Well here goes pharmseller,
Say you have a debt. Your debt is "Y" in value. The bank will charge interest on your debt. You will pay "X" in interest to the bank.
When you do your taxes you can take "X" off of your earned income because it went toward loan interest. Now the feds will take less from your income.
Geuss what? You just paid 100% of "X" to the bank. Every last dime. If you had kept "X" and paid taxes on it, the feds would only take a percentage and the bank got jack didley.
For example: You have $50,000 in debt to the bank at 10%. That's $5000 in interest. When you give it to the bank, there is nothing left. If you had kept it, you would pay taxes on it as income. In the 25% bracket that would be $1250; you get to keep the other $3750. And the bank gets $0.
So now John Q. Public is $3750 richer, even without that tax "deduction" of loan interest.
OT - What you hope to do when you retire...
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Please post political post in the new Politics forum.
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Ysabel Kid
- Moderator
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Andrew -
Your math and economics are impeccable, but you are assuming that people can have no debt. Some can, but for most of us, as Quinn stated, it is a matter of managing the debt we have logically. For most Americans, owning a home outright, especially while young, is just not possible. So some debt - a home loan - is common.
The alternative is renting. That is not a wise economic choice, as despite the recent housing slump and corresponding adjustment to home values, homes and land tend to increase in value every year. Part of building wealth is capturing that equity build - which you as a home do, even with the loan (the bank does not).
So, if you have debt (again, being debt-free is the ideal), should it be "good debt" or "bad debt"? A home loan is "good debt" in that you are borrowing to purchase an appreciating asset, and you do get to claim the interest on the loan to decrease your tax liability. You are a bit too young to remember, but we used to be able to claim ALL interest to reduce our tax burden - car loans, credit cards, etc. Now we can not. So a "bad loan" would be paying off a depreciating asset (a stereo on a credit card balance, for example), and not being able to write off any of it.
Using your example, if the same person paid off their $50K house loan, but had $50K in school loans, credit card balances, etc., they would be out the interest and not have the write off.
"Be not a lender or a borrower" was sage advice from Ben Franklin. However, owning your home is one of the safest means to building wealth and a safe retirement, so borrowing when young to accomplish this - within reason - is indeed a wise economic choice.
One other point. Your credit rating is established by your performance against payments for loans. Unless one is fabuously wealthy - in which case none of this discussion applies - the only way a person establishes credit is that payment history. Having a home automatically increases your credit rating (you are more stable than those who don't own a home), and making the payments on time increases your credit rating again. May not be important to one who carries no debt, but it the poop hits the propeller, it's nice to have the ability to access loans.
Your math and economics are impeccable, but you are assuming that people can have no debt. Some can, but for most of us, as Quinn stated, it is a matter of managing the debt we have logically. For most Americans, owning a home outright, especially while young, is just not possible. So some debt - a home loan - is common.
The alternative is renting. That is not a wise economic choice, as despite the recent housing slump and corresponding adjustment to home values, homes and land tend to increase in value every year. Part of building wealth is capturing that equity build - which you as a home do, even with the loan (the bank does not).
So, if you have debt (again, being debt-free is the ideal), should it be "good debt" or "bad debt"? A home loan is "good debt" in that you are borrowing to purchase an appreciating asset, and you do get to claim the interest on the loan to decrease your tax liability. You are a bit too young to remember, but we used to be able to claim ALL interest to reduce our tax burden - car loans, credit cards, etc. Now we can not. So a "bad loan" would be paying off a depreciating asset (a stereo on a credit card balance, for example), and not being able to write off any of it.
Using your example, if the same person paid off their $50K house loan, but had $50K in school loans, credit card balances, etc., they would be out the interest and not have the write off.
"Be not a lender or a borrower" was sage advice from Ben Franklin. However, owning your home is one of the safest means to building wealth and a safe retirement, so borrowing when young to accomplish this - within reason - is indeed a wise economic choice.
One other point. Your credit rating is established by your performance against payments for loans. Unless one is fabuously wealthy - in which case none of this discussion applies - the only way a person establishes credit is that payment history. Having a home automatically increases your credit rating (you are more stable than those who don't own a home), and making the payments on time increases your credit rating again. May not be important to one who carries no debt, but it the poop hits the propeller, it's nice to have the ability to access loans.
