Debt and quality of life.

[HAPConst]

I came out of a sports environment. You have no idea just how much money some people have. The lesser known the individual is the better they can enjoy their wealth and fly under the radar. The more well known someone is the more restricted their lives are. Imagine not being able to run to the store because you don’t have a security detail that night or you don’t want to park your Ferrari at Walmart. Even worse is the paranoia that is ever present. Constant worry someone will recognize you and follow you home. There’s a lot to be said about being rich vs famous.

[Boopie]

Originally Posted by Krash

There are happy wealthy people and miserable wealthy people (often due to personal relationships), and then there are happy middle class folks and unhappy middle class folks. That is true.

However, if someone is rich and unhappy, and then they suddenly find themselves as being poor, that's not going to cheer them up.

Sounds like a great premise for a TV show…(“Schitt’s Creek”).

Choices A and B don’t capture the nuances of debt.

The best purchase my husband and I ever made was in our 20s, on the most expensive house we could afford, after making a 20% down payment. We paid a premium for a jumbo fixed rate mortgage (8.5%) initially. We refinanced it lower, and when interest rates dropped again we refinanced to a 15-year conforming. We paid off our mortgage a few years ago, before the age of 50. Having no mortgage, fortuitously, allowed us the freedom to make some very important lifestyle choices during the pandemic closures.

So, yes, before the age of 30 we had a “better,” ie bigger and more expensive house, in an excellent neighborhood, because we were able to sacrifice and save the $ for a down payment, and made further sacrifices to pay the mortgage. Other than our expensive house, we didn’t live a lavish lifestyle, and lived well within our means. Living mortgage free is a game changer.

We are also in a far better position having made that purchase when we did, instead of going for a less expensive home or waiting to buy (especially given California’s property tax rates). My home is far less expensive to keep than, literally, the monthly rent on a nearby studio apartment.

We pay off all of our credit cards every month. We have no debt, but don’t own any rental property or any other source of passive income.

We are very fiscally conservative. We have a friend who is an extraordinarily successful businessman who uses debt to finance purchasing rental real estate. From his perspective, having a ton of equity in a home is stupid because it just sits there and does nothing. He actually uses debt as leverage in a smart way, to generate additional income. That totally works for him, and many others. I don’t begrudge those who know how to use debt wisely to purchase income generating assets. I don’t think I’m smart or savvy enough to do that, and don’t have the stomach for that, either.

What wouldn’t be smart is using home equity to finance a lavish lifestyle.

So, as someone above posited, it is “better” to have $10 million in assets and $5 million in debt than $5 million in assets and no debt. But, from a peace of mind perspective, of where I am now, I prefer the latter.

[Incroyable12]

Originally Posted by HAPConst

I came out of a sports environment. You have no idea just how much money some people have. The lesser known the individual is the better they can enjoy their wealth and fly under the radar. The more well known someone is the more restricted their lives are. Imagine not being able to run to the store because you don’t have a security detail that night or you don’t want to park your Ferrari at Walmart. Even worse is the paranoia that is ever present. Constant worry someone will recognize you and follow you home. There’s a lot to be said about being rich vs famous.

Yes it's always kind of shocking just how many random obscure rich people there are.

[Star Ferry]

Originally Posted by Incroyable12

Yes it's always kind of shocking just how many random obscure rich people there are.

I have a theory that many of the obscure rich, provoked by the pandemic to consider their mortality, started spending more of their money. And that these reserves of hidden wealth were so vast, even this small group opening their wallets had a big impact on inflation.

[enjoythemusic]

'printing' trillions in currency with a few computer keystrokes didn't help inflation either. There's no real limit to the modern central bank currencies that can easily be created.

[Star Ferry]

Originally Posted by enjoythemusic

'printing' trillions in currency with a few computer keystrokes didn't help inflation either. There's no real limit to the modern central bank currencies that can easily be created.

