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Paying off debt is usually good financial advice, but it is arguably the wrong thing to do if you expect higher and higher inflation (which you mentioned is you

by ak_111 5y ago

Paying off debt is usually good financial advice, but it is arguably the wrong thing to do if you expect higher and higher inflation (which you mentioned is your expectation). If you expect inflation to keep increasing, then one of the financially smart things to do would be to take as much debt as possible and purchase hard assets with the debt (such as land or commodities). For me personally, I wouldn't follow this advise because I don't like the psychological burden of being indebted. I just wanted to highlight how higher inflation expectations disrupts traditional saving advice. It nullifies the idea of hoarding lots of cash.

actually_a_dog 5y ago
Correction: paying off fixed rate debt is arguably the wrong thing to do. By all means, take a good, hard look at any variable or extremely high interest rate debt.
astrange 5y ago
Keep in mind that if you get your advice from the internet, the one constant thing you'll see is everyone is always claiming the economy is about to collapse and there's about to be hyperinflation. (And yes, we are seeing inflation for the rest of this year. No gigantic Volcker rate hikes though.) I don't know why they don't constantly predict deflationary spirals instead, which are even worse, but it's probably childhood memories of the 70s.
bluGill 5y ago
The question was about bad times not how to invest if you do well in otherwise bad time. If you lose your job you need a little debt as possible, if you have zero debt and a paid off house your expenses are food and heat - you could afford a large house (not a mansion) working minimum wage, which might happen in the worst cases. If you know for sure inflation will be through the roof, but you will keep your job: then taking on more debt at a fixed low rate now, and investing in something that grows is the right thing. However this is risky. I can tell you what investments would have worked in the past, but it isn't hard to find historical advice that turned out bad. As such I would never recommend taking on more debt to invest even though the math seems to work. Though not paying off the house and instead investing in something else might be good advice. Note that when those who retire early are surveyed most paid off the house early. Even though they know the math says index funds are a better investment, the peace of mind from not having dept is something they all say is important. In short the best financial advice isn't always the advice that works in practice. YMMV

by ak_111 5y ago

actually_a_dog 5y ago

Correction: paying off fixed rate debt is arguably the wrong thing to do. By all means, take a good, hard look at any variable or extremely high interest rate debt.

astrange 5y ago

Keep in mind that if you get your advice from the internet, the one constant thing you'll see is everyone is always claiming the economy is about to collapse and there's about to be hyperinflation. (And yes, we are seeing inflation for the rest of this year. No gigantic Volcker rate hikes though.) I don't know why they don't constantly predict deflationary spirals instead, which are even worse, but it's probably childhood memories of the 70s.

bluGill 5y ago

The question was about bad times not how to invest if you do well in otherwise bad time. If you lose your job you need a little debt as possible, if you have zero debt and a paid off house your expenses are food and heat - you could afford a large house (not a mansion) working minimum wage, which might happen in the worst cases. If you know for sure inflation will be through the roof, but you will keep your job: then taking on more debt at a fixed low rate now, and investing in something that grows is the right thing. However this is risky. I can tell you what investments would have worked in the past, but it isn't hard to find historical advice that turned out bad. As such I would never recommend taking on more debt to invest even though the math seems to work. Though not paying off the house and instead investing in something else might be good advice. Note that when those who retire early are surveyed most paid off the house early. Even though they know the math says index funds are a better investment, the peace of mind from not having dept is something they all say is important. In short the best financial advice isn't always the advice that works in practice. YMMV