Well, interest free is better than I expected. He’s still making money on each tool, and by making it convenient and easy for you to buy them, he’s selling a lot more.
How do you feel about debt?
- Thread starter Nick1994
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To that point - time horizon makes the pay off debt versus investing risk tradeoff interesting is time horizon. If you look at the 30 year rolling return of the S&P you'd be between 8% and 12% in most years. If you move that time horizon to 20 years the range becomes wider (but still positive returns) and move it to 10 years and you start to get negative returns in some years as well as significant upside.
I'm a big fan of indexing in a set it and forget it like the S&P and dollar cost averaging. Yes, I'm going to get in and out at the "wrong" time for some of those dollars but I'm also not going to be successful timing the market (if I was I'd be doing something else with my time).
Ya but the key word in your comment is BUT.....not a sure thing....
Until you do its still a debt ...
That is my thought. I'm hoping to get a good nest egg going over the next 5 years, but once I hit 50, I might start aggressively paying off my mortgage. Especially if I can get the wife to go back to work (then I can both save and pay at the same time). But for now, I'm better off saving aggressively so as to build that nest egg.
I think he talking about using extra money to invest vs paying down large debt faster. Not borrowing with the intent to invest it. Which if so, I agree with him on. That said your last statements are very true.
When you can borrow money at less than 1/3 what the market is returning, You DO NOT
pay cash for big ticket items like auto or real estate or Home improvements.
You paid off that $30K car paper? You just "lost" 3-5 grand in returns that year.
You pay off the rest of that $250K mortgage?
You just forfeited $25K+ in market earnings over that year.
Now multiply that time 5 or 10 or more years,
Now back in the early 90's I would not be singing this tune, Mortgages and auto loans were over 10%
But I was accidentally smart We keep the debut and kept the money in the market so we were building a big base for future earnings.
Earning we want and need now as we approach retirement.
Some say "I rest easier" with no debt.
I don't know why that would be!
You are wise beyond your years. Far ahead of me at that age. Stay on the path @AutoMechanic
I admire your work ethic as well. That will carry you far.
As others said, you should just pay off the whole thing and just pay cash when you need something. That actually makes it more painful to part with the cash as you buy something so that may control your impulse buying. If you don't have the cash on hand wait til he comes by next week. Also 5% is too low for savings, even 15% is kinda low but you're young so it might be ok. It looks like some of your purchases are big ticket items and the truck charges 2-3x or even 4x what tools would cost somewhere else like Zoro, Amazon and other online places. I suppose it makes sense to buy the little things from the truck where it might break, that's the warranty and service premium that you're paying for. But the bigger ticket items, I'm not sure the warranty/service pays for itself. As for the debit card, I would switch to a credit card and kept the debit card handy. You just pay off the entire credit card balance when due. You get bigger rewards, like Fidelity offers a 2% cash back on everything card. You don't get that with debit. Plus debit doesn't build up a credit rating, you normally need 6 credit lines to get a solid credit score. At your rate, you probably don't have a credit score. You could start off with the standard store cards like Macy's or Target and then get a regular credit card. Just pay off the entire balance each month and never carry a balance. You won't be able to buy a house without a good credit score and if you ever go to a dealership to buy a car and they pull your credit, you're not going to get good rates.
I have to disagree. There is good debt and bad debt.
I could have sold stock and paid off our home earlier and minimized interest expense. In fact, I did some of this.
But I also maximized my 401K and, for the most part, held on to stock.
Yes, it is amazing to own a home free and clear, especially in an area where the housing cost is stupid expensive.
But that stock would be worth about $500K today. Or more. I got much less.
Am I mad at my decision? Of course not! I want the remaining stock to appreciate, right?
But none of us has a chrystal ball. So, for me, the best hedge is balance.
Unfortunately, I don't know the meaning of the word... Ha!
Key word again is BUT..............and a few of them I might say too
Yes. The last term of my mortgage was 3.65%. So paying extra against that was only guaranteeing myself 3.65%. Of course some of that was back in 2018 (I think) when The market was down ~5% for the year, so that was a good play. Most other years though the market beat that pretty easily.