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Idahoser
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Andrew
- Advanced Levergunner
- Posts: 2043
- Joined: Thu Sep 06, 2007 5:30 pm
- Location: Southern Missouri
Kid/pharmseller,
Yes, the idea I laid out assumes no debt, but, it is an example to show how it would be with no debt: fantastic.
I agree. Having debt towards a home is 99% of peoples fate. A necessary evil, if you will. Renting is great, if you are a landlord.
I was blessed to have taken a debt/money management course last year at church. It put an entirely new view on how I spent the money I had. Since the course I have had little tolerence for debt in my life.
If I can stick to my retirement plan, it would atcually only take about 30 more years for me to reach financial security. Living off the interest of a huge principal. Then when I croak, the youngin's will get a $#@!-load of money toward their retirement.
Keep that cycle up, and my great-grandchildren will retire as multi-millionaires. That would be cool.
Yes, the idea I laid out assumes no debt, but, it is an example to show how it would be with no debt: fantastic.
I agree. Having debt towards a home is 99% of peoples fate. A necessary evil, if you will. Renting is great, if you are a landlord.
I was blessed to have taken a debt/money management course last year at church. It put an entirely new view on how I spent the money I had. Since the course I have had little tolerence for debt in my life.
If I can stick to my retirement plan, it would atcually only take about 30 more years for me to reach financial security. Living off the interest of a huge principal. Then when I croak, the youngin's will get a $#@!-load of money toward their retirement.
Keep that cycle up, and my great-grandchildren will retire as multi-millionaires. That would be cool.
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pharmseller
- Senior Levergunner
- Posts: 1005
- Joined: Fri Mar 30, 2007 9:17 am
- Location: Willamette Valley, OR, USA
Andrew,Andrew wrote:Kid/pharmseller,
Yes, the idea I laid out assumes no debt, but, it is an example to show how it would be with no debt: fantastic.
I agree. Having debt towards a home is 99% of peoples fate. A necessary evil, if you will. Renting is great, if you are a landlord.
I was blessed to have taken a debt/money management course last year at church. It put an entirely new view on how I spent the money I had. Since the course I have had little tolerence for debt in my life.
If I can stick to my retirement plan, it would atcually only take about 30 more years for me to reach financial security. Living off the interest of a huge principal. Then when I croak, the youngin's will get a $#@!-load of money toward their retirement.
Keep that cycle up, and my great-grandchildren will retire as multi-millionaires. That would be cool.
I read a book (Die Broke, by Stephan Pollan and Mark Levine) that addressed the issue of large inheritances. In most cases, the kids turned out pretty poorly if they knew they had a pile of money waiting for them. It suppresses, or even kills, initiative, as well as creating family stress. Why work or strive if you know you don't need to?
Remember how sweet it felt to own your first car/gun/whatever knowing that you purchased it with your own money? Paper route, boxboy, any job, but what you bought came from your labor, it wasn't given to you for free. As a result you probably treasured it.
I believe that things that are gotten without being earned have far less value (sometimes no value at all) compared to things that are earned.
I really recomend the book.
http://books.google.com/books?id=1AQ0Kh ... il#PPA4,M1
I hope this link turns out, it's the entire text from Amazon.
It's a noble sentiment to want our kids to have it better than we did, but let them earn their way. They turn out better.
Quinn
We are determined that before the sun sets on this terrible struggle, our flag will be recognized throughout the world as a symbol of freedom on the one hand, of overwhelming power on the other.
General George C. Marshall, 1942
General George C. Marshall, 1942
I retired last November @ age 49. I can not express enough that you need to plan and invest. I did and it is working out just right. Actually, I don't know how I ever had the time to work. I stay plenty busy doing the things I want to and I seem to be pretty productive right now.
Yesterday I got up, played on the puter till daylight and then went to the hunt club to listen for gobblers and to do a little arrowhead hunting. Then went to the gun store and sat around awhile. Came home and played in the garden and then back to the woods with the wife and dogs for a little more arrowhead hunting.
Today I will hit the woods for awhile, go to a local auction and finish up with a ride down to the river. Yep - I'm busy.
