Has anyone been debt-free and not liked it?

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mattymcmatt
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Has anyone been debt-free and not liked it?

Post by mattymcmatt » Sat Jan 17, 2009 9:33 am

I'm currently in the process of becoming debt-free (just five months to go on paying my student loans) and have read a few threads here arguing the benefits of having a mortgage vs. not having one. (I'm renting with no plans to purchase so these are more just threads of interest)

I'm curious if there's some people that worked to become debt-free and then decided that they would like to take on some debt to invest. If so, what were your reasons for doing so and was it a good decision to go back into debt?

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DA
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Re: Has anyone been debt-free and not liked it?

Post by DA » Sat Jan 17, 2009 9:43 am

mattymcmatt wrote:I'm curious if there's some people that worked to become debt-free and then decided that they would like to take on some debt to invest.
Being debt free is pretty liberating, IMHO.

You won't find many here who will endorse borrowing money to buy stocks.

Dan

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Re: Has anyone been debt-free and not liked it?

Post by bob90245 » Sat Jan 17, 2009 10:16 am

mattymcmatt wrote:I'm curious if there's some people that worked to become debt-free and then decided that they would like to take on some debt to invest.
What is your plan after you initially become debt-free? What interest rate will you have to pay on your new loan? What rate of return are you expecting on your investments? After all is said and done, will you be ahead? What happens if your investments don't work out as planned and yet you still have to make your loan payments?

If you get the hint that I'm skeptical, you're right.

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Post by bernsteinfan » Sat Jan 17, 2009 10:20 am

As long as you don't lose your job, not having debt makes you a lot more financially independent and less needing of a certain (higher) level of income. Becoming debt free means being able to say "Oh well, I can afford the same lifestyle because at least I'm debt free" in more times than not when the economy worsens and your income drops somewhat (this seems to be the most likely occurrence rather than job loss outright so far) instead of not sleeping at night or worse.

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Re: Has anyone been debt-free and not liked it?

Post by Sponger » Sat Jan 17, 2009 10:20 am

mattymcmatt wrote:I'm currently in the process of becoming debt-free (just five months to go on paying my student loans) and have read a few threads here arguing the benefits of having a mortgage vs. not having one. (I'm renting with no plans to purchase so these are more just threads of interest)

I'm curious if there's some people that worked to become debt-free and then decided that they would like to take on some debt to invest. If so, what were your reasons for doing so and was it a good decision to go back into debt?
I've been debt free for a long time. What's not to like?

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Post by huskerblue » Sat Jan 17, 2009 10:29 am

Paid off house after 7 years in July 2007. Laid off from job in August 2008. Wife's job brings in enough to cover ALL bills after pulling back on 401(k) contrib to just enough to get full match, less dinners outs, less silly spending, etc. Received a couple offers on jobs that weren't what I really wanted but had I not been debt free I likely would have taken because eating beats not eating. Now on the cusp of getting a GREAT job doing EXACTLY what I want to do because I had the ability to wait for it.

Real life stories are always good teachers.

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Post by mithrandir » Sat Jan 17, 2009 10:29 am

It's the wrong question.

I could sell my house, pay off the sub-$800/month mortgage, move to Manhattan and rent a studio for $2000 a month. The rent would eat about half my take-home pay. But I could say I'm debt-free!

Having debt - or not having debt - is not the issue. It's what you spend versus what you earn, period.

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Post by nisiprius » Sat Jan 17, 2009 11:08 am

Essentially debt-free since 1995, and getting the mortgage paid off put us into a position where we were able to get the kids through college without their needing to get student loans. Not a moment's regret yet.

The big problem with debt, as with many things in life, is psychological. It is one of many areas in which people are strongly tempted to kid themselves, in order to keep doing what they want to do and avoid doing things that are unpleasant.

There can be perfectly valid rationales for staying in debt or taking on more debt. A business that is booming, has every reason to continue to boom, and has an opportunity to expand, for example.

But when someone comes up with some clever-clever spreadsheet rationale that shows that some investment will earn so many basis points more than their mortgage after allowing for the tax deduction, I always wonder whether it is a rationale, or just a rationalization. I always suspect that some of these people merely have a desire to invest without the wherewithal.

