Author Topic: Personal Debt  (Read 6046 times)

DooDiligence

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Re: Personal Debt
« Reply #10 on: May 24, 2019, 03:13:39 PM »
I'm extremely debt averse after a failed jewelry wholesale business which left me with a smoking hole of unsecured debt. (I'm terrible at selling jewelry.)

This included maxed out LOC's from both AmSouth (now Regions) & Wachovia (now WFC) & a bunch of $25K+ CC's. (and payables to Thai & Italian manufacturers.)

I remember barely being able to sleep at night

I thought about filing for bankruptcy & rejected the idea since I find people who do this to be douchebags.

Went back to work offshore & paid it all off (except for the Italian manufacturer, who I sent a box of his own jewelry which was worth a bit more than what I owed him.)

Also built & paid for a house (2013) & socked away a pile.

Rode the offshore wave for all it was worth & got right!

The only debt I have now is a vehicle loan at 2.14% which will be paid off at the end of 2022.

If I can't pay cash for it, I don't want it (other than a reasonably priced vehicle at an extremely low rate.)
Healthcare 20.9% - EW NVO // BRK.B - 22.7% // Auto's & Oil 14.7% - CLB GPC VDE

Banking 10.2% - WFC // Entertainment 4.8% - DIS // Drinkers & Smokers 7.0% - MO

Retail 1.5% - ULTA

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%'s held @ MV 11/29/2019 minus 18.2% investable cash

i trumpet my ignorance

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thepupil

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Re: Personal Debt
« Reply #11 on: May 24, 2019, 03:32:10 PM »
I am up to my eyeballs in mortgage debt, because I live in a high cost area and just bought a small house (near DC). Itís a 10/1 JUmbo ARM from Wells Fargo at 3.125%, so for the first ten years, I wonít pay extra down and will focus all excess on rebuilding liquidity outside of retirement accounts after down payment. I figure close to  highest incomes in the country + AMZN + limited supply of single family homes, makes it a not entirely terrible bet. plus when your rent gets bumped to $3500 you can justify almost anything if you have a decent 7+ year time horizon.

sleepydragon

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Re: Personal Debt
« Reply #12 on: May 24, 2019, 04:19:12 PM »
Itís not about whether YOU want to have debt or not, itís about what your wife wants. :)
I would have a much smaller mortgage if not because of my wife, and now I will soon apply for a big car loan for a Mercedes SUV.
But when I say that to my wife, she says itís because of her that I had to work so much harder and now makes more money.

« Last Edit: May 24, 2019, 04:23:34 PM by sleepydragon »

Parsad

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Re: Personal Debt
« Reply #13 on: May 25, 2019, 01:14:24 AM »
+1.

I have home loan at 2.8% and car loan at 2.1%. Not paying them off - the future dollars are worth less than current dollars. For the equivalent cash, I can buy WFC at 3.75% yield which covers  the interest payment.

If you look at US GDP in current dollars - it is advancing at ~5% year over year

It depends really on what I consider my personal "coverage" ratios. I will borrow money all day at a 5% rate or lower. Give me all the money in the world if that's my hurdle. But I have to have certainty that if shit hits the fan I will be able to repay this. My home? Why would I tie up all the money I had in my mid 20's, in an illiquid asset that I never plan on selling, when I can borrow at 3.5%? Why would I take $50K for my car and forgo that money being invested for the next 5 years, when I can borrow at 1.7%? Heck I am so dedicated to invested that even my snow blower I took 12 months 0 interest financing for. I've seen quotes about never interrupting compounding, or how the more you invest the better off you will be, well I live that to the extreme. The key thing here though, is risk management and being 100% honest about the necessity of what you are buying/borrowing, and whether or not you can afford it.

I'm not a fan of being scared of everything. My entire life I've heard people make excuses not to be in the stock market, or not to make investments. More often than not, in fact, almost all the times, those fears are really just excuses and owning businesses and being invested would have worked out for them.

I'm in a similar circumstance to Shalab and agree with others that I'm relatively averse to debt...I get a get good night's sleep every night, no matter what Trump, Trudeau or the rest of the world do.  I have a mortgage at 3.29% and a car loan at 1.9%...other than that no debt...not credit cards, no line of credit, nothing!  And the only reason I have a mortgage and car loan is because of the low interest rates...I have enough in investments, cash, etc to pay the mortgage and car loan off several times over, but am growing it at 12%+ annually. 

I put everything on my card each month that I can to get the points, and then it is paid off in full every month.  The reason...I remember how tough it was in the first few years of Corner Market Capital...I was in debt after a couple of years, burning through what investments I had, and sleeping well each night was tough!  Slowly things started to turn...and I decided I never wanted to be in that position again.  I still live relatively frugally other than the $21K winning bid on this year's lunch and golf with Wayne Gretzky at Fairfax's AGM, and save more money than I spend each month!  Cheers!
No man is a failure who has friends!

John Hjorth

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Re: Personal Debt
« Reply #14 on: May 25, 2019, 04:16:21 AM »
This is indeed a fascinating topic - thank you for taking initiative to start it, Castanza!,

The common denominators [themes?] are pretty clear, based on personal experience in life and your own personal view on risks related to your personal balance sheet not including your stock portfolio:

1. Optimization of funds available for investment, based on your personal preferences about your personal balance sheet ex. your portfolio,
2. While 1. was what made you investors in the first place, in combination with your earnings after tax.