On a serious note, make sure you plan for your health benefits (insurance). I had a state plan that I was able to continue, but it is very expensive and I can not get a private plan due to high blood pressure.
Yesterday I got up, played on the puter till daylight and then went to the hunt club to listen for gobblers and to do a little arrowhead hunting. Then went to the gun store and sat around awhile. Came home and played in the garden and then back to the woods with the wife and dogs for a little more arrowhead hunting.
Today I will hit the woods for awhile, go to a local auction and finish up with a ride down to the river. Yep - I'm busy.
On a serious note, make sure you plan for your health benefits (insurance). I had a state plan that I was able to continue, but it is very expensive and I can not get a private plan due to high blood pressure.
I will retire in 2 years 10 months. I will have 32 years in with a large Federal Natural Resource agency. I have no debt, even credit cards. Kids will be through college. I plan to buy a lathe and milling machine and have fun tinkering with guns and doing some general repair work on only those projects I choose.
3855
A Winchester Collector
A Winchester Collector
Let's see now ....
I am doing what I like doing
I hunt
I shoot
I reload
I cast bullets
I travel
I get to talk to people about eternity and hopefully help point some in the right direction
I write
I get to meet the greatest people in the world all the time
I find myself caught up in adventures across the country and around the world from time to time
I get to walk with people through some tough times
I enjoy what I am doing
Why the heck would I want to retire?
I am doing what I like doing
I hunt
I shoot
I reload
I cast bullets
I travel
I get to talk to people about eternity and hopefully help point some in the right direction
I write
I get to meet the greatest people in the world all the time
I find myself caught up in adventures across the country and around the world from time to time
I get to walk with people through some tough times
I enjoy what I am doing
Why the heck would I want to retire?
I hoped to go hunting, shooting, boating, fishing, and a lot of that with the grandkids. There have been a couple of bumps in the road as parents have sickened and died. This has kept me pretty busy and given less time for actual shooting and hunting than I would have liked. I do get to spend some time here though... My wife is going to buy some "investment" property which means I'll be doing maintenance on three houses. Also, I've been considering going back to work full-time after Mom's situation changes to allow that. Retirement? Hah!
Sincerely,
Hobie
"We are all travelers in the wilderness of this world, and the best that we find in our travels is an honest friend." Robert Louis Stevenson
Hobie
"We are all travelers in the wilderness of this world, and the best that we find in our travels is an honest friend." Robert Louis Stevenson
long term plan
I have left full time work with tools and gone into a consulting role.
After 30 years working Union for a couple fo major electric companies the pensions are taken care of.
I am 49 this year. I figure to work this safety gig for a few years.. or shift into sales. Or I could work out of the Hall a few months every year. I have opitions.
Wife found a job that suits her education. She should be able to retire her students loans quickly. We helped one of the kids with college ... he graduates next year... my parent loans represent skipping a new car for 5 years.. so I figure that was a good investment. If she stays in her job for 10 -15 years she will have a good pension too.
I still own a house in a depressed market. I can make the payment and let it set empty... I may lease it this spring. I hate to do that... a buyer will show up as soon as the contract is inked.
Renting may have some tax advantages. If I wait and sell after the "comeback" I should have a pretty good chunk of equity to roll into other investments.
I dont really think I will retire in the classic sense. I am looking to maybe build a few saddles, or open a gun and pawn shop or something. I see taking a few horses to board and running a few beef to pay property taxes.
If you pay off early or not..your house is a good savings account... markets slump but if you keep it long enough you will make some money.
~Jeff
After 30 years working Union for a couple fo major electric companies the pensions are taken care of.
I am 49 this year. I figure to work this safety gig for a few years.. or shift into sales. Or I could work out of the Hall a few months every year. I have opitions.
Wife found a job that suits her education. She should be able to retire her students loans quickly. We helped one of the kids with college ... he graduates next year... my parent loans represent skipping a new car for 5 years.. so I figure that was a good investment. If she stays in her job for 10 -15 years she will have a good pension too.
I still own a house in a depressed market. I can make the payment and let it set empty... I may lease it this spring. I hate to do that... a buyer will show up as soon as the contract is inked.