Now, throw into that mix the many people who stand to profit by lending money to you, or by overcoming your sales resistance to buying something that you can't afford. And that there are very few people except yourself that benefit from your avoiding debt.

One's own normal weakness is thus reinforced by sales pitches, always weighted toward the benefits of taking on debt, and toward minimizing or dismissing the problems.

I'll bet that rational analysis would show that there are ten people in debt who shouldn't be, for every one person who isn't and should.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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Post by Sam I Am » Sat Jan 17, 2009 11:29 am

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gasman
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Regrets

Post by gasman » Sat Jan 17, 2009 11:50 am

Regret? I do have some regrets of the life experiences not experienced in order to be debt free. I don't mean the bigger house, nicer car, more clothes or toys or better restaurants. But not taking a year off when young, and not traveling more. I can do these things now, but a year off in my twenties or a summer in europe then I think would have been more meaningful.

NOT Borrowing to invest has not been a regret, or only one in hindsight. Two of my partners who have expensive house and HAD paid off mortgages borrowed heavily in 2005 to invest in the stock market. Think about that.

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Post by MWCA » Sat Jan 17, 2009 1:05 pm

Been debt free for over 8 years now. Its nice not paying an extra tax on purchases. My only regret is I was not debt free sooner.

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Post by Mitchell777 » Sat Jan 17, 2009 1:23 pm

I have only borrowed money once, with the exceptions of credit card debt that I pay off each month in full. That was to purchase my first home. I know being debt free may or may not have been the best move at times, but some financial decisions are not all about the bottom line. It allowed me to sleep better at night, so it was worth it for me personally.

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Post by lckamp » Sat Jan 17, 2009 1:27 pm

Hi:
I've been debt free for about 20 years and never really regretted it. In fact I believe it was a great goal for us and resulted in a financial discipline that we might not have had otherwise.
Enjoy | Al Seekamp

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Re: Regrets

Post by Puakinekine » Sat Jan 17, 2009 2:17 pm

gasman wrote:Regret? I do have some regrets of the life experiences not experienced in order to be debt free. I don't mean the bigger house, nicer car, more clothes or toys or better restaurants. But not taking a year off when young, and not traveling more. I can do these things now, but a year off in my twenties or a summer in europe then I think would have been more meaningful.
I don't know how much age has slowed you down, but I think that I am enjoying travel a lot more as an adult then as the person I was in my twenties. I was much too self involved at the time and much too interested in the opposite sex to really appreciate much of the world around me.

As for debt, we have been debt free since the mid-nineties when we paid off our mortgage early. It is a very, very good feeling and I can't say anything against it.

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Post by Toons » Sat Jan 17, 2009 2:24 pm

Im 58,wife is 53 we are debt free(including mortgage). I have never regretted it for a moment. Its a good feeling to go thru monthly expenses in Quicken and see Utilities as about my only expense(course there are taxes,insurance,etc).The monies that come in monthly we pay ourselves first by investing in mutual funds and savings accounts then we allow ourselves spending money.
Once you become debt free you don't have to borrow to invest :D

The wealthy didn't get that way by paying interest to someone other than themselves :D
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

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Re: Has anyone been debt-free and not liked it?

Post by TRC » Sat Jan 17, 2009 2:40 pm

mattymcmatt wrote:(I'm renting with no plans to purchase so these are more just threads of interest)
I'd rather have a mortgage any day of the week and be paying myself first by paying down the principal than paying rent on someone elses mortgage and helping them get rich.

Is there a reason you don't want to buy a property?

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Post by xerty24 » Sat Jan 17, 2009 2:45 pm

Being "debt free" is more a psychological choice rather than an economically rational one in many circumstances. If you've got $100K in the bank earning 3% and $100K of debt paying 3%, you're basically breaking even on cashflow (up to you tax situation). You could just have $0 in the bank and no debt... but then what would you do if you needed to pay some big medical bill, or buy a house when the market tanks 50% and no one is lending for mortgages, or you lose your job (you can always live off the cash and go bankrupt on the debt if you have to). Having cash and debt provides much more flexibility than having neither.

I have had a positive liquid net worth for over 10 years. However, for the last 10 years I have kept outstanding debt (usually unsecured) rather than pay it off out of my assets. Why? Because the interest rates I could get were sufficiently low that I would break even or profit after investing in a good savings account or bonds (not that I always did this). But more to the point, it allowed me the flexibility to make large investments in good opportunities when they arose.

