patrick.net

You should always be investing for capital appreciation while you are working.
The reason is to have capital to create income when you have no income from working.
You should be investing at the same time as paying your house or other debt because you want to get the benefit of the compounding effect.
Look at funds from Vanguard, T.Rowe Price, Fidelity.

Patrick had a bumper sticker that summed it up pretty well, debt = slavery. We've been debt free, again, for about six months now. And that was like a few hundred interest free to a hospital. But still, knowing I only have to cover my monthly expenses, and if they get too much, I can just move, feels good.

@Patrick if you still have those, could you send me one? I can provide you with an address.

GreaterNYCDude says

What are you guy's opinion on debt?

No one will EVER give you this opinion. You don't have to pay it. There are options to get out of it. THIS is why the morons that tell you do not invest in 401k/IRA are just that morons. No creditor can touch it. Dividends and invested income tax free. You don't lose your house.

You could rack up $500k in CC debt and never pay it. People don't understand the system. If you have $500k in the bank they WILL take it. A retirement fund is protected. If you BK with $1k in your checking account and $1M in retirement funds they restructure the debt or wipe it out because on paper you have $1k and the creditors will get shit. That's why there a cap on retirement investment. Outside of a total financial collapse, no one can touch it. You don't want a big savings account or checking account or CD. Max out 401k, Roths, HSA's. You're looking at $30k/pp a year. $60k/couple. After 5 years you can take money out of the Roth. HSA anytime as long as you have it document.

Debt isn't slavery. It's a tool. Learn how to use it is all I'll say. You don't have to repay it either. You won't go to jail unless you lie. This is why most people are poor. Too scared to take the risks.

I'll second this. If it's a big company, or someone who tried to screw you, fuck 'em. I once had TMobile insist I didn't return a phone and open a collection against me. Solution? I ordered a brand new iphone on some deal that didn't require any payment, then never paid for the phone or my plan. Sold the phone for $200. I once had ATT insist I return a router I purchased second hand. Of course I told them to fuck off, and got hit with a piddly $60 collection.

Also, if you order service and they don't know who you are, what can they do when you don't pay? Can't do shit...

NuttBoxer says

I'll second this. If it's a big company, or someone who tried to screw you, fuck 'em. I once had TMobile insist I didn't return a phone and open a collection against me

Yup. It's a contract to do business together. Yes it may ding your credit, but you usually can get out of that even. Everyone gets freaked out. Own a building. Tenant doesn't pay. For fucks sake you evict them. You'll never get the back rent. Might be harder to rent in the future for the tenant.

I think I've brought it up before. Had to short sale a building in Chicago personally. Good now, but I wanted to hang myself. I felt like a fucking failure. I was 25(ish) in 2008 when it started going south. Took 2 years and then the wife, well I got the wife pregnant and the thoughts of suicide went away. I'm not joking. I was close. Really rough patch in my life. NEVER let debt control you. You don't have to pay it.

In hindsight I was a fucking idiot for even thinking that over fucking debt. I did the math. BOA lost NOTHING on my short sale. It may have been a gain because of amortization. Banks guilt you into feeling bad. They don't operate if they don't loan. It's a fucking shit situation. I've grown beyond that and understand debt and bankruptcy much more. As long as you're not going to jail who gives a shit? Our current house was bought when we couldn't even get a loan. You figure shit out.

About to build a house with $100k with a gift. Mom "assumes" the loan (not really) that we'll still pay principle and interest on. She pays taxes and insurance. $600/mo for her, a cut of $600/mo for her. We pay $600/mo on principle and interest. She doesn't reset the tax rate and gets the senior exemption making her portion lower. $90K per year pension and no debt for her. She's substantially closer to us and my sister. Fucking best win win out of a long term shit show. She's locked in low and we get our responsible dream house with her help.

I'm fortunate as fuck. You have to think. You have to be trustworthy. These opportunities are out there for everyone. If shit really hits the fan I've got plans to buy property up with my mom and sister. I haven't failed anyone yet except myself and my wife early on in our days together. I think for some of you coastal guys it's going to get shitty. I've been there. You don't have to pay debt. That's all I'll say. Will it mess things up, yes. You'll figure it out if you're smart. I almost didn't. And that's why I get testy with some users here. Life lessons matter. I'm in the best place I could be currently and the landscape looks like shit. Find the positive.

