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Anthony Bourdain on not having debt

318 points by bootload 10y ago

bootload 10y ago
"Once I did that risky thing, leaving the only profession I knew to become a professional writer and TV guy, I was, and continue to be, very careful about the decisions I make every day." Sage advice. Here's the link to the book publishing mentioned ~ http://www.eater.com/2012/2/22/6611779/the-lineup-for-anthony-bourdains-ecco-imprint-roy-choi-texas-barbecue http://www.eater.com/2012/2/22/6611779/the-lineup-for-anthon... / http://www.publishersweekly.com/pw/by-topic/industry-news/publisher-news/article/48650-anthony-bourdain-gets-his-own-book-line-at-ecco.html http://www.publishersweekly.com/pw/by-topic/industry-news/pu...
kevinmannix 10y ago
I wish more people thought this way. Debt can be be used effectively, but as Uncle Ben said, "With great power comes great responsibility." It seems that too much of America is wooed into a false sense of security by their ability to obtain debt without judging their ability to pay that debt off.
- bootload 10y ago
  "I wish more people thought this way." It used to be common to view personal debt this way. I noticed a big change in the way debt was perceived by during the late '80s. Since then, debt is seen as normal. I'm pretty sure the finance industry has pushed 'Fractional reserve banking' to the limit to allow unchecked borrowing for land and housing. [0] Reference [0] "fractional-reserve banking permits the money supply to grow beyond the amount of the underlying base money originally created by the central bank" ~ https://en.wikipedia.org/wiki/Fractional-reserve_banking https://en.wikipedia.org/wiki/Fractional-reserve_banking
  - paulcole 10y ago
    There's also the rebranding of the scary "second-mortgage" into the treat-yourself "home-equity-line-of-credit."
    - bittercynic 10y ago
      Those are two distinct products. I think they're both scary ways to treat-yourself.
      - daemin 10y ago
        It's the way that consumer culture can grow, because you use your line of credit to buy a second or third car, nicer car, jet ski, boat, canoe, etc. Then when you have all of this stuff you have to buy a bigger property just so that you have space to store it. So that means selling your existing property to someone else to repeat the cycle. It is certainly an efficient way to keep money moving.
  - soVeryTired 10y ago
    Fractional reserve banking doesn't really exist any more in the developed world. Banks lend against their capital, not their reserves [1]. [1] http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q102.pdf http://www.bankofengland.co.uk/publications/Documents/quarte...
    - bootload 10y ago
      "In normal times, the Bank of England implements monetary policy by setting the interest rate on central bank reserves." thx @soVeryTired, plz excuse lack of financial knowledge. What is the definition of "reserves"?
      - soVeryTired 10y ago
        A bank's reserves are the funds it holds in its account in the central bank. Some countries require that a certain proportion of the bank's assets are held in reserve in order to be sure it can easily meet its short term liabilities (i.e. to safeguard liquidity). In that regard, the system is a little like fractional reserve banking. But the UK and Canada don't have reserve requirements at all. In general, the main constraint on a bank's lending is its capital. Which is why you read about "core tier 1 capital ratios" when a failing bank makes headlines.
        bootload 10y ago
        "A bank's reserves are the funds it holds in its account in the central bank." Are those reserves (capital) fluid? From the tier-1 you refer I get the impression these are real physical assets and in flux. Interesting. How do the UK banks handle market runs? (I must read more about the banking system) In Aus major banks are government backed with minimal competition.
- camillomiller 10y ago
  It surprises me all the time to see what you can do with a CC in America. Here in Europe it's also very common to have a direct debit card. You don't have a monthly bill, but the amount you spend is directly deducted from your account. Lots of people prefer that.
  - taurath 10y ago
    We have those here too, and I think it's relatively common to pay off of those.
  - glandium 10y ago
    As coming from a country where debit cards are widespread (France), and living in one where they barely existed until recently (Japan), and having had my (japanese) debit card fraudulently used (still a mystery how ; not stolen, barely even used at all ; last use 8 months prior), I now know that credit cards are better in that case: if you notice the fraudulent use early enough, it's not going to hit your account, while I'm now stuck waiting for a reimbursment that will hopefully happen 3 months after reporting the event. Just for that, I now prefer a CC, not using the "Credit" part of it. Edit: well, technically, I'm using it, but only as a buffer. But it's always awkward to be asked "single payment?" for ridiculous amounts like $20. Huh, yeah, why? are people really paying such amounts in multiple installments?
  - douche 10y ago
    The best option in the US is to use a credit card as if it were a debit card, and pay your balance off every month. This way, you get to take advantage of the better fraud protections, cash-back rewards, and balance-smoothing benefits of the credit card, without paying any intetest. And it improves your credit score. Unless you have no financial discipline, there's no reason to use debit over credit.
  - lostboys67 10y ago
    Well until recently when the EU decided to "help" consumers I was making £20 a month by using my CC and paying it off in full each month. And credit cards (in the UK ) provide protection for buyers against shoddy goods
- d_t_w 10y ago
  I agree with your sentiment, but it strikes me that there is safety and opportunity in behaving badly when the bulk of your peers are swept away in an orgy of debt fuelled spending. Ten years ago I bought a small flat in London to live in. I paid a respectable deposit and didn't over-leverage. We were at the end of decade long property boom, there were huge concerns about the level of borrowing and ability to repay, predictions of mass repossessions if the BoE raised rates by even a quarter percent, the BoE would regularly "jaw-bone" the fact that the rate must rise[1]. The bank wanted to lend me 5x the amount I borrowed. I could have bought an entire 3 bedroom house rather than just a 1 bed flat situated in the same property. I borrowed within my bounds, priced the debt relative to an upward BoE rate, played it sensible. What a missed opportunity! In retrospect I should have taken all the cash the bank wanted to throw at me and bought the whole house. I would have been able to manage the repayments fine, and financially I would be light-years ahead of where I am now. All because the government will literally burn anyone to keep those vested in the housing market safe (particularly I reference the U.K/NZ/AU, I assume the U.S.A is similar). Behave badly in droves and the government will never raise that BoE rate. They will burn savers, they will continue to inflate the housing bubble, they will set fire to the hopes of anyone under the age of 30 buying a house to live in. Literally anything to save the retirement nest-egg of a generation of baby-boomers, aided and abetted by a generation of baby-boomer politicians. Only external factors will bring an end. In the U.K that may be Brexit (as external as that is), in AU that may be Chinese capital controls. Until those external factors are applied you're fine misbehaving. For me, behaving respectably was a mistake. [1] The rate today is 0.25%, an all-time historic low. The rate when I bought was 0.5%, at the time an all-time historic low. Saving in the U.K the last decade? Sucks to be you: https://qz.com/750443/the-bank-of-england-just-cut-interest-rates-after-seven-years-of-preparing-for-a-hike/ https://qz.com/750443/the-bank-of-england-just-cut-interest-...