I will add to OP's comment specifically on student debt that in general that's one of the last types of debt I advise people to pay down. The rates on student loans are often quite low and sometimes tax deductible, and federal student loans act as free life insurance too in that they disappear if you die rather than burdening your estate.
Toons wrote:The wealthy didn't get that way by paying interest to someone other than themselves :D
On the contrary, the way to get rich is by using other people's money - just look at the traders or hedge fund managers on Wall Street.

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Post by RTR2006 » Sat Jan 17, 2009 2:56 pm

We paid off our home in December 2005 and our small but annoying credit card debt last November.

I maximize my 401K, invest in a P&G DRIP plan, we save what we can separately, and enjoy the rest.

We don't buy what we can't pay for; debt is the heroin of the masses (or something like that).

RTR

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Post by livesoft » Sat Jan 17, 2009 3:24 pm

We were debt-free from age 0 to age 37. We didn't like it, so we bought a house.

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Post by Die Hard » Sat Jan 17, 2009 8:23 pm

livesoft wrote:We were debt-free from age 0 to age 37. We didn't like it, so we bought a house.
And, a Lexus....Correct? :lol:
The best way to teach your children about money is to not have any.............

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Blue
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Post by Blue » Sat Jan 17, 2009 8:36 pm

one point in favor of debt, it can be a motivator to play better offense.

I suspect if you have all debt paid off it is easier to slip into semi-retirement/start to slow down earlier than you would have otherwise.

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Post by Ella » Sun Jan 18, 2009 1:35 am

xerty24 wrote:I will add to OP's comment specifically on student debt that in general that's one of the last types of debt I advise people to pay down. The rates on student loans are often quite low and sometimes tax deductible, and federal student loans act as free life insurance too in that they disappear if you die rather than burdening your estate.
Are you sure about this? I was under the impression that your estate was responsible for your student debt -- Do you know where I can read about this, maybe an IRS publication?

I have a ton of student debt and no enthusiasm for paying it off quickly. It's at a low rate (3.875) and paying it off would eat up more than one year of taxable investing...just feels pointless and non-exciting. As Dave Ramsey says, I've come to treat my student loans like a pet...

Ella

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Post by MOBoglehead » Sun Jan 18, 2009 2:50 am

Being debt-free is certainly a good thing, if only for the fact that it makes you more secure and therefore better able to withstand financial shocks such as a job loss, etc.

However, I think psychology and emotion are as much factors as rationality when it comes to debt. You can easily make the case that it is more rational to carry mortgage debt than to pay it off when mortgage rates are as low as they are now. Still, many people still prefer a paid-off mortgage for the psychological security it brings. This is why the debate over paying off the mortgage versus investing never ends.

One thing is absolutely certain : It makes no sense to carry non-deductible high interest debt ( credit card debt, high-rate car loans, etc ).

My take is this : As long as you are maxing out your tax-deferred and tax-advantaged accounts ( 401K, IRA ) and you pay off your credit cards every month, you will be ok. Beyond that, don't sweat the details.

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Re: Has anyone been debt-free and not liked it?

Post by mattymcmatt » Sun Jan 18, 2009 4:46 am

OP here - Interesting responses as always. I asked the question as someone in another thread said that no one ever regretted paying their mortgage off early and someone replied that they had paid off their mortgage but then decided to take out a mortgage. So I found it interesting that some people would do that and wanted to know why.
TRC wrote:I'd rather have a mortgage any day of the week and be paying myself first by paying down the principal than paying rent on someone elses mortgage and helping them get rich.

Is there a reason you don't want to buy a property?
Yes, in my city housing prices are very high. The starting price for one bedroom condos is $250-300k. My rent currently is $550/month and once my student loans are paid off I'll be investing the difference. I live pretty frugally (save $1500-2000 per month), don't like paying interest and have been brainwashed by Dave Ramsey so my thoughts have been to wait until I have cash to purchase a house. At least, once I have my student loans paid off I will be able to see what it's like to be debt free.

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Re: Has anyone been debt-free and not liked it?