The topic is fascinating, because every tiny personal story as a backdrop makes it easier to understand your posts about investing.

I won't repeat my own personal story, because it is already posted here on CoBF [so you can dig it up], I'll just say the following here:

1. I didn't loose one dime under the GFC on investing as such, however I managed to screw up dearly in other parts of my personal balance sheet, playing a game with maximizing deferred taxes, that I in reality couldn't afford. What happened is proof of that. I should have cut spending instead, in many years before I got in trouble.
2. To this day I think I'm also here on CoBF only because my bank trusted me [instead of just flushing me out in the sewer], combined with that I delivered as promised, and actually changed personal behavior. [In Danish, it's called "taking the spoon in the other hand".]

- - - o 0 o - - -

In short, it's not only in investing, but in all economic aspects of life about not to become the patsy in any situation.

As a former screw-up, I'm now very averse to personal debt. I still remember that feeling like a straying dog coming home by its own will after many hours - wet and dirty all over - in relation to going to & leaving the bank related to my situation. It was not as such just about that nagging & embarrassing feeling of being an idiot [and CPA by education] - more like accepting that I felt like an idiot because I actually was, that being even more nagging and embarrassing! [ : - ) ] The bank did not "take" me "under" in the situation, I think.

So no debt here, except for household expenses not related to automated payments or paid by e-banking, that goes on credit cards, where the balances get paid monthly. The bank got its last DKK owed to it by me now about three years ago.
« Last Edit: May 25, 2019, 04:32:21 AM by John Hjorth »
ĒIn the race of excellence Ö there is no finish line.Ē
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DooDiligence

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Re: Personal Debt
« Reply #15 on: May 25, 2019, 04:37:07 AM »
I may only have 1 feather but this is my tribe.
Healthcare 20.9% - EW NVO // BRK.B - 22.7% // Auto's & Oil 14.7% - CLB GPC VDE

Banking 10.2% - WFC // Entertainment 4.8% - DIS // Drinkers & Smokers 7.0% - MO

Retail 1.5% - ULTA

---

%'s held @ MV 11/29/2019 minus 18.2% investable cash

i trumpet my ignorance

https://twitter.com/tunawish

SharperDingaan

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Re: Personal Debt
« Reply #16 on: May 25, 2019, 05:10:00 AM »
Everyday you're going to be bombarded with 'stupid' offers, that are intended to trap the borrower into the debt cycle.
It's not hard to exploit them, but you really need to look at cost versus benefit; most aren't worth the effort.

We run almost all our expenses through a credit card, pay in full before the due date, and collect the points. The banker exists to be exploited, we're very good at it, run all debt/mortgage payments through the cards, and help ourselves to the offers (offfered by their marketing depts versus their branch manager). If we have not earned a free return flight to Europe every 9 months, we've failed.

Banking is built on trying to get the customer to buy as many products as possible. Use 3-4 products on a monthly basis, and we'll give you this/that off. Cheque, Saving, MM Fund (to pay the card from), TFSA; and suddenly there's no banking fees OR minimum balance required. Needless to say, on those rare occassions we actually talk to the banker, it's an interesting conversation.

SD
« Last Edit: May 26, 2019, 08:02:52 AM by SharperDingaan »

boilermaker75

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Re: Personal Debt
« Reply #17 on: May 25, 2019, 05:53:41 AM »
My parents lived through the Great Depression. So their experience greatly influenced me. So, I am debt adverse. I do use credit cards to get the points but I have always paid them off each month. I had a car loan once and hated it. Since then I have always paid cash for cars. I have taken out mortgages to buy houses, but always paid extra capital to get them paid off. I did take out a mortgage on my house in 2012 so that I could loan the money to my daughter so she could buy a place in West Hollywood, which has tripled in value. I could get a much lower rate than she could, if she even could have gotten a loan from a bank at that time. We gift her the mortgage payments each year.

John Hjorth

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Re: Personal Debt
« Reply #18 on: May 25, 2019, 10:03:19 AM »
My parents lived through the Great Depression. So their experience greatly influenced me. So, I am debt adverse. I do use credit cards to get the points but I have always paid them off each month. I had a car loan once and hated it. Since then I have always paid cash for cars. I have taken out mortgages to buy houses, but always paid extra capital to get them paid off. I did take out a mortgage on my house in 2012 so that I could loan the money to my daughter so she could buy a place in West Hollywood, which has tripled in value. I could get a much lower rate than she could, if she even could have gotten a loan from a bank at that time. We gift her the mortgage payments each year.

Your wife & you are good people, Mike,

I hope you'll enjoy your weekend, with the wishes of the best from my better half & I - especially to your wife.
ĒIn the race of excellence Ö there is no finish line.Ē
-HH Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the United Arab Emirates and Ruler of Dubai

writser

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Re: Personal Debt
« Reply #19 on: May 25, 2019, 11:16:42 AM »
In general I donít like personal debt but we made an exception for our mortgage. 25 year fixed 2.x% or something like that (from the top of my head) with some added tax advantages as a cherry on the cake. Accelerated payoff possible if we want that for whatever reason. Seemed like too good a deal to pass. Iím reasonably confident I can do better things with that money and our personal leverage is still very modest.

Though if the value of your mortgage is larger than the the value of your savings Iíd probably be more comfortable paying off debt first.
When you are dead, you do not know you are dead. It's only painful and difficult for others. The same applies when you are stupid.