Everyone is blaming the new money. I think we should blame the new money plus the old money. But regardless of whose fault it is, I really enjoyed the small $20 pizza I had last night

[enjoythemusic]

Originally Posted by Star Ferry

Everyone is blaming the new money. I think we should blame the new money plus the old money. But regardless of whose fault it is, I really enjoyed the small $20 pizza I had last night

But the far larger picture is, family society that needed only one 'earner' to thrive years ago... whereas today both parents / two jobs to survive. How has their monetary policy of currency devaluation negatively impacted the human race / society?

[brandrea]

Originally Posted by enjoythemusic

But the far larger picture is, family society that needed only one 'earner' to thrive years ago... whereas today both parents / two jobs to survive. How has their monetary policy of currency devaluation negatively impacted the human race / society?

Can you expand on this Steven? I know you’re a progressive thinker.

Thank you

[Drand]

Originally Posted by HAPConst

I came out of a sports environment. You have no idea just how much money some people have. The lesser known the individual is the better they can enjoy their wealth and fly under the radar. The more well known someone is the more restricted their lives are. Imagine not being able to run to the store because you don’t have a security detail that night or you don’t want to park your Ferrari at Walmart. Even worse is the paranoia that is ever present. Constant worry someone will recognize you and follow you home. There’s a lot to be said about being rich vs famous.

That's actually an issue now I think about it. They have the money and game yet no real peace of mind. Added to the fact that they're more likely to be robbed or something due to the wealth they have.
What's it to life then?
What's the true source of happiness and real peace?

[Chiboy]

Originally Posted by Boopie

Sounds like a great premise for a TV show…(“Schitt’s Creek”).

Choices A and B don’t capture the nuances of debt.

The best purchase my husband and I ever made was in our 20s, on the most expensive house we could afford, after making a 20% down payment. We paid a premium for a jumbo fixed rate mortgage (8.5%) initially. We refinanced it lower, and when interest rates dropped again we refinanced to a 15-year conforming. We paid off our mortgage a few years ago, before the age of 50. Having no mortgage, fortuitously, allowed us the freedom to make some very important lifestyle choices during the pandemic closures.

So, yes, before the age of 30 we had a “better,” ie bigger and more expensive house, in an excellent neighborhood, because we were able to sacrifice and save the $ for a down payment, and made further sacrifices to pay the mortgage. Other than our expensive house, we didn’t live a lavish lifestyle, and lived well within our means. Living mortgage free is a game changer.

We are also in a far better position having made that purchase when we did, instead of going for a less expensive home or waiting to buy (especially given California’s property tax rates). My home is far less expensive to keep than, literally, the monthly rent on a nearby studio apartment.

We pay off all of our credit cards every month. We have no debt, but don’t own any rental property or any other source of passive income.

We are very fiscally conservative. We have a friend who is an extraordinarily successful businessman who uses debt to finance purchasing rental real estate. From his perspective, having a ton of equity in a home is stupid because it just sits there and does nothing. He actually uses debt as leverage in a smart way, to generate additional income. That totally works for him, and many others. I don’t begrudge those who know how to use debt wisely to purchase income generating assets. I don’t think I’m smart or savvy enough to do that, and don’t have the stomach for that, either.

What wouldn’t be smart is using home equity to finance a lavish lifestyle.

So, as someone above posited, it is “better” to have $10 million in assets and $5 million in debt than $5 million in assets and no debt. But, from a peace of mind perspective, of where I am now, I prefer the latter.

I haven't kept up with this thread but really, really agree with this comment. We didn't hit a home run in Beverly Hills real estate, but have otherwise followed a similar playbook. One thing I will add is that having a very conservative personal balance sheet (paying off mortgages, etc.) allows one to be more aggressive in investing style.

To each his own.

[Trailboss516]

Originally Posted by Boopie

So, as someone above posited, it is “better” to have $10 million in assets and $5 million in debt than $5 million in assets and no debt. But, from a peace of mind perspective, of where I am now, I prefer the latter.

Like you, I would take $5M and 0 debt. Actually, I can't really think of any number where I'd prefer the scenario with the debt (and the subsequent double of assets).

