Let's talk personal debt

[david1289]

Be debt free. Investments are at the mercy of the stock brokers, but debt is not...it's at the demand of your banker. Take care of demands first.

 

[KilkennyArms]

Plan A.... Plan B works well in theory but most people don't have the self discipline to not spend some or all the money. The other question is where would you invest it? In the stock market? The economy is headed for a steep hill soon. Only hard assets mean anything in a depression.

 

[kd5rjz]

This. Though I admit, we went against my normal routine and financed my wife's car purchase because it was 0% money I can shuffle and make things work to pay it off cash if need be though.

I would never go out of my way to borrow money against an existing asset for the purpose of investing, but when faced with the choice of handing them a check, or them handing me the keys on a 0% note, I went with letting my money sit to make more. Mathematically it's the same, but yea... some of the markets are really doing well right now (some mainstream mutual funds though Vanguard, T.Rowe Price, and the like have made 30-40% in the last 12 months), and even guaranteed investments earn more than 0%.

I wouldn't pull money out against a house to invest though. Too big an asset and too much uncertainty there.

Yeah, if you can get the money at 0%, that's a no brainer!

 

[Shadowrider]

Here's my plan. Come February I'm paying off both of my cars. I'm going to stuff those car payments into a brokerage account and buy nothing but dividend paying MLPs and royalty trust stocks. (I already own some) DRIP and DCA are your friend.
After I get enough dividends coming in to pay my mortgage payment, I'm then going to keep stuffing the car payments into extra principle payments on my house payment over and above what I've always paid. Then I'll go back to stocks with the house payment that I don't have to pay anymore. I figure that I'll be debt free and have a nice chunk in 10 years or I'll be debt free far sooner with less of a chunk. It all depends on my ability to resist paying off the mortgage the 1st instant I have the cash to do it. It's just going to depend on the interest rates and what's going on at the time, but in general I hate make that detest having debt.

 

[Shadowrider]

Yeah, if you can get the money at 0%, that's a no brainer!

Even if you have 0% loans you STILL have debt. Don't forget that.

 

[dwkennedy]

Even if you have 0% loans you STILL have debt. Don't forget that.

"Well then, you should have put my money on deposit with the bankers, so that when I returned I would have received it back with interest."

So you see, I have a biblical imperative to take all the cheap money offered to me and invest it in low yielding, but safe investments. Mortgages, no fee 0% interest credit card advances, float, and cash back from reward points, it all goes in the high interest checking account.

That way I am performing arbitrage and can enjoy a riskless return. No way I'm putting the money in the stock market or on the roulette wheel.

I'm not getting rich but it isn't a lot of work for the money it brings in. Kind of fun to beat the banks for a change.

 

[WillR]

If you have investment professionals telling you to borrow to invest seek different representation immediately. Pay off house . If the bank can beat the 3% or whatever then you won't be paying 3%. Think about that .

 

[shotty]

Plan A.... Plan B works well in theory but most people don't have the self discipline to not spend some or all the money. The other question is where would you invest it? In the stock market? The economy is headed for a steep hill soon. Only hard assets mean anything in a depression.

Very true about discipline, most people just don't have it. Have known several people to take home equity loans to buy crap they really don't need to impress people they really don't like. Before you can turn around they 2 loan payments, they get their tit in a ringer and end up losing the whole ball of wax. Scratching their heads and watching a big screen by the pool, they ask "how did we get into this mess?" It's that dam bankers fault for making us that loan.

 

[DPI]

Here's my plan. Come February I'm paying off both of my cars. I'm going to stuff those car payments into a brokerage account and buy nothing but dividend paying MLPs and royalty trust stocks. (I already own some) DRIP and DCA are your friend.
After I get enough dividends coming in to pay my mortgage payment, I'm then going to keep stuffing the car payments into extra principle payments on my house payment over and above what I've always paid. Then I'll go back to stocks with the house payment that I don't have to pay anymore. I figure that I'll be debt free and have a nice chunk in 10 years or I'll be debt free far sooner with less of a chunk. It all depends on my ability to resist paying off the mortgage the 1st instant I have the cash to do it. It's just going to depend on the interest rates and what's going on at the time, but in general I hate make that detest having debt.

I really like your logic here! The MLP distributions (return of capital) are not taxable and you could be receiving a mortgage interest deduction on those mortgage payments. You could essentially be net tax accretive until your cost basis goes to zero, usually taking 20 years. When this happens you will be taxed at the capital gains rate for the distributions.

The issue will be if you ever part with the MLP. You will be taxed (at the capital gains rate) for the appreciation of the unit price, with the cost basis of the purchase price less your return of capital.

 

[Chard]

Retired - already implemented Plan A