Comments on Wisdom Steps 101 ... Be Weird...Be Debt Free: Why You Should NEVER borrow To Invest

This site is one of the best I have ever seen, wis...

2006-05-21T14:34:00.000-05:00

This site is one of the best I have ever seen, wish I had one like this.
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I just got approval for $9,200 at 0% for 12 months...

2006-05-12T20:38:00.000-05:00

I just got approval for $9,200 at 0% for 12 months. I'll another $800 in of my savings into a CD, and in 12 months I'll have a profit of $500. Then I'll pay it all back. This will not cost me a cent. I suppose your readers can read your admonishments and my hard numbers and make up their own minds.

If I borrow 100 gold pieces from Peter at 5% inter...

2006-05-12T12:52:00.000-05:00

If I borrow 100 gold pieces from Peter at 5% interest, and loan them to Paul at 6% return... that's a 1% profit for me! I should ask Peter if he has more gold pieces!

That's my point put concisely. The government subsidy on mortgage interest puts fixed, low rates at levels below the available rates of return. As rates of return rise, there is no sound financial incentive to pay down cheaper debt.

Again: You want to be debt-free, and I can respect that. I want to be an investor. And yes, I will turn out better off for it. Paying interest will hold you back IF it's more expensive than all your investment options. Anything above 4-5% probably is.

Basically, Kevin, at the very bottom of rates, the rules reverse. If someone has a moral or religious prohibition against debt, they should pay it off. If one's concern is financial, rate determines the best approach. Ugh, this is getting so annoying to repeat.

business credit? This blog discusses "Personal Fi...

2006-05-12T10:20:00.000-05:00

business credit? This blog discusses "Personal Finance" not business finance...even John Cummuta keeps them seperate and uses slightly different thoughts, all though some personal finance thoughts enter into business thoughts, he keeps them seperate and says that in the beginning it may be nesesary to get a business started, but also the business should be set up so that is 100% seperate from you as the owner, so that it does not adversely affect your personal finance.
again, keeping BF seperate from PF...you have to plan for the future and paying interest will hold you back, not get you ahead.

Kevin, I respect your interest in this subject, bu...

2006-05-12T08:57:00.000-05:00

Kevin, I respect your interest in this subject, but I can't yet respect your math. I have to correct you on extrmely factual grounds:

1) $61k is not debt. It's credit. It means I can get $61k should I need it, in an emergency or investment situation. I don't use a credit card or have any consumer credit debt. $0.

2) If you list a mortgage, you also have to list the asset. You should know this! So if you -$130k, you also need to +$200k, a reasonable value of my property. So how's my net worth now? $108,000. Hey, not bad. Personally I don't care that much, but not bad, really.

And what do you think of how I bought this lovely home? I paid $520k for two houses. Four years later, I sold one for $412k. I also had to pay for some upgrades, but now I'm enthusiastic about paying off the remaining debt. Except I won't pay off a 6% mortgage, because it is not wise. Instead, I will invest in 6% CD's or bonds. Because THEY ARE WORTH MORE. There's the same rate debate that got us into this discussion.

Kevin, I don't have an employer. I run my own business. Tomorrow could be a terrible day for business. If that happened, Kevin, I would be able to pay my obligations for YEARS to come, even with NO ADDITIONAL INCOME. Do you understand? People who run their own business may need credit for very necessary, practical reasons. Corporations and cities issue bonds for fundamentally sound reasons! They may need to make investments before the profits season, for example. I avoid credit at all costs, but it's there if I need it, particularly for a medical emergency.

I earn pretty good wages right now. I earn $8,000 per month, but I only spend $2,000 per month. So I save for a rainy day. And I have credit for a VERY rainy day. A flippin' MONSOON day. I also carry full home, auto, and medical insurance, so who knows why I might need that much credit, but it costs me nothing, so who cares. You seem to say a contractor's life is irresponsible, and people shouldn't work on contracts, but rather that the only responsible lifestyle is one of a salaried employee. After all, a contractor could be out of work in two months (as I will be, working on my home business). Do you realize not everyone has just one job? Are we irresponsible? Nonsense. First of all, I'm saving six thousand dollars a month! And secondly, someone has to build things you need!

The 0% stuff has never charged interest. I reached 0% when coming out of debt two years ago. I was re-negotiating the debt as I went, and I haven't paid a penny to a bank since. Simply put, I USE THEIR GREED AGAINST THEM. It doesn't seem like you'll ever understand this, but honestly, NOT A PENNY to these banks in over two years. I am helping a 4th person out of debt now. He thinks his $1,700 is serious debt. Well it's serious to him and I want to help him out of it. Low rates can help (he's at 20%+ now!).

I also have an asset called an investment loss. Congress has different rules for investment losses vs. business losses. This means investing in an index fund or other equity yields a bit more for me... so it's worth it. Simply put: I'm an investor, while you're focused on being debt-free. And you know what? That's fine. Just don't say you're an investor! An investor would focus on rate, not verse.

well anonymous, you say I should learn to use a sp...

2006-05-11T17:04:00.000-05:00

well anonymous, you say I should learn to use a spreadsheet. I say, you should learn to do math....letys use YOUR numbers:
$17k in the bank
+$21k in retirement and medical savings
-$61k in available credit
-$130k in mortgage debt
---------
-$153,000 Net worth

You are NOT "doing fine."

forget Crown's biblical refrences, if your employer went bankrupt tomorrow and couldn't pay it's employees, laid you off, fired you, cut your salary, or otherwise some adverse fincial situation happens (as will happen to many people 1 in every ten years), you would not be able to pay the loan(s). That 0% intrest will start charging interest, because of your GAMBELING on your future. As the articles stated, when you borrow you are presuming that nothing advearse will happen to your finances. The better way is to save, not pay the bank interest, giving the bank all your wealth, and pay cash for everything. What happens is we take loans and the only one that gets rich is the bank. Take a look at your house and then the bank (that great big building or gleaming steal and glass). ALL the furniture in the bank (or mortgage company) is yours. It's called in the financial world a "Transfer of Wealth!"

I haven't even mentioned how most Americans buy more house then they need...I paid cash for my house, spent 30k to bring it up to code, and then because of MY stupidity, hawked it, by putting a mortgage on it. My house will soon be free and clear again.

do you oppose mortgages? you really need to sell y...

2006-05-11T10:28:00.000-05:00

do you oppose mortgages? you really need to sell your place and rent. that would eliminate your debt. AND THAT'S GOD'S LAW.

A mortgage is borrowed money, invested in a home.

is God against running a business? when i invest i...

2006-05-10T12:00:00.000-05:00

is God against running a business? when i invest in my business using debt to finance future gains, [and when my plan is sound and usually successful], does God oppose this capitalism? give me a break.

Yes, payments. I have more than enough savings to ...

2006-05-10T11:57:00.000-05:00

Yes, payments. I have more than enough savings to cover the payments. And most liquid investments can be cashed out immediately. So what's the real risk?

It's clear we're not going to agree. You're certainly not convincing me. I'm not involved in unwise debt. I counsel people to get away from it every chance I get. But I am involved in debt that is worth the cost. Running a business makes this very necessary. But I don't get the feeling I'll ever fully explain this to you. I will enjoy the benefits of wise debt. You will always say all debt is evil. That's the name of your blog so why should I be surprised? I don't really like a non-financial analysis of this financial matter in which it's alleged that my views run against God and family. Learn to use a spreadsheet. Mine says I have $17k in the bank, $21k in retirement and medical savings, $61k in available credit, and $130k in mortgage debt. I'm doing fine. I only sought to show you how rate works. God believes in rate. And more importantly, so do banks.