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Old 17 December 2022, 01:58 AM   #241
huncho
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Originally Posted by Star Ferry View Post
Isn’t someone massively better off with 100K in cash and 100K in debt, versus have zero dollars? The debtor has way more ability to turn things around, while the 0 debt 0 equity guy can’t even buy Ramen noodles.
yes but financial geniuses in the real world will tell you that guy is living outside his means
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Old 17 December 2022, 03:39 AM   #242
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Debt free is mentally gratifying(obviously)!
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Old 17 December 2022, 03:47 AM   #243
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that depends who you owe the 100k to
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Old 17 December 2022, 05:17 PM   #244
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Again, there is no right or wrong answer. There are many factors to consider. The ďholier than thouĒ zero debt response isnít necessarily the smart answer.

If you know what youíre doing, itís much easier to turn $10m into $20m than it is to turn $5M into $20M.

So suddenly having $20 million worth of assets and $5 million worth of debt is pretty good.

Of course, the risk/reward ratio is not for everyone, and itís all contingent upon making smart investments. Definitely stay away from FTX/SBF.


But thatís how people build wealth.

Iím about to retire but Iím not paying down the small amount of debt I have. Instead, Iím aggressively investing money to make even more money.


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Another way to look at it...$10 mil in assets and $5 mil in debt. You make 10%. Your net worth goes up $1 Million. The guy who has $5 mil in assets and no debt makes 10%, his net worth goes up $500k.

By utilizing debt you are doubling your net worth and gains. Like you said...building wealth.

On the other hand, I would say that age has a lot to do with it....in your 20's, 30's, and early 40's, asset accumulation is the way to go. Once you hit late 40's and 50's I'd start the debt retirement phase, assuming you want to retire in your early to mid 50's.
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Old 17 December 2022, 06:43 PM   #245
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It is very interesting for me to read these reviews, because these surprised me. To be honest, I never thought that you in the US thought about money this way. For example, we put this much more simple way:

You are in debt if your net worth is negative, because then you are not a free person. However, if you only have to pay the interest and this does not disturb your lifestyle at all, then you have no debt, but credit. I'm sorry, I know we use these terms a bit different as you do, but I try to explain this in a different way:

To maintain a debit's costs is nothing more then to maintain your assets' or your home's costs, and so on. It's simply some money you have to pay from your income, like you do this for the insurances, loans and so on.

In short, if you can live your life free, than you have no debt. If the debt's interest hurts your lifestyle, than you have a debt.
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Old 17 December 2022, 07:22 PM   #246
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Honestly, sure debt is okay if it’s leading to a life of debt free.

No one likes to be owned by others. Well I don’t.

Oh I can borrow another 15m to make 30m. Who cares, this thread is crazy nearly more then me.

We are only a ship passing by you know, in 100 years or less no one will know we existed, don’t get to excited.
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Old 17 December 2022, 08:18 PM   #247
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Debt and quality of life.

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Originally Posted by Moondoggy View Post
Honestly, sure debt is okay if itís leading to a life of debt free.

No one likes to be owned by others. Well I donít.

Oh I can borrow another 15m to make 30m. Who cares, this thread is crazy nearly more then me.

We are only a ship passing by you know, in 100 years or less no one will know we existed, donít get to excited.

So in my posts above, I talk about debt not being a bad thing, but I wasnít necessarily talking about borrowing money to make more money. I should have been more clear but what I meant is that itís not always a good idea to pay off your mortgage or pay cash for a car; especially when interest rates were at historically low levels (free money).

Reason is that you can invest that money in the stock market and get a better return on your investment.

Iím not sure Iím a fan of borrowing money for the purposes of investing in stocks, bonds, crypto, etc. However, borrowing for real estate or a new business enterprise can obviously be an extremely wise and fruitful decision too, no doubt.


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Old 17 December 2022, 08:26 PM   #248
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For me personally, it’s easier to save a dollar then earn a dollar.
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Old 17 December 2022, 10:37 PM   #249
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Another way to look at it...$10 mil in assets and $5 mil in debt. You make 10%. Your net worth goes up $1 Million. The guy who has $5 mil in assets and no debt makes 10%, his net worth goes up $500k.

By utilizing debt you are doubling your net worth and gains. Like you said...building wealth.

On the other hand, I would say that age has a lot to do with it....in your 20's, 30's, and early 40's, asset accumulation is the way to go. Once you hit late 40's and 50's I'd start the debt retirement phase, assuming you want to retire in your early to mid 50's.
Yes, this is true, assuming there is zero cost to borrowing. Please let me know where I can get this rate.

Also, if the reverse happens, and investments go down -- like most stock and bond investments this year -- you lose twice as much (plus the interest on the borrowings unless someone lends to you for free).
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Old 17 December 2022, 10:59 PM   #250
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Yes, this is true, assuming there is zero cost to borrowing. Please let me know where I can get this rate.

Also, if the reverse happens, and investments go down -- like most stock and bond investments this year -- you lose twice as much (plus the interest on the borrowings unless someone lends to you for free).
Agreed It comes down to risk reward and knowing what your goals are IMHO.

They are very different for everyone clearly.
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Old 18 December 2022, 12:18 AM   #251
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I was going to post something similar. It all depends on your risk tolerance. For years I leveraged debt to make money. Yes, it worked but man did I spend a lot of time thinking about it and even worrying about it.

I decided to pay everything off and see what debt free was like. Wow, for me, it was so nice not having to "manage" my finances anymore. The majority of my salary gets deposited in a brokerage account and swept in to mutual funds each month. I pay my expenses yearly now (those that allow it).

I totally get leveraging debt but I am personally happier that I live a boring, debt free life now. I also used to play the credit card points game maximizing every purchase around which card gave the most points. Nope, no more. I know this might make some credit card junkies cringe, but I now just pay with my 2% cards and call it a day.
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Old 18 December 2022, 01:08 AM   #252
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I totally get leveraging debt but I am personally happier that I live a boring, debt free life now.
Ditto, and agree with you/others it depends on risk-tolerance and, frankly, common sense / math skills. Some are truly epic at this and yes you can add to your currency stash this way... but at what 'costs' and stress level. So yeah, personal choice.

Like they say in the movie War Games:

A strange game. The only winning move is not to play.
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Old 18 December 2022, 09:21 AM   #253
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Yes, this is true, assuming there is zero cost to borrowing. Please let me know where I can get this rate.

Also, if the reverse happens, and investments go down -- like most stock and bond investments this year -- you lose twice as much (plus the interest on the borrowings unless someone lends to you for free).
Actually, when factoring in mortgage payments on the assets, the return is even better, and the difference between the Net Worth gain is even greater in favor of the person who used the debt. This is because at the end of the year you will owe less than the $5M. The cost to borrow or amount of mortgage paid has no bearing on the appreciation of the assets. That's the difference in cash flow vs. net worth.
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