How do you feel about debt?

[Blinker]

Not really true. Debt means you owe more than your assets value.
If I have a $300K mortgage on a house that has appreciated to $1M, that is a problem I will take every day.
I owe money but I am not in debt.
More than likely I used the bank's money to gain an appreciating asset. I would never been able to buy that same asset with cash.

I can’t tell if you’re doing this deliberately to trick others or not, but you’re being very one sided in this debt topic. You keep talking about mortgages like those are the only debt contracts people have. Mortgages are very complex and it could either go favorably, or unfavorably when you go to sell. So even mortgages aren’t a 100% fool proof way of obtaining assets. We could have a whole college semester devoted to how mortgages work so I’ll just stop right there.

You’re forgetting about the MOUNTAINS of consumer debt that this nation is under. Consumer debt contracts that will NEVER grow in value and the debt exceeds the value of the goods. Consumer electronics, appliances, furniture, kids toys, clothing, etc. There is just so much “stuff” that people buy and can’t afford it. What about people who charge all their grocery and dining out expenses? Once you’ve consumed the food you have nothing to show for it. And don’t get me started on all the other indulgences that society has normalized that people use debt to obtain. Do you still think that debt is good to have?

 

[53' Stude]

Never been in debt. If I was, I’d try to pay it off or get out of debt quickly

 

[Dave Hess]

Young adults see their parent(s) in debt and for them it’s normal to be on a never ending ‘thread mill’ of debt.

Theres good debt..... there’s also bad debt.



Blinker,

You are 100% correct about consumer debt. It keep growing and growing.....

 

[hrv]

I can’t tell if you’re doing this deliberately to trick others or not, but you’re being very one sided in this debt topic. You keep talking about mortgages like those are the only debt contracts people have. Mortgages are very complex and it could either go favorably, or unfavorably when you go to sell. So even mortgages aren’t a 100% fool proof way of obtaining assets. We could have a whole college semester devoted to how mortgages work so I’ll just stop right there.

You’re forgetting about the MOUNTAINS of consumer debt that this nation is under. Consumer debt contracts that will NEVER grow in value and the debt exceeds the value of the goods. Consumer electronics, appliances, furniture, kids toys, clothing, etc. There is just so much “stuff” that people buy and can’t afford it. What about people who charge all their grocery and dining out expenses? Once you’ve consumed the food you have nothing to show for it. And don’t get me started on all the other indulgences that society has normalized that people use debt to obtain. Do you still think that debt is good to have?

Yup just look at this past Christmas...Credit card usage was way way up....

 

[JeffKeryk]

I can’t tell if you’re doing this deliberately to trick others or not, but you’re being very one sided in this debt topic. You keep talking about mortgages like those are the only debt contracts people have. Mortgages are very complex and it could either go favorably, or unfavorably when you go to sell. So even mortgages aren’t a 100% fool proof way of attaining assets. We could have a whole college semester devoted to how mortgages work so I’ll just stop right there.

You’re forgetting about the MOUNTAINS of consumer debt that this nation is under. Consumer debt contracts that will NEVER grow in value and the debt exceeds the value of the goods. Consumer electronics, appliances, furniture, kids toys, clothing, etc. There is just so much “stuff” that people buy and can’t afford it. What about people who charge all their grocery and dining out expenses? Once you’ve consumed the food you have nothing to show for it. And don’t get me started on all the other indulgences that society has normalized that people use debt to obtain. Do you still think that debt is good to have?

Why would I try to trick others? Let me clarify my thoughts on debt...
I never said all debt is good. There is good debt and bad debt. Personally I have zero debt, but it took 20 years to pay off my primary mortgage. I own a home in prime Silicon Valley real estate. Actually, my wife and I own 3.
I pay cash for my vehicles, which are typically the 2nd biggest cost people have.
When you get into your 60s, do you want to be paying rent or have a home free and clear? I am not sure about a college semester, but I am pretty fluent in mortgages.

My point about mortgages is, you have to have a place to live. Of course, location location location is a huge consideration. Credit card debt for clothes and fancy crap? No thank you; that's a recipe for financial ruin.
I used to be a drunk, broke and homeless. Today, let's just say things are different. You might be surprised how many people come to me for financial advice and help.