[BroncoOne]

Originally Posted by HAPConst

I came out of a sports environment. You have no idea just how much money some people have. The lesser known the individual is the better they can enjoy their wealth and fly under the radar. The more well known someone is the more restricted their lives are. Imagine not being able to run to the store because you don’t have a security detail that night or you don’t want to park your Ferrari at Walmart. Even worse is the paranoia that is ever present. Constant worry someone will recognize you and follow you home. There’s a lot to be said about being rich vs famous.

Yes. There are envious and crazy people out there.

Given this perspective, it always makes me wonder why non famous people are constantly showing off on social media. They are completely capable of flying u dear the radar and enjoying their wealth and toys but want to broadcast it to the world, inviting what the pro athlete wants to avoid but can’t.

What’s worse is that I suspect many of them don’t own the toys that they flash online. Worst of both worlds.

[enjoythemusic]

Originally Posted by brandrea

Can you expand on this Steven? I know you’re a progressive thinker.

Thank you

The below is waaaaaay oversimplified. Even I could 'shoot holes' in it. It really cries out for human interaction to fully grasp the far larger concept. Or maybe not. But hey, here it goes....

Right now we have a consumption-based economy based on 'purchases' via central bank currency that devalues. Will avoid the problems of the consumption-based system, yet the later with constant devaluation has caused more human work hours to 'survive'. More work hours means less time with your parents as they age, or with them when you were young. There is a lot to be said about social interaction. As an example, call it a 'recent study', stagnated speech development by youth during a period of universal mask wearing is an example. No universal masks, no problem.

But a long slow game of currency devaluation is insidious. Like boiling a frog. But there's also....

Also, what personal stress and possible health issues (both physical and mental) are caused due to having to work more due to needing ever-more currency to 'survive'. We can all agree the USA minimum wage has fallen far behind reality, but why? If a currency was stable, a Fed mandate I remind you, minimum wage would be the same and work the same for forever. That is stability. If your lifecycle 'costs' are stable, and as an offshoot confident, how would that make you feel?

Anywho, there's a bunch more things. I just wish more attention was given to the societal downfall due to currency devaluation was discussed more, and more importantly, acted upon and corrected for the sake of human growth and prosperity.

[scarlet knight]

Mo money, mo problems.

[bobernet]

Originally Posted by enjoythemusic

The below is waaaaaay oversimplified. Even I could 'shoot holes' in it. It really cries out for human interaction to fully grasp the far larger concept. Or maybe not. But hey, here it goes....

Right now we have a consumption-based economy based on 'purchases' via central bank currency that devalues. Will avoid the problems of the consumption-based system, yet the later with constant devaluation has caused more human work hours to 'survive'. More work hours means less time with your parents as they age, or with them when you were young. There is a lot to be said about social interaction. As an example, call it a 'recent study', stagnated speech development by youth during a period of universal mask wearing is an example. No universal masks, no problem.

But a long slow game of currency devaluation is insidious. Like boiling a frog. But there's also....

Also, what personal stress and possible health issues (both physical and mental) are caused due to having to work more due to needing ever-more currency to 'survive'. We can all agree the USA minimum wage has fallen far behind reality, but why? If a currency was stable, a Fed mandate I remind you, minimum wage would be the same and work the same for forever. That is stability. If your lifecycle 'costs' are stable, and as an offshoot confident, how would that make you feel?

Anywho, there's a bunch more things. I just wish more attention was given to the societal downfall due to currency devaluation was discussed more, and more importantly, acted upon and corrected for the sake of human growth and prosperity.

Not wrong, but not the whole story, in my opinion. I think the bigger driver of this is lifestyle expectation changes.

In the 1940s or 50s, it required one income, but that was for a normal family to live in a modest ~1000sqft home. Most families would have a single, domestic car. Frequently, the food budget was subsidized by some degree of gardening, farming, animal husbandry. People had much more modest wardrobes. Outside/paid entertainment and dining choices and consumption were dramatically lower. It might not be a stretch to say that people were living a subsistence lifestyle more than a consumption lifestyle.

