Pay off Debts now Yes or No?

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Tue, Jul 12, 2011 - 6:02pm Spinny
Dr Durden
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Twin Cities, MN
Joined: Jun 14, 2011
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Spinny wrote: I'm 23,

Spinny wrote:

I'm 23, married, no kids.

I believe in no debt if at all possible. We are saving until we can either purchase/build a home in full.

Currently we have

  • No debt.
  • 1,160 oz silver and 3 oz gold. (Aprox $46,000)
  • Aprox $20,000 cash.
  • Well over 1 yr food storage and all the necessities.

We rent a nice 2,000 sq ft house for $325/month. An awesome deal.

We have our bases covered in the event of total collapse. The fact that we don't own our home might alarm some but it makes sense for us because we have family who live on farms and would likely end up there anyway. I don't think two people trying to keep a homestead going would be the most ideal.

Perfect scenario would be for our investments to fair well enough for us to get a place sometime in the near future. GO SILVER BABY!

I had to check your location; didn't think this is still possible here, now, today in America. Very impressive, hat tip you you.

Got GIABO? "It's called the American dream, because you have to be asleep to believe it." ~George Carlin
Wed, Jul 13, 2011 - 1:22am
CharlesT4
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Edmonton,
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Joined: Jun 19, 2011
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Leverage

I use student loans as a low risk means to gain leverage on my physical holdings. I'm not waiting for the currency to collapse or for inflation to jet past 30%. What I am looking for is silver to appreciate by 30% to 40% for the next 10 years, simple interest. Every year that silver outperforms the nominal interest rate, which is 4% on my line of credit and interest free on my government loan, I pocket the difference in the form of physical silver.

IMO, this is the safest way to gain leverage to precious metals prices when using debt. I'm not sure what COMEX charges for margin, but I'm sure it is more that my average rate of 1.7%.

Right now I'm really liking the mining shares, but I'm going to have to wait until the beginning of the new school year for additional capital to put in the market. Would have loved to scope up SVM below $8. Maybe the EE can coordinate a massive raid for the end of august so I can get in on the cheap.

I like Robert Kiyosaki's idea of Good Debt Versus Bad Debt. Good debt makes you richer, bad debt makes you poorer. But at the end of the day, it comes down to personal preference. Running leveraged positions isn't for the faint of heart, I'm just glad I don't have to worry about margin calls.

Wed, Jul 13, 2011 - 3:35pm
Tom L
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Lower your Cash Outlays.

I think you should take a middle position based on your cash flow situation. Save some and pay down some. I wouldn't necessarily pay the highest interest rate first either. I would pay the smallest balance off first in order to free up the monthly cash.

In my case that would be a $4k car loan balance. By doing so that would free up $126/month, which you won't need to layout in the case of a negative hit to your cash flow, ie. job loss.

It'll do no good to pay $2k off a credit card debt if you owe $6k and then lose your job. Your monthly expenses will be the same. But, if you need that CC to live on while unemployed, having a lower overall cash-flow drain will give you more time to find work. Pay that car off or that student loan and the time demands on your money go down. If you don't lose your job, great. Then you paid a little extra in interest overall for the security of having lower cash outlays and a higher savings rate.

As well, I wouldn't hold zero cash. Have a store of a few grand b/c gold is not money. You can't get your oil changed with a gold coin.

Time Value of Money. Always.

Ta,

ps. @Spinny You are in excellent shape, sir. You have my respect.

-- Support bacteria, it's the only culture some people have. Need Goats or Chickens? Say hello at: www.facebook.com/PirateDogAcres
Thu, Jul 14, 2011 - 6:30am
asymptote
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Australia
Joined: Jun 16, 2011
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I did.

I was lucky though. A very well timed retrenchment from a very wealthy company paid out 14 months equivalent after tax. I used that, to help sell my house, buy a property out of the city and now rent in our chosen location, and put an family granny in the doomstead. My fear, if the banking system in nationalized, what's to stop the government rigging some kind of deal where debt=tax. I didn't want to live with that legacy. I hated having debt as well.

I did consider leaving the country with what I had however... :)

At the end of the day, I still have a a big enough stack. Debt free is really nice, because home ownership glues you to a property and makes it really difficult to be fluid, and that will be important in the times coming. My 12 month rental agreement expired, so it's month by month now. I can leave at any point. I have no city property crash liability.

One idea however. Restructure your mortgages, increasing the LVR to maximum. Get a mortgage with an offset account, then put the proceeds in to the offset account. It's there in an emergency, but you are paid in advance now by months to years. When TSHTF everyone else will default before you will so you have time to se how the banks\gov react and plan accordingly.