NuttBoxer says

Patrick if you still have those, could you send me one? I can provide you with an address.

@NuttBoxer Sorry I gave them all away quite a while ago. Maybe I should order more, but the site is no longer really about debt.

True, but that statement goes to the heart of the corruption in this country, and every country that has a central bank. Still radically relevant.

NuttBoxer says

True, but that statement goes to the heart of the corruption in this country, and every country that has a central bank. Still radically relevant.

Not really. We don't have debtor prison. You don't have to pay it. Just don't bite off more than you can chew. Generally tax free too and you can pay yourself. Not a knock on you or Patrick, but I can make hundreds of thousands a year on debt. Stresses me out and we do fine otherwise.

Buy a value add property and cash out refi. You could pay yourself tax free $200k no problem and someone else pays for it. You can do this with business too. Play the game, don't hate it. I regret not learning earlier. No one teaches it. I could easily have $20-30M right now. Wife and I fucked up. We were scared of debt.

Fact is you will lose at some point. No one makes 100% the right decision. If you want to be truly wealthy you NEED debt.

I have been considering debt. I had this conversation with a friend, who has some money coming in. In a system of fiat printing press money and inflation, debt can lock in assets that you pay for with increasingly value-less dollars, even with current interest rates. Money is shit, but the control of the asset with the money isn't, especially if the money is devaluing faster than the interest on the debt.

I have a natural aversion to debt, but in inflationary times, real assets are king.

I ran up a couple of credit cards a few years ago and I am procrastinating about paying them off.
I guess I will pay one down this year.
I just didn't want to spend any of my mutual funds to do it from a strange sense of greed.
At least I stopped using them a year or so ago.
It was funny in 2020 I was in Walmart with a girl and I had maxed it out and it didn't work; she flipped out "You're broke! You have no money!"
It was great, her tantrum said it all.

clambo says

It was funny in 2020 I was in Walmart with a girl and I had maxed it out and it didn't work; she flipped out "You're broke! You have no money!"
It was great, her tantrum said it all.

You mean she didn't love you for your true, inner self? How unusual for the fair sex.

GreaterNYCDude says

As much as I could try to invest in the market 1) I'm not that good, and 2) the market has more or less peaked, and I don't see another major bull market given that we are seeing the end of the "everything bubble". Once I own the house free and clear, then I'll have plenty of "play money" to invest or whatever and hopefully catch the next upswing

Open an account with https://personal1.vanguard.com/mmx-move-money/funding-method

If you want to be very cautious then invest long term (at least 5 years) in a Vanguard Lifestrategy Fund like a 60% bond/40% stock fund.

I look at it this way, your total percentage invested in stocks should generally be no more than 100 minus your age.

.

clambo says

I ran up a couple of credit cards a few years ago and I am procrastinating about paying them off.
I guess I will pay one down this year.

Pay them down dude. Debt is fine, but use it responsibly. We carry $10-50k of CC debt at any moment. If you're not paying it off your mutual funds are a negative return unless you have some insanely low interest rate on your CC's, unlikely.

Not trying to be a dick either. Never carry CC debt unless it's zero interest. A balance transfer fee here or there is fine, but you're likely paying 15% plus. Your mutual fund is likely not making that much, though I don't know. You've mentioned you're older than I am, so not trying to be some young punk douche nozzle. I play the CC game and make $8k easily a year off benefits and points. They have their benefits if responsible. I liken it to gambling or drinking. Both can be enjoyable or they can destroy you.

Point being, if your CC's aren't paying you, pay them off asap. Or if your assets are protected from BK you could go into fuck you mode and max them all out and stop paying them. If your mutual funds aren't in IRA/401k/HSA/Roth then I believe they can get at them in a BK situation. Not financial advice, just what I believe to be true.

My dad did it when he got terminal cancer. Still married, but decoupled finances from my mom and wiped out massive amounts of debt. So he personally filed BK. He was a fucker, but my mom has a $90k/yr pension and health care as a teacher and $1M tax free cash from other assets she sold off. One of the smartest financial moves I've seen and he was a dick. So that's saying something.