Post by Met Income » Sun Jan 18, 2009 4:58 am

TRC wrote:
mattymcmatt wrote:(I'm renting with no plans to purchase so these are more just threads of interest)
I'd rather have a mortgage any day of the week and be paying myself first by paying down the principal than paying rent on someone elses mortgage and helping them get rich.

Is there a reason you don't want to buy a property?
Any day of the week? Clearly, there are factors that make the decision wise or not (purchase prices, interest rate, etc.)

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Post by celia » Sun Jan 18, 2009 9:01 am

Here's a very, very interesting article about someone who believes you are converting "human capital" into financial capital throughout your life. He has borrowed to invest in stocks. I don't know if he was ever completely debt-free, but that is irrelevant in this story.
Moshe A. Milevsky

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Re: Has anyone been debt-free and not liked it?

Post by Ron » Sun Jan 18, 2009 9:39 am

mattymcmatt wrote:I'm curious if there's some people that worked to become debt-free and then decided that they would like to take on some debt to invest. If so, what were your reasons for doing so and was it a good decision to go back into debt?
Personally I would not borrow to invest, but that's a personal decision based upon fears of my wife/me coming from famlies who had little and just "surviving" during our early years together.

However, we did something that could be considerd an alternative answer to your question. We built our current home in '94, obtained with a 30-year note/mortgage. Having the advantage of owning three other homes over the previous 25 years of marriage we rolled over all profits (some little, some not so little) into our down payment.

We had intentions of keeping the payments into our retirement, but my wife had a change of heart as we approached our 50th birthday (we're the same age). She did not want to go into retirement with the strain of an additional payment.

Anyway, through a lot of strain/pain (e.g. LBYM), we paid off the note in late 1999 - 5.5 years instead of the 30 year original note.

After it was paid off, we took the normal payment amount and increased our 401k's. If you remember what happened at the end of last century, you know we bought cheap. In addition, we saved between $100-150k in foregone interest (on the mortgage/note) along with the gross income we would have had to make to cover that interest.

So in a way, we did "borrow to invest". We could have continued to make the payments (borrowing) but we paid off our debt and continued to pay that note/mortgage amount by redirecting that payment to our investments.

Just an alternative view.

- Ron

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Post by giacolet » Sun Jan 18, 2009 10:40 am

The banking community is not too happy aboyut debt free relationships. I work with several individuals who are delighted to have a loan because they have purchased an asset they will sell for a profit. One individual keeps three million in the bank and takes over distressed commercial property borrowing money from the bank that is foreclosing to close the deal. These are income business properties in the resort Gulf Beaches, Clearwater Beach, Treasure Island Beach, Maderia Beach on the Gulf of Mexico. If the prior owner had not swindled three million dollars and got caught the properties would not have become distressed. The properties on Madeira Beach will provide rental income for him and his family for his life and for the life of his business-partner son. He will sell a cocktail lounge in Clearwater Beach for 1.5million nearly doubling his money. The income flow from the comercial beachfront rentals will pay his mortgage leaving his three million stash intact and, in addition to the overage on the rental income, he will live off the $750,000 he will clear on the sale of the cocktail lounge. Debt can be a good thing and in my estimation it's the engine of the financial community.

Bogleheads ... where is the business venture spirit? Everybody can't write books on finance and keep the economy turning. Relatively speaking I don't see contributors to this forum who have $15-25 million for investment. We are a bunch of poor folks.
May your heart always be joyful. | May your song always be sung. | May you stay forever young. | ----Bob Dylan

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Post by Ron » Sun Jan 18, 2009 11:21 am

giacolet wrote:We are a bunch of poor folks.
Not necessarily. Here's another view....

My wife/me are in our early 60's. I'm retired. My wife (her choice, since she's not emotionally ready for retirement) continues to work.

Our combined budget, including all expenditures (including taxes) is around 100k (+/-).

Over an assumed retirement of 30 years (ignoring increases in expenditures due to inflation) we will "add back in" to the economy $3M.

Maybe we don't "dabble" in investment schemes; however we are debt free and the money we spend goes right back into the economy.

For two mostly middle income, mostly retired, I think we are doing our share in keeping the economy going.

Of course, you (and others) can surly tell me that we are wrong :roll: ...