  - d_t_w 10y ago
    My language is a bit loose, of course the BoE is independent and controls the rate. But the government sets the BoE remit to use the rate to keep inflation within acceptable bounds, and Gordon Brown decided to move from RPI (which includes some measure of mortgage payments) to CPI (which doesn't). It does seem madness that we would control monetary supply without consideration of inflation in the largest asset group that lose monetary policy impacts (actual house prices, not just mortgage payments), but then I'm no economist so what do I know.
- err4nt 10y ago
  I view debt as gambling against future prosperity. It's a faustian deal you make with yourself to steal your own future earnings to use today. What a bittersweet deal (most of the time)
  - mdpopescu 10y ago
    As a general rule, people in the future are richer than people in the past - both individually and at the society level. It is gambling, but history suggests that it generally works out.
    - Thrillington 10y ago
      Timescales are a bit off for that rule though. People are generally better off in a few years from now, unless they've been paying that extra prosperity to as monthly interest on their debt.
      - mdpopescu 10y ago
        If the interest is larger than the entire gain, sure. However, most people don't do that as far as I can tell from looking around me.
- charlieflowers 10y ago
  Most Americans are using debt to buy consumer goods. So the question most should ask themselves is, "As a citizen of a first world country, with a good job and a super high standard of living, why is it that I need to consume some of tomorrow's dollars to get myself even more stuff right now?"
  - shostack 10y ago
    Then there's the flip side of using credit cards to get a 1%+ discount on things and paying it off in full. If you have the cash and discipline, debt can be used for very low risk benefit.
    - taurath 10y ago
      And CC companies bank on the fact that if even a small percentage of people aren't able to pay it off in full they'll get their "rewards" back in full within a single period of interest.
      - ctrlrsf 10y ago
        They also bank of the fact that you will use your plastic for more frivolous purchases since it's so convenient. Plus you think you're getting some cash back reward later, so you don't feel so bad about it. If you had to pay cash, you might not be wasting as much money.
      - someguydave 10y ago
        no they make 1-5% of every swipe
        WesleyLivesay 10y ago
        Yep, they make money either way. However, it only takes 1 person carrying a balance at 20% to make up for the rewards of 20 people who spend and pay off.
  - adrianN 10y ago
- lastyearman 10y ago
  Debt is new currency. If everyone is buying their cars with credit, soon nobody can afford to buy with cash. Around here even if you have decent wage right now, but not a stable job, you can't get credit to buy a house, while someone with a low pay but stable job can, you're effectively poorer than them.
  - WJW 10y ago
    You seem to appraise the stability of a job as having zero (or at least very low) value. This might be justified if you are certain that you can get a new job in a short term if you lose the current one. However, from the banks' viewpoint the probability of you getting a new job soon enough to not miss any payments may be appraised much lower, possibly being influenced by other economic sectors where getting a new job takes much longer. Banks have interest and dividend payments to make themselves, so they obviously place a high value on stability. So yes, someone with a lower paying but more stable job may be more wealthy than someone with a higher paying but more unstable job. Appraising the current net value of a job is always a bit shaky though, because there are so many variables.
mmastrac 10y ago
This is fantastic advice for 95% of people. If you one of the few that can manage debt responsibly, however, you'd be missing out on the opportunity for leverage. In many cases a person can effectively trade their good credit for additional returns. Of course, you need to fully understand the risk/return profile of any leveraged investment you make AND be careful not to be overleveraged at any point. It's a fine line to walk, but it can be a valuable part of your investment portfolio.
- kobeya 10y ago
  Leverage doesn't come without a cost -- it magnifies your losses too.
- cortesoft 10y ago
  I think the important thing to consider is what you are taking on debt for - are you using it for investment in something or for an expense? A house or an education is an investment - it can be a good or bad one, of course, but the idea of going into debt to obtain either of those should not be dismissed out of hand. Both can provide a return on those investments greater than the interest cost. However, if you are taking on debt for an expense (a vacation, a new car when you have a working one already, a new toy), then you are gaining nothing in return for the interest. You could easily wait until you have the money saved up, since those expenses have no extra return for purchasing early. The worst debt, of course, is when you are taking it on because you simply have more expenses than you do income. This is often the source of credit card debt. If you are growing in debt but not growing in investments, you need to take a hard look at your lifestyle.
  - wtvanhest 10y ago
    IMO, student debt the way it is structured in the US cannot be classified as an investment because it cannot be discharged and has no collateral. You cannot get a return on student debt. You can get a return on an education, but the debt is much more like a cc then an investment, especially if any of the student debt is used to pay living expenses.
  - chjohasbrouck 10y ago
vinceguidry 10y ago
You obviously didn't read the article. Bourdain did not reach the magical 'no-debt' world of wonder until after he got famous. If anything it's a fake-cautionary tale. "Don't do what I did kids, even though I'm rich and did more blow and had way more fun than you'll ever have in your whole life!" Ugh.
- dang 10y ago
  Please don't insinuate that someone hasn't read an article. "Did you even read the article? It mentions that" can be shortened to "The article mentions that." https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html. We detached this comment from https://news.ycombinator.com/item?id=13882117 https://news.ycombinator.com/item?id=13882117 and marked it off-topic.
- ethbro 10y ago
