Almost a pathological fear of debt, to my detriment?

Questions on how we spend our money and our time - consumer goods and services, home and vehicle, leisure and recreational activities
tranquility
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Re: Almost a pathological fear of debt, to my detriment?

Post by tranquility » Sat Jan 13, 2018 11:58 pm

I am the same and I am lovin it!

Call_Me_Op
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Re: Almost a pathological fear of debt, to my detriment?

Post by Call_Me_Op » Sun Jan 14, 2018 7:36 am

Lynx310650 wrote:
Fri Jan 12, 2018 12:33 pm
I just cannot stand debt, even when it's arguably to my benefit to hold on to it because of low interest.
No, it's never "arguably" to your benefit to hold debt because of low interest. You are forgetting to factor-in risk.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

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jabberwockOG
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Re: Almost a pathological fear of debt, to my detriment?

Post by jabberwockOG » Sun Jan 14, 2018 7:43 am

DrGoogle2017 wrote:
Sat Jan 13, 2018 11:36 pm
jabberwockOG wrote:
Sat Jan 13, 2018 11:05 pm
DrGoogle2017 wrote:
Sat Jan 13, 2018 2:14 pm
smitcat wrote:
Sat Jan 13, 2018 1:08 pm
DrGoogle2017 wrote:
Sat Jan 13, 2018 11:20 am


This generalization doesn’t work. Not in HCOL, you will be poor forever.
Financially knowledgeable folks have the advantage of deciding when debt is to their benefit. This leads to more 'tools' available to enhance their savings and their lives.
I’m not sure one has to be savvy. My 22 year old, non savvy person, told me she’s given up her emergency fund, going to contribute fully to Roth IRA, instead of half as she told me last year. I now figure why, she was approved a large credit card from PenFed recently, she has every intention of pay her balance off every month, but instead of having her emergency savings earning zero interest, she wants to invest her money. The credit card serves as the emergency fund. It was no prop from me. I offered to lend her money to contribute to Roth IRA, but she refused.
Plus the credit card saves charges when she travels overseas. Last year, she paid nearly $200 on overseas transactions. PenFed didn’t approve her of a credit card because she wasn’t earning much. It’s called leveraging off your future income. She was shocked they approved such as large amount. But both of my kids have built very good credit history. They are more conservative then I am at the same age.
Extremely financially sophisticated and savvy? Seriously? Using a credit card and going into debt to pay for a real financial emergency because the "financially savvy" person has no liquid cash savings at hand (i.e. an emergency fund) is the exact opposite of having an emergency fund.


Almost every one I have met in my life that wants to explain how smart they are managing and leveraging debt ends up looking pretty silly and working for a long long time... Usually they never get the chance to understand the freedom, peace of mind and FI that having no debt produces.
As long as my income covers my expenses, that’s all it matters.
Famous Last words and a truly scary statement that has produced a tremendous amount of regret and pain in many lives. But having said that if someone thinks they are smart enough to manage and use leverage as a way to FI then I say go for it. Different strokes for different folks. This particular folk prospered staying out of debt except for home mortgages and always paid those off 2-3x as fast as normal amortization schedule.

smitcat
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Re: Almost a pathological fear of debt, to my detriment?

Post by smitcat » Sun Jan 14, 2018 8:07 am

jabberwockOG wrote:
Sat Jan 13, 2018 11:05 pm
DrGoogle2017 wrote:
Sat Jan 13, 2018 2:14 pm
smitcat wrote:
Sat Jan 13, 2018 1:08 pm
DrGoogle2017 wrote:
Sat Jan 13, 2018 11:20 am
jabberwockOG wrote:
Sat Jan 13, 2018 9:54 am
In most cases financially independent folks earn interest while poor and perpetually poverty stricken folks pay interest.
This generalization doesn’t work. Not in HCOL, you will be poor forever.
Financially knowledgeable folks have the advantage of deciding when debt is to their benefit. This leads to more 'tools' available to enhance their savings and their lives.
I’m not sure one has to be savvy. My 22 year old, non savvy person, told me she’s given up her emergency fund, going to contribute fully to Roth IRA, instead of half as she told me last year. I now figure why, she was approved a large credit card from PenFed recently, she has every intention of pay her balance off every month, but instead of having her emergency savings earning zero interest, she wants to invest her money. The credit card serves as the emergency fund. It was no prop from me. I offered to lend her money to contribute to Roth IRA, but she refused.
Plus the credit card saves charges when she travels overseas. Last year, she paid nearly $200 on overseas transactions. PenFed didn’t approve her of a credit card because she wasn’t earning much. It’s called leveraging off your future income. She was shocked they approved such as large amount. But both of my kids have built very good credit history. They are more conservative then I am at the same age.
Extremely financially sophisticated and savvy? Seriously? Using a credit card and going into debt to pay for a real financial emergency because the "financially savvy" person has no liquid cash savings at hand (i.e. an emergency fund) is the exact opposite of having an emergency fund.