FYI, my biggest gripe about public education is the lack of personal finance as a part of the cirriculum. IMO, no one should get outta 8th grade without a basic understanding of banking, checking accounts and credit cards. No one should get outta high school without an understanding of mortgages, bond and stock markets, retirement and the time value of money.

I hope this clarifies my position. If you have any questions, please feel free to ask me.

 

[tc1446]

I don't do debt! If I can't pay for it, I don't buy it. I do have sufficient toys to keep me occupied.....paid for.

 

[nomas]

I'm no financial guru by any means . My advice to people is to max out your 401k if your employer offers one , and pay off your mortgage before you retire . If you can do those two things , it will be a huge help to you . Oh , and don't treat Credit Cards as free money , cuz it ain't .

 

[PWMDMD]

In a prolonged bull market with very low-interest rates, there is an argument for not paying off low-interest debt and investing the money. This argument falls apart when life takes some weird turn and you lose your job or get sick and can't work and your cash flow declines for whatever reason and now you can't pay the debt. If this is all occurring during a market downturn then selling off investments compounds your losses and while it may save you from bankruptcy, it's a loss all the same. There is a risk in keeping debt on your books. Some people are willing to take reduced returns to alleviate this risk. Some people have no problem keeping as much debt as possible and risking all their cash flow in the market. Most people are somewhere between these two extremes and will tolerate some debt and attempt to reduce it as quickly as possible but also put money in the market.

 

[alarmguy]

A small adjustment to your claim:

You borrowed a fixed amount from the lender, with a term that you agreed upon (whether it is fixed 30, 15, 10 years or ARM 3,5,7 years). The market price of the asset you borrow for (house, but can also be a car or other things) can fluctuate. Home typically has a pretty stable appreciation over long term (10+ years) unless the local job market collapse (i.e. a steel mill in a mill town close down). This is the reason why bank does not like to lend 100% to the asset price.

Yes, things could happen and his house can suddenly be in a bad market that he loses his job and cannot afford to sell it for what is owe (because all of a sudden 95% of the houses are on sale at the same time), but this all depends on how much he borrow and how bad the situation is. There are many things in life are really a gamble, owning a house is a gamble, renting a house while you are working is a gamble (your income can go away and your rent goes up), so you really just have to make some common sense bet in life.

Not sure what "adjustment" to my "claim" you are adjusting. (not being a wisely saying this) I dont know what you are replying to me *LOL*
AS far as what banks like to lend is based on the mortgage being conforming to not to FannieMae or Freddie Mac. If its not, the bank is stuck with the mortgage.
Anyway, no sure what you are replying to me is all the reason I am posting. Except I am against debt and for couples buying homes, focusing on a 15 year mortgage creates more value to them, or a 30 year is they have the discipline to pay it back. Home do appreciate and I think EVERYONE should buy one with a 15 year mortgage or less if possible. Most young people have money "leaking" out of their paychecks everywhere, at Starbucks, on the Apple Watches, on the high end cell phones, at restaurants, on auto loans for car they should own, ect ,ect...

Its nice to see the value of their homes go up but for those (almost everyone in the general population) taking out 30 year mortgages that value over time might be just meeting the payments they are making. Lets say you buy a modest $500,000 home with 10% down and its value over 10 years in a normal market goes up with some luck to $600,000, its a wash because they just paid almost $100,000 in interest over those 10 years and still owe $342,713 after 10 years of payments and $276,000 in 15 years.
Over 30 years at 4% they will pay $323,412 in interest on that $450,000 mortgage and total payment of $888,000 Yeah, they get a tax deduction but I like sticking to numbers because they are going to put money into the home anyway, upgrades, maintenance ect.

Ok, so the same couple takes out a 15 year mortgage, stops spending excess money on all the garbage they dont need in life to pay it.
They will get a better rate so lets take 3.70%. In 10 years they will only owe $145,000 on the house and only pay a total of $142,000 in interest for the entire life of the mortgage of 15 years vs paying $323,000 in interest for the 30 year. The $500,000 home only cost them 643,000 instead of the 30 year that cost them $888,000 There is something to be said to get the house paid off. Sometimes people think investing the difference in payments of a 15 or 30 is better. I dont agree,

With all this said... Im just rambling on because I dont know what your reply to me is about *LOL* That's ok, its Sunday morning and I was up late last night. !

