Debt. Good, bad, or whatever?

[1911 1LE]

Originally Posted by mlee

Very well said...

+1, you just have to set that goal and make it happen.

Time for another beer

[Vegas Bound]

Originally Posted by BuddyLee

Also a home loan interest is tax deductible, you do not have that write off as well. A fully paid for home is non liquid and non tax deductible.

I don't have enough write offs to itemize. Just take the standard PLUS 1099 expenses.

[mlee]

Originally Posted by 1911 1LE

+1, you just have to set that goal and make it happen.

Time for another beer

Cheers...

Originally Posted by Vegas Bound

I don't have enough write offs to itemize. Just take the standard PLUS 1099 expenses.

Yeah, not even close there.

[Vegas Bound]

Originally Posted by mlee

Cheers...



Yeah, not even close there.

If I had a mortgage, my combined interest and property taxes would be less than $2500 each year.

[1911 1LE]

My property tax is almost equal to my mortgage payment from 8 years ago. The development around here is f-ing unreal.

[KenKat]

Originally Posted by BuddyLee

That is a good idea. But what about 10 years after the loan origination when the borrow window expires? What would your next move be?

My first one was set up that way but a couple of years into the payback period, they offered me a new HELOC with a better rate and a 30 year term so it’s good to 2046. I may never use it again, but it’s available if needed.

I am all for paying off debt, don’t get me wrong, and most debt is bad, but I am not willing to go so far as to say ALL debt is bad.

[0stones0]

Originally Posted by pyroguy

....


0stones0 do you think the vendor doesn’t pass that 3-5% on to you? Have you ever paid cash for stuff at a show or event? Often times you can even negotiate if you go into the store and offer to pay cash. They will knock that 3-5% off or do better than that if you’re willing to pay cash.The myth that you’re making money off of the credit card company is false.There’s a reason why their buildings are skyscrapers and our houses aren’t.

....

I think it’s quite unrealistic to say you can walk into a store and negotiate a cash price. For everyday shopping experiences, that is not the way it works. It’s possible but, not the norm by any means.
Yes, we are being paid. By check, product, or account credit. How they reimburse themselves (the card companies), to make up for what they pay us out, doesn’t change the fact that we are getting rewarded for using their cards.
Most of what you say makes good sense. There is a plethora of people out there that shouldn’t use cards, for sure. Some of us, are comfortable with the way it works and are satisfied with the arrangement. Again, your mileage may vary.

[FarmerFran]

Originally Posted by Iron Lung Jimmy

Pyroguy... I meant the bank makes the insurance payments for you out of escrow so that is one less thing you have to deal with.

You are winning. Great job.

Fran... living debt free is a goal, not something most people can automatically do. But if you buy into the idea that it is attainable and put in the work and sacrifice toward it you can do it. It is no different than any other achievement that people accomplish.

Then we are saying the same thing. It is a tightrope that one must balance.

[FarmerFran]

Another thing no one ever realizes though, you never "own" your property (land). You are forever paying for it and only renting it from Uncle Sam.

So technically you are forever in debt.

[0stones0]

Originally Posted by FarmerFran

Another thing no one ever realizes though, you never "own" your property (land). You are forever paying for it and only renting it from Uncle Sam.

So technically you are forever in debt.

Right. Property taxes are proof. Do the math on a lifetime of paying that. Ouch!

[pyroguy]

Originally Posted by Iron Lung Jimmy

Fran... living debt free is a goal, not something most people can automatically do. But if you buy into the idea that it is attainable and put in the work and sacrifice toward it you can do it. It is no different than any other achievement that people accomplish.

I couldn’t have said it better myself. To quote Henry Ford, “Whether you think you can or you think you can’t, you’re right.”

Originally Posted by BuddyLee

Paying cash for a home is not always the right strategy. If you use all of your available cash to payoff a home so that you have no payment and you have no available cash for emergency or repairs where do you get money? Because your home equity is not liquid. So you get a home equity loan? get a credit card? or raid your retirement fund? Also a home loan interest is tax deductible, you do not have that write off as well. A fully paid for home is non liquid and non tax deductible.

When paying off a home you should have an emergency fund set in place prior to doing so. Like you said, life happens and “emergency” situations pop up, whether it’s the hot water heater breaking or someone in the home having a heart attack, or anything. If you have an emergency fund of cash sitting in a savings account so that it’s accessible, but not too accessible, you can play ahead for a rainy day.