  I didn't read anywhere in there where he says don't do what he did. He lived his life the way he wanted to, there were some rough times. Now he has a family, different priorities and resources, so is taking those into account but still generally living the same way. My tl;dr would be "I was always in debt when I was young. Now I have a bit of money and prioritize those I care about, but after that's funded I'd rather have great experiences than a larger bank account."
  - varelse 10y ago
    As a long-time fan of his, his early life IMO (I've read and loved Kitchen Confidential) was shortsighted hedonism that came to a crashing halt when he became famous. He has since settled for dating/marrying beautiful women, noticing that chain smoking would probably kill him and started doing Krav Maga instead, and becoming smart about money. His dayjob's not so bad either.
wtvanhest 10y ago
Off topic, but why did the creator of this site make the top bar move when scrolling? That makes it 100% impossible to read for people who use the top of the screen as a line to read along. Also, is their a chrome extension to cancel that functionality?
- wtvanhest 10y ago
  My question is serious. I cannot track text very well and rely on the top of screens.
- willbw 10y ago
  I'm not having that problem on Safari.
- k-mcgrady 10y ago
  I'm using latest Chrome and it's not happening to me. I have UBlock Origin installed but also tried with it disabled and still no issue.
- davidddavidson 10y ago
  Using latest Chrome and the topnav is fixed/doesn't scroll along with the page
nkozyra 10y ago
Debt is a manifestation of risk. As general financial advice, "don't take on debt" is akin to "don't take risks." It depends. On a lot of things.
- bootload 10y ago
  "As general financial advice" Bordain is being very specific. This is about personal debt and being risk adverse, "I am fanatical about not owing anybody any money. I hate it. I don’t want to carry a balance, ever." The whole article is explaining his prior life as working chef. Notice he has a lone but tries to avoid risky debt?
- deleted 10y ago
  [deleted]
- jdavis703 10y ago
  Going into debt to vacation in the Caribbean (which is what he did) is not the same as using it to say start a business or get an education.
  - idiot_stick 10y ago
    >Going into debt to vacation in the Caribbean (which is what he did) is not the same as using it to say start a business or get an education. They differ only if the metric you choose to measure against the debt is "money". But some of us do things for other than money; happiness comes to mind.
    - nkozyra 10y ago
      Precisely. It would be totally sensible also to argue that a trip such as that one paid off even financially later in less obviously connected ways.
      - jdavis703 10y ago
        You're very right. If you need a vacation for mental health purposes (doesn't even have to be clinical) that's still an investment. But if it's your typical entertainment oriented vacation then that's a poor use of debt.
vinhboy 10y ago
> Nobody likes paying high taxes, but I don’t mind. How refreshing. I agree with him. Paying my taxes is a point of pride for me. It's a repayment for all those years I was poor and the government paid for me to live and go to school.
- refurb 10y ago
  Not sure if you're living in the US, but I do and I have the exact opposite viewpoint. The amount of waste, corruption and poor planning by the gov't makes me feel like I'm throwing money away. I'd rather give it a charity since then I'd know a majority of it had an impact. I think if the gov't was a bit more efficient and could be shown to be good stewards of money I'd probably hate paying taxes a lot less.
  - ethbro 10y ago
    Having worked for some charities, there's sausage being made there too. Just like the government has spots of greater than free market efficiency. I don't think one or the other is strictly better. You point at corruption and waste wherever you find it, then you work to make it less.
    - mi_noi_noi 10y ago
      You could say charities are better in the sense that: - You at least have more than one choice. If the charity you give to performs poorly by whatever metrics you value, you can give to another one next time. - It is voluntary. Nobody with guns will put you in a cage if you don't donate to a charity, as is the case if you don't pay your taxes.
      - ryanhuff 10y ago
        Couldn't you say that about whatever city that you live in? Many people voluntarily live in their choice of city or state (in the U.S.). If you don't like that government's priorities, you could move elsewhere.
partycoder 10y ago
The problem is that debt starts modifying your behavior. If you are in debt you are more likely to tolerate conditions you don't enjoy, e.g: if you live paycheck to paycheck, being happy at your job is not your top priority.
teslaberry 10y ago
so funny because when you are paying your taxes you are paying not only your own debt, but the debt of major banks, major government sponsored financial entities , insurance company bailouts, the debt of military contractors -------- you are paying for what was spent by the government on all of these guy upfront......and it's your debt............they call it taxes. so you are in big debt and you're paying it off!. it's just , you didn't spend most of it.
doctorcroc 10y ago
Bourdain is an OG. I've always admired his candor and ability to reflect on the things most important in life (and he knows it first-hand, having traveled nearly every where) -- time, lack of stress, and the enjoyment of good food with good people. Cheers!
appleiigs 10y ago
Debt conversations always have these weird grandpa rules of thumb and words of wisdom, as you can see in the other comments. The proper use of debt is to match the debt with the asset. If you are buying a house, a 25-year mortgage matches the value of the house. If you are buying a car, a 5-year loan matches the value of the car. If you are buying a sandwich with a credit card, well... you should pay off your credit card at the end of the month because that sandwich is long gone.
- piker 10y ago
  Were you deliberately using the "match the debt with the asset" rule of thumb as an example of your first sentence?
  - appleiigs 10y ago
    No, matching debt to assets is proper finance theory and practice. I was referring to "don't use any debt" and "debt is manifestation of risk" and "With great power comes great responsibility" and "use debt for investments, not expenses".
    - piker 10y ago
      And for banks that borrow short and lend long? They're just ignorant of "proper finance theory and practice"? Or have they properly understood that the risks involved in credit transactions have a bit more nuance than your rule allows for?
      - appleiigs 10y ago
        Banks are definitely measured on Asset Liability Management by policy and regulations. Deviations from being matched would be an active choice, while being matched would be the default/starting point.
- tonyedgecombe 10y ago
  It seems to me the people struggling with their finances don't have a problem matching debt to assets, it's they have a problem with too much house or too much car.
ianai 10y ago
