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purple hayes
Frightened Inmate #2
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 Posted: 01/19/06 - 15:32 Post subject:
| airehead wrote: | | purple hayes wrote: | | airehead wrote: | | purple hayes wrote: | | airehead wrote: | | Recently I read an article on how financial managers consider it stupid to have a paid-for house. "You should be using the equity in it...yadda yadda" Yeah, I'm out of debt, out of your pocket and you want me right back in it? I don't think so, bucko. |
What would you use the equity for if you had all your debts paid? |
They were talking about financing a whole slew of things. Vacations and other stuff. |
Any financial advisor that told me to take out a HELOC to go on vacation would be fired on the spot. |
No kidding. But they were advocating it as the best financial move in this article. I'm no financial wiz, but being in debt=not good. Someone owning me= not good.
They were saying that those people sitting on paid off houses were being stupid with their money.  |
Being in debt for education, home ownership or starting a business = OK debt.
Someone (with a good credit history) paying you + interest = good.
I wouldn't pay off my house early at the expense of contributing to my 401(k) or IRA, but if I had money left over after maxing out those, I would put it toward the house.
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sonnylax
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Posted: 01/19/06 - 17:52 Post subject:
I would argue that being in debt for school isn't necessarily good. (Clark Howard agrees with me on this issue too, fwiw).
Either you are going to a school that is too expensive (or too far from home)
OR
you should work full/part time and length your education process to pay as you go to avoid debt.
For those wanting the full blown four-year college experience - Clark is a big advocate of staying at home for the first two years and attending a nearby community college for all your introductory classes THEN transferring the final two years to the 4-year institution. Teaches fiscal restraint and responsibility without breaking the bank.
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cherylpf
crazy cat lady
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Posted: 01/19/06 - 18:23 Post subject:
| sonnylax wrote: | I would argue that being in debt for school isn't necessarily good. (Clark Howard agrees with me on this issue too, fwiw).
Either you are going to a school that is too expensive (or too far from home)
OR
you should work full/part time and length your education process to pay as you go to avoid debt.
For those wanting the full blown four-year college experience - Clark is a big advocate of staying at home for the first two years and attending a nearby community college for all your introductory classes THEN transferring the final two years to the 4-year institution. Teaches fiscal restraint and responsibility without breaking the bank. |
While Gman's figures are shocking, I guess I'm more along the lines of PH's thinking where some reasonable debt is okay or smart in some situations. Reasonable debt to be would be the kind that can be written off and feasibly paid off. I haven't researched much of Clark Howard, but his school theory isn't very realistic. The cost of going to school is high and increasing fast. The payoff of a degree from a major university with the right majors can be big and the opportunity cost of prolonging graduation and a salaried position to work for minimum wage or tips to get through school is huge, ie, not worth it, esp considering tax breaks from loan interest from reasonable debt. (I am not talking about the med students who buy ferraris and travel Italy from their med school loans) And speaking of med school, what about graduate programs that don't allow working? Its a lovely theory but it really doesn't pan out in practice I'm afraid.
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cherylpf
crazy cat lady
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Posted: 01/19/06 - 18:27 Post subject:
Back to Gman's facts, I think the new minimum payment law is a good thing. Anyone previously (well, and even still) paying only minimums is in for a world of hurt.
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sonnylax
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Posted: 01/19/06 - 19:51 Post subject:
| cherylpf wrote: | | sonnylax wrote: | I would argue that being in debt for school isn't necessarily good. (Clark Howard agrees with me on this issue too, fwiw).
Either you are going to a school that is too expensive (or too far from home)
OR
you should work full/part time and length your education process to pay as you go to avoid debt.
For those wanting the full blown four-year college experience - Clark is a big advocate of staying at home for the first two years and attending a nearby community college for all your introductory classes THEN transferring the final two years to the 4-year institution. Teaches fiscal restraint and responsibility without breaking the bank. |
While Gman's figures are shocking, I guess I'm more along the lines of PH's thinking where some reasonable debt is okay or smart in some situations. Reasonable debt to be would be the kind that can be written off and feasibly paid off. I haven't researched much of Clark Howard, but his school theory isn't very realistic. The cost of going to school is high and increasing fast. The payoff of a degree from a major university with the right majors can be big and the opportunity cost of prolonging graduation and a salaried position to work for minimum wage or tips to get through school is huge, ie, not worth it, esp considering tax breaks from loan interest from reasonable debt. (I am not talking about the med students who buy ferraris and travel Italy from their med school loans) And speaking of med school, what about graduate programs that don't allow working? Its a lovely theory but it really doesn't pan out in practice I'm afraid. |
I agree with you somewhat Cheryl. There are obvious exceptions. But I would still maintain that many people are working toward a 4-yr degree at the moment and
A. Won't use degree in their line of work.
or
B. Can't afford the degree they are pursuing in the first place.
Some college degrees aren't even worth the paper they are printed on.