- Ron

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Post by xerty24 » Sun Jan 18, 2009 1:06 pm

Ella wrote:
xerty24 wrote:I will add to OP's comment specifically on student debt that in general that's one of the last types of debt I advise people to pay down. The rates on student loans are often quite low and sometimes tax deductible, and federal student loans act as free life insurance too in that they disappear if you die rather than burdening your estate.
Are you sure about this? I was under the impression that your estate was responsible for your student debt -- Do you know where I can read about this, maybe an IRS publication?
Ella - here's a good summary for Stafford loans, including the cancellation from death or permanent disability. Here's the FSA's description too.

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Post by mptfan » Sun Jan 18, 2009 1:11 pm

Ella, there are two different issues to consider here. 1) Federal student loans are usually discharged upon your death, assuming no one else has agreed to pay them. 2) In most cases, your unsecured debt (student loans, credit card debt) dies with you. For BOTH of these reasons, your estate may not be responsible for your individual student loan debt after you die. Read this thread...

http://www.bogleheads.org/forum/viewtop ... e+debt+die

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Re: Has anyone been debt-free and not liked it?

Post by TRC » Sun Jan 18, 2009 4:18 pm

mattymcmatt wrote:
Is there a reason you don't want to buy a property?
Yes, in my city housing prices are very high. The starting price for one bedroom condos is $250-300k. My rent currently is $550/month and once my student loans are paid off I'll be investing the difference. I live pretty frugally (save $1500-2000 per month), don't like paying interest and have been brainwashed by Dave Ramsey so my thoughts have been to wait until I have cash to purchase a house. At least, once I have my student loans paid off I will be able to see what it's like to be debt free.[/quote]

Can you live further away from your job to find a more reasonably priced house? I'm in the same boat up here in Boston. I decided to move 1 hour outside the city to find something cheaper.

Housing prices have dropped, inventory is high, and interest rates are dirt cheap. Now's the perfect time for a first time homeowner to jump in and find a great deal. Look for a motivated seller (bank owned, pre-foreclosure, fixer upper, etc.)...there are deals to be found right now.

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Post by giacolet » Sun Jan 18, 2009 4:49 pm

Ron wrote:
Of course, you (and others) can surly tell me that we are wrong ...

- Ron
O. K., Ron you are wrong.

He also opined:
Maybe we don't "dabble" in investment schemes;
That's really a poor choice of words, "dabble" and "schemes."

There's no call to be prejudicial for persons who make their living evaluating opportunities and making sound real property investments.

You don't have the mindset. You don't have the bankroll. Enjoy your upper middle class retired lifestyle.
May your heart always be joyful. | May your song always be sung. | May you stay forever young. | ----Bob Dylan

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Post by UKbloke » Sun Jan 18, 2009 5:31 pm

giacolet wrote:Debt can be a good thing and in my estimation it's the engine of the financial community.

Bogleheads ... where is the business venture spirit?
Indeed. If, as an entrepreneur, you can find a way to return significantly more than 10% on invested capital, borrowing starts making a lot of sense.

This can be simple, e.g. starting a car wash based on a new technology or whatever breaks the current limitations of the existing business model.

Moreover, if things go wrong, your personal assets are protected by limited liability, provided you follow the law.

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Re: Has anyone been debt-free and not liked it?

Post by mattymcmatt » Sun Jan 18, 2009 6:33 pm

TRC wrote:
Can you live further away from your job to find a more reasonably priced house? I'm in the same boat up here in Boston. I decided to move 1 hour outside the city to find something cheaper.

Housing prices have dropped, inventory is high, and interest rates are dirt cheap. Now's the perfect time for a first time homeowner to jump in and find a great deal. Look for a motivated seller (bank owned, pre-foreclosure, fixer upper, etc.)...there are deals to be found right now.
I could but I REALLY love being able to walk to work in 30 minutes/bike to work in 10 minutes and not having a car. If I moved further away I would need to pay more money (for a car, mortgage payments) for having less time (commuting). It doesn't make sense to me right now.

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Post by cantabtim » Sun Jan 18, 2009 8:08 pm

Living in a location where you don't need a car to get to work or play is a privilege of great price. There are reasons alleged for moving to a car dependent lifestyle (larger house, safer neighborhood, better schools) but I'm unconvinced by any of them.

