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Do you have debt? And how do you manage it

#1 User is offline   Macros 

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Posted 19 November 2023 - 01:39 AM

Of the back of, and not to detract from the inherently awful college debt in the USA, student debt thread


Do you have debt(s) and how do you manage them


To be quite candid we owe the bank(s) a fucking fortune. But.....compared to someone on a 30 year mortgage off a 300k house we owe fuck all. So it's all relative.

What we pay out on various loans and cards etc monthly is brutal, and it's a massive part of why I fly to Scotland for work every week, but in theory we have 3 years left of it.


Do we refinance, drop to a really cushy payment and take 15 years to clear it and probably pay another 10/15k in interest in the long haul or such it up and wipe 8t?
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#2 User is offline   Tiste Simeon 

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Posted 19 November 2023 - 07:06 AM

If you can stick it for another 3 years then for sure try to get rid of it. Much better in the long run.

I'm being absolutely shafted by mortgage payments right now. Was always quite fortunate with the monthly rates etc but the fixed rate ran out at exactly the wrong time and my monthly repayments have nearly doubled...
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#3 User is offline   Mezla PigDog 

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Posted 19 November 2023 - 08:17 AM

I'd be tempted to refinance, Mac. You have to live in the now to some extent. Our only debt is our mortgage but we got a good fixed rate before Liz Truss blew up the economy. We also have a house that we can pay for on one salary if we need to but it's a pretty shit house for what we earn and this is where I'd be tempted if I was you, Mac.

We've always lived within our means and gone without stuff unless we can afford it. Sunk a lot of money into education and sacrificed various things in favour of paying off student debt and sinking effort into jobs that are fortunately now paying off nicely. But the economy is built on people who don't live within their means so whenever there is a calamity the macroeconomic solutions are to help people who made what I would view as bad decisions but I think are actually rational economic decisions to live with long term debt because it is what everyone else does. Appreciate recent times the government and interest rates haven't worked to bail people out as they did previously, which is why it's always a gamble.

So weigh it up but don't pay off debt just for the sake of it. Depends what you can afford to carry. If I could speak to myself 12 years ago I would tell myself to live a little more.
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#4 User is offline   Mezla PigDog 

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Posted 19 November 2023 - 08:23 AM

I guess I mean don't pay it off fast just for the sake of it.
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#5 User is offline   Cyphon 

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Posted 19 November 2023 - 09:40 AM

I've been told there is good debt and bad debt, although I struggle a bit the concept.

Based on that advice I'd say clear your other debt and then have the cushty debt of your mortgage so you can live life.

Slight hypocrisy of my part here as we're not doing this as between early years child care, huge house mortgage with fixes ending in 2025 I don't think I'll be consciously be taking that advice myself...

Edit: all the advice I've seen is to snowball paying off the debt as the best way of dealing with it. There's lot is stuff (and guff) on this on reddit.

This post has been edited by Cyphon: 19 November 2023 - 09:48 AM

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#6 User is offline   Macros 

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Posted 19 November 2023 - 02:02 PM

I struggle with the concept of good and bad debt as debt is bad in my eyes, but I get the overarching idea and view it as there is debt and bad debt, some is worse than others dictated by its terms, interest etc.

I don't think we have bad debt in the US student loans model, what debt we have is manageable and constantly reducing. Its not directly impinging our lifestyle, I'd we didn't have it then sure we would go ahead and build the extension we want, but we do have it and thus would need to take on more debt to build it right now.

We stayed with friends in SA back in March and got chatting to them about their business etc (older couple) and Alan then said something that stuck with me, he hasn't bought anything that he did not have the reserves for in over 15 years. No finance on vehicles, no mortgage on a property. Successful business people, but the whole company was started on this ethos, all the risk was their own cash reserves put up front and as a couple they've never been beholden to the bank.

I love this idea, granted I'm aware if you want something done now, it's not an option. I've never taken finance for a vehicle, but have also never spent over 3 or 4k on a car. My volco was 2200, bought it 2 years ago, its probably still worth 2. Its 18 years old, 130,000 odd miles on the clock and going strong.
I'm happy to never have a fancy ass car, they get me from A to B. So I've always struggled to understand why someone would want to put the weight of a car payment on themselves when there as so many serviceable vehicles about for cheap.
Same goes for taking a loan for a holiday, just don't take the holiday, save the money and go next year, if you can afford loan repayments you can afford to save surely?

I'm waffling a lot today, apologies.