Look at the Christmas ads from the time. A “big” gift for your wife might be a new sit-down ironing board or a new Hoover or Kirby vacuum.

The lifestyle expansion, consumption growth, etc has been as much or more of a driver of two income families as central bank currency devaluation.

Also not bulletproof thinking here, just my $0.02.

[V25V]

Originally Posted by HAPConst

I came out of a sports environment. You have no idea just how much money some people have. The lesser known the individual is the better they can enjoy their wealth and fly under the radar. The more well known someone is the more restricted their lives are. Imagine not being able to run to the store because you don’t have a security detail that night or you don’t want to park your Ferrari at Walmart. Even worse is the paranoia that is ever present. Constant worry someone will recognize you and follow you home. There’s a lot to be said about being rich vs famous.

yeah rough life.....

[Incroyable12]

Originally Posted by Star Ferry

I have a theory that many of the obscure rich, provoked by the pandemic to consider their mortality, started spending more of their money. And that these reserves of hidden wealth were so vast, even this small group opening their wallets had a big impact on inflation.

While not rich by sports star standards, there are probably a lot of Boomers with half a million to a million in their savings accounts who are probably opening up their wallets now.

Then there are also all those obscure entrepreneurs who make quite a bit of money from non-glamorous stuff like food distribution, wholesaling, or owning a chain of successful franchises, etc.

[enjoythemusic]

Originally Posted by bobernet

N...The lifestyle expansion, consumption growth, etc has been as much or more of a driver of two income families as central bank currency devaluation.

Also not bulletproof thinking here, just my $0.02.

Yes, your assessment seems logical. Yet as we're now seeing 'payment for work' would increase as laborers 'demand' more income while the currency remains stable.

When we combine unstable devaluating currency AND labor's demand for higher payment... Please tell me when in history the current system's minimum wages have equaled or exceeded the real cost if living.

Again, I do understand your logic, but there's the reality of human work hours being 'valued less' over time, which equals more hours to survive. You're hitting on consumption, which the economy is based, is the other 'problem' in and of itself.

-----

Btw, at some point we also need to touch on financial transaction parasitic loss. The loss of 'value' due to inefficiency and high (over 0.25%, though better still it should be free for users. Banks get loan interest, which pays the Fed's system operation costs). Normal consumers should not directly suffer from parasitic system costs, plus it hurts those the most who can least 'afford' it.

[Kinnakeet]

Originally Posted by Incroyable12

Yes it's always kind of shocking just how many random obscure rich people there are.

I know some extremely wealthy people that post on TRF. None of them have ever posted pics of watches holding steering wheels of expensive cars. Or have even show their cars on TRF. Or their complete watch collections. So yes, you never know.

[brandrea]

Originally Posted by Kinnakeet

I know some extremely wealthy people that post on TRF. None of them have ever posted pics of watches holding steering wheels of expensive cars. Or have even show their cars on TRF. Or their complete watch collections. So yes, you never know.

[Krash]

Originally Posted by Trailboss516

Like you, I would take $5M and 0 debt. Actually, I can't really think of any number where I'd prefer the scenario with the debt (and the subsequent double of assets).

Again, there is no right or wrong answer. There are many factors to consider. The “holier than thou” zero debt response isn’t necessarily the smart answer.

If you know what you’re doing, it’s 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 it’s all contingent upon making smart investments. Definitely stay away from FTX/SBF.


But that’s how people build wealth.

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


Sent from my iPhone using Tapatalk

[Drand]

Originally Posted by Krash

Again, there is no right or wrong answer. There are many factors to consider. The “holier than thou” zero debt response isn’t necessarily the smart answer.

If you know what you’re doing, it’s 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 it’s all contingent upon making smart investments. Definitely stay away from FTX/SBF.


But that’s how people build wealth.

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


Sent from my iPhone using Tapatalk

[enjoythemusic]

Originally Posted by bobernet

The lifestyle expansion, consumption growth, etc has been as much or more of a driver of two income families as central bank currency devaluation.