There was a point where financing the government was a patriotic act. People would give other people War Bonds as presents. But now the patriotic thing is to trash talk which ever party is in the administration and wax poetic about governmental corruption. You can't have it both ways. You can't say no to financing your government and scorn corruption. Either you're okay paying for your government, you're okay with someone else paying for your government (to possibly include other governments!), or you're okay with your government paying for itself with printed money. (That last option, seignorage, leads to hyperinflation.)
- taurath 10y ago
  The government needs better PR frankly, instead of allowing itself to be a punching bag all day. Nobody can even imagine how many things the government and your tax dollars provide.
  - coderjames 10y ago
    I was thinking about this recently when I filed my taxes. Maybe if they provided some kind of itemized receipt? "You paid $x in taxes. This was distributed as $y to infrastructure, $z to education, $w to defense" etc.
    - patrickaljord 10y ago
      Your tax dollar don't pay for $y, $z or $w. You pay for the national debt mostly at this point. The government overspends and gets its money either from debt or from over printing. Even if top 10 of fortune 500 paid 100% taxes, it would still not cover spending. Just saying.
      - maxerickson 10y ago
        Interest on the national debt is a small portion of the US budget: https://www.nationalpriorities.org/budget-basics/federal-budget-101/spending/ https://www.nationalpriorities.org/budget-basics/federal-bud... Even if you just look at discretionary spending, debt payments are not a large portion of spending. New borrowing is also larger than the interest payments.
grecy 10y ago
I have always viewed debt as a promise of future labor. i.e. if I have debt now, I must go to work in the future to pay it back. Because I have no debt, I don't have to go to work, and can spend the next two years driving around Africa. I'm so passionate about saving money I even wrote an e-book on how to do it: http://theroadchoseme.com/work-less-to-live-your-dreams http://theroadchoseme.com/work-less-to-live-your-dreams
- camillomiller 10y ago
  I think you were downvoted for self-promotion, but I don't care, your blog is great. Good luck with your travels!
- harryh 10y ago
  Now turn it around. What is money? Money is someone else's debt. Money is a promise that someone else will go to work for you in the future to pay it back.
- SN76477 10y ago
  I view debt as the same way. Debt is a form of pressure and motivation. I do not however like to save money, I prefer to invest it. I will get your ebook, thanks for the info.
- amelius 10y ago
  > I have always viewed debt as a promise of future labor. And how do you feel about venture capital?
Mikeb85 10y ago
If your return on capital is higher than the interest rate, you should take on debt. If it's not (and for most it's not), then you shouldn't. Pretty simple. Anyhow, the article is an interesting anecdote about Bourdains life, but has little to do with money. He makes money from TV and books, can live comfortably because he makes quite a bit, but he's no financial savant.
- camillomiller 10y ago
  Indeed. That's why Apple takes on debt and does bonds to pay dividends, buy back stock and other stuff they need to pay big money for. With their cash reserve money is dirty cheap and they can actually make more money cause people will rebuy their debt like hot cakes.
- tonyedgecombe 10y ago
  The return on capital includes a risk factor, there is no risk that you won't have to repay the debt (other than death or bankruptcy).
  - paulddraper 10y ago
    Death won't automatically void the debt, though of course it's only the beneficiaries of your estate that will feel the effects.
Theodores 10y ago
> I didn’t put anything aside, ever. Money came in, money went out. I was always a paycheck behind, at least. I usually owed my chef my paycheck: again, cocaine. Like I said, until I was 44, I never even had a savings account. Anyone who has ever spent any of their money on class 'A' drugs is not in any position to dispense any type of wise financial advice.
- popularrecluse 10y ago
  But wisdom usually comes from experience.
- tonyedgecombe 10y ago
  Converts love to proselytize.
- Bartweiss 10y ago
  I mean... there's even a note to that effect at the top of the article. Bourdain says like five times that he makes decisions for convenience and security over efficiency. This isn't advice on how to maximize your wealth, it's a personal account of how he lived and how debt and wealth influence him on an emotional level.
strictnein 10y ago
I've been to a couple of his tour stops, where he gives talks about various topics (usually food and travel and his TV shows are the main things discussed). If you find Bourdain interesting, you'll probably find his talks quite entertaining. Anyways, at one of his shows he straight up said that each of his stops pays for a year of private schooling in NYC for one of his kids. Thought it was an interesting way of looking at things.
Draiken 10y ago
This is an interesting story and all that, but honestly, he only got to the "debt free nirvana" after becoming rich and famous. I pay my credit card, pay my taxes and my mortgage, but that takes almost all my money away. So if I look at it my net worth it is basically negative. Only way I'll get to the debt free nirvana is if I get rich somehow. It's not a real choice. So the entire premise of the article is pretty weak.
- deleted 10y ago
  [deleted]
- mattcantstop 10y ago
  > Only way I'll get to the debt free nirvana is if I get rich somehow. It's not a real choice. So the entire premise of the article is pretty weak. No, that certainly is not the case. Slow and steady saving and investing is the way to become wealthy. Check out www.reddit.com/r/personalfinance or www.mrmoneymustache.com as examples of this.
  - Draiken 10y ago
    I've seen the Mustache site before, but let's be honest here: this only works if you live a frugal life style. It might work if you are alone with no attachments or your SO has the same views, but not for anyone else. I'm trying to become less attached to things and have gone a long way, but telling your wife and kid to not want to eat out, for instance, is almost impossible...
alistproducer2 10y ago
> Nobody likes paying high taxes, but I don’t mind. It's actually amazing how little most Americans pay in taxes yet we complain. This year my effective tax rate was ~8%. Of course this is by using every legal tax shelter available. Considering what I get from the Federal government here in the US, I think 8% is actually fair. If it spent more of my money doing thing like taking care of home and quit with the empire building I'd be happy to pay more.
- plandis 10y ago
  8%? You either live very close to (or under) the poverty line or are fabulously wealthy. I'm assuming that you're rich since you mentioned tax shelters. TurboTax put my effective tax rate this year at 26%.
  - alistproducer2 10y ago
    Nope. 2 income, low 6 figures. There are pretty significant shelters for us middle class folks. $36k available in 401k contributions alone.another $6.5 k for HSA. $5k for childcare spending along with credits and deductions for the same thing. The key is to have a cost of living where u can afford to take advantage of them all.
2color 10y ago
My response to the article: https://medium.com/@2color/my-response-to-anthony-bourdain-does-not-want-to-owe-anybody-even-a-single-dollar-bc6d5b3db40e#.kao1e5c62 https://medium.com/@2color/my-response-to-anthony-bourdain-d...