Mortgage at fixed 2% and CCs with 0% APR is the only debt I carry.

I know the math sometimes works for having debt, but I have a visceral aversion to paying any interest, ever.

I love having no debt at all. Haven't had any since my wife paid off the last $4K of my student loan just after we got married. I think the engineering degree justified taking on some debt, but nothing else in my life ever did.

Someone on this site years ago said "The important thing is that interest flows towards you rather than away from you."

The stock market worked out for me, though it's been up and down lately, over and over. I still don't have to work.

Having no debt has been a life goal for my wife and I. We started our life together $90k in the hole, and no house. We had jobs but not much money. We paid off all student debt, paid off an auto we no longer have, and bought two houses, and sold the first one. Now we have one auto loan and the house loan which is around 45-50% of the value. We could pay off the auto loan with cash but that interest rate is low, and emergency money is a good idea. We don’t keep credit card debt.

Currently funding almost $2k a month in education costs between wife who is finishing her PhD, and kids who are into club sports.
Wife works and makes six figures too tho, so we are aight.

Patrick says

Someone on this site years ago said "The important thing is that interest flows towards you rather than away from you."

Yep. Only my first car and first house were bought with debt. I paid of that first house as soon as I could (I was single with rent paying roommates, plus I made it a rental when I moved out). My next two residence houses were paid for in cash. I had no inherences and no rich wife, but by avoiding consumer debt I now have a very upscale house and well over $1 million in the bank. Granted, I am not in California, and I did use debt to buy rental properties over the last 3 decades. Even so, I paid off those rental homes as well (again, not California, where in the1990s I was able to pay low hundreds to buy a newer 3bed 2.5 bath 2 car detached with a 1/2-acre yard home.

WookieMan says

Not really. We don't have debtor prison. You don't have to pay it. Just don't bite off more than you can chew. Generally tax free too and you can pay yourself. Not a knock on you or Patrick, but I can make hundreds of thousands a year on debt. Stresses me out and we do fine otherwise.

Buy a value add property and cash out refi. You could pay yourself tax free $200k no problem and someone else pays for it. You can do this with business too. Play the game, don't hate it. I regret not learning earlier. No one teaches it. I could easily have $20-30M right now. Wife and I fucked up. We were scared of debt.

Fact is you will lose at some point. No one makes 100% the right decision. If you want to be truly wealthy you NEED debt.

What I'm referring to is without a central bank, you can't do any of that corrupt shit. Central banks value leveraging, lying and cheating, so that's what they reward. Without them people would be required to earn their living by hard work, good ideas, and sound judgement.

And most taxes didn't exist until after our current central bank was formed in 1913. You want real tax free, try no central bank. No debtors prison? Try getting charged for a crime and not being able to pay bail. Try getting traffic tickets you can't afford to pay. Jails aren't full of rich people.

The debt that exists via central banking is used to enslave us. They steal the most valuable thing we have, our time, our life.

WookieMan says

Buy a value add property and cash out refi. You could pay yourself tax free $200k no problem and someone else pays for it. You can do this with business too. Play the game, don't hate it.

Dude, you don't actually PRODUCE anything. You're a parasite. That will eventually destroy the nation, because NOBODY will produce anything.

That's the "game" the game is called "corruption". You are the definition of a useless eater. What do you produce? What have you EVER produced?

richwicks says

Dude, you don't actually PRODUCE anything. You're a parasite. That will eventually destroy the nation, because NOBODY will produce anything.

A new building dude. Pay tradesmen that then buy groceries and goods and keep other people employed that then buy more goods. They then build a house or buy a house and the cycle continues.

I sometimes think you're being obtuse on purpose. You tech guys have produced nothing but shit that has corrupted humanity. You know it too. I've produced things that put a roof over peoples heads. What you do benefits no one besides the people borrowing debt and then end up sitting on their ass like you do. You're their bitch. This is fact. I could do alllllll the same things now that you could have done 40-50 years ago without tech. When you were a baby and I wasn't even born.

I've produced more and contributed more. That's not even debatable.

WookieMan says

A new building dude. Pay tradesmen that then buy groceries and goods and keep other people employed that then buy more goods. They then build a house or buy a house and the cycle continues.