Also not bulletproof thinking here, just my $0.02.

Here's an idea.

Ok, we have a Parent Company that is the privately-owned Federal Reserve Bank that has a single retail product called the Dollar. The Fed Bank has regional locations that support their localized storefront Dollar Product Retailers (commercial and credit union banks we all see and use for personal/business checks, deposits, etc.... Wells Fargo, BoA, Citibank, etc). This is the basic structure we have today, so nothing has changed. All good.

So here's the idea.

Let the Parent Company Fed be independent as they are now to set their business partner rates as they so choose.

Their Dollar Product retailers (Wells Fargo BoA, Citibank, our local credit union, etc) give actual inflation rate interest payout on deposits (~9% as of today). This way the Federal Reserve's Dollar Product does not lose value / buying power while localized users have it 'stored' within their Retail Store locations.

It makes no sense having your Dollar product in a retailer's storage, and being used at10:1 or 20:1 leverage for loans) if it is guaranteed to lose value at an insulting 1% annual percentage rate, right? So this helps add CONfidence to the currency that by storing your Dollar Product at these Retailers is always keeping its' buying power / value while in storage. It also keeps the independence of the Fed in setting rates for their direct business partners.

This also acts as a way to have the Federal Reserve's banking system be fair to depositors of their Dollar Product.

This is just a start, a beginning as it were, and not a full-on solution of course.

It would be great as CONgress could easily pass a law ensuring bank depositors are guaranteed by the parent company, the Federal Reserve, to receive actual inflation-based interest, so the consumer's Dollar Product within their Retailer's storage does not lose value / buying power. It is fair, and honest, for depositors. Wouldn't you agree?

Your thoughts?

[Star Ferry]

Edit: Lol, thought this was the crypto thread. On this topic: the shell game of our central bankers has severely weakened the currency, but it’s not too bad on a global standard. This is what people who control any currency will inevitably do. They produce a ton of it, live like kings, and then it devalues. Plus one for the Euro Zone — our European friends have done an incredible job relative to everyone else, even as certain member states have complained.

Objectively most folks are better off with a mix of debt and equity. This helps them fund major expense and facilitates “consumption smoothing” which is what most folks prefer. if you have 5 million in the bank, then you’re no longer “most folks” and so then it’s more down to personal preference, but most non-TRF members need debt at some point.

[AF_Rob]

Only debt I'm willing to take on is a home and a primary daily driver. Home is modest and car is too. When I buy a car, it's 50% down and pay off within a year. If I can't do that, I can't afford it. I use the credit card for everything and never carry a balance.

Cost of living and footprint is pretty low. It opens up a lot of space to do what I want.

[BroncoOne]

Originally Posted by Incroyable12

While not rich by sports star standards, there are probably a lot of Boomers with half a million to a million in their savings accounts who are probably opening up their wallets now.

Then there are also all those obscure entrepreneurs who make quite a bit of money from non-glamorous stuff like food distribution, wholesaling, or owning a chain of successful franchises, etc.

As to franchises, there are nearly 800,000 of them in the US alone. They produce nearly $1 trillion in yearly economic output.

The industry has consolidated heavily in the last decade. Yes, there are still people who own a single franchise or 2 or 3, but there is a substantial amount of multi-unit franchisees that own dozens and even hundreds of franchises in multi brands. A handful own thousands of franchises and have even acquired franchisors and collect royalties along with paying them.

Extremely cheap debt has certainly fueled this consolidation and expansion.

[TswaneNguni]

If you have debt,the bank is your master.

[Blansky]

I think one of the major downfalls of the consumer/capitalistic society of the US is the fact that so many people have never been schooled in how money/investing/debt even works.

Kids just hit the street running at 18 or 24 and have no idea how the system they live under even works. And very few have parents that could teach them either.

[Star Ferry]

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.

[brandrea]

Originally Posted by Star Ferry

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.

That depends who you owe the 100k to