Almost every one I have met in my life that wants to explain how smart they are managing and leveraging debt ends up looking pretty silly and working for a long long time... Usually they never get the chance to understand the freedom, peace of mind and FI that having no debt produces.
Its a shame we never met then - well managed CC use, home mortgage, business loans, school loan, and a 0% truck loan were all in our last year alone. I do not have the exact totals yet but the CC bills will be about $120,000 for the year 2017.
We will be retiring early shortly with a 'greater than average' plan in place.

michaeljc70
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Re: Almost a pathological fear of debt, to my detriment?

Post by michaeljc70 » Sun Jan 14, 2018 9:24 am

You need to look at the opportunity costs. It seems you are only looking at half the equation. What else can the money to pay off the debt be used for (401k match, IRA, savings, etc)?

hulburt1
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Re: Almost a pathological fear of debt, to my detriment?

Post by hulburt1 » Sun Jan 14, 2018 9:39 am

At 55 I was at work FedEx. As I was loading my truck something went in my hip. Missed 6 months Dr. said I had to go back to work. I could not. Here the choice work and be in pain 24hr a day or be done. If I had debt a car loan, house loan I would have been in very bad shape. I could not get SS because the Dr. said he could not say it happened on the job.

michaeljc70
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Re: Almost a pathological fear of debt, to my detriment?

Post by michaeljc70 » Sun Jan 14, 2018 9:58 am

hulburt1 wrote:
Sun Jan 14, 2018 9:39 am
At 55 I was at work FedEx. As I was loading my truck something went in my hip. Missed 6 months Dr. said I had to go back to work. I could not. Here the choice work and be in pain 24hr a day or be done. If I had debt a car loan, house loan I would have been in very bad shape. I could not get SS because the Dr. said he could not say it happened on the job.
What if you had 50k in debt but an extra 50k in savings? You'd be in exactly the same position. Obviously if you had $50k in debt and blew it on something, different story.

hulburt1
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Re: Almost a pathological fear of debt, to my detriment?

Post by hulburt1 » Sun Jan 14, 2018 10:59 am

What if you had 50k in debt but an extra 50k in savings? You'd be in exactly the same position. Obviously if you had $50k in debt and blew it on something, different story.

You see if you live debt free I was in you can sleep better. I knew that I could live on 1000 a month if I had to. not lose my house, cars or ?
It also over the 40 years of investing instead of paying debt I would not have 2.5m right now.

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Earl Lemongrab
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Re: Almost a pathological fear of debt, to my detriment?

Post by Earl Lemongrab » Sun Jan 14, 2018 11:22 am

hulburt1 wrote:
Sun Jan 14, 2018 9:39 am
At 55 I was at work FedEx. As I was loading my truck something went in my hip. Missed 6 months Dr. said I had to go back to work. I could not. Here the choice work and be in pain 24hr a day or be done. If I had debt a car loan, house loan I would have been in very bad shape. I could not get SS because the Dr. said he could not say it happened on the job.
Only if you have not saved that money. Done properly, that money you didn't use for paying off debt early should have been working away for you and been ready to support you in your time of need. If you take out debt and blow the money, then you'd have trouble. Not when you use it wisely.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

DrGoogle2017
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Re: Almost a pathological fear of debt, to my detriment?