All you're doing is driving up the cost for everybody else.

Look, I understand the system, I accept it for what it is, but it's going to destroy the country in time. It used to be that land and stock speculation was literally illegal. That was 200 years ago, but can't you see what kind of development that has occured in our civilization just because we got rid of the worst parasites for just 200 years?

You personally have more access to information and travel than the richest man in the world did in 1800. You might live in a smaller home, but you don't have to have servants to feed and groom the horses, to maintain your buggy, to keep stoking the fire in the middle of the night, to pump water for you newly invented toilet, to light your gas lamps...

The biggest problem we have today, is a parasite class. They don't actually produce anything. My father owned a building supply business when I was a kid. When I see the shitboxes that are being erected where I live, it's just horrible to see, because I know they won't last 30 years years, much less 100 years. Everything is a temporary shelter now.

There's no reason for it, it's fairly trivial to make a home (at greater cost of course) that has very low maintenance that will last 100 years without any real work at all. You see this all over Europe, and we're building EVERYTHING to be disposable. What a fucking waste of resources. We're still building with WOOD. A flammable material that can be eaten by bugs that needs continual maintenance to prevent degregation.

Think about it, everything around you will be replaced and gone in less than 100 years, probably 50. This is just stupidity. You're not even allowed to build actually permanent structures. We're in Brave New World now in that Consumption is King. They even said it continually in the 1980's, that was "growth" - it's just another word for "waste". The GDP is just a measure of how much CHURN there is in the economy. We are constantly encouraged just to produce landfill and any attempt to stop that, well, meet regulations.

richwicks says

This is just stupidity. You're not even allowed to build actually permanent structures.

That's the buyers choice. I'm building a brick shit house. I've been inside probably 5,000 properties in my lifetime. I know construction. I'm building a $600k house in an area where the median is maybe $250k. Not logical. But I know what the fuck I'm doing and have the funds to back it up.

Let me know if you think this guy is an idiot??? https://www.youtube.com/watch?v=YiBUh5v0icM

I'm this guy on a small scale. Go down the rabbit hole and you'll realize how dumb you are. You don't know everything. You revert to the same points on 1 or 2 topics. Government bad and you don't know what I know and I'm smarter.... your'e not.

richwicks says

it's fairly trivial to make a home (at greater cost of course) that has very low maintenance that will last 100 years

Yes, the poured houses like they have in Omaha that are actually tornado proof. The whole house including the gables is concrete. These houses can be sided with brick or any other conventional siding so they look like a conventional home. One builder in Omaha made a whole neighborhood of the homes.

HeadSet says

richwicks says

it's fairly trivial to make a home (at greater cost of course) that has very low maintenance that will last 100 years

Yes, the poured houses like they have in Omaha that are actually tornado proof. The whole house including the gables is concrete. These houses can be sided with brick or any other conventional siding so they look like a conventional home. One builder in Omaha made a whole neighborhood of the homes.

This is how I always thought houses should be build in tornado and hurricane areas.

richwicks says

We're still building with WOOD.

I would not dis wood, however. I have seen plenty of homes build in the 50s thru 70s that are wood framed that have not rotted and will be around quite a while. Around here, we have plenty of late 1700 and 1800 homes (like those with "heart of pine" floors) that still have the original bones, fireplaces, etc.

RC2006 says

This is how I always thought houses should be build in tornado and hurricane areas.

And in any fire prone area. If I was King and Tyrant of California, I would mandate that all homes build in those ecological fire prone areas must be fully poured with steel roofs and cement shingle or brick siding.

WookieMan says

I'm this guy on a small scale. Go down the rabbit hole and you'll realize how dumb you are. You don't know everything. You revert to the same points on 1 or 2 topics. Government bad and you don't know what I know and I'm smarter.... your'e not.

I cannot control your impressions of me, and I don't care what you think of me, or what you believe my mental processes are.

I'm chiefly interested in government corruption and propaganda as a hobby. I find it fascinating that no matter how obvious it is, only a small percentage will acknowledge it. I used to think it was because people were afraid to acknowledge it, but they are genuinely unaware of it. It took a forced injection for an obvious non-pandemic event to finally drill that home on me. I really am stunned. All these people I once respected just turn out to be idiot, gullible, savants.