 

[hrv]

In a prolonged bull market with very low-interest rates, there is an argument for not paying off low-interest debt and investing the money. This argument falls apart when life takes some weird turn and you lose your job or get sick and can't work and your cash flow declines for whatever reason and now you can't pay the debt. If this is all occurring during a market downturn then selling off investments compounds your losses and while it may save you from bankruptcy, it's a loss all the same. There is a risk in keeping debt on your books. Some people are willing to take reduced returns to alleviate this risk. Some people have no problem keeping as much debt as possible and risking all their cash flow in the market. Most people are somewhere between these two extremes and will tolerate some debt and attempt to reduce it as quickly as possible but also put money in the market.

Pay you debt off as fast as you can first....Thats my motto...

 

[Dave Hess]

Economy is still in shambles.

Will there be stimulus checks for the people living on the edge of poverty ?

 

[PimTac]

Not sure what "adjustment" to my "claim" you are adjusting. (not being a wisely saying this) I dont know what you are replying to me *LOL*
AS far as what banks like to lend is based on the mortgage being conforming to not to FannieMae or Freddie Mac. If its not, the bank is stuck with the mortgage.
Anyway, no sure what you are replying to me is all the reason I am posting. Except I am against debt and for couples buying homes, focusing on a 15 year mortgage creates more value to them, or a 30 year is they have the discipline to pay it back. Home do appreciate and I think EVERYONE should buy one with a 15 year mortgage or less if possible. Most young people have money "leaking" out of their paychecks everywhere, at Starbucks, on the Apple Watches, on the high end cell phones, at restaurants, on auto loans for car they should own, ect ,ect...

Its nice to see the value of their homes go up but for those (almost everyone in the general population) taking out 30 year mortgages that value over time might be just meeting the payments they are making. Lets say you buy a modest $500,000 home with 10% down and its value over 10 years in a normal market goes up with some luck to $600,000, its a wash because they just paid almost $100,000 in interest over those 10 years and still owe $342,713 after 10 years of payments and $276,000 in 15 years.
Over 30 years at 4% they will pay $323,412 in interest on that $450,000 mortgage and total payment of $888,000 Yeah, they get a tax deduction but I like sticking to numbers because they are going to put money into the home anyway, upgrades, maintenance ect.

Ok, so the same couple takes out a 15 year mortgage, stops spending excess money on all the garbage they dont need in life to pay it.
They will get a better rate so lets take 3.70%. In 10 years they will only owe $145,000 on the house and only pay a total of $142,000 in interest for the entire life of the mortgage of 15 years vs paying $323,000 in interest for the 30 year. The $500,000 home only cost them 643,000 instead of the 30 year that cost them $888,000 There is something to be said to get the house paid off. Sometimes people think investing the difference in payments of a 15 or 30 is better. I dont agree,

With all this said... Im just rambling on because I dont know what your reply to me is about *LOL* That's ok, its Sunday morning and I was up late last night. !

This goes back to households needing to sit down and scrutinize their budget. Find out where the money is being spent and then ask those hard questions. Do I really need that or can I do it cheaper?

 

[DwightFrye]

Yup just look at this past Christmas...Credit card usage was way way up....

We would have to know how much money was spent on online shopping which is normally paid by credit cards, and how many of thoose shoppers are paying off the bill when it is received this month for that statement to have any real context.

With credit card interest rates approaching 25% for many cards now, it astounds me how many people run up debt in the thousands of dollars on frivolous and unneeded items and then barely pay more than the minimum amounts each month.

I certainly agree that there should be some education given at middle school level about personal finances. It would be a whole lot more useful than teaching about all the different gender variations.

 

[PimTac]

My guess is that credit card usage is up mainly for online shopping and for those who use cards for all purchases to get a percentage of money back. Plus, all the smartphone purchases which are attached to cards. I use my iPhone quite a bit to purchase things.

I might be off on this but I seem to recall reading that cash sales are down to something like 17%.

