4 ms·

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.

by nkozyra 10y ago

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.
chjohasbrouck 10y ago
Risk is one of the things that debt can represent, sometimes, but there can be debt that doesn't involve any risk, and there are risks that don't involve debt. What's risky about using a credit card to buy a kayak? And how does investing money you already have in small cap equities represent a debt? I think for the vast majority of individuals just trying to make good personal finance decisions, "don't take on debt" is (on average) great advice.
- mockery 10y ago
  (I don't really agree with the simplification of debt = risk. Despite that...) > What's risky about using a credit card to buy a kayak? If you unexpectedly lose your job or are otherwise unable to pay off the card on the schedule you expected, you'll incur significant interest on the debt and end up having to pay far more than you originally planned. Compared with saving up money and paying in cash, there are clearly additional risks incurred when using the card. (If you had the money to pay off the card already and are just using the CC as a convenient method of payment, the risk is obviously far lower.)
  - hueving 10y ago
    >If you had the money to pay off the card already and are just using the CC as a convenient method of payment, the risk is obviously far lower Right, but you're still taking on debt for the month and then paying it in full. What is the risk?
    - mseebach 10y ago
      As with risks, so with debts. There are large ones and small ones. Paying down a balance on a credit card every month is pretty low risk, but not as low as paying with a debit card in the first place. Also, a credit card you're paying down monthly isn't really 'debt', isn't it usually something you do for the air miles or cashback?
      - hueving 10y ago
cobookman 10y ago
I sometimes wonder if the attitude of take on risks is somewhat of a survivorship bias. I'd assume that the expected return of the safe choice is always higher than that of risky ones. Now you could make a ton of money by taking risk, but its kind of like playing the lotto. Few winners lots of losers.
yequalsx 10y ago
I think people don't consciously think in these terms. I once had debt in the form of student loans and a car loan. Becoming debt free was a great relief. It removed a ton of stress and provided me with freedom. The emotional well being from being debt free is not something that can easily be quantified in monetary terms. For the average person, I see it as "don't take on debt" being akin to "don't willingly get into a situation where you may have to worry".
jeffdavis 10y ago
To some, debt is a hit to one's freedom, dignity, and privacy. Most debt requires you to give a lot of personal information, tell a bank what you are buying, and then stick to a fairly arbitrary payment plan with various penlties for non-compliance. So it's perfectly sensible to minimize your debt for non-financial reasons.
- usaphp 10y ago
  buying a house, car, going to school, university, having a baby also requires you to give a lot of personal information, it does not mean its a reason not to use those things...
  - hueving 10y ago
    >it does not mean its a reason not to use those things... It is for people really sensitive to privacy that are distrustful of institutions.
    - pc86 10y ago
      Not having a baby because of the privacy implications is not a choice a mentally well person makes.
      - hueving 10y ago
        There is a non-trivial portion of the home birth movement that does it because of distrust of institutionalized medicine.
        usaphp 10y ago
        Does it mean their baby will live without paperwork and no health insurance?
        hueving 10y ago
        Yes. Some have even made the argument that this makes voter identification requirements racist (due to the higher home birth participation of African Americans).
appleiigs 10y ago
Debt can reduce risk. Many corporations use leverage up a project, say 90%, so they only need to put in the 10%. If something goes wrong, they lose the 10% and they walk.
- icantdrive55 10y ago
  Yea, but they are usually LLC's. If I could have a do over, I would enter society as an LLC. "Here's my baby--Donald J. Liability proof LLC. Hell--Lawyers do it. Doctors used too, but I don't see it as much. I don't know why? I recall LLC's are easily broken up when used by certain professions. I see nothing wrong with debt as long as your Judgement Proof, or you can count on a clean Chapter 7. I have no love for CC companies.
paulddraper 10y ago
Risk is a component of debt. Debt has risk, just as investment has risk. The risk comes from the underlying reason to borrow.

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.

by 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.

chjohasbrouck 10y ago

Risk is one of the things that debt can represent, sometimes, but there can be debt that doesn't involve any risk, and there are risks that don't involve debt. What's risky about using a credit card to buy a kayak? And how does investing money you already have in small cap equities represent a debt? I think for the vast majority of individuals just trying to make good personal finance decisions, "don't take on debt" is (on average) great advice.

mockery 10y ago
(I don't really agree with the simplification of debt = risk. Despite that...) > What's risky about using a credit card to buy a kayak? If you unexpectedly lose your job or are otherwise unable to pay off the card on the schedule you expected, you'll incur significant interest on the debt and end up having to pay far more than you originally planned. Compared with saving up money and paying in cash, there are clearly additional risks incurred when using the card. (If you had the money to pay off the card already and are just using the CC as a convenient method of payment, the risk is obviously far lower.)
- hueving 10y ago
  >If you had the money to pay off the card already and are just using the CC as a convenient method of payment, the risk is obviously far lower Right, but you're still taking on debt for the month and then paying it in full. What is the risk?
  - mseebach 10y ago
    As with risks, so with debts. There are large ones and small ones. Paying down a balance on a credit card every month is pretty low risk, but not as low as paying with a debit card in the first place. Also, a credit card you're paying down monthly isn't really 'debt', isn't it usually something you do for the air miles or cashback?
    - hueving 10y ago

cobookman 10y ago

I sometimes wonder if the attitude of take on risks is somewhat of a survivorship bias. I'd assume that the expected return of the safe choice is always higher than that of risky ones. Now you could make a ton of money by taking risk, but its kind of like playing the lotto. Few winners lots of losers.

yequalsx 10y ago

I think people don't consciously think in these terms. I once had debt in the form of student loans and a car loan. Becoming debt free was a great relief. It removed a ton of stress and provided me with freedom. The emotional well being from being debt free is not something that can easily be quantified in monetary terms. For the average person, I see it as "don't take on debt" being akin to "don't willingly get into a situation where you may have to worry".

jeffdavis 10y ago

To some, debt is a hit to one's freedom, dignity, and privacy. Most debt requires you to give a lot of personal information, tell a bank what you are buying, and then stick to a fairly arbitrary payment plan with various penlties for non-compliance. So it's perfectly sensible to minimize your debt for non-financial reasons.

usaphp 10y ago
buying a house, car, going to school, university, having a baby also requires you to give a lot of personal information, it does not mean its a reason not to use those things...
- hueving 10y ago
  >it does not mean its a reason not to use those things... It is for people really sensitive to privacy that are distrustful of institutions.
  - pc86 10y ago
    Not having a baby because of the privacy implications is not a choice a mentally well person makes.
    - hueving 10y ago
      There is a non-trivial portion of the home birth movement that does it because of distrust of institutionalized medicine.
      - usaphp 10y ago
        Does it mean their baby will live without paperwork and no health insurance?
        hueving 10y ago
        Yes. Some have even made the argument that this makes voter identification requirements racist (due to the higher home birth participation of African Americans).

appleiigs 10y ago

Debt can reduce risk. Many corporations use leverage up a project, say 90%, so they only need to put in the 10%. If something goes wrong, they lose the 10% and they walk.

icantdrive55 10y ago
Yea, but they are usually LLC's. If I could have a do over, I would enter society as an LLC. "Here's my baby--Donald J. Liability proof LLC. Hell--Lawyers do it. Doctors used too, but I don't see it as much. I don't know why? I recall LLC's are easily broken up when used by certain professions. I see nothing wrong with debt as long as your Judgement Proof, or you can count on a clean Chapter 7. I have no love for CC companies.

paulddraper 10y ago

Risk is a component of debt. Debt has risk, just as investment has risk. The risk comes from the underlying reason to borrow.