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> Everything is so easy when you don't have debt. A couple of days ago the current President of my country was asked what should one do if he had a hard time f

> Everything is so easy when you don't have debt. A couple of days ago the current President of my country was asked what should one do if he had a hard time finding a job, finally got rather low paying job, but he'd still like to start a family. He answered without a shred of hesitation that such people should borrow money from somewhere, effectively becoming indebted to some bank for the rest of their lives. It's a very common mindset, people are being trained to believe that living with a huge debt is a perfectly normal thing. It isn't. Just as you say all you need to do is to live within your means and rationalize your spendings a bit. It's surprising how many things can be "within your means", even with very little income, if you're willing to do some work on your own. I was way poorer than I'm now for most of my life, but I was never indebted to anyone. Instead of borrowing money I've learned to live making around $200 a month. That's of course another country, another currency and another economy, but to put things in perspective: that's less than one tenth of average income here. I learned to fix things that broke, learned to make things of my own, learned to recognize when something is worth its price and when it's not. I'm almost 30 now; I earn twice the average salary now, but I still make (some) furniture of my own, I still repair things around the house myself and I still don't buy the most expensive things "just because". I don't know about economy and such, maybe it really is beneficial for most people in the economy to borrow money and live way above their current means, but on a personal level taking on a debt looks like an economic suicide.

moron4hire 11y ago
>> I don't know about economy and such, maybe it really is beneficial for most people in the economy to borrow money and live way above their current means, but on a personal level taking on a debt looks like an economic suicide. If your view of a healthy economy is one that siphons money out of the working class and into the coffers of large corporations in an ever growing spiral of consumption, then yes, taking on debt "makes sense". If the amount of money being spent and the market capitalization of your largest firms are the only way a country knows how to measure its wealth, then it will clearly prioritize spending over all else. Personally, I think a healthy economy is one that meets the needs of its citizens. Why should 150 million people be "stimulated" and "incentivized" to spend money they don't have to make sure they all have new iPhones so Apple gets richer? Wouldn't it be better for those people to save their money and spend it on things that are actually important to them? Half those people spending half that money in their home towns probably goes a lot further. I was poor too, when I was a kid and entering my career. I fix stuff around my house, too. Why am I going to spend $1000 on a new TV when it's a $2 capacitor that is the problem? Maybe that's what it is. We don't trust a system that wasn't there for us. The modern era of data-fueled, giganto-corp protectionist capitalism is all about making sure the richest get their due before the rest of us. Don't get me wrong, I believe in capitalism. It's how small businesses work. I'd much rather give my money to a local shop ran by people in my own community, people I know, friends even. I know I'm helping them out, they know they're helping me out. That's healthy.
snowwrestler 11y ago
Debt is a tool--a really powerful one. Leaving it out of your financial toolbox can be quite limiting and make it harder to achieve financial stability. Most people do so out of a vague unease about it, rather than a full accounting for their risks and opportunities. Yes, taking on debt is a risk, but it is far from the worst financial risk you can face, because it is predictable and often tax-advantaged. If taken on for the right reasons, it can provide leverage to achieve returns that would otherwise be unavailable. For example, using mortgage to purchase property when you are young provides more time for compound appreciation of your property. And at least in the U.S., people who earn college degrees when they are young have average lifetime earnings improvements well in excess of the typical student loan costs.
- moron4hire 11y ago
  >> If taken on for the right reasons... Most people don't take it for the right reasons. They take it because they've been told to. And they aren't doing anything towards enhancing their understanding of debt. For example, lots of people will go into debt to go on international trips. We structure our travel on our credit card and pay it off right away because it pays us to fly again! But most people don't have that system in place, they run up the credit card debt and then take 6 months to pay it off. I just plain hate the idea of paying for something today that I used up yesterday. And I don't think the emotional impact can be overlooked. Even if you can make an argument to me that it would be "smart" to carry a transient purchase as debt (and I know you're not going to try to, I'm just making a hypothetical), I'd still feel bad about it, and that bad feeling is going to have a real impact on my quality of life. Before I was finally out of debt, I paid off my student loans before I paid off my car (when I had a car) because even though the APR was higher on the car, I could pay off the student loans sooner. It's a snowballing effect. It felt like an accomplishment and it helped me maintain my frugality. Telling someone with $30k in credit card debt (I know several people like this, it's not that uncommon these days) that they shouldn't run a balance on their credit cards isn't helping them. You've not told them anything they don't already know. But maybe they don't already know that they don't have to have a big house. That's the intention of my story, to try to jolt people out of their half-waking state. People aren't perfectly rational beings and it's probably stupid to expect them to be so. But there are simple rules of thumb that I think people can take to heart that will improve their overall outcome much better than telling them "you need to consider and be careful with the debt". People work much better with all-or-nothing measures, rather than measures that rely on subtlety and restraint. It's probably why no-carb diets work out better than calorie counting. It's not because carbs are particularly unhealthy, it's that people can't constrain themselves to the small portions necessary to count calories while eating complex carbohydrates. I know I can't. So what makes more sense? To repeatedly fail at exercising restraint? Or to succeed at a slightly less efficient plan? Even taking on a mortgage is most of the time a bad call for most people. They live in the house for 5 to 10 years, then move before they get even close to realizing the potential of the property. Then, instead of getting a similar-sized place, they get something larger, something that fits inside their paycheck. Even if they sold their previous house for a net profit, they just roll that over into the new house. The net effect is that they are constantly renting from the bank. That only makes sense if the mortgage costs less than rent for a similar place. If it doesn't, it's smarter to rent a place and sink the difference into a fund for buying a place when it does make sense to buy. But most people aren't going to keep track of their finances like that.
doc_holliday 11y ago
It's good for the economy in the short term because it brings demand forward (whether this is then repaid in more productivity in the future is the problem!) Terrible for individuals though, brings untold misery.