 

[Blinker]

Why would I try to trick others? Let me clarify my thoughts on debt...
I never said all debt is good. There is good debt and bad debt. Personally I have zero debt, but it took 20 years to pay off my primary mortgage. I own a home in prime Silicon Valley real estate. Actually, my wife and I own 3.
I pay cash for my vehicles, which are typically the 2nd biggest cost people have.
When you get into your 60s, do you want to be paying rent or have a home free and clear? I am not sure about a college semester, but I am pretty fluent in mortgages.

My point about mortgages is, you have to have a place to live. Of course, location location location is a huge consideration. Credit card debt for clothes and fancy crap? No thank you; that's a recipe for financial ruin.
I used to be a drunk, broke and homeless. Today, let's just say things are different. You might be surprised how many people come to me for financial advice and help.

FYI, my biggest gripe about public education is the lack of personal finance as a part of the cirriculum. IMO, no one should get outta 8th grade without a basic understanding of banking, checking accounts and credit cards. No one should get outta high school without an understanding of mortgages, bond and stock markets, retirement and the time value of money.

I hope this clarifies my position. If you have any questions, please feel free to ask me.

Thank you for clarifying your position. I’m sorry if I made it seem like I was accusing you of being the bad guy. I fully agree with your approach. A mortgage can be a good financial obligation to take on if you purchase at the right time and you have the financial means/stability to pay it back. I share the same mentality as you when it comes to cars and credit cards as well .

From what you’ve shared I’m not surprised that others come to you for financial advice, you’ve found a way that works and others are interested in learning what it takes to change their financial outlook. I hope you continue to help people who look up to you for financial advice.

In general I recommend people to not use financing and debt to fund their lifestyle. With few exceptions, of course.

 

[PWMDMD]

Economy is still in shambles.

Will there be stimulus checks for the people living on the edge of poverty ?

Better than expected jobs numbers this month and up until last week all the markets at an all-time high, in spite of The Cron. If you think this is "shambles" wait for the real turn - the bull doesn't go on forever. We are ripe for recession and the fed has very little it can do (where do you go when interest rates are already zero and there is inflationary pressure to increase it?).

 

[Blinker]

My guess is that credit card usage is up mainly for online shopping and for those who use cards for all purchases to get a percentage of money back. Plus, all the smartphone purchases which are attached to cards. I use my iPhone quite a bit to purchase things.

I might be off on this but I seem to recall reading that cash sales are down to something like 17%.

There is data for that.
https://www.investopedia.com/credit-card-debt-numbers-rising-again-amid-pandemic-5202629

Key Points:
- 55% of Americans carry a balance month to month
- Nearly 1 in 5 Americans have over $20,000 in credit card debt.

And this is just consumer revolving debt (credit cards). Then add the installment loans (mortgage, auto, etc), personal loans and its clear to see that most Americans are drowning in debt.

 

[PimTac]

Better than expected jobs numbers this month and up until last week all the markets at an all-time high, in spite of The Cron. If you think this is "shambles" wait for the real turn - the bull doesn't go on forever. We are ripe for recession and the fed has very little it can do (where do you go when interest rates are already zero and there is inflationary pressure to increase it?).

Where did the better than expected jobs numbers come from? Expected was over 400,000. Actual was 199,000. A huge miss.

This is not political but right now the labor markets are a huge mess. The excuse that most are upgrading to better jobs is a ruse. That has been going on since the beginning. People always want to move up and they do.

 

[Blinker]

Better than expected jobs numbers this month and up until last week all the markets at an all-time high, in spite of The Cron.

Jobs report for December 2021 was lower than excepted, it was regarded as a disappointment.

 

[PimTac]

There is data for that.
https://www.investopedia.com/credit-card-debt-numbers-rising-again-amid-pandemic-5202629

Key Points:
- 55% of Americans carry a balance month to month
- Nearly 1 in 5 Americans have over $20,000 in credit card debt.

And this is just consumer revolving debt (credit cards). Then add the installment loans (mortgage, auto, etc), personal loans and its clear to see that most Americans are drowning in debt.

I would agree but a key question for this; is that debt manageable?

Now $20,000 in CC debt is a lot. It’s clear that a a big segment of the population is living by paying minimums. That would be the 20% noted above.