...
debt is none of them.
i have no debt.
so i have no intention to write more.
that s all, folks
sorry
babara
Is debt a force of good or evil?
Well if consider owning the banker and having to work like a Hebrew slave to pay him back 5 times as much as you borrowed good...
-I owe $50K/15 yr on a $225K home (Was $250K before the bubble busted)
-7K on a vehicle (Book $15K)
- I feel good about my situation now but it was much uglier until I sold at the height of the bubble in 2004 & purchased a home well with-in my means (To LIVE in...not flip)....I owed $175K on the old place.
- I think I am in good enough shape to tell people how it feels not to be slaving for the man...it is unbelieveable...just fantastic. I can save cash now & if I see a new bedroom suite that would look banging in my home I can pay for it with-out paying interest or making payments. Saving for my next car now...it will be a cash only deal.
PS...I have read several comments that mention college debt. I have Sons and I have told them it is better to go to Tech school and have it paid for as you go than to attend Harvard and come out $100K in the hole. What a scam it is to make college a life requirement but then punish the sheeple with a lifetime of debt and overpriced text books they change every semester. Be smart and don't fall into that trap.
Tools!
Rent is debt. On a monthly basis, you can get your ass kicked out if you don't make a payment.
How long does it take to get a homedebtor out of their place?
I'm sorry if I sound like a simple f*ck, but debt should only be used for: 1)producing income. 2) appreciating assets.
Bitterrenter,
As usual, you have it exactly backwards. Feudalism means absolute control of individuals based on their geographic location. That's exactly what your brand of socialism is. Yes, the feudal lords were responsible for taking care of the poor, sick and elderly on their fiefs too, until it's more cost-effective to dispose of them en masse; slave owners had the same kind of responsibility. That's the responsibility of your socialist politicians. In return, the feudal lords, slave masters, and modern day socialist politicians get to demand goods and services from their subjects by the threat of violence.
American middle class is being destroyed because the rapid expansion of the government. Despite all the talks of conservatism and fiscal responsbiity, administrations and congressional sessions from both parties not only failed to rein in the size of government, but also consistently expanded it. It is bigger now than ever. American prosperity was built on a consistent averaage 2% a year improvement in real wages from 1793 to 1840, and 4% a year from 1840 to 1930 (quickening due to industrialization). At 2%, that's a doubling of living standard every 36 years, or roughly each generation. That's why historically Americans could expect their children to live better than their forefathers every generation. At 4%, that's a doubling every 17-18 years! That's the kind of rapid economic improvement that drew millions of European immigrants to the US in the late 19th century and the beginning of the 20th. Yes, that's despite the devastating Civil War, the war that killed most number of Americans ever. The so-called Robber-Barons actually presided over the most rapid period of growth in American history ever.
Gold was abolished as currency by FDR, so a consistent income measure could not be extended beyond 1933. In terms of houses and cars, there was no real increase in average hourly wage between 1930 and 1970. Between 1970 to today, there's a roughly 60% decline! That represents a 2.5% decline each year.
Yes, the difference between a doubling in living standards in a generation vs. a halving of living standards in a generation boils down to as little as +2% each year vs. -2% each year! When the government sector controls 30-40% of the economy, it only takes only about 10% of government spending (10% of 40%, i.e. 4% of GDP) being wasted to turn a +2% annual growth to a -2%! Lord knows the bureacrats are wasting more than 10 cents of every dollar that they spend.
From those small numbers youcan see just how efficiency through competition is critical to the health of an economy and long term well being of its inhabitants. Monopoly is always inefficient; government being a monopoly with the exclusive right to use deadly force is the worse kind of monopoly.
Q: Is debt a force of good, or a force of evil?
- - - - - - - - - - - - - - -
Is a knife a force of good, evil?
- It depends on how it is used.
Bonus #1: Are you in debt?
- Yep-bought the adjacent 2½ acres (with pasture, barn and pond) in January. Two months after paying off my home I gladly bit into ~$120K of debt.
Bonus #1a: If you are, how does it make you feel?
- Not bad! $700/month is doable. Worth it because:
a) The land will never be developed unless it is on my terms.
b) I can do whatever the fvck I want – whether it’s planting fruit trees, berries, or putting in a garden and setting up a roadside stand to sell the produce.
c) Land only goes up in value – bwahahaha!
Already getting calls from local horse owners wanting to use the barn & pasture for their horses. Getting $200/mo per horse will help make the monthly nut – and that’s with the owner taking care of the horses! All in all, not a bad way to go, is it?
-Mammoth
Debt is not inherently evil. It's just abused way toooo often - people too often go down the 'dark side' of the 'debt force.
Properly used and managed (very carefully) can be a positive thing. But it seems most Americans are WAY OVER doing it.
Debt free, except for the house. 10 years left @ 5.75%. House payment < 25% of take-home pay, value at < 1.5x annual income.
Thanks, Dave Ramsey!
friends of casy, no one but gold-diggers or you Mother cares about how much dough you claim to have. No one.
It's remarkable how morons try to change the subject. As if they were not talking to their intellectual and moral betters.
Try that crap on your bleached blond wife and retarded kids. You'll do fine.
Those of us who know better are only laughing.
Enjoy your future. I'll see you bagging my groceries sooner or later.
Well, it depends what you consider debt. I use arbitrage a lot to earn interest and take advantage of free money on things like student loans, credit cards offering 0% rate for 1.5 years, $7k tax credit to buy homes as now, Section 179 25K tax deduction that forces taxpayers to subsidize my BMW X5, etc, etc.
I also use leverage to increase my profits and IRR, thanks to a Democratic party socialist regime that forces sheeple to subsidize my interest on loans, thus increasing my return in real estate. For example, after the sheeple subsidized my house for 5 years, I sold at bubble's peak, took the $500k tax free, and now rent. But I'm ready to use the new $7k tax credit, again subsidized by sheeple, to buy another house for pennies on the dollar.
I'm not sure why many of you whine so much about the Democrats. I happen to love Obama and the Democratic party's socialism. I can apply arbitrage and have all their sheeple subsidize my investments. Case in point, years ago I got $30k from student loan @ 2% and bought property overseas for a huge return (including exchange rate), while going to a public university for peanuts. Because of straight A's and graduating Summa Cum Laude, the bill was cut by 1/3 with subsidized scholarships. Easy money.
Next step is opening some nonprofit so I can earn a truck load of money without paying a dime in taxes. I'm thinking about some nonprofit to take illegal immigrant causes, or something to do with the ponzi scheme environment, since the Democratic party will win and they love those issues. Needless to say that I'm voting for any DNC candidate they put on the ticket.
Now if you're talking about dumb people who get into debt for overspending at Wal-Mart, I'm not your guy.
libvet,
sorry if my net worth offended you. you seem to have an inferiority complex going on. good luck with that.
-FOC
"Sometimes I ask myself who is really better off. I make good money yet drive a 7 year old Camry and live in a modest home. I see people I know who make 1/2 as much as me driving new BMWs and living in 4000 sq ft homes"
Well, you're right about one thing, if these folks are entrepreneurial and have made money from creating a company/product, leveraged investments (futures/forex), etc, then I concur, since they can probably turn that trick again and again.
For the most part, however, many of the 'keeping with the Jones' types are living on the monthly payment program and at some point in time, circa 50+ years of age, they may have to take a pay cut to keep their line of work or worse, leave their original profession altogether due to age discrimination. What then? File bankruptcy in one's fifties? And then who'll hire 'em, besides a rental car pick up/drop off guy?
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