Post by DrGoogle2017 » Sun Jan 14, 2018 11:50 am

jabberwockOG wrote:
Sun Jan 14, 2018 7:43 am
DrGoogle2017 wrote:
Sat Jan 13, 2018 11:36 pm
jabberwockOG wrote:
Sat Jan 13, 2018 11:05 pm
DrGoogle2017 wrote:
Sat Jan 13, 2018 2:14 pm
smitcat wrote:
Sat Jan 13, 2018 1:08 pm


Financially knowledgeable folks have the advantage of deciding when debt is to their benefit. This leads to more 'tools' available to enhance their savings and their lives.
I’m not sure one has to be savvy. My 22 year old, non savvy person, told me she’s given up her emergency fund, going to contribute fully to Roth IRA, instead of half as she told me last year. I now figure why, she was approved a large credit card from PenFed recently, she has every intention of pay her balance off every month, but instead of having her emergency savings earning zero interest, she wants to invest her money. The credit card serves as the emergency fund. It was no prop from me. I offered to lend her money to contribute to Roth IRA, but she refused.
Plus the credit card saves charges when she travels overseas. Last year, she paid nearly $200 on overseas transactions. PenFed didn’t approve her of a credit card because she wasn’t earning much. It’s called leveraging off your future income. She was shocked they approved such as large amount. But both of my kids have built very good credit history. They are more conservative then I am at the same age.
Extremely financially sophisticated and savvy? Seriously? Using a credit card and going into debt to pay for a real financial emergency because the "financially savvy" person has no liquid cash savings at hand (i.e. an emergency fund) is the exact opposite of having an emergency fund.


Almost every one I have met in my life that wants to explain how smart they are managing and leveraging debt ends up looking pretty silly and working for a long long time... Usually they never get the chance to understand the freedom, peace of mind and FI that having no debt produces.
As long as my income covers my expenses, that’s all it matters.
Famous Last words and a truly scary statement that has produced a tremendous amount of regret and pain in many lives. But having said that if someone thinks they are smart enough to manage and use leverage as a way to FI then I say go for it. Different strokes for different folks. This particular folk prospered staying out of debt except for home mortgages and always paid those off 2-3x as fast as normal amortization schedule.
I’m in the same boat as you, all I have is home mortgage, so why are you going on and on about lecturing people about debt. All these comments are unnecessary, such as truly scary, way to poverty, regret and pain. Give it a rest. All this drama for nothing. Take a chill pill. Read what I’ve wrote earlier in this thread. I never like any other debt except home mortgage.

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jabberwockOG
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Re: Almost a pathological fear of debt, to my detriment?

Post by jabberwockOG » Sun Jan 14, 2018 12:54 pm

DrGoogle2017 wrote:
Sun Jan 14, 2018 11:50 am
jabberwockOG wrote:
Sun Jan 14, 2018 7:43 am
DrGoogle2017 wrote:
Sat Jan 13, 2018 11:36 pm
jabberwockOG wrote:
Sat Jan 13, 2018 11:05 pm
DrGoogle2017 wrote:
Sat Jan 13, 2018 2:14 pm


I’m not sure one has to be savvy. My 22 year old, non savvy person, told me she’s given up her emergency fund, going to contribute fully to Roth IRA, instead of half as she told me last year. I now figure why, she was approved a large credit card from PenFed recently, she has every intention of pay her balance off every month, but instead of having her emergency savings earning zero interest, she wants to invest her money. The credit card serves as the emergency fund. It was no prop from me. I offered to lend her money to contribute to Roth IRA, but she refused.
Plus the credit card saves charges when she travels overseas. Last year, she paid nearly $200 on overseas transactions. PenFed didn’t approve her of a credit card because she wasn’t earning much. It’s called leveraging off your future income. She was shocked they approved such as large amount. But both of my kids have built very good credit history. They are more conservative then I am at the same age.
Extremely financially sophisticated and savvy? Seriously? Using a credit card and going into debt to pay for a real financial emergency because the "financially savvy" person has no liquid cash savings at hand (i.e. an emergency fund) is the exact opposite of having an emergency fund.


