Author Topic: Debt is Good!  (Read 2151 times)

Frizhand

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Scortius

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Re: Debt is Good!
« Reply #1 on: March 29, 2017, 02:37:36 PM »
A 'persuasive' argument for keeping debt!

http://www.marketwatch.com/story/you-have-to-be-debt-free-when-you-retire-and-4-other-debt-myths-debunked-2017-03-29

These arguments are absolutely true.  Low interest debt can give you more financial security and can act as a springboard to more wealth if managed by a responsible Mustachian.

scottish

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Re: Debt is Good!
« Reply #2 on: March 29, 2017, 05:28:50 PM »
What did the author mean about 'passing on debt to your heirs'?   

Scortius

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Re: Debt is Good!
« Reply #3 on: March 29, 2017, 07:50:05 PM »
What did the author mean about 'passing on debt to your heirs'?   

My guess is that before any inheritance can pass, the estate must first settle any outstanding debts.  So, no, it wouldn't be a direct transfer of liability.

Gondolin

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Re: Debt is Good!
« Reply #4 on: March 30, 2017, 08:01:51 AM »
Much as I love any and all activity on this subforum, this is a great article that articulates positions widely espoused in the MMM community.

(Sincerely) Better luck next time OP.

OurTown

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Re: Debt is Good!
« Reply #5 on: March 30, 2017, 08:23:41 AM »
It seems the basic comparison is the interest rate on the debt vs the potential rate of return on whatever investment you are considering.  The flip side, however, is cash flow.  It may be to your advantage to pay off the debt altogether and free up that cash flow you were losing on your monthly payment to do something else.  Ergo, debt free early retirement => a lower monthly spend => a smaller stache is necessary => you can pull the trigger sooner.

Just Joe

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Re: Debt is Good!
« Reply #6 on: March 30, 2017, 08:29:23 AM »
While I understand the points made here and the article's points - if a person's income fluctuates or is uncertain - I would think having no debt would be a big plus. True, you are missing out on investment interest but in case of another Great Recession but if you are debt free it takes less money to survive or a smaller job to keep the lights on.

MUCH easier if a person doesn't have a house payment or some other kind of debt.

The assumption is that the market will always go up and historically it has over the long term. However, over shorter periods like a five year period or a ten year period - a person could be a dire straits while trying to float debts, investments have tanked so you can't continue to be FIRE'd, low or no income (unemployment or underemployment), etc. It might be difficult to return to work after retirement if your skillset has is views as out of date. Age discrimination is real. Wal-Mart job? Sure. Return to professional work? Not as easy.

Who wants to be in their 70s and and lose their home or be forced to return to work when their body is failing them due to old age b/c the economy tanked?

Choices made at 30 yrs old can be very different than choices at 70 yrs old. I've witnessed the retiree with a mortgage. Witnessed another person on the cusp of retirement only to have the economy belly flop (2008) losing a big part of their investments when a sizeable number of investments evaporated with the market failures. This delayed retirement by a several years (delaying other people's ability to advance in their own careers) and significantly changed the kind of retirement they could afford.