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airehead
Oompa Loofah
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Posted: 01/19/06 - 20:55 Post subject:
| sonnylax wrote: | | cherylpf wrote: | | sonnylax wrote: | I would argue that being in debt for school isn't necessarily good. (Clark Howard agrees with me on this issue too, fwiw).
Either you are going to a school that is too expensive (or too far from home)
OR
you should work full/part time and length your education process to pay as you go to avoid debt.
For those wanting the full blown four-year college experience - Clark is a big advocate of staying at home for the first two years and attending a nearby community college for all your introductory classes THEN transferring the final two years to the 4-year institution. Teaches fiscal restraint and responsibility without breaking the bank. |
While Gman's figures are shocking, I guess I'm more along the lines of PH's thinking where some reasonable debt is okay or smart in some situations. Reasonable debt to be would be the kind that can be written off and feasibly paid off. I haven't researched much of Clark Howard, but his school theory isn't very realistic. The cost of going to school is high and increasing fast. The payoff of a degree from a major university with the right majors can be big and the opportunity cost of prolonging graduation and a salaried position to work for minimum wage or tips to get through school is huge, ie, not worth it, esp considering tax breaks from loan interest from reasonable debt. (I am not talking about the med students who buy ferraris and travel Italy from their med school loans) And speaking of med school, what about graduate programs that don't allow working? Its a lovely theory but it really doesn't pan out in practice I'm afraid. |
I agree with you somewhat Cheryl. There are obvious exceptions. But I would still maintain that many people are working toward a 4-yr degree at the moment and
A. Won't use degree in their line of work.
or
B. Can't afford the degree they are pursuing in the first place.
Some college degrees aren't even worth the paper they are printed on. |
Lots of places won't even look at you if you don't have that piece of paper.
That being said, my sister earned more with her two year degree from a vo-tech school than she ever did with her BS degree from Baylor. 
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cherylpf
crazy cat lady
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Posted: 01/20/06 - 10:03 Post subject:
| sonnylax wrote: | | cherylpf wrote: | | sonnylax wrote: | I would argue that being in debt for school isn't necessarily good. (Clark Howard agrees with me on this issue too, fwiw).
Either you are going to a school that is too expensive (or too far from home)
OR
you should work full/part time and length your education process to pay as you go to avoid debt.
For those wanting the full blown four-year college experience - Clark is a big advocate of staying at home for the first two years and attending a nearby community college for all your introductory classes THEN transferring the final two years to the 4-year institution. Teaches fiscal restraint and responsibility without breaking the bank. |
While Gman's figures are shocking, I guess I'm more along the lines of PH's thinking where some reasonable debt is okay or smart in some situations. Reasonable debt to be would be the kind that can be written off and feasibly paid off. I haven't researched much of Clark Howard, but his school theory isn't very realistic. The cost of going to school is high and increasing fast. The payoff of a degree from a major university with the right majors can be big and the opportunity cost of prolonging graduation and a salaried position to work for minimum wage or tips to get through school is huge, ie, not worth it, esp considering tax breaks from loan interest from reasonable debt. (I am not talking about the med students who buy ferraris and travel Italy from their med school loans) And speaking of med school, what about graduate programs that don't allow working? Its a lovely theory but it really doesn't pan out in practice I'm afraid. |
I agree with you somewhat Cheryl. There are obvious exceptions. But I would still maintain that many people are working toward a 4-yr degree at the moment and
A. Won't use degree in their line of work.
or
B. Can't afford the degree they are pursuing in the first place.
Some college degrees aren't even worth the paper they are printed on. |
Well, thats a good point, if you are directionless and just there for the 4 year experience with (nothing personal anyone) some random liberal arts major...yeah, you might have done better starting out at the junior college level to figure out what you want to do. But those with goals, I can guarantee you the job market here looks at where your degree came from before they decide to throw your resume in the trash. And many of those desirable schools aren't so easy to just transfer in at Junior year, was my point. As much as I like to promote education, kids just unsure what to do post high school graduation taking on student debt to go to Whatever U is silly, agreed.