Almost every one I have met in my life that wants to explain how smart they are managing and leveraging debt ends up looking pretty silly and working for a long long time... Usually they never get the chance to understand the freedom, peace of mind and FI that having no debt produces.
As long as my income covers my expenses, that’s all it matters.
Famous Last words and a truly scary statement that has produced a tremendous amount of regret and pain in many lives. But having said that if someone thinks they are smart enough to manage and use leverage as a way to FI then I say go for it. Different strokes for different folks. This particular folk prospered staying out of debt except for home mortgages and always paid those off 2-3x as fast as normal amortization schedule.
I’m in the same boat as you, all I have is home mortgage, so why are you going on and on about lecturing people about debt. All these comments are unnecessary, such as truly scary, way to poverty, regret and pain. Give it a rest. All this drama for nothing. Take a chill pill. Read what I’ve wrote earlier in this thread. I never like any other debt except home mortgage.


One of the best features of public forums like this one is to allow a wide audience to see significantly different perspectives and sometimes contrary points of view on financial issues. I chose text from previous posts because it was a good example of exactly how not think about debt. I suggest that forum participation works best when we try not to take personally any contrary opinions and perspectives expressed on a forum. In the end readers will absorb what they can and use (or disregard/discard) what info they can glean here per their own judgement.

sport
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Re: Almost a pathological fear of debt, to my detriment?

Post by sport » Sun Jan 14, 2018 1:31 pm

Debt, like fire, is a tool. Used wisely, it is valuable. Used carelessly, you can get "burned". Saying "all debt is bad" is just as silly as saying "all fire is bad". That means you should not cook food because your house might burn down. As far as mortgage debt goes; you have to live somewhere. So, you have a choice: You can make your own mortgage payments, or help your landlord make his/her mortgage payments on the rental you live in. Either way, you make mortgage payments, except your own mortgage eventually gets paid off. The landlord's mortgage might get paid off too, but you will still make the payments.

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Re: Almost a pathological fear of debt, to my detriment?

Post by lightheir » Sun Jan 14, 2018 1:44 pm

Off topic here, but I honestly believe housing prices are partly insane because of mortgages, which are a 'social accepted' means of financial engineering.

In a world where mortgages would be illegal, housing prices would be farrrr lower than what they are now and much more reasonable to fully pay off in a MUCH shorter period of time. The 30-year chain and ball system of mortgages we have now result in a big increase in home prices (because of 'affordability under a 30 year mortgage'), which is all good for the financier, but no good for the tethered homeowner. Unfortunately, this is the system we have now, and I don't like it despite having to participate in it.

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Re: Almost a pathological fear of debt, to my detriment?

Post by sport » Sun Jan 14, 2018 2:20 pm

lightheir wrote:
Sun Jan 14, 2018 1:44 pm
Off topic here, but I honestly believe housing prices are partly insane because of mortgages, which are a 'social accepted' means of financial engineering.

In a world where mortgages would be illegal, housing prices would be farrrr lower than what they are now and much more reasonable to fully pay off in a MUCH shorter period of time. The 30-year chain and ball system of mortgages we have now result in a big increase in home prices (because of 'affordability under a 30 year mortgage'), which is all good for the financier, but no good for the tethered homeowner. Unfortunately, this is the system we have now, and I don't like it despite having to participate in it.
If there were no mortgages, many (most?) houses would never be built in the first place. Almost everyone would live in apartments.

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jabberwockOG
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Re: Almost a pathological fear of debt, to my detriment?

Post by jabberwockOG » Sun Jan 14, 2018 5:31 pm

sport wrote:
Sun Jan 14, 2018 2:20 pm
lightheir wrote:
Sun Jan 14, 2018 1:44 pm
Off topic here, but I honestly believe housing prices are partly insane because of mortgages, which are a 'social accepted' means of financial engineering.

In a world where mortgages would be illegal, housing prices would be farrrr lower than what they are now and much more reasonable to fully pay off in a MUCH shorter period of time. The 30-year chain and ball system of mortgages we have now result in a big increase in home prices (because of 'affordability under a 30 year mortgage'), which is all good for the financier, but no good for the tethered homeowner. Unfortunately, this is the system we have now, and I don't like it despite having to participate in it.
If there were no mortgages, many (most?) houses would never be built in the first place. Almost everyone would live in apartments.
There will always be someone ready to jump in and explain and rationalize how easy access to debt makes the world an easier place : )

The truth is that "easy money" availability of debt is one of the factors contributing to real estate prices going up and most "easy money" driven bubbles eventually burst.