As for the tax deductible argument, let’s say you have a $200k loan at 5% interest and make the average household income of $50k. That would put you in a 25% income tax bracket. With a $200k mortgage you would pay about $10k in interest in a year. Now the tax benefit from paying that $10k in interest is a $2.5k write off. So to avoid paying $2.5k in taxes to the government, you’re going to pay the bank $10k. Why not give that same $10k to your favorite charity or church and get the $2.5k back as a write off?

Originally Posted by 0stones0

I think it’s quite unrealistic to say you can walk into a store and negotiate a cash price. For everyday shopping experiences, that is not the way it works. It’s possible but, not the norm by any means.
Yes, we are being paid. By check, product, or account credit. How they reimburse themselves (the card companies), to make up for what they pay us out, doesn’t change the fact that we are getting rewarded for using their cards.
Most of what you say makes good sense. There is a plethora of people out there that shouldn’t use cards, for sure. Some of us, are comfortable with the way it works and are satisfied with the arrangement. Again, your mileage may vary.

Not every time you can get the discount, but many times you can if you just ask. In place of getting the home improvement store credit card I have actually gotten the same discount just telling them I do not have credit cards, but I’ll keep coming back if I can get the discount anyway.

Yes you’re getting money back from the credit card companies, but the credit card companies know that you’re spending more in extra spending than what they’re giving you back so they don’t mind “giving” you money so that you will use their cards more.


I’m not saying that I’m looking down on people who use credit cards, nor am I looking down on people who have debt. I’ve had way more debt in my life than I want to admit to, but I know that it REALLY handcuffs people as well. Last year I fell victim of a restructure at work and was out of work for a couple months after my job was eliminated. Had my wife and I not worked extremely hard and paid off everything except our house we would have been in some extremely hot water and I would have had to have taken a job that was not the right fit for me just so that I could have a job.

[pyroguy]

So the arguments so far for debt are:

High credit score
Rewards points/miles
Cash back on credit card usage
Mortgage tax write off
You can’t live life without debt

The only real justification I saw for a high credit score was cheaper insurance rate, which you’re likely spending more on credit cards and/or interest than what you’re saving on insurance so that’s a wash
You can get reward points/miles without a credit card and no millionaire ever said they made their millions because of the savings from their airline/hotel points/miles.
Cash back on credit cards is a myth because statistically speaking you’re spending more than they’re “giving” you back and you can make better large purchase deals with cash.
Mortgage tax write off is a joke because you’re giving the bank 3 times what you’re saving in taxes.
It is possible to live without debt with enough focus and dedication.

[BuddyLee]

Okay, now you have a mortgage 200K at 5% for 30 years that you have paid on for 10 years but you can refinance at 3% for 30 years. Home loans pay back interest on the early years first the principle next. So in the early years of the new new you are paying more interest than principle again. Better to stay with the 5% for 20 more years or go for 3% for 30 more years?

[Silver14]

Originally Posted by pyroguy

So the arguments so far for debt are:

High credit score
Rewards points/miles
Cash back on credit card usage
Mortgage tax write off
You can’t live life without debt

The only real justification I saw for a high credit score was cheaper insurance rate, which you’re likely spending more on credit cards and/or interest than what you’re saving on insurance so that’s a wash
You can get reward points/miles without a credit card and no millionaire ever said they made their millions because of the savings from their airline/hotel points/miles.
Cash back on credit cards is a myth because statistically speaking you’re spending more than they’re “giving” you back and you can make better large purchase deals with cash.
Mortgage tax write off is a joke because you’re giving the bank 3 times what you’re saving in taxes.
It is possible to live without debt with enough focus and dedication.

Nobody said rewards are how people earn their income, living, or that it made them a millionaire. If someone offered you $500, $1000, or even $2000 a year for free and it didn’t change anything you do, would you refuse it?

That’s how some people use rewards. They treat their card like cash, pay it off monthly without accruing interest, and get a reward back. It’s not the typical credit card user experience, but it happens. Not everyone overextends themselves or spends more than planned solely because some do.

They can be a tool in ones financial toolbox despite most using them in a way that makes their finances worse.