318 points by bootload 10y ago

"Once I did that risky thing, leaving the only profession I knew to become a professional writer and TV guy, I was, and continue to be, very careful about the decisions I make every day." Sage advice. Here's the link to the book publishing mentioned ~ http://www.eater.com/2012/2/22/6611779/the-lineup-for-anthony-bourdains-ecco-imprint-roy-choi-texas-barbecue http://www.eater.com/2012/2/22/6611779/the-lineup-for-anthon... / http://www.publishersweekly.com/pw/by-topic/industry-news/publisher-news/article/48650-anthony-bourdain-gets-his-own-book-line-at-ecco.html http://www.publishersweekly.com/pw/by-topic/industry-news/pu...

kevinmannix 10y ago

I wish more people thought this way. Debt can be be used effectively, but as Uncle Ben said, "With great power comes great responsibility." It seems that too much of America is wooed into a false sense of security by their ability to obtain debt without judging their ability to pay that debt off.

bootload 10y ago
"I wish more people thought this way." It used to be common to view personal debt this way. I noticed a big change in the way debt was perceived by during the late '80s. Since then, debt is seen as normal. I'm pretty sure the finance industry has pushed 'Fractional reserve banking' to the limit to allow unchecked borrowing for land and housing. [0] Reference [0] "fractional-reserve banking permits the money supply to grow beyond the amount of the underlying base money originally created by the central bank" ~ https://en.wikipedia.org/wiki/Fractional-reserve_banking https://en.wikipedia.org/wiki/Fractional-reserve_banking
- paulcole 10y ago
  There's also the rebranding of the scary "second-mortgage" into the treat-yourself "home-equity-line-of-credit."
  - bittercynic 10y ago
    Those are two distinct products. I think they're both scary ways to treat-yourself.
    - daemin 10y ago
      It's the way that consumer culture can grow, because you use your line of credit to buy a second or third car, nicer car, jet ski, boat, canoe, etc. Then when you have all of this stuff you have to buy a bigger property just so that you have space to store it. So that means selling your existing property to someone else to repeat the cycle. It is certainly an efficient way to keep money moving.
- soVeryTired 10y ago
  Fractional reserve banking doesn't really exist any more in the developed world. Banks lend against their capital, not their reserves [1]. [1] http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q102.pdf http://www.bankofengland.co.uk/publications/Documents/quarte...
  - bootload 10y ago
    "In normal times, the Bank of England implements monetary policy by setting the interest rate on central bank reserves." thx @soVeryTired, plz excuse lack of financial knowledge. What is the definition of "reserves"?
    - soVeryTired 10y ago
      A bank's reserves are the funds it holds in its account in the central bank. Some countries require that a certain proportion of the bank's assets are held in reserve in order to be sure it can easily meet its short term liabilities (i.e. to safeguard liquidity). In that regard, the system is a little like fractional reserve banking. But the UK and Canada don't have reserve requirements at all. In general, the main constraint on a bank's lending is its capital. Which is why you read about "core tier 1 capital ratios" when a failing bank makes headlines.
      - bootload 10y ago
        "A bank's reserves are the funds it holds in its account in the central bank." Are those reserves (capital) fluid? From the tier-1 you refer I get the impression these are real physical assets and in flux. Interesting. How do the UK banks handle market runs? (I must read more about the banking system) In Aus major banks are government backed with minimal competition.
camillomiller 10y ago
It surprises me all the time to see what you can do with a CC in America. Here in Europe it's also very common to have a direct debit card. You don't have a monthly bill, but the amount you spend is directly deducted from your account. Lots of people prefer that.
- taurath 10y ago
  We have those here too, and I think it's relatively common to pay off of those.
- glandium 10y ago
  As coming from a country where debit cards are widespread (France), and living in one where they barely existed until recently (Japan), and having had my (japanese) debit card fraudulently used (still a mystery how ; not stolen, barely even used at all ; last use 8 months prior), I now know that credit cards are better in that case: if you notice the fraudulent use early enough, it's not going to hit your account, while I'm now stuck waiting for a reimbursment that will hopefully happen 3 months after reporting the event. Just for that, I now prefer a CC, not using the "Credit" part of it. Edit: well, technically, I'm using it, but only as a buffer. But it's always awkward to be asked "single payment?" for ridiculous amounts like $20. Huh, yeah, why? are people really paying such amounts in multiple installments?
- douche 10y ago
  The best option in the US is to use a credit card as if it were a debit card, and pay your balance off every month. This way, you get to take advantage of the better fraud protections, cash-back rewards, and balance-smoothing benefits of the credit card, without paying any intetest. And it improves your credit score. Unless you have no financial discipline, there's no reason to use debit over credit.
- lostboys67 10y ago
  Well until recently when the EU decided to "help" consumers I was making £20 a month by using my CC and paying it off in full each month. And credit cards (in the UK ) provide protection for buyers against shoddy goods
d_t_w 10y ago
I agree with your sentiment, but it strikes me that there is safety and opportunity in behaving badly when the bulk of your peers are swept away in an orgy of debt fuelled spending. Ten years ago I bought a small flat in London to live in. I paid a respectable deposit and didn't over-leverage. We were at the end of decade long property boom, there were huge concerns about the level of borrowing and ability to repay, predictions of mass repossessions if the BoE raised rates by even a quarter percent, the BoE would regularly "jaw-bone" the fact that the rate must rise[1]. The bank wanted to lend me 5x the amount I borrowed. I could have bought an entire 3 bedroom house rather than just a 1 bed flat situated in the same property. I borrowed within my bounds, priced the debt relative to an upward BoE rate, played it sensible. What a missed opportunity! In retrospect I should have taken all the cash the bank wanted to throw at me and bought the whole house. I would have been able to manage the repayments fine, and financially I would be light-years ahead of where I am now. All because the government will literally burn anyone to keep those vested in the housing market safe (particularly I reference the U.K/NZ/AU, I assume the U.S.A is similar). Behave badly in droves and the government will never raise that BoE rate. They will burn savers, they will continue to inflate the housing bubble, they will set fire to the hopes of anyone under the age of 30 buying a house to live in. Literally anything to save the retirement nest-egg of a generation of baby-boomers, aided and abetted by a generation of baby-boomer politicians. Only external factors will bring an end. In the U.K that may be Brexit (as external as that is), in AU that may be Chinese capital controls. Until those external factors are applied you're fine misbehaving. For me, behaving respectably was a mistake. [1] The rate today is 0.25%, an all-time historic low. The rate when I bought was 0.5%, at the time an all-time historic low. Saving in the U.K the last decade? Sucks to be you: https://qz.com/750443/the-bank-of-england-just-cut-interest-rates-after-seven-years-of-preparing-for-a-hike/ https://qz.com/750443/the-bank-of-england-just-cut-interest-...
- d_t_w 10y ago
  My language is a bit loose, of course the BoE is independent and controls the rate. But the government sets the BoE remit to use the rate to keep inflation within acceptable bounds, and Gordon Brown decided to move from RPI (which includes some measure of mortgage payments) to CPI (which doesn't). It does seem madness that we would control monetary supply without consideration of inflation in the largest asset group that lose monetary policy impacts (actual house prices, not just mortgage payments), but then I'm no economist so what do I know.
err4nt 10y ago
I view debt as gambling against future prosperity. It's a faustian deal you make with yourself to steal your own future earnings to use today. What a bittersweet deal (most of the time)
- mdpopescu 10y ago
  As a general rule, people in the future are richer than people in the past - both individually and at the society level. It is gambling, but history suggests that it generally works out.
  - Thrillington 10y ago
    Timescales are a bit off for that rule though. People are generally better off in a few years from now, unless they've been paying that extra prosperity to as monthly interest on their debt.
    - mdpopescu 10y ago
      If the interest is larger than the entire gain, sure. However, most people don't do that as far as I can tell from looking around me.
charlieflowers 10y ago
Most Americans are using debt to buy consumer goods. So the question most should ask themselves is, "As a citizen of a first world country, with a good job and a super high standard of living, why is it that I need to consume some of tomorrow's dollars to get myself even more stuff right now?"
- shostack 10y ago
  Then there's the flip side of using credit cards to get a 1%+ discount on things and paying it off in full. If you have the cash and discipline, debt can be used for very low risk benefit.
  - taurath 10y ago
    And CC companies bank on the fact that if even a small percentage of people aren't able to pay it off in full they'll get their "rewards" back in full within a single period of interest.
    - ctrlrsf 10y ago
      They also bank of the fact that you will use your plastic for more frivolous purchases since it's so convenient. Plus you think you're getting some cash back reward later, so you don't feel so bad about it. If you had to pay cash, you might not be wasting as much money.
    - someguydave 10y ago
      no they make 1-5% of every swipe
      - WesleyLivesay 10y ago
        Yep, they make money either way. However, it only takes 1 person carrying a balance at 20% to make up for the rewards of 20 people who spend and pay off.
- adrianN 10y ago
lastyearman 10y ago
Debt is new currency. If everyone is buying their cars with credit, soon nobody can afford to buy with cash. Around here even if you have decent wage right now, but not a stable job, you can't get credit to buy a house, while someone with a low pay but stable job can, you're effectively poorer than them.
- WJW 10y ago
  You seem to appraise the stability of a job as having zero (or at least very low) value. This might be justified if you are certain that you can get a new job in a short term if you lose the current one. However, from the banks' viewpoint the probability of you getting a new job soon enough to not miss any payments may be appraised much lower, possibly being influenced by other economic sectors where getting a new job takes much longer. Banks have interest and dividend payments to make themselves, so they obviously place a high value on stability. So yes, someone with a lower paying but more stable job may be more wealthy than someone with a higher paying but more unstable job. Appraising the current net value of a job is always a bit shaky though, because there are so many variables.