But like was stated though it’s hard to argue with owning a home outright I guess.
Hindsight is always tough, you can’t beat yourself up because you can only make decisions with the information you had at the time. In the 14 years I held a mortgage if I had gone variable rate instead of fixed I also would have saved a ton of dough.
Next stimulus check open up a Roth IRA.
My grandparents, my parents and in laws never took on any debt except a 15 year mortgage. And never 0% lunacy.
All retired multi millionaires including my in-laws who rarely pulled in 60k/year with 5 daughters . They drove normal paid for new/used cars, traveled the world/country and had some cash toys or "play homes". My grandparents, and my parents paid CASH for our college. My wife got ton of scholarship money as parents were approaching poverty level with family of 7.
I am trying my hardest to follow their path. Paying cash you tend to spend less on things that lose value like vehicles, boats etc. Also make intelligent decisions because you have cash in hand and don't run out and buy something that costs $23k with payments instead of writing the check for $2.5k for repairs without thinking too much. If you require to take debt on a vehicle do it in 3-4 years because you won't overspend.
The taking loans way of getting rich works really well for some but is not without risk which people seem to brush over. Risk allows reward.
All retired multi millionaires including my in-laws who rarely pulled in 60k/year with 5 daughters . They drove normal paid for new/used cars, traveled the world/country and had some cash toys or "play homes". My grandparents, and my parents paid CASH for our college. My wife got ton of scholarship money as parents were approaching poverty level with family of 7.
I am trying my hardest to follow their path. Paying cash you tend to spend less on things that lose value like vehicles, boats etc. Also make intelligent decisions because you have cash in hand and don't run out and buy something that costs $23k with payments instead of writing the check for $2.5k for repairs without thinking too much. If you require to take debt on a vehicle do it in 3-4 years because you won't overspend.
The taking loans way of getting rich works really well for some but is not without risk which people seem to brush over. Risk allows reward.
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Fixed rate debt on appreciating assets (land, house, etc.) doesn't bother me. Inflation will only make my life better, and that's why I financed instead of "saving up" (and getting WRECKED!). Variable or any 'worthless' debt, such as CC's, etc. sucks and I hate it.
People expecting student debt to automatically be forgiven and somehow student debt will be paid off by US taxpayer amaze/disgust me. Some (few ok) had ZERO intention of paying it back, some figured it would be lightened, some figured a little in due time and $100,000 poof paid off - I don't know but many BA's = no job or only $50K year.. There are lots of negatives here (accelerated college costs, majors, gpa standards, predatory, etc) , so don't ask me how I feel about student debt, because I might go on............
Ahem, and sorry. Carry on.........
Ahem, and sorry. Carry on.........
Debt to me is weird; it's like a necessary evil. On one hand some of us kind of have to go into "debt" in order to purchase big things like houses and cars. On the other hand, debt can easy go unchecked and stack up like a runaway train.
What I don't like the most about debt nowadays is the credit score that's linked to it and in some ways doesn't make sense - like when I paid off my car and my score actually went down because the account closed. And why is the 30% credit utilization a recommendation to build credit over any amount less.
What I don't like the most about debt nowadays is the credit score that's linked to it and in some ways doesn't make sense - like when I paid off my car and my score actually went down because the account closed. And why is the 30% credit utilization a recommendation to build credit over any amount less.
Buying real estate at higher interest rates (and therefore lower prices) is the way to go if possible. Try explaining this and housing cyclicality to a first time home buyer desperate to get their own place and see what happens. Some might even fully understand what your talking about and still want to buy right now.
Where i dissagree with you is on the investors selling. They wont. They will just rent things out to an ever growing pool of CantBuyers. Perhaps some short term home flippers sell at a loss but that will be absorbed quickly to landlords and primary residence buyers.
Rates could go up, lets say to 4%, and people will just eat the higher payments. Perhaps it stalls the upswing in prices but it feels like high prices are here to stay. If we got to 5% loans things could get really dicey but the whole world agrees, rates are in the toilet.
I get the temptation to pull the chips out of the casino and pay off my house but i am too greedy!
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