The typical Macro Economics class explains and illustrates how using/incurring debt and using leverage can be rational and extremely good things and this is 100% true. Going from macro to micro is where the rub is introduced. When an individual goes into debt there is a level of risk associated with that debt that more than a few sadly do not adequately understand given the random and completely unforgiving vagaries of luck and life.

I am not saying all debt is bad, especially debt incurred to attempt to own an appreciating or income producing asset (mostly real estate, sometimes an education) can have a valid risk/reward profile as long as a clear-eyed rational relatively conservative purchase has occurred. In my view consumer debt incurred to own depreciating assets, or even worse debt incurred to have an "experience" (vacations, eating out, etc), should be avoided.

Prov227
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Re: Almost a pathological fear of debt, to my detriment?

Post by Prov227 » Sun Jan 14, 2018 11:02 pm

OP, why change? I'm the same way, although for me it's less about "fear" and more about hating loose ends. One obligation here, another obligation there ... no thanks. I'd need to tidy up those liabilities.

That spirit, combined with a distaste for anyone having a claim on me, makes me very debt averse. No different than if I owed a small sum to a friend/family/coworker for something minor. I'm driven by a conviction compelling me to get those loose ends tied up ASAP.

We did take out a mortgage for our home. Then attacked it with an intensity like our hair was on fire. Blessed to pay it off in 6 years. No regrets.
"...and the borrower is slave to the lender." -Proverbs 22:7

quantAndHold
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Re: Almost a pathological fear of debt, to my detriment?

Post by quantAndHold » Mon Jan 15, 2018 1:31 am

Fixed rate debt is a hedge against inflation. Our mortgages were absolutely fantastic hedges against housing inflation. In the long run, we were able to live in nicer places for far less money than if we had tried to save up and pay cash. We are living in a house that’s paid off that we would never have been able to afford at any point in our lives if we had had to save the money up front. During the time we’ve had this house, housing prices skyrocketed, and if we had been renting, we would have always been behind the curve, trying to save, against perpetually increasing rents and increasing home prices.

So, yeah, debt free now, but I don’t regret the car loans and and mortgages for a second. Okay, maybe one of the mortgages back in the 90’s...but it all worked out in the end.

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Re: Almost a pathological fear of debt, to my detriment?

Post by quantAndHold » Mon Jan 15, 2018 1:45 am

sport wrote:
Sun Jan 14, 2018 2:20 pm
lightheir wrote:
Sun Jan 14, 2018 1:44 pm
Off topic here, but I honestly believe housing prices are partly insane because of mortgages, which are a 'social accepted' means of financial engineering.

In a world where mortgages would be illegal, housing prices would be farrrr lower than what they are now and much more reasonable to fully pay off in a MUCH shorter period of time. The 30-year chain and ball system of mortgages we have now result in a big increase in home prices (because of 'affordability under a 30 year mortgage'), which is all good for the financier, but no good for the tethered homeowner. Unfortunately, this is the system we have now, and I don't like it despite having to participate in it.
If there were no mortgages, many (most?) houses would never be built in the first place. Almost everyone would live in apartments.
If there were no mortgages, our cities would mostly look like Brazilian favelas.

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randomizer
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Re: Almost a pathological fear of debt, to my detriment?

Post by randomizer » Mon Jan 15, 2018 2:28 am

I feel uncomfortable with debt but I will myself to live with it because I have a less than 2% mortgage. It's the rational thing to do.
75:25 AA / Expected retirement: 2097

anoop
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Re: Almost a pathological fear of debt, to my detriment?

Post by anoop » Mon Jan 15, 2018 2:43 am

If you're not comfortable with debt then stay away from it. I'm the same way. It may not be the most financially savvy move, but I think it's better to chill and do better at my job (and possibly earn more that way) then have worries like debt on mind all the time. I gave up $750 in incentives because I refused to lease or finance my car, instead preferring to pay upfront.

The universe works in interesting ways. Just because one chases money doesn't mean that one will get to enjoy it.

mwm158
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Re: Almost a pathological fear of debt, to my detriment?