Also, to Aire's point, many industries have lucrative careers considering the education. I'm thinking of vo-tech or associate's degrees in industries like healthcare. You'll go farther with a Bachelor's degree, but the cost of tuition farther? Maybe not in some areas.
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blue
your favorite weapon
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Joined: 21 May 2002
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Location: armed and ambitious
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Posted: 01/20/06 - 11:07 Post subject:
| purple hayes wrote: |
Being in debt for education, home ownership or starting a business = OK debt.
Someone (with a good credit history) paying you + interest = good.
I wouldn't pay off my house early at the expense of contributing to my 401(k) or IRA, but if I had money left over after maxing out those, I would put it toward the house. |
sounds like i could be in ok shape.
another important thing to consider is buying what you can *afford*.
a recent online pharmaceutical company in my town did really well - the owners bought a million dollar home - 2 years later they had to close up shop.
a 200,000 home would've done them just fine i'm sure. now they wasted so much of their eggnest that they can't afford anything else - although we think they bought the house outright, hopefully they can sell it.
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purple hayes
Frightened Inmate #2
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Posted: 01/20/06 - 11:25 Post subject:
| blue wrote: | | another important thing to consider is buying what you can *afford*. |
Truer words have never been spoken.
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Pug
The Movie Geek
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Posted: 01/23/06 - 22:24 Post subject:
My wife and I have amassed some debt from our own personal spending which hasn't always been smart, financing our wedding on our own via credit cards, and the student loan/car thing. We are now actively working on paying it back as quickly as we can and it'll take some time. Suddenly being squeezed by bills is a shocking experience, but kind of a valuable one. We know what mistakes we made and while it'll take years to undo the mistakes we won't make them again and know that if we want to go back to Disney this year we need to save up the money while still paying down debt (and yes, I know that the Disney money could be better used on a credit card) and that what we want has to come out of pocket or it isn't going to happen.
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Floridaboiler
POTFH
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Posted: 02/01/06 - 22:53 Post subject:
Debt sucks and I hate it. We got into a few bills that snowballed and we are now working our way out of it. It was really nice for a few years when we had zero debt but since we bought the house certain expense just catch up with you. Amazing how buying a house, having 2 kids and losing one income can make you realize what is truly important.
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tdassow
Member
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Posted: 02/03/06 - 17:51 Post subject:
| purple hayes wrote: | | airehead wrote: | | Recently I read an article on how financial managers consider it stupid to have a paid-for house. "You should be using the equity in it...yadda yadda" Yeah, I'm out of debt, out of your pocket and you want me right back in it? I don't think so, bucko. |
What would you use the equity for if you had all your debts paid? |
This is similar to a question I would pose to a class when I presented a "Financial Awareness" workshop for individuals on public assistance. Having "extra" money is a foreign concept to most people.
For me, if my home was paid for, I would consider a whole slew of alternatives based on the return. For example, if the equity costs me 5%, (include fees, etc.) I would want to be sure whatever I placed the money in would produce more than 5%, (after taxes and fees too!)
Only then would I pull money out of any asset, in this case, home.
Whenever making finanical moves, my wife and I try to make "value" decisions.
By the way, February in Alaska, (-23° this am) a trip to Hawaii seems like a GREAT value!
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thegman
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Posted: 09/13/06 - 23:11 Post subject:
Changing the direction of this old thread, here's an interesting snippet from one of my dailies. I bet you can guess the conclusion before you get there:
| Quote: | "What can be added to the happiness of a man who is in health, out of debt, and has a clear conscience?" asked Adam Smith.
But...what about people who have more debt than any one else...whose health suffers from too much sustenance...and whose conscience is encumbered with a bloody war made on people they didn't even know, for a purpose no one knows? Can they expect happiness?
As to their conscience and health, we have no opinion. But as to their debt we have many.
A recent report from the CIA ranks nations in order of their current account balance. The current account, we remind you, is like the operating statement of a business or an individual. Income must exceed outflow or your upkeep is your downfall. The difference between what comes in and what goes out, if it is positive, accumulates as though it were a profit. If it is negative, it builds up - but not necessarily, in the form of debt.
So what do we see? The country with the best position is Japan - with a current account balance of plus $165 billion. China is in the number two position, with almost as much. And here we pause to give readers a chance to gasp. China - a country run by communists - has the second best current account balance in the world. Figure that. In other words, Marxism...at least as practiced in the Middle Kingdom...has proven no bar whatever to capitalist success.
But we will move on...