I don't really know what my end goal with this thread was, I think I can see where our life will be at when we have the debt cleared and want to get to there quick, but also there's stuff I want to do that takes money that will prolong that debt free goal. Being rent and mortgage free we could gather money up into our savings so quickly if we didn't have the driving range loans hanging over us, and could very easily get to the no loans again place I think. If we killed ourselves and took no holidays it could be done before I'm 40

But what kind of a life is that, after the news from my mate today I've been very morbid of myself and just thinking, do stuff now, you never know what's coming etc
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#7 User is offline   amphibian 

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Posted 19 November 2023 - 03:06 PM

The used car market in the US at least has been extremely expensive. A large program called Cash for Clunkers basically paid people money to get rid of a generation of cars that were producing higher emissions, were less safe, and had lower fuel economy. About 677k cars were scrapped and overall, the program worked.

However, that did lead into a situation where especially during COVID pandemic, there weren't enough used cars to go around and the prices were sky high for a while.

I wish there'd been a corresponding drive for mass transit, but we're not that collectively smart here in America.

Being able to buy everything with no financing means that person is rich. Especially if there's a business and property involved. That's kind of moving the goal posts a bit when we're talking about regular people debt.

My view of paying down debt is one that includes health and family/personal time. Of what good is paying debt off fast of it comes with wrecking a body and/or family or your personal ties?

If those three years are sustainable, then go that route. If it's something that makes you not want to get up in the morning and the people around you hate it, that comes with a big cost. I'd go the other way if that is what's happening.

Having a life doesn't start happening after one's free of debt. Life is happening now. The people, opportunities, and time you have now aren't all going to be there when you're done paying off the debt.

This post has been edited by amphibian: 19 November 2023 - 03:06 PM

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#8 User is offline   Mentalist 

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Posted 19 November 2023 - 07:20 PM

I have one mortgage to my name, and a significantly larger one I share with my parents on a new house we bought as a retirement option for them.

My own place I'm renting out, and it (largely) pays for itself. Was making small profit off it before the lockdowns, but when my last tenants gave me notice at the time when I couldn't even show the place in person due to quarantine restrictions, so I had to lower the rent to try to entice someone there. Could probably get into profits again, if I tried getting someone new there, but I honestly don't want the headache of advertising and all that crap again.

The big mortgage we split 3-way, so it's generally manageable. Plus I get to live there in the summer largely on my own, so would be pretty silly of me to complain. I do hate the interest rate we got on it, but our closing was at just about the worst time. Thankfully i was able to renew my own for a fixed 5 year term right before the war, and before the rates started spiking.

So to answer the immediate question, I have loads of debt, but except for when I open the banking app, I tend to forget it exists, so it doesn't really affect my day-to-day life.
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#9 User is offline   Cause 

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Posted 19 November 2023 - 11:18 PM

I have been meaning to return to my own thread, just been a lot going on. I do make a distinction between good and bad debt and it was partly why I asked about student debt especially but was tempted to add medical debt but I did feel like a typical mortgage is not necessarily a bad thing. I asked it in the phoenix inn and not the discussion thread because I also wasnt trying to delve into the problem of student debt and if we should or how to solve it. I was just interested in waht having that kind of debt does to a person.

Realistically I think few if anyone can really buy a home without a mortgage and even if they could I am not sure that they should want to. If the bank will float you half a million dollars at 3% interest for example you have almost made free money. Inflation will essentially partly wipe away your debt over the years and you will be able to buy a better home than you ever could otherwise. This of course assumes you made a wise financial decision, the bank or anyone else shady hasnt hoodwinked you and chance hasn't decided to mess with you.

Tiste's story is one I understand is all too common in the UK right now with peoples mortgage payments almost doubling overnight. I had former UK colleagues telling me it would be happening to them soon. I don't quite understand the details but I guess its because the interest rate isn't fixed and with Covid and inflation and everything else people are now getting screwed.

I am fearful of debt and sometimes even wonder if I am overly fearful. I worry about my retirement. I want to make sure that when I hit 65 or thereabouts I can stop working and not worry about the future. I try to learn a lot of finacial advance and try and follow many of the guidelines. Have at least 3x salary saved by 40, dont spend more than 30% of your salary on rent etc. When a friend who I know earns less than me buys a car that I know is twice as expensive as I would get myself, I think to myself he is being foolish as a small part of me wonders if my calculations are too conservative. That said I

I calculated that I saved 40% of my salary in 2022, and thats partly because in sales when you earn commission its not guaranteed and so I don't factor it in my budget and its like bonus money when it happens. I send 20% automatically from every paycheck to savings. Some people think thats crazy but when I lose my Job like now I am grateful to not have to panic about my rent, food or cancel planned vacations. Now 2022 was likely an outlier and I expect large future expenses like a car and house and thats partly why I am trying to save so much now.

