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I'm getting tired of all this "live debt free!" nonsense. There's good debt and bad debt, and people like this should learn the difference before giving financial advice.
Hint: don't be a dick.
Take this year, for example. I happen to have a mortgage that I could pay off completely later this year without penalties. I've been saving to do just that, and parking the balance in the market until the day comes to pull the trigger. But what's this? I'm up 11.6% on the year thus far. It's hard to come up with an argument for not letting it ride a few more months and watching to see what happens.
Granted, there's always risk in the market, and using the fund today would net me a cool 4% risk free. But still...
I've noticed that people on the poorer side of the spectrum have made peace with the fact that there are (many) circumstances outside of their control that they are simply unable to address. They don't try by buying the rafts of expensive insurances that middle class people often insist on mostly because they simply can't. Its almost a zen thing. It costs time and money not just to acquire things, but to hold onto th…
Could you explain more on what you're referring to when you say insurances?
I'm getting tired of all this "live debt free!" nonsense. There's good debt and bad debt, and people like this should learn the difference before giving financial advice.
Debt is like sex. It's better to preach discipline, responsibility, and understanding than abstinence.
I'm getting tired of all this "live debt free!" nonsense. There's good debt and bad debt, and people like this should learn the difference before giving financial advice.
That's the "norm". That's what "everyone" does (everyone who is in a first world country and has a decent job).
Is that somehow "smart debt"? Really? What's so smart about it?
It is smart for whomever loaned that money out ... they get back free money paid consistently over the years. How is it smart, in 90% of the cases, for the borrowers?
Our culture tends not to see this in the same way fish don't see water.
There can be totally valid reasons for not getting rid of your mortgage even if you have the opportunity - if you have something better to do with the money. If you are paying 3.5% on your mortgage but you can invest somewhere with a return greater than 3.5% after tax, why would you pay down your mortgage?
Here are some reasons: 1) It is difficult to take a house away from you if you are worried about "bail-in" type scenarios. 2) Paying off your mortgage is a guaranteed investment (there is no default risk) and so it should be compared with long term investing in very high quality government bonds when looking at rates of return, rather than what you can achieve more broadly. 3) It eliminates any future call risk, wher…
I take issue with (4) because if you have a mortgage you are already perfectly hedged against future housing costs. If you have a floating rate mortgage you are exposed to interest rates, but you can hedge against that by fixing your mortgage.
I think a blanket "debt is bad" approach is naive, just as much as a "risk is bad" approach is naive. All other things being equal, you would rather not have any risk or any debt. But for the right price, you should be willing to take on both. What 'the right price' is will depend on many things, like your stage of life, your income, your safety nets (the state, your family) etc. If you take a "debt is bad" approach then you are saying that the right price is infinity, which doesn't seem sensible.
I'm getting tired of all this "live debt free!" nonsense. There's good debt and bad debt, and people like this should learn the difference before giving financial advice.
I personally am much more likely to follow anonymous investment advice. Do you have any tips on how I could re-mortgage my house or get some cheap loans to buy gadgets or invest? Hint: don't be a dick.
Look into the concept of leverage sometime.
Remember, your life is precious. Don't live your 20s and 30s as an ascetic just so you can retire to a golf course in your 50s. I spend a lot now (but not beyond my means) because these are some of the best years of my life, and I know that there's a very significant probability (not guaranteed, but large) that my earning potential will continue to increase for the next 10 years at least (I'm 28).
I have made an informed, calculated decision to evolve my spending like this. My utility function is simply that $100 is worth more to me now that it will be when I'm 35. Ergo, borrowing (limited) money can be a net utility positive.
"Maybe it is because I don’t allow any advertising at all into my life..." ...How does he manage this? Advertising and marketing have become a major, major, nearly pathological personal issue for me, to such an extent that I sometimes fantasize, on the train on the way to work, for example, about the ability to temporarily turn off my ability to read.