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With 0% interest on some cars and near 3% on mortgages I can see some debt as a reasonable option.
Being overextended is quite a different animal than being in debt.
Debt, if used correctly, can be one part of your longer term investment strategy.
Free money is free money. For example, if you have a 2.5 percent mortgage, with less than 10 years to pay, then it makes more sense to invest your cash in a vehicle paying 5-10 percent than it does to pay off that mortgage. Same with vehicle loans.
Like many posters on here, I use a charge card, far different than a credit card for most of my purchases. It gets paid off every month and is safer than a debit card.
Credit is just a tool if used correctly. Not having credit, because you always paid cash for something, could really hurt you if an unexpected emergency happens. Lenders put people with zero credit in the same category as those with bad credit.
My hard and fast rule for any debt I carry is this; if I can't pay it all off tomorrow, without sacrificing more than 25 percent of my portfolio, then I don't have it.
Shouldn't your income be included in this. We have a small mortgage, and our house payment is $620 a month including taxes and insurance. My retirement income at 52 is above the nationwide average, and I'll get a huge bonus when I turn 62 if the politicians don't steal it.
We did it by leaving California, and moving to Nevada. We had always intended to buy down, and were going to use our equity in our California home to do it. When it evaporated, we did the same thing, because the costs came down here too. Between our medical, and mortgage write off we still get a greater deduction than standard, so for us it works. We could pay off the mortgage if we had to, but would have to pay taxes on the money we took from the IRA, so it is better for us this way.
Credit is just a tool if used correctly. Not having credit, because you always paid cash for something, could really hurt you if an unexpected emergency happens. Lenders put people with zero credit in the same category as those with bad credit.
I am 40 years old and still have 25 more years to go. I am afraid however that the generation before mine was the last to retire. Government jobs are gone, most pensions have turned into 401k's, state jobs eliminate positions through budget cuts. My generation will probably work til were dead.
Being overextended is quite a different animal than being in debt.
Debt, if used correctly, can be one part of your longer term investment strategy.
Free money is free money. For example, if you have a 2.5 percent mortgage, with less than 10 years to pay, then it makes more sense to invest your cash in a vehicle paying 5-10 percent than it does to pay off that mortgage. Same with vehicle loans.
Like many posters on here, I use a charge card, far different than a credit card for most of my purchases. It gets paid off every month and is safer than a debit card.
Credit is just a tool if used correctly. Not having credit, because you always paid cash for something, could really hurt you if an unexpected emergency happens. Lenders put people with zero credit in the same category as those with bad credit.
My hard and fast rule for any debt I carry is this; if I can't pay it all off tomorrow, without sacrificing more than 25 percent of my portfolio, then I don't have it.
Nonetheless, debt financing of investments partially impairs those investments' gains. And if the investments are losses ... well, you know the drill.
Being overextended is quite a different animal than being in debt.
Debt, if used correctly, can be one part of your longer term investment strategy.
Free money is free money. For example, if you have a 2.5 percent mortgage, with less than 10 years to pay, then it makes more sense to invest your cash in a vehicle paying 5-10 percent than it does to pay off that mortgage. Same with vehicle loans.
Like many posters on here, I use a charge card, far different than a credit card for most of my purchases. It gets paid off every month and is safer than a debit card.
Credit is just a tool if used correctly. Not having credit, because you always paid cash for something, could really hurt you if an unexpected emergency happens. Lenders put people with zero credit in the same category as those with bad credit.
My hard and fast rule for any debt I carry is this; if I can't pay it all off tomorrow, without sacrificing more than 25 percent of my portfolio, then I don't have it.
One of the most sensible posts on this thread.
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Originally Posted by mlb
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Social Security doesn't need to be cut, not through a chained CPI or raising the retirement age or anything else. It needs to be expanded and increased.
Huh? I'm looking forward to the reasoning behind that - seeing as how there are fewer workers, earning lower wages, contributing fewer dollars to the sysem.
Quote:
Originally Posted by BayAreaHillbilly
Nonetheless, debt financing of investments partially impairs those investments' gains. And if the investments are losses ... well, you know the drill.
No doubt some win this gamble. Some, but not all.
This is a good strategy for the knowledgeable investor - not the novice or riverboat gambler. I do this with a small portion of my money - but generally choose relatively conservative investments with a good track record - not high fliers - and watch these investments and the general market very carefully. So far, it has paid off.
There are certain hazards with debt. For example: If your car or home is carrying a loan, and something happens that you can't make the payments, they can still reposes, even if the debt is relatively small compared to the value of the asset. Paying of the loan means the item is completely mine. Plus paying any interest was always aggravating to me, especially if I could pay it off and save the cost of the interest.
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