I don't know how people can function with this level of cognitive dissonance. I may be very well wrong, but I'm not filled with inconsistencies in my thinking.

richwicks says

I don't know how people can function with this level of cognitive dissonance.

They are dependent on others for support.

richwicks says

and I don't care what you think of me

You keep responding, so false, you do care.

richwicks says

It took a forced injection for an obvious non-pandemic event to finally drill that home on me. I really am stunned. All these people I once respected just turn out to be idiot, gullible, savants.

I didn't get the vaccine. So I'm not gullible.

richwicks says

I may be very well wrong, but I'm not filled with inconsistencies in my thinking.

You can't have inconsistencies when you repeat the same drivel in every comment man. We could be talking about hot dogs and you'd say government is bad, Iraq, WMD's.... Your hobby just shows laziness in your comments. Maybe get another hobby? Just a thought.

WookieMan says

You can't have inconsistencies when you repeat the same drivel in every comment man. We could be talking about hot dogs and you'd say government is bad, Iraq, WMD's.... Your hobby just shows laziness in your comments. Maybe get another hobby? Just a thought.

Look, if I'm wrong, point it out.

I'm interested when I'm wrong, I want to know when I'm wrong.

Again, I have to respect you to be insulted by you, so you can't insult me. You need to learn to think in the same way.

I think you're a bad person, who has found joy in understanding how to be useless, and a parasite on the public who actually ARE productive and keep society running and functional despite the parasites. That's what I think. Do you care I think this? Why? Well, if you ARE bothered by this opinion, it's because part of you think this is correct.

I grew up among useful, productive, people. Farmers everywhere, the bedrock of civilization, the MOST IMPORTANT people of our civilization. I thought engineering might be that, but look how it's been perverted? There CAN be use in it, but I'm in fucking Silly Con Valley, this is just a massive spy operation. You'd think people would be upset that we have massive corporations imposing censorship, disseminating propaganda, lying to the public, and misinforming them.

Nope!

I don't even know if most people are human in the way I think a human being is. I'm in a minority. Maybe all of you are human, and I'm not. Maybe I'm some sort of throwback animal that has vestigial instincts of cooperation within a society. Well if that's the case, we're dying out. Best of luck when we're all dead.

HeadSet says

And in any fire prone area. If I was King and Tyrant of California, I would mandate that all homes build in those ecological fire prone areas must be fully poured with steel roofs and cement shingle or brick siding.

yeah i know someone who owns in a mountain town within central colorado and they have hardie board (cement panels) for siding and a metal roof ... they built their home in 1999 ...

my grandparents bought a house in the 1950's that was built in 1910's and is wood frame... that home is still holding up fine and passed the home inspection when it was sold in 2018 ...

.

richwicks says

I'm interested when I'm wrong, I want to know when I'm wrong.

You may not use debt. Fine. Take it away... You and 5B people are dead. We didn't get to this place without debt. If you think life is bad I can respect that. I think there are a lot of shit humans. I also don't want to see bodies piled in the streets because we upended something that works.

Most poor people are poor because of government support and laziness. No point in getting out of that position. Give me an above average life globally where I can sit on my ass I'd take it. I know that's the fall back. I don't want that though. Debt isn't the problem. It's people.

I'm not religious, but respect it. Just have some will and some fucking morals. We've lost that. Not saying you're immoral, but most are. Humans have seemingly lost the will to live in a civilized society. No one contributes. The scum of the earth run for elected office in many places (not me :) People just don't give a shit anymore and you seem like a person that has completely given up. That solves nothing. Do something instead of bitch.

richwicks says

I grew up among useful, productive, people. Farmers everywhere, the bedrock of civilization, the MOST IMPORTANT people of our civilization. I thought engineering might be that, but look how it's been perverted? There CAN be use in it, but I'm in fucking Silly Con Valley, this is just a massive spy operation. You'd think people would be upset that we have massive corporations imposing censorship, disseminating propaganda, lying to the public, and misinforming them.

When did you move to Silicon Valley and when did you start to notice it going bad ? Please elaborate more.