mmastrac 10y ago

This is fantastic advice for 95% of people. If you one of the few that can manage debt responsibly, however, you'd be missing out on the opportunity for leverage. In many cases a person can effectively trade their good credit for additional returns. Of course, you need to fully understand the risk/return profile of any leveraged investment you make AND be careful not to be overleveraged at any point. It's a fine line to walk, but it can be a valuable part of your investment portfolio.

kobeya 10y ago
Leverage doesn't come without a cost -- it magnifies your losses too.
cortesoft 10y ago
I think the important thing to consider is what you are taking on debt for - are you using it for investment in something or for an expense? A house or an education is an investment - it can be a good or bad one, of course, but the idea of going into debt to obtain either of those should not be dismissed out of hand. Both can provide a return on those investments greater than the interest cost. However, if you are taking on debt for an expense (a vacation, a new car when you have a working one already, a new toy), then you are gaining nothing in return for the interest. You could easily wait until you have the money saved up, since those expenses have no extra return for purchasing early. The worst debt, of course, is when you are taking it on because you simply have more expenses than you do income. This is often the source of credit card debt. If you are growing in debt but not growing in investments, you need to take a hard look at your lifestyle.
- wtvanhest 10y ago
  IMO, student debt the way it is structured in the US cannot be classified as an investment because it cannot be discharged and has no collateral. You cannot get a return on student debt. You can get a return on an education, but the debt is much more like a cc then an investment, especially if any of the student debt is used to pay living expenses.
- chjohasbrouck 10y ago

vinceguidry 10y ago

You obviously didn't read the article. Bourdain did not reach the magical 'no-debt' world of wonder until after he got famous. If anything it's a fake-cautionary tale. "Don't do what I did kids, even though I'm rich and did more blow and had way more fun than you'll ever have in your whole life!" Ugh.