I am scared of a mortgage, it would crush me if due to bad luck I lost my house and the huge investment it represents because I couldn't make payments. I want at least 20% down and I want several months of emergency mortgage payments save up before I buy a house. I want to make sure Ill have a reserve for repairs or other unforeseen problems that could shake me. I find myself wondering if my fear though is preventing me from acting. I cant save up enough to buy the house outright thats being too safe. whats the correct balance.

I think part of what upsets me so much about the idea of student debt is that it starts people off in a positions where instead of building to their future they start in a whole and are just trying to claw their way back up to neutral. Seeing my savings grow gives me a huge sense of relief and satisfaction that my life, my safety from emergencies and my future is growing stronger stronger. I think though I also need to adapt my mindset partially in that same in how I think a mortgage is a good kind of debt in that it gets you a house, dtudent debt gets you a degree or at least it should. The degree should mean higher earnings and so this debt is not pointless. I think part of why I have such a negative view of student debt is becuase having recieved a PhD at a cost that never exceed more than 2k dollars a year I just dont believed people should have to spend so much to get their degrees. So I return to thinking the debt is pointless in that it doesnt have to be that way. Dont go to Australia and live life using loans when you could study at your local college while living at home. Still I know life doesnt always work that way.

The craziest debt for me is credit card debt. I know for some people they live very different lives to my own and its not always possible, but dont pay for things with a credit card that youc ant pay off at the end of the month. Credit card interest rates are dsigusting! 20% in america! If you cant afford a TV in cash save for it. If its an emergency and you need a plumber to save your house do what you have to. I remeber a colleague from my PhD lab who saved her mother a fortune. Her mother was going to finance a mattress and an exorbitant rate from a furniture store. Her daughter who was much more mathematically and financially savy was able to explain to her mother that if she saved for 3 motnhs she could get the mattress and it would be over. If she financed it she would have to make 12 payments and would end up paying double. This latter case is also a case of predatory lending (not sure if this is the proper descption legally speaking) which I think happens a lot in places like South Africa

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Macros cany you refinance to have the longer pay off timeline and pay it off early if you prefer but you wont have the crushing pressure?
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#10 User is offline   amphibian 

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Posted 20 November 2023 - 12:39 AM

The way American healthcare is set up: one can have a million in the bank and lose it all in like two years if a serious disabling event occurs.

I deal with this stuff every so often because of the specific work I do.

So unclench the fear based on retirement.

I will say that I am about to be 38 and I will not have 3x my salary saved by 40. Not even 1x my salary.
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#11 User is offline   amphibian 

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Posted 20 November 2023 - 12:57 AM

My parents never had 3x salary liquid at any point in their lives so far.
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#12 User is offline   Cyphon 

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Posted 20 November 2023 - 08:02 AM

3x your yearly income liquid sounds mad. 3x yearly income in assets sounds more likely.

That said even that is probably not achievable for 50% of the population.
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#13 User is offline   Maark Abbott 

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Posted 20 November 2023 - 08:50 AM

Wait, you guys have savings? What does that word even mean
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#14 User is offline   Tapper 

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Posted 20 November 2023 - 04:01 PM

We had to up our mortgage recently, courtesy of the extended renovation of the property we bought.
Once we can finally move in, we ought to be fine, but I dread every single header featuring the ECB decision-making.
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#15 User is offline   Cause 

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Posted 20 November 2023 - 08:06 PM

View Postamphibian, on 20 November 2023 - 12:39 AM, said:

The way American healthcare is set up: one can have a million in the bank and lose it all in like two years if a serious disabling event occurs.

I deal with this stuff every so often because of the specific work I do.

So unclench the fear based on retirement.

I will say that I am about to be 38 and I will not have 3x my salary saved by 40. Not even 1x my salary.


As someone who already had cancer once who know lives int eh USA you ahve no idea how much feat I have over the US healthcare.

In fact I am battling this right now, when I lost my job I couldnt get cobra becuase they dissolved the USA company entirely.

_______________________________________________________________

I read you should aim for 1 million in savings to retire at 65 comfortably. With inflation that will be 2 million by the time Im 65 or so. Its a really big number. I think part of my retirement concenrs may stem from the fact that I come from South Africa. I have no expectation of any kind of social security or welfare to support me when I retire at all. I also dont have kids and frankly dont think I want any. That means my golden years are all on me and its entirely possible I may need to pay a nurse or similar. I have huge hopes for the nephew.