.

ad says

When did you move to Silicon Valley and when did you start to notice it going bad ? Please elaborate more.

Ditto.

Add on, why do you still live there? I think you're surrounding yourself with shitty people and that jades your reality of what the rest of the country is actually like. You live in a far left place. I did in Chicago. It was shitty. I moved and life has only been better. Our foreign policy has nothing to do with me. We police the earth as a country and deaths from war have fallen off a cliff until this Russia/Ukraine shit.

I made a mistake driving my kids to the wrong school for basketball practice because my youngest practices at a different school. It's karma. I got them to practice and the school was locked and the parents were all sitting out so they technically weren't late. I think you need to cheer up a bit. There are issues for sure, but repeating the same things that barely influence you is not productive. Or as I've said, run for office.

Look at Barack Obama. Love or hate him it's not impossible to get to the highest position in the world in a short amount of time. Heck even Trump. No political acumen and he became POTUS. And if you've given up on the US, move to a better country.

Patrick says

I know the math sometimes works for having debt, but I have a visceral aversion to paying any interest, ever.

That's kind of where I'm at. The extra $$ I'm paying towards the mortgage could I invest it.. of course.

Conversley, could I leverage debt to my advantage? Of course. But leverage works both ways.

I've run the math and the difference between paying the minimum on my loans and investing it today, vs paying down the debt now and then investing significantly more money later once the house is paid off. In some scenarios I win, others I loose, some are a push. It depends on what the broader economy does over the next 5 to 10 years. 2022 was meh. 2023 is looking to be about the same. I'd tue "everything bubble" ever pops, or even continues to deflate, then at some point it will make sense to jump in and ride the next wWA.

And as I say. I'm making out retirement accounts already. This is what do do with my "free" cash flow. Invest it or pay down the mortgage. It's a true first world problem and I'm blessed to be in such a strong position financially.

Reading the comments, some love debt as a tool to create wealth (the old adage it takes money to make money) other stay away from it (neither a borrower or a lender be)

There is also a difference between "good debt" and "bad debt" but that's a whol different debate.

GreaterNYCDude says

There is also a difference between "good debt" and "bad debt" but that's a whol different debate.

It's not a debate though. Think of it this way. You have a drill. You either know how to use it or not. There are are flat head, phillips, square, regular drill bits, etc. Some people just don't know how to use the damn thing. Is that the drills problem?

People can't blame debt if they don't know how to use it. As I said, 80% of us are dead without debt. Back to the early 1800's. I'll take the debt 10 out of 10 times. Unless you fraudulently obtained said debt you don't have to pay it either and won't go to jail.

The problem is lack of training. Most in this country are financially illiterate. Schools don't even teach the basics anymore (balancing a checkbook, interst vs. principal, making a budget, etc)

GreaterNYCDude says

The problem is lack of training. Most in this country are financially illiterate. Schools don't even teach the basics anymore (balancing a checkbook, interst vs. principal, making a budget, etc)

It's so easy to obtain this information ignorance is not an excuse. It's not exactly rocket science either.

Eric Holder says

It's so easy to obtain this information ignorance is not an excuse. It's not exactly rocket science either.

The lingo is intentionally hard to understand because the system relies on deception, greed, and thievery. So agreed, bullshit != rocket science.

Eric Holder says

It's so easy to obtain this information ignorance is not an excuse. It's not exactly rocket science either.

I've told the story before. We bought our house $85k cash. We didn't have it. Not even close at the time. You figure it out. Margin loan from the MIL on her stock and we bought it cash. Refi'd and paid her back and paid $180/mo interest only for 12 months to own the home...

None of it is rocket science. You just were never taught about it in high schools which is probably 50% at best of educated people. 25% got a college degree of substance or finished. Education does not equal intelligence. The more educated, I've found them to be dumber overall. My uncle can't read and probably has $100M in his bank account/investments. Has more land than extremely famous people as neighbors in Desert Mountain in Scottsdale.

Debt and leverage is how you get out of a shit hole life. 100%. You might fuck up. Guess what. You don't have to pay it. That's the beauty of debt. It's tax free too. Get equity in a couple buildings and pay yourself $200k tax free in a cash out refi. It is basic math. Driving a car is probably riskier than debt.