dang 10y ago
Please don't insinuate that someone hasn't read an article. "Did you even read the article? It mentions that" can be shortened to "The article mentions that." https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html. We detached this comment from https://news.ycombinator.com/item?id=13882117 https://news.ycombinator.com/item?id=13882117 and marked it off-topic.
ethbro 10y ago
I didn't read anywhere in there where he says don't do what he did. He lived his life the way he wanted to, there were some rough times. Now he has a family, different priorities and resources, so is taking those into account but still generally living the same way. My tl;dr would be "I was always in debt when I was young. Now I have a bit of money and prioritize those I care about, but after that's funded I'd rather have great experiences than a larger bank account."
- varelse 10y ago
  As a long-time fan of his, his early life IMO (I've read and loved Kitchen Confidential) was shortsighted hedonism that came to a crashing halt when he became famous. He has since settled for dating/marrying beautiful women, noticing that chain smoking would probably kill him and started doing Krav Maga instead, and becoming smart about money. His dayjob's not so bad either.

wtvanhest 10y ago

Off topic, but why did the creator of this site make the top bar move when scrolling? That makes it 100% impossible to read for people who use the top of the screen as a line to read along. Also, is their a chrome extension to cancel that functionality?

wtvanhest 10y ago
My question is serious. I cannot track text very well and rely on the top of screens.
willbw 10y ago
I'm not having that problem on Safari.
k-mcgrady 10y ago
I'm using latest Chrome and it's not happening to me. I have UBlock Origin installed but also tried with it disabled and still no issue.
davidddavidson 10y ago
Using latest Chrome and the topnav is fixed/doesn't scroll along with the page

nkozyra 10y ago

Debt is a manifestation of risk. As general financial advice, "don't take on debt" is akin to "don't take risks." It depends. On a lot of things.

bootload 10y ago
"As general financial advice" Bordain is being very specific. This is about personal debt and being risk adverse, "I am fanatical about not owing anybody any money. I hate it. I don’t want to carry a balance, ever." The whole article is explaining his prior life as working chef. Notice he has a lone but tries to avoid risky debt?
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jdavis703 10y ago
Going into debt to vacation in the Caribbean (which is what he did) is not the same as using it to say start a business or get an education.
- idiot_stick 10y ago
  >Going into debt to vacation in the Caribbean (which is what he did) is not the same as using it to say start a business or get an education. They differ only if the metric you choose to measure against the debt is "money". But some of us do things for other than money; happiness comes to mind.
  - nkozyra 10y ago
    Precisely. It would be totally sensible also to argue that a trip such as that one paid off even financially later in less obviously connected ways.
    - jdavis703 10y ago
      You're very right. If you need a vacation for mental health purposes (doesn't even have to be clinical) that's still an investment. But if it's your typical entertainment oriented vacation then that's a poor use of debt.

vinhboy 10y ago

> Nobody likes paying high taxes, but I don’t mind. How refreshing. I agree with him. Paying my taxes is a point of pride for me. It's a repayment for all those years I was poor and the government paid for me to live and go to school.

refurb 10y ago
Not sure if you're living in the US, but I do and I have the exact opposite viewpoint. The amount of waste, corruption and poor planning by the gov't makes me feel like I'm throwing money away. I'd rather give it a charity since then I'd know a majority of it had an impact. I think if the gov't was a bit more efficient and could be shown to be good stewards of money I'd probably hate paying taxes a lot less.
- ethbro 10y ago
  Having worked for some charities, there's sausage being made there too. Just like the government has spots of greater than free market efficiency. I don't think one or the other is strictly better. You point at corruption and waste wherever you find it, then you work to make it less.
  - mi_noi_noi 10y ago
    You could say charities are better in the sense that: - You at least have more than one choice. If the charity you give to performs poorly by whatever metrics you value, you can give to another one next time. - It is voluntary. Nobody with guns will put you in a cage if you don't donate to a charity, as is the case if you don't pay your taxes.
    - ryanhuff 10y ago
      Couldn't you say that about whatever city that you live in? Many people voluntarily live in their choice of city or state (in the U.S.). If you don't like that government's priorities, you could move elsewhere.

partycoder 10y ago

The problem is that debt starts modifying your behavior. If you are in debt you are more likely to tolerate conditions you don't enjoy, e.g: if you live paycheck to paycheck, being happy at your job is not your top priority.

teslaberry 10y ago

so funny because when you are paying your taxes you are paying not only your own debt, but the debt of major banks, major government sponsored financial entities , insurance company bailouts, the debt of military contractors -------- you are paying for what was spent by the government on all of these guy upfront......and it's your debt............they call it taxes. so you are in big debt and you're paying it off!. it's just , you didn't spend most of it.

doctorcroc 10y ago

Bourdain is an OG. I've always admired his candor and ability to reflect on the things most important in life (and he knows it first-hand, having traveled nearly every where) -- time, lack of stress, and the enjoyment of good food with good people. Cheers!

appleiigs 10y ago

Debt conversations always have these weird grandpa rules of thumb and words of wisdom, as you can see in the other comments. The proper use of debt is to match the debt with the asset. If you are buying a house, a 25-year mortgage matches the value of the house. If you are buying a car, a 5-year loan matches the value of the car. If you are buying a sandwich with a credit card, well... you should pay off your credit card at the end of the month because that sandwich is long gone.

piker 10y ago
Were you deliberately using the "match the debt with the asset" rule of thumb as an example of your first sentence?
- appleiigs 10y ago
  No, matching debt to assets is proper finance theory and practice. I was referring to "don't use any debt" and "debt is manifestation of risk" and "With great power comes great responsibility" and "use debt for investments, not expenses".
  - piker 10y ago
    And for banks that borrow short and lend long? They're just ignorant of "proper finance theory and practice"? Or have they properly understood that the risks involved in credit transactions have a bit more nuance than your rule allows for?
    - appleiigs 10y ago
      Banks are definitely measured on Asset Liability Management by policy and regulations. Deviations from being matched would be an active choice, while being matched would be the default/starting point.
tonyedgecombe 10y ago
It seems to me the people struggling with their finances don't have a problem matching debt to assets, it's they have a problem with too much house or too much car.

ianai 10y ago

There was a point where financing the government was a patriotic act. People would give other people War Bonds as presents. But now the patriotic thing is to trash talk which ever party is in the administration and wax poetic about governmental corruption. You can't have it both ways. You can't say no to financing your government and scorn corruption. Either you're okay paying for your government, you're okay with someone else paying for your government (to possibly include other governments!), or you're okay with your government paying for itself with printed money. (That last option, seignorage, leads to hyperinflation.)

