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It Is Not About the Money, Silly, It Is All About the Time

jacquesmattheij.com

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Re: It Is Not About the Money, Silly, It Is All About the Time

#41

Post by NickPollard »

jacquesm wrote: post #24
nilkn wrote: post #20

Earlier quoted context omitted.

Debt is like sex. It's better to preach discipline, responsibility, and understanding than abstinence.

I'm all for debt if used responsibly. Getting a mortgage can - depending on your personal financial situation and the market conditions - be a good decision. But paying it off versus buying a bunch of gadgets or a new car should be a no-brainer. Unless you have a guaranteed ROI on some investment plan.

It doesn't need to be guaranteed, it just needs to be better expected value, with a volatility you're willing to accept.

Risk, like debt, is not always a bad thing, as long as you're informed and understanding of it.

As Daniel Kahneman said in 'Thinking, Fast and Slow', people ought to take more opportunities with risky outcomes with positive expected values - some you will lose, but over your life, taking a large number of these risks will result in a positive outcome.

(Obviously, only take risks where the negative outcome is one you can get through, i.e. it won't kill you, or leave you completely penniless etc.)

Re: It Is Not About the Money, Silly, It Is All About the Time

#42

Post by jacquesm »

conjecTech wrote: post #31
zzleeper wrote: post #12

Earlier quoted context omitted.

Was just thinking the same thing. Keeping the mortgage and investing on index funds is the same thing as "leveraging up" your investments. AKA, it's the same as saying "let's borrow 1k from the bank at 3.5% and put it into the SP500".

Taking the mortgage was the thing that leveraged you to begin with. Investing in the market rather than paying it off at an advanced rate merely serves to not further reduce your leverage.

You have to consider the rent-vs-buy situation of that particular market in order to really evaluate the decision of whether or not taking a mortgage is the right thing to do.

Re: It Is Not About the Money, Silly, It Is All About the Time

#43

Post by moron4hire »

For all the people who are saying "there is good debt and bad debt" and stuff about not paying off your mortgage early: what you say makes mathematical sense, but there is also something to be said for achieving a certain level of simplicity in ones arrangements.

For example, I paid off my student loans before my car and my credit cards, way back when I had my own brush with debt servitude. The student loans were the lowest interest of the bunch, but they were also the smallest by that point. I would have spent less overall by paying off the credit card first, but I was able to pay off the student loan immediately. Eliminating it completely helped me on an emotional level stay engaged in my debt reduction. A mile marker, an "easy win".

Most people don't have the patience or willpower to work their finances in the most optimal way. Borrowing at X percent to invest at X+Y percent makes no sense for people who have difficulty remembering to pay bills on time; the late fees will destroy them. And the solution is not "just pay the bills on time", because that's already supposed to be done.

Better to live life understanding what you're capable of. I freelance because I know I'm not capable of getting into an office at 8am for more than three days in a row (actually, it's any set time), and most employers would prefer you to do it 365 days in a row. We already tried "get me up earlier" and that didn't work. Time for new solutions to the problem.

Re: It Is Not About the Money, Silly, It Is All About the Time

#44

Post by jacquesm »

JoeAltmaier wrote: post #38
charlieflowers wrote: post #26

Earlier quoted context omitted.

OK, well look around. Do you know a lot of people (is it possibly even most of the people you know) who have 2 or more car loans, and at least one home loan? 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 consi…

Really there's only car and house debt. The rest are small fry. And both of those can be problematic.

Don't forget about credit cards and buying on credit. That's not necessarily 'small fry' and neither are student loans.

Re: It Is Not About the Money, Silly, It Is All About the Time

#45

Post by iNate2000 »

artmageddon wrote: post #23
noonespecial wrote: post #10

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…

> rafts of expensive insurances that middle class people often insist on Could you explain more on what you're referring to when you say insurances?

car insurance, home insurance, fire insurance, life insurance, health insurance, legal costs insurance...

Re: It Is Not About the Money, Silly, It Is All About the Time

#46

Post by smackfu »

charlieflowers wrote: post #26
DontBeADick wrote: post #14

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.

OK, well look around. Do you know a lot of people (is it possibly even most of the people you know) who have 2 or more car loans, and at least one home loan? 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 consi…

>It is smart for whomever loaned that money out ... they get back free money paid consistently over the years.

Now explain why the same logic doesn't apply to a landlord being the smart one, and a renter being the dumb one.

Re: It Is Not About the Money, Silly, It Is All About the Time

#47

Post by throwaway283719 »

gglitch wrote: post #25

"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.

It's actually not that hard. I very rarely see advertising, and I didn't even make a conscious effort to do it.

I don't have a TV, I don't listen to the radio, I don't read magazines or newspapers, I pay a subscription for all the streaming services I use and I use ad-blockers when browsing the internet.

None of these are conscious choices to avoid advertisements - I would do all of them even if they didn't have that pleasant side effect.

The only time I see advertisements is when I take public transport - the underground in London is full of them, but they're pretty easy to tune out.

Re: It Is Not About the Money, Silly, It Is All About the Time

#48

Post by noonespecial »

artmageddon wrote: post #23
noonespecial wrote: post #10

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…

> rafts of expensive insurances that middle class people often insist on Could you explain more on what you're referring to when you say insurances?

Health insurance for starters. Poor people will likely have a (mostly less than sufficient) government option that they pay little for, hoping that they don't get sick.

Then comes the mandatory insurances of "ownerships". Mortgage insurance to cover loan default, required property insurance for that home, auto insurance (full coverage also required by your lender on a new car) etc.

Fearful insurances like disability insurance to cover the bills if they should become unable to work (wouldn't want to lose all my stuff). Life insurance so the kids have a comfortable life at the level they've become accustom to in the even of death etc.

There may also be liability insurances connected with their line of work.

Middle class people have a lot of insurances that often take a significant portion of their monthly budget.

Re: It Is Not About the Money, Silly, It Is All About the Time

#49

Post by carsongross »

throwaway283719 wrote: post #27
carsongross wrote: post #11

Earlier quoted context omitted.

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…

Yeah, I broadly agree that all of these are valid things to consider, particularly if you are quite risk averse. 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…

Regarding #4, no you are not. If housing prices tank, you are levered the wrong way, as millions of underwater homeowners have discovered. Owning your house outright, somewhat paradoxically, makes it less awful if prices decline.

I agree that "debt is bad" is simplistic, but good debt, in my mind, is self liquidating debt taken on for productive enterprise. Mortgages are not self liquidating, and consumer credit is of course much, much worse. Mortgages at least have the benefit of good rates and tax advantages, although the size of them can often make the practical cash-flow ramifications dicey.

You are right, of course: at some rate of return, a sure thing at 3% becomes less attractive than an alternative investment. And you have to look at your broader investment basket to put together the appropriate mix of risk and returns. If paying off your mortgage involves say 20% of you net worth, that's different than 90% of it. So, as always, it depends.

I do like the thought experiment where you ask yourself "If I had my house paid off, would I take out a mortgage to make this investment?"

Re: It Is Not About the Money, Silly, It Is All About the Time

#50

Post by DontBeADick »

charlieflowers wrote: post #26
DontBeADick wrote: post #14

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.

OK, well look around. Do you know a lot of people (is it possibly even most of the people you know) who have 2 or more car loans, and at least one home loan? 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 consi…

A mortgage can be an extremely good investment, and a 0% car loan is essentially free money if you were going to buy the car anyway. My point is that there's no one-size-fits-all financial advice, and trying to promote the hip, rebellious "debt-free" lifestyle rather than educating people about debt really isn't doing them any favors.
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