Germany is the third most 'profitable' country in the world - with a positive current account balance of $115 billion. Then the list goes into various oil producers, watchmakers, and assorted national curiosities...such as Algeria...with - would you believe it - has an $18 billion surplus! Even tiny Hong Kong ended last year nearly $20 billion to the good.
But between Swaziland and the Comoros (which, we believe is an island nation somewhere off the coast of Africa) the figures make the kind of transformation that can only be likened, in the material world, to going from light to darkness, or in the sentient world, from life to death. That is, they go from positive to negative. The numbers which were such a comfort to Germany and such a delight to Japan become an embarrassment.
Poor Burkina Faso, perhaps the most God-forsaken hole on the surface of the whole planet, suffers a $438 million deficit and still manages to hold its head up in public.
"Hey, wait a minute," said a friend at a dinner party recently, "Burkina Faso is not so bad. My wife and I love to go there for desert trekking. There is nothing there...no restaurants...no hotels you'd want to go to...no theatres...not much of anything. But out there in the natural world... in the desert, there is a quality that is sublime. I wish I could describe it to you...but you have to see it for yourself."
That said, at least Burkina Faso is far from the worst on the CIA's list. The rest of Africa follows...and then come the Banana Republics of Latin America...and finally, guess who makes the end of the line-up? Guess who has the worst current account deficits in the entire world? Guess which countries spend more than they earn - regularly and spectacularly?
Last in line are the nations of the Anglo-Saxon, English-speaking debt-based empire! New Zealand has a deficit of nearly $10 billion. Then, South Africa...and India...and Australia all have deficits too. Among the major former colonies of the British Empire, only Canada seems to have any sense. It runs a surplus. The others are all debtors. The UK itself is third from the bottom with a $57 billion negative current account balance.
For no reason we can think of, the penultimate on the list is Spain. And then comes the worst of all...the United States of America, with a current account balance of a minus $829 billion.
Add up all the deficits of the entire world and you get a figure barely half of the U.S. total.
The U.S. economy makes up a quarter of the world total...that it should have more than half of the world's current account deficits is a spectacular success - only made possible by its great wealth and status.
And here, in yesterday's news, comes the latest: "Record $68 billion trade deficit in July," reports Bloomberg.
Nothing fails like success. |
Buy gold. You'll thank me later. 
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jrjo
Gone Fishin
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Posted: 09/13/06 - 23:58 Post subject: Re: Debt.
Some of these are scare-statistics....
| thegman wrote: | | Banks are taking back homes almost faster than they can finance them. In December 2005, 81,290 properties across America entered some stage of foreclosure. |
With the average finance term being something like 5 years and there being probably in the neighborhood of a 100-million properties in the US, that's something like 20-million finance transactions per year. 81,290 x 12-mos = 406,450... that's a far way from 20-million and being able to say "taking back homes almost faster than they can finance them"
| Quote: | | That was also the period when, for the first time in history, the savings rate of Americans dipped into negative numbers. |
"Savings rate" statistics do NOT include house payments, 401k or other retirement plans. BOTH of these assets are currently at all time highs. Personal wealth in this country has never been higher. People simply are investing in real estate and pension accounts instead of keeping a stingy savings account at the bank.
| Quote: | | Online holiday shoppers spent more than $30.1 billion online in the weeks leading up to Christmas 2005 – a 25% increase over the same outrageously festive season in 2004. |
The "brick-n-mortar" shopping decreased by the near same amount. Online shopping isn't putting America in debt, it's a tool for doing the same spending that has always happened.
"Shopping" is a good thing for the US economy. Americans have NEVER slowed down their shopping. Through a technology bust, terrorist scares, job doom-n-gloom news, war, skyrocketing gas prices, election turmoil, airline problems, hurricanes, auto maker shake downs, all these things were suppose to KILL the American shopper. But did they? Not one US dollar. We keep spending no.matter.what. And even IF it is financed with debt, when compared to our home equity, 401k, inheritances and all those assets "on paper", personal balance sheets are at an all time high.
Debt might be high, but assets are higher. Corporations in this country are sitting on cash reserves that are unfathomable right now. Unheard of stock-buy-backs are going on in such places as Microsoft. Getting rid of cash is the biggie corporate question of the decade. With low interest rates, maintaining debt is easy. Should those rates ratchet way up (which I don't believe will happen with the federal reserve forever and ever at the helm now), cash and equity will swing across the balance sheet and eliminate debt.
You gotta talk about the whole pie when it comes to debt... assets are just as prevalent out there right now too.
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