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Post by Bigfoothunter » Sun Jan 18, 2009 10:13 pm

When I became debt free, I didn't feel anything. Nothing. Made no difference until several years later and the company was laying off lots of staff, and I saw these guys sweating with anxiety and worry, and then I had a feeling which told me that I was different. Had I not taken a road of removal of debt years before, I too would have been full of anxiety and worry. Bigfoot

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Post by Gekko » Sun Jan 18, 2009 10:20 pm

ive never met anyone who paid off all of their debt and ever regretted it.

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Post by stratton » Sun Jan 18, 2009 10:25 pm

Gekko wrote:ive never met anyone who paid off all of their debt and ever regretted it.
If you pay off your debt and have no savings then an emergency pops up you can regret it.

The example I hear a lot on shows such as Brinker or Bruce Williams is someone inherits some money and uses that and most of their savings to pay off the house thinking they can build up thieir emergency fund in the future. Then an emergency hits almost immediately such as getting laid off. Ooops. No job, so no loan.

So yes, you can get burned if you aren't careful and do some minimal planning.

Paul

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Re: Has anyone been debt-free and not liked it?

Post by Toons » Sun Jan 18, 2009 11:10 pm

"I live pretty frugally (save $1500-2000 per month), don't like paying interest and have been brainwashed by Dave Ramsey so my thoughts have been to wait until I have cash to purchase a house. At least, once I have my student loans paid off I will be able to see what it's like to be debt free.[/quote]"


Rice and Beans ,Beans and rice,,stay the course and keep listening to Dave.NO debt,,keep working on loan payoff,,good job
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

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Re: Has anyone been debt-free and not liked it?

Post by stratton » Sun Jan 18, 2009 11:17 pm

Toons wrote:"I live pretty frugally (save $1500-2000 per month), don't like paying interest and have been brainwashed by Dave Ramsey so my thoughts have been to wait until I have cash to purchase a house. At least, once I have my student loans paid off I will be able to see what it's like to be debt free.
"


Rice and Beans ,Beans and rice,,stay the course and keep listening to Dave.NO debt,,keep working on loan payoff,,good job[/quote]
That's a great way to go for the first year or two out of school:

1. Get first job and live like a student with a few extra goodies.
2. Build up emergency fund
3. Max out 401K to $15,500

Do that for a year or two and then throttle back the 401K to 10% of what you make and start saving for house and paying down any loans quicker.

The initial large 401K savings will be money that will really make your day in about 10 years. It will really pay off in the last few years before retirement after its had decades to multiply.

Paul

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Post by rich » Mon Jan 19, 2009 12:13 am

giacolet wrote:The banking community is not too happy aboyut debt free relationships. I work with several individuals who are delighted to have a loan because they have purchased an asset they will sell for a profit. One individual keeps three million in the bank and takes over distressed commercial property borrowing money from the bank that is foreclosing to close the deal. These are income business properties in the resort Gulf Beaches, Clearwater Beach, Treasure Island Beach, Maderia Beach on the Gulf of Mexico. If the prior owner had not swindled three million dollars and got caught the properties would not have become distressed. The properties on Madeira Beach will provide rental income for him and his family for his life and for the life of his business-partner son. He will sell a cocktail lounge in Clearwater Beach for 1.5million nearly doubling his money. The income flow from the comercial beachfront rentals will pay his mortgage leaving his three million stash intact and, in addition to the overage on the rental income, he will live off the $750,000 he will clear on the sale of the cocktail lounge. Debt can be a good thing and in my estimation it's the engine of the financial community.

Bogleheads ... where is the business venture spirit? Everybody can't write books on finance and keep the economy turning. Relatively speaking I don't see contributors to this forum who have $15-25 million for investment. We are a bunch of poor folks.

First, I see a lot of "will sells". How do you KNOW this will happen? Could it be wishful thinking?

Second, I suspect you are VERY misinformed about the people here being a bunch of poor folks. Sure there probably aren't a lot with $15-25 million (then again maybe there are) but that is very consistent with the style of this forum. Unless you are phenomenally wealthy to begin with, in order to make $15-25 million through investing you have to take TONS of risk. A select few that attempt it will make a lot of money and most will fail. Bogleheads probably will not be in either group. We are not phenomenally wealthy but we are also not destitute.

Third, is $15-25 million your bar for being not poor?