taurath 10y ago
The government needs better PR frankly, instead of allowing itself to be a punching bag all day. Nobody can even imagine how many things the government and your tax dollars provide.
- coderjames 10y ago
  I was thinking about this recently when I filed my taxes. Maybe if they provided some kind of itemized receipt? "You paid $x in taxes. This was distributed as $y to infrastructure, $z to education, $w to defense" etc.
  - patrickaljord 10y ago
    Your tax dollar don't pay for $y, $z or $w. You pay for the national debt mostly at this point. The government overspends and gets its money either from debt or from over printing. Even if top 10 of fortune 500 paid 100% taxes, it would still not cover spending. Just saying.
    - maxerickson 10y ago
      Interest on the national debt is a small portion of the US budget: https://www.nationalpriorities.org/budget-basics/federal-budget-101/spending/ https://www.nationalpriorities.org/budget-basics/federal-bud... Even if you just look at discretionary spending, debt payments are not a large portion of spending. New borrowing is also larger than the interest payments.

grecy 10y ago

I have always viewed debt as a promise of future labor. i.e. if I have debt now, I must go to work in the future to pay it back. Because I have no debt, I don't have to go to work, and can spend the next two years driving around Africa. I'm so passionate about saving money I even wrote an e-book on how to do it: http://theroadchoseme.com/work-less-to-live-your-dreams http://theroadchoseme.com/work-less-to-live-your-dreams

camillomiller 10y ago
I think you were downvoted for self-promotion, but I don't care, your blog is great. Good luck with your travels!
harryh 10y ago
Now turn it around. What is money? Money is someone else's debt. Money is a promise that someone else will go to work for you in the future to pay it back.
SN76477 10y ago
I view debt as the same way. Debt is a form of pressure and motivation. I do not however like to save money, I prefer to invest it. I will get your ebook, thanks for the info.
amelius 10y ago
> I have always viewed debt as a promise of future labor. And how do you feel about venture capital?

Mikeb85 10y ago

If your return on capital is higher than the interest rate, you should take on debt. If it's not (and for most it's not), then you shouldn't. Pretty simple. Anyhow, the article is an interesting anecdote about Bourdains life, but has little to do with money. He makes money from TV and books, can live comfortably because he makes quite a bit, but he's no financial savant.

camillomiller 10y ago
Indeed. That's why Apple takes on debt and does bonds to pay dividends, buy back stock and other stuff they need to pay big money for. With their cash reserve money is dirty cheap and they can actually make more money cause people will rebuy their debt like hot cakes.
tonyedgecombe 10y ago
The return on capital includes a risk factor, there is no risk that you won't have to repay the debt (other than death or bankruptcy).
- paulddraper 10y ago
  Death won't automatically void the debt, though of course it's only the beneficiaries of your estate that will feel the effects.

Theodores 10y ago

> I didn’t put anything aside, ever. Money came in, money went out. I was always a paycheck behind, at least. I usually owed my chef my paycheck: again, cocaine. Like I said, until I was 44, I never even had a savings account. Anyone who has ever spent any of their money on class 'A' drugs is not in any position to dispense any type of wise financial advice.

popularrecluse 10y ago
But wisdom usually comes from experience.
tonyedgecombe 10y ago
Converts love to proselytize.
Bartweiss 10y ago
I mean... there's even a note to that effect at the top of the article. Bourdain says like five times that he makes decisions for convenience and security over efficiency. This isn't advice on how to maximize your wealth, it's a personal account of how he lived and how debt and wealth influence him on an emotional level.

strictnein 10y ago

I've been to a couple of his tour stops, where he gives talks about various topics (usually food and travel and his TV shows are the main things discussed). If you find Bourdain interesting, you'll probably find his talks quite entertaining. Anyways, at one of his shows he straight up said that each of his stops pays for a year of private schooling in NYC for one of his kids. Thought it was an interesting way of looking at things.

Draiken 10y ago

This is an interesting story and all that, but honestly, he only got to the "debt free nirvana" after becoming rich and famous. I pay my credit card, pay my taxes and my mortgage, but that takes almost all my money away. So if I look at it my net worth it is basically negative. Only way I'll get to the debt free nirvana is if I get rich somehow. It's not a real choice. So the entire premise of the article is pretty weak.

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mattcantstop 10y ago
> Only way I'll get to the debt free nirvana is if I get rich somehow. It's not a real choice. So the entire premise of the article is pretty weak. No, that certainly is not the case. Slow and steady saving and investing is the way to become wealthy. Check out www.reddit.com/r/personalfinance or www.mrmoneymustache.com as examples of this.
- Draiken 10y ago
  I've seen the Mustache site before, but let's be honest here: this only works if you live a frugal life style. It might work if you are alone with no attachments or your SO has the same views, but not for anyone else. I'm trying to become less attached to things and have gone a long way, but telling your wife and kid to not want to eat out, for instance, is almost impossible...

alistproducer2 10y ago

> Nobody likes paying high taxes, but I don’t mind. It's actually amazing how little most Americans pay in taxes yet we complain. This year my effective tax rate was ~8%. Of course this is by using every legal tax shelter available. Considering what I get from the Federal government here in the US, I think 8% is actually fair. If it spent more of my money doing thing like taking care of home and quit with the empire building I'd be happy to pay more.

plandis 10y ago
8%? You either live very close to (or under) the poverty line or are fabulously wealthy. I'm assuming that you're rich since you mentioned tax shelters. TurboTax put my effective tax rate this year at 26%.
- alistproducer2 10y ago
  Nope. 2 income, low 6 figures. There are pretty significant shelters for us middle class folks. $36k available in 401k contributions alone.another $6.5 k for HSA. $5k for childcare spending along with credits and deductions for the same thing. The key is to have a cost of living where u can afford to take advantage of them all.

2color 10y ago

My response to the article: https://medium.com/@2color/my-response-to-anthony-bourdain-does-not-want-to-owe-anybody-even-a-single-dollar-bc6d5b3db40e#.kao1e5c62 https://medium.com/@2color/my-response-to-anthony-bourdain-d...