Post by mwm158 » Mon Jan 15, 2018 3:13 am

.....
Last edited by mwm158 on Sat Jan 20, 2018 3:44 pm, edited 1 time in total.

anoop
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Re: Almost a pathological fear of debt, to my detriment?

Post by anoop » Mon Jan 15, 2018 3:31 am

mwm158 wrote:
Mon Jan 15, 2018 3:13 am
This is such a strange thread. Clearly debt has its uses. Imagine if all future doctors spent the first 60 years of their lives working at McDonald's to save up enough money for Med School. There's also clearly bad uses of debt. You just have to evaluate the pros/cons and decide for yourself when it makes sense.
If people didn't take debt, things would cost a whole lot less. And that includes education. In fact, free availability of student loans where parents have to stand guarantor (and pay up in the unfortunate case that their child passes even before completing college), is the only reason why education is in a bubble now. By staying away from debt we can be part of the solution instead of part of the problem that leverage creates. It is very hard to do when everyone around you is having a party.

MoonOrb
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Re: Almost a pathological fear of debt, to my detriment?

Post by MoonOrb » Mon Jan 15, 2018 3:32 am

Yes it's to your financial detriment, but it's not among the worst financial mistakes you could make. You might consider seeing a therapist and talking through this. But really, there are financial mistakes you can make that are so much worse than this that if you are happy living your life the way you live it, then just keep doing what you're doing.

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Re: Almost a pathological fear of debt, to my detriment?

Post by Luke Duke » Mon Jan 15, 2018 8:43 am

LiterallyIronic wrote:
Fri Jan 12, 2018 1:20 pm
Lynx310650 wrote:
Fri Jan 12, 2018 12:41 pm
Even at historically low rates, I just hate the thought of being beholden to a payment for 30 years.
I hear you on that. We just got a 30 year mortgage, and have only made three payments so far. But we always pre-pay enough principal to make sure that we're paying more principal than interest. Last month we had to do an extra $257 in principal, but this month we only have to do an extra $254, so it'll get easier and easier (but our plan is to pay either: 1) enough to make principal more than interest; or 2) $200, whichever is greater, so we'll never pay less than $200 extra toward principal). But at 3.875% interest, we could probably do better putting that money in the market. But I can't have this mortgage hanging around for 30 years.
It sounds like you should have gotten a 15yr mortgage.

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Re: Almost a pathological fear of debt, to my detriment?

Post by Luke Duke » Mon Jan 15, 2018 8:45 am

lightheir wrote:
Sun Jan 14, 2018 1:44 pm
Off topic here, but I honestly believe housing prices are partly insane because of low interest mortgages, which are a 'social accepted' means of financial engineering.

In a world where mortgages would be illegal, housing prices would be farrrr lower than what they are now and much more reasonable to fully pay off in a MUCH shorter period of time. The 30-year chain and ball system of mortgages we have now result in a big increase in home prices (because of 'affordability under a 30 year mortgage'), which is all good for the financier, but no good for the tethered homeowner. Unfortunately, this is the system we have now, and I don't like it despite having to participate in it.
FIFY

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Re: Almost a pathological fear of debt, to my detriment?

Post by smitcat » Mon Jan 15, 2018 9:49 am

Luke Duke wrote:
Mon Jan 15, 2018 8:45 am
lightheir wrote:
Sun Jan 14, 2018 1:44 pm
Off topic here, but I honestly believe housing prices are partly insane because of low interest mortgages, which are a 'social accepted' means of financial engineering.

In a world where mortgages would be illegal, housing prices would be farrrr lower than what they are now and much more reasonable to fully pay off in a MUCH shorter period of time. The 30-year chain and ball system of mortgages we have now result in a big increase in home prices (because of 'affordability under a 30 year mortgage'), which is all good for the financier, but no good for the tethered homeowner. Unfortunately, this is the system we have now, and I don't like it despite having to participate in it.
FIFY
It is always nice to dream about a place or situation that does not exist - it is always better to figure out how to thrive in a place that does exist.

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Re: Almost a pathological fear of debt, to my detriment?

Post by technovelist » Mon Jan 15, 2018 11:33 am

I don't have a fear of debt.

I have had a mortgage most of my life (two different houses).