moron4hire 11y ago

>> I don't know about economy and such, maybe it really is beneficial for most people in the economy to borrow money and live way above their current means, but on a personal level taking on a debt looks like an economic suicide. If your view of a healthy economy is one that siphons money out of the working class and into the coffers of large corporations in an ever growing spiral of consumption, then yes, taking on debt "makes sense". If the amount of money being spent and the market capitalization of your largest firms are the only way a country knows how to measure its wealth, then it will clearly prioritize spending over all else. Personally, I think a healthy economy is one that meets the needs of its citizens. Why should 150 million people be "stimulated" and "incentivized" to spend money they don't have to make sure they all have new iPhones so Apple gets richer? Wouldn't it be better for those people to save their money and spend it on things that are actually important to them? Half those people spending half that money in their home towns probably goes a lot further. I was poor too, when I was a kid and entering my career. I fix stuff around my house, too. Why am I going to spend $1000 on a new TV when it's a $2 capacitor that is the problem? Maybe that's what it is. We don't trust a system that wasn't there for us. The modern era of data-fueled, giganto-corp protectionist capitalism is all about making sure the richest get their due before the rest of us. Don't get me wrong, I believe in capitalism. It's how small businesses work. I'd much rather give my money to a local shop ran by people in my own community, people I know, friends even. I know I'm helping them out, they know they're helping me out. That's healthy.

snowwrestler 11y ago

Debt is a tool--a really powerful one. Leaving it out of your financial toolbox can be quite limiting and make it harder to achieve financial stability. Most people do so out of a vague unease about it, rather than a full accounting for their risks and opportunities. Yes, taking on debt is a risk, but it is far from the worst financial risk you can face, because it is predictable and often tax-advantaged. If taken on for the right reasons, it can provide leverage to achieve returns that would otherwise be unavailable. For example, using mortgage to purchase property when you are young provides more time for compound appreciation of your property. And at least in the U.S., people who earn college degrees when they are young have average lifetime earnings improvements well in excess of the typical student loan costs.

moron4hire 11y ago
>> If taken on for the right reasons... Most people don't take it for the right reasons. They take it because they've been told to. And they aren't doing anything towards enhancing their understanding of debt. For example, lots of people will go into debt to go on international trips. We structure our travel on our credit card and pay it off right away because it pays us to fly again! But most people don't have that system in place, they run up the credit card debt and then take 6 months to pay it off. I just plain hate the idea of paying for something today that I used up yesterday. And I don't think the emotional impact can be overlooked. Even if you can make an argument to me that it would be "smart" to carry a transient purchase as debt (and I know you're not going to try to, I'm just making a hypothetical), I'd still feel bad about it, and that bad feeling is going to have a real impact on my quality of life. Before I was finally out of debt, I paid off my student loans before I paid off my car (when I had a car) because even though the APR was higher on the car, I could pay off the student loans sooner. It's a snowballing effect. It felt like an accomplishment and it helped me maintain my frugality. Telling someone with $30k in credit card debt (I know several people like this, it's not that uncommon these days) that they shouldn't run a balance on their credit cards isn't helping them. You've not told them anything they don't already know. But maybe they don't already know that they don't have to have a big house. That's the intention of my story, to try to jolt people out of their half-waking state. People aren't perfectly rational beings and it's probably stupid to expect them to be so. But there are simple rules of thumb that I think people can take to heart that will improve their overall outcome much better than telling them "you need to consider and be careful with the debt". People work much better with all-or-nothing measures, rather than measures that rely on subtlety and restraint. It's probably why no-carb diets work out better than calorie counting. It's not because carbs are particularly unhealthy, it's that people can't constrain themselves to the small portions necessary to count calories while eating complex carbohydrates. I know I can't. So what makes more sense? To repeatedly fail at exercising restraint? Or to succeed at a slightly less efficient plan? Even taking on a mortgage is most of the time a bad call for most people. They live in the house for 5 to 10 years, then move before they get even close to realizing the potential of the property. Then, instead of getting a similar-sized place, they get something larger, something that fits inside their paycheck. Even if they sold their previous house for a net profit, they just roll that over into the new house. The net effect is that they are constantly renting from the bank. That only makes sense if the mortgage costs less than rent for a similar place. If it doesn't, it's smarter to rent a place and sink the difference into a fund for buying a place when it does make sense to buy. But most people aren't going to keep track of their finances like that.

doc_holliday 11y ago

It's good for the economy in the short term because it brings demand forward (whether this is then repaid in more productivity in the future is the problem!) Terrible for individuals though, brings untold misery.