This post has been edited by Cause: 20 November 2023 - 08:10 PM

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#16 User is offline   Maark Abbott 

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Posted 21 November 2023 - 08:54 AM

I don't think retirement is a realistic proposition for most people any more. I fully expect to work myself to death without a choice in the matter. I have already accepted that I will never earn enough to be able to not work, and things look like they'll only get worse with economies and such.
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#17 User is offline   Azath Vitr (D'ivers 

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Posted 21 November 2023 - 01:31 PM

View PostMaark Abbott, on 21 November 2023 - 08:54 AM, said:

I don't think retirement is a realistic proposition for most people any more. I fully expect to work myself to death without a choice in the matter. I have already accepted that I will never earn enough to be able to not work, and things look like they'll only get worse with economies and such.


So for most people the best hope really is AI (and robotics... and virtualization to reduce physical requirements until robotics can catch up).

Here's hoping for the end of the vast majority of de facto forced labor (or at least that which does not significantly enhance one's self in desirable ways) before we all die....
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#18 User is offline   amphibian 

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Posted 21 November 2023 - 06:57 PM

As always, how does AI and robotics put more money into my pocket or Maark's pocket without wrecking our industries and killing our jobs for extractive capital entities to make money off stealing/crushing unions/individual people?

We digress though.

I think having 3x salary liquid is absolute nonsense because that money would be sitting there doing little when it could be invested or spent to make life better now.

I don't really have savings right now due to putting together a life after divorce. I put a decent chunk of my paycheck towards retirement and always have, but that's not easily accessible, liquid money. I am slowly getting to a place where I can sock away money, especially with my recent good results at work. I am not alone in that - there's quite a few of my peers and others who cannot do even this. Maark's dark joke bites hard for me and harder for him + others.

6 months salary seems to be a healthy point for emergency savings. I will aim for that.
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#19 User is offline   Cause 

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Posted 21 November 2023 - 07:37 PM

To clarify something:

3-6 months savings for emergencies is the standard recommendation. Its also 3-6 months of expenses, not 3-6 months of salary or even after tax salary. You might even factor in unemployment you might reasonably expect to recieve against the expenses.

Also its 3x annual salary for retirement that is the recommendation. Here I believe savings means networth, it definitely does not mean liquid cash in a savings account that would be a financial disaster. Here I believe it means investments, stocks, savings account and assets. Some might argue to exclude your house since you have to live somewhere so you could downgrade your house but you will never realise its full financial value in retirement from a spending sense.

The 3x savings by 40 is probably also a looser recoomendation than the emergency savings account. The latter should probably always aimed for but 30-40 for many is also when your career might finally be taking off. If you get a big promotion at 39 the calculation goes out the window even as your fiancial position may never have been better. I think really you can only do whats possible, and you have to account for your specific situation. Some people may reasonably expect large inhertinces from their parents where others may get nothing. My Mother is over 70 but my grandmother is over 100, so I also would never plan my life around something so uncertain but its a variable. My path in life meant I spent a decade in university and started my career late, I earn more with a PhD than without but I also missed out on years of work compared to others. It effects my position. So take all financial advise with a gran of salt.

I think the main advice is with retirment or paying fown debt is the same, dont wait for tomorrow.


________________________________________________________

Two major stastics about the USA that haunt me are:

40% of americans cant handle an unexpected $400 emergency expense without going into debt
60% of Americans live paycheck to pacycheck (Its not the poorest 60%, Its people across all earning ranges)

A quick google search says the UK is slightly better with only 30% or so living paycheck to paycheck.
Canada is about 45% apparently
Australia 50%
Sweden the same google search I have been using for the others doesnt show an answer on the first page. Nice!

The stats whcih in the USA at least I know have nothing to do with the current Biden economy (which on paper is really good despite most people apparently disagreeing), or with covid are instead just the way America has been for a long time. It speaks I think to the lack of any real social net in the richest country on the planet but I do believe its partly an indication of terrible financial literacy. Easy debt like credit card make it easy to fall behind. I dont think the governments doesnt teach it in schools as part of a conspiracy, however its clear that many people never get taught. Never assign malice to what could just be goverment incompetence.

This post has been edited by Cause: 21 November 2023 - 07:47 PM

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#20 User is offline   amphibian 

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Posted 21 November 2023 - 07:48 PM

We have to get past today to get to tomorrow, so there's a lot bound up in being able to not wait for tomorrow.

The people in South Africa who haven't borrowed to buy anything in 15 years have a far greater capacity to not wait for tomorrow (because they're rich) than I do.
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