Fourth, just a personal question that you obviously don't have to answer. Are you involved with real estate, either through your job or personal investments other than your primary residence?
Best regards, | Rich

Ella
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Post by Ella » Mon Jan 19, 2009 1:38 am

Xerty24 and mptfan, thanks for the info about students loans being discharged at death. Its good to know for estate planning! Though I plan to instruct my executor to pay the debts off anyway (thanks to student loans I have a great career today, so I'm grateful), unless for some reason my estate has been totally depleted and paying off the loans would deprive my disabled family member of needed money.

Thanks again for clarifying this for me - I'm kind of amazed I didn't know this, after 17 years of being a student loan holder!

Ella

CAP
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Post by CAP » Mon Jan 19, 2009 12:36 pm

I agree with those who said that it is great to be debt free with savings. It does give a person more options. I also don't like paying interest unless absolutely necessary.

When I started working, I did rent as I did not want the responsibility that comes with home ownership--repairs, yardwork, having the place checked on while away, possible storm damage etc etc. I was away a lot & it was so easy to just call the lardlord for repairs. Then I changed my mind & decided that I wanted a house for weekend getaways & for possible long-term ownership. It really became a project as I designed the house & had it custom built on lake property that my parents had helped me to purchase after I graduated from college. I had a construction loan & paid it off rather than taking out a mtg. I am really glad that I did this as I saved the monthly mtg. payments plus interest. I invested the money & paid cash for a new car. I have always paid myself first. This choice may not be for everyone, but I am totally glad that I have remained debt free with options.

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Random Musings
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Post by Random Musings » Mon Jan 19, 2009 1:18 pm

Being debt free is great - unless you really miss that monkey that was on your back.

There are good reasons to take on debt (buying a home to live in, starting a business, raising debt for capital expansion in business, availability of emergency money using HELOC - and I'm sure some other strategic reasons) - but generally speaking, it's a positive to be debt-free.

RM

Ron
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Post by Ron » Mon Jan 19, 2009 1:37 pm

giacolet wrote:Enjoy your upper middle class retired lifestyle.
I am :lol:

Thank you very much...

I exceeded my expectations (leaving my parents home when I turned 19, $20 in my pocket, and the clothes on my back).

Looking back, some 42 years to what I have today I consider myself extremely blessed.

Maybe for you, "upper middle class" means little. However for me, it's more than I could have ever imagined.

8) :lol: ...

- Ron

plake15
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Post by plake15 » Mon Jan 19, 2009 2:25 pm

If you add up the interest paid over the past 10-15 years of someone who had a mortgage,(several hundred thousand on a 250K mortgage even with any tax housing breaks),then you throw in credit card debt,the interest paid on that..average Joe pays minimum monthly credit card bill due and his monthly mortgage payment..thats how he treats his debt bills..

I would bet very very few people could have come close to getting a better return in stocks or investments when you include the combined several hundred thousand they paid in interest over that time span.

That idea of not paying off credit card debt and mortgage debt so Joe can invest and earn better return I would bet for average american is a losing cause 99% of time when you think of the actual stats involved with his interest and what his to investment return would have to look like ..

I have no problem with debt if one has passion to start a business and take loan to bring that dream to life,and if one wants to buy a home and go into debt to raise a family etc.. But when someone uses that "reasoning" of I would rather invest and do better than pay off my all my debts(mortgage,credit card etc..9 times out of 10 will lose that battle when you look at the true numbers involved..

xerty24
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Post by xerty24 » Mon Jan 19, 2009 4:19 pm

Random Musings wrote:Being debt free is great - unless you really miss that monkey that was on your back.
I teach my debt monkey to do tricks to earn his keep :)

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uspeed
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Post by uspeed » Tue Jan 20, 2009 12:14 am

There are two types of debt.

1. Bad Debt such as credit card, auto loan, other loan etc.
2. Good debt such as first home mortgage

Some time you have to find that you have debt and you have a capability to pay off, but what is the opportunity cost, how much you will get when you invest same money some where else, considering the risk factor.

I think if you have a good debt it is fine., overtime it will pay you off.

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mattymcmatt
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Post by mattymcmatt » Tue Jan 20, 2009 12:28 am

uspeed wrote:There are two types of debt.

1. Bad Debt such as credit card, auto loan, other loan etc.
2. Good debt such as first home mortgage
I've never been clear about this. Why is a mortgage good debt?

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