Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Debt is merely away of money being moved around. Its the cornerstone of capitalism. All companies are in debt as they either borrow from banks or sell bonds to raise money. Governments sell bonds to raise money as well. Even wealthy people use credit cards for purchases, or use financing for business expansion.
Nothing is wrong with debt as long as you can make payments.
Debt created the mess this country is currently in and not the people in who live in housing projects, collect welfare and all other degenerates of society. People have to worry about degenerates when it comes to high increases in taxes. Debters and lowlives ruin this country and city for better and worse! I said my two cents.
Debt created the mess this country is currently in and not the people in who live in housing projects, collect welfare and all other degenerates of society. People have to worry about degenerates when it comes to high increases in taxes. Debters and lowlives ruin this country and city for better and worse! I said my two cents.
Debt is how new businesses are created, and is an important part of how businesses expand. Debt is used to purchase automobiles, homes, help financial college tuition for those who might not otherwise be able to afford it, etc. All major purchase involve debt, or even if they are paid in cash, you're using the banking system which makes its money off debt.
No one carries about buckets of gold coins or wheel barrows of cash.
American individuals are over-indebted way above their means to pay. There is nothing wrong with borrowing money but if someone owes more than 50% of net income and their net worth cannot cover 100% of borrowings then they are in trouble especially if they lose their jobs.
Businesses are a different story because of their access to capital markets, their ability to diversify their earnings and reorganize their operations, and the legal and political protections they have at default which ordinary individuals do not have.
I believe Bronxguyanese was talking about personal debt and not business debt.
American individuals are over-indebted way above their means to pay. There is nothing wrong with borrowing money but if someone owes more than 50% of net income and their net worth cannot cover 100% of borrowings then they are in trouble especially if they lose their jobs.
I believe Bronxguyanese was talking about personal debt and not business debt.
Yes but he was treating it like a "four letter word." Personal debt is not always a bad thing since it allows you to buy things like an education, a house, a car, etc. The problem is lending more than someone can afford to pay back. I've personally never liked credit cards because they are mostly used for purchasing consumer goods and if you can't afford to buy a $2,000 handbag and need to put it on your card, you probably shouldn't buy it at all. That, however, is totally different from not being able to pull out $500,000 to buy a house BUT being able to come up with 25% of that total amount as a down payment as well as having a well paying, stable job that will allow you to pay off the amount that you borrowed.
That, however, is totally different from not being able to pull out $500,000 to buy a house BUT being able to come up with 25% of that total amount as a down payment as well as having a well paying, stable job that will allow you to pay off the amount that you borrowed.
This is still not a good idea IMO. Esp. for middle class households, this would be tantamount to putting the bulk of thier life savings in a single debt-financed asset that may not appreciate enough to cover interest, inflation and higher taxes. Better for them to put savings in a diversified investment account which won't require them to borrow money.
This is still not a good idea IMO. Esp. for middle class households, this would be tantamount to putting the bulk of thier life savings in a single debt-financed asset that may not appreciate enough to cover interest, inflation and higher taxes. Better for them to put savings in a diversified investment account which won't require them to borrow money.
But you're assuming that they aren't also investing. In the case of those that are home owners, self include, some invest in addition to owning a home. After all, you have to live somewhere and there are really only two choices. Pay money to a landlord and at the end of the day not own the place, or pay money to a bank and at the end of the day, own the place. The reality of the situation is that the amount I'm paying to mortgage my place (including the taxes and maintenance) is comparable to what I would pay in rent given my income.
the only good debt in this whole country is visa swipes to employers' payrolls so they can guarantee your pay check every week. everything else, well they need to pay people more
so they can afford all this nonsense people assume they need, if they can't already afford it.
But you're assuming that they aren't also investing. In the case of those that are home owners, self include, some invest in addition to owning a home. After all, you have to live somewhere and there are really only two choices. Pay money to a landlord and at the end of the day not own the place, or pay money to a bank and at the end of the day, own the place. The reality of the situation is that the amount I'm paying to mortgage my place (including the taxes and maintenance) is comparable to what I would pay in rent given my income.
Yes but my assumption is correct. If they are buying a $500K home, where will the majority of their savings be in the next 10 to 20 years? It will be in the house. As a percentage of total savings, the house will be the largest asset in the portfolio versus stocks, bonds, insurance etc. Doesn't look like very good diversification.
Now compared with renting - it really depends where you rent. If they pay the high rents in Manhattan and brownstone Brooklyn, then renting doesn't look like a big advantage. But if they rent in other boroughs or the suburbs, then it becomes more attractive. Consider that with a $500K house, they will pay thousands per month in interest expense, taxes (that keep going up!), maintenance and repairs etc. Those are expenses, not investments especially in the first 10 years. That amount will almost approximate a monthly rent of $2,500 - $3,200. At least when they rent, they can put the majority of the remainder of their savings (after paying expenses) to diversified investments that have a higher ROI and better risk profile than home ownership. If they own a mortgage, most of the savings will go to paying down the balance. They may own the house but as a financial asset it is losing money.
If I can find a rental for 3K or less it will definitely be more attractive in the financial sense than buying a $500K house.
I laugh when people say, 'you're throwing away your money on rent'
This is a misconception that's not entirely correct.
In my case, I pay $1,500 for a place that if I was to pay mortage for, it would be way over 2k /mo.
That saves me more than $500 a month, which I can put towards a couple of foreign, domestic and industry diversified indexes.
Per my calculations, It hink I will come up with a greater ROI than if I had my money tied up on a mortage, hoping that the rate of appreciation of my property would be higher than the inflation rate.
Now if I ever had an emergency, I could quickly sell my indexes to cover the expenses. Hoewver, we cannot say the same thing about the liquidity of a property which can take, weeks, if not months to sell.
Now, I'm not saying that homeownership is a bad investment, but it's not the best or greatest. It's all about what they call in economics, 'opportunity cost'
The notion that renting equals throwing away your money, is just erroneous if can put your money to work for you elsewhere.
Yes but he was treating it like a "four letter word." Personal debt is not always a bad thing since it allows you to buy things like an education, a house, a car, etc. The problem is lending more than someone can afford to pay back. I've personally never liked credit cards because they are mostly used for purchasing consumer goods and if you can't afford to buy a $2,000 handbag and need to put it on your card, you probably shouldn't buy it at all. That, however, is totally different from not being able to pull out $500,000 to buy a house BUT being able to come up with 25% of that total amount as a down payment as well as having a well paying, stable job that will allow you to pay off the amount that you borrowed.
Credit cards are also used to purchase certain things you cannot do with debit cards, such as car rentals and checking in hotels. Also, using your credit cards and paying them off can help build your credit history, enabling you to do auto loans or mortgages or other types of loans you may need. Credit cards are a good back up to savings in case of emergency.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