However, I no longer have a mortgage because I paid it off earlier this year.

In fact I have no debt of any kind at this point, other than whatever balances are on my credit cards, all of which will be paid off when the bills come in.

Debt can be a tool, or it can be a trap. I think most people aren't as wary of it as they should be.
In theory, theory and practice are identical. In practice, they often differ.

LiterallyIronic
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Re: Almost a pathological fear of debt, to my detriment?

Post by LiterallyIronic » Mon Jan 15, 2018 12:03 pm

Luke Duke wrote:
Mon Jan 15, 2018 8:43 am
LiterallyIronic wrote:
Fri Jan 12, 2018 1:20 pm
Lynx310650 wrote:
Fri Jan 12, 2018 12:41 pm
Even at historically low rates, I just hate the thought of being beholden to a payment for 30 years.
I hear you on that. We just got a 30 year mortgage, and have only made three payments so far. But we always pre-pay enough principal to make sure that we're paying more principal than interest. Last month we had to do an extra $257 in principal, but this month we only have to do an extra $254, so it'll get easier and easier (but our plan is to pay either: 1) enough to make principal more than interest; or 2) $200, whichever is greater, so we'll never pay less than $200 extra toward principal). But at 3.875% interest, we could probably do better putting that money in the market. But I can't have this mortgage hanging around for 30 years.
It sounds like you should have gotten a 15yr mortgage.
We considered it. But in the end, I preferred to have the lower required monthly payment (in exchange for the higher interest rate). If I lose my job as a software developer, I can still manage the $808 PITI delivering pizzas or working at Walmart. Couldn't stomach the risk of not being able to make the higher payments of a 15-year mortgage.

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Re: Almost a pathological fear of debt, to my detriment?

Post by khangaroo » Mon Jan 15, 2018 1:57 pm

OP - I was just like you too because I formed my personal finance foundation with Dave Ramsey's help so I ended up COMPLETELY hating debt. But once I got debt-free I think I was able to finally understand my emotions about money a lot better. I knew I hated debt but I also realized how beneficial it can be, so against Dave Ramsey's better wishes I still use a credit card (monthly payoff) and I have a bank loan that will cost me $605 in interest if I don't pay it off early ($5,000 at 4.59% for 60 months). I took out the loan because I didn't want to waste a Roth Contribution year while I was paying off all my debts. I have enough in cash to pay off the loan right now but have decided not to because I'm finishing up an MBA and want to have the extra cash handy.

It's truly a personal preference thing and how much does debt really annoy you? It sounds like it annoys you a lot and that's okay. I personally think that debt can be used as a tool but if you don't like it then there is no point in taking on debt and then hating yourself for doing so. I'm most likely going to pay off my loan before 2020 because I just don't like the feeling of paying someone else interest. Also it feels great when you don't owe a dime to anybody.

cherijoh
Posts: 4678
Joined: Tue Feb 20, 2007 4:49 pm
Location: Charlotte NC

Re: Almost a pathological fear of debt, to my detriment?

Post by cherijoh » Mon Jan 15, 2018 2:36 pm

123 wrote:
Fri Jan 12, 2018 1:46 pm
Fear of mortgage debt would seem to be the biggest thing that would have an adverse effect on you. When I got my mortgage I did not look at it as debt but as a mechanism to pretty much "lock-in" the majority of my housing costs for the next 30 years. It was the long-term cost savings that made me get one.
+1
Assuming the OP isn't living somewhere rent-free, he/she is trying to save up enough money to pay cash for a house while simultaneously paying rent in a HCOL area. That doesn't sound very feasible to me. In order to attempt this, I suspect that OP will need to neglect something else - like savings for retirement! I don't think the OP made any mention of what he/she could be doing with the money they used to pay off debt early or which will be needed to buy a house in cash.

The key IMO is buying a house that you can actually afford - which is often less than what a realtor or a banker will tell you. Rent vs. own decisions are very much dependent on where you live. But my decision to buy a house with a 20% down payment paid off handsomely. I paid off the mortgage in under 22 years and for much of that time housing expenses (mortgage, taxes, insurance, HOA dues) have been quite a bit lower than an equivalent home would cost to rent. (It has now been paid off for a couple of years).

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