Renting may have some tax advantages. If I wait and sell after the "comeback" I should have a pretty good chunk of equity to roll into other investments.
I dont really think I will retire in the classic sense. I am looking to maybe build a few saddles, or open a gun and pawn shop or something. I see taking a few horses to board and running a few beef to pay property taxes.
If you pay off early or not..your house is a good savings account... markets slump but if you keep it long enough you will make some money.
~Jeff
Retired almost 2 yrs. now....& still learning how to do
Been 2 yrs and took a 3 monther from N.Y. and got to Ariz. up to Utah, Colo. and putted home with truck & camper. Hunted 2 weeks in Pa. each year and a week around hear. Shoot alittle IDPA weekly,IPSC occassionally, hit the gym with wife. Work on house projects and have a good time. Just bought a plumbers furnace (old but needs alittle cleanup and a valve replaced)Cost $25 but seems to be nice shape. Keep u posted.afish470 
afish4570
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new pig hunter
- Senior Levergunner
- Posts: 1362
- Joined: Fri Sep 14, 2007 5:11 pm
- Location: SoCal
I was able to retire last year.
Plan # 1: become a better guitar player ... no progress yet.
Plan # 2: go pig hunting more often ... nope, hasn't happened.
Been out shooting a lot more, read 2 dozen books I wouldn't have otherwise read, taken more afternoon naps, slept till 9am without guilt.
Currently negotiating for some part-time work in the nuke industry.
In general: enjoying things while I continue to decompress from the working world.
Cheers,
Carl
Plan # 1: become a better guitar player ... no progress yet.
Plan # 2: go pig hunting more often ... nope, hasn't happened.
Been out shooting a lot more, read 2 dozen books I wouldn't have otherwise read, taken more afternoon naps, slept till 9am without guilt.
Currently negotiating for some part-time work in the nuke industry.
In general: enjoying things while I continue to decompress from the working world.
Cheers,
Carl
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gundownunder
- Senior Levergunner
- Posts: 1449
- Joined: Fri Sep 07, 2007 12:02 pm
- Location: Perth. Western Australia
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PPpastordon
- Levergunner 2.0
- Posts: 237
- Joined: Mon Sep 03, 2007 7:37 pm
- Location: Indiana
If you read this far you also read JimT's post. He travels more than I do, but aside from that my life is about like his. I also like it!
The closest I want to ever come to retirement is one of my favorite sayings; "I got tired yesterday and am retired today!"
Grace and Peace.
The closest I want to ever come to retirement is one of my favorite sayings; "I got tired yesterday and am retired today!"
Grace and Peace.
Pastordon
Pastordon's Blog
The man who thinks he knows something does not yet know as he ought to know. (1 Cor. 8:2)
Pastordon's Blog
The man who thinks he knows something does not yet know as he ought to know. (1 Cor. 8:2)
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pharmseller
- Senior Levergunner
- Posts: 1005
- Joined: Fri Mar 30, 2007 9:17 am
- Location: Willamette Valley, OR, USA
Just be sure to pick the muslims who want to kill good people. There's a bunch of muslims out there who just want to live and let live.Bogie35 wrote:It'll probably be another 25 years, but I'm going to travel the planet for a few years. Then I'm going to arm myself and become the first serial killer in history to target child molesters, child abusers, drug dealers, rapists, gangster rappers and muslims. Mums the word, ok?
bogie
Quinn
We are determined that before the sun sets on this terrible struggle, our flag will be recognized throughout the world as a symbol of freedom on the one hand, of overwhelming power on the other.
General George C. Marshall, 1942
General George C. Marshall, 1942
I have been so busey for the past two weeks, this is the frist time I have been able to check the forum.
This topic captivated me , as I have been planning my retirement for several years now ( even though it seems to be a million years away ).
I will drive in the fast lane, about 30 mph or so, untill about 7:00am, then I will go to Hardees and wait untill some one comes in. I will then cut in line in front of them to complain about the ," Rotten coffee from the bottom of the pot...".
Then I will go back to the highway, and drive about 30mph in the fast lane untill about 6:30, then I will go tho the movie theater, and pretend that I don't understand the prices.The rest of the day will be filled with prank calls to whoever will answer the phone.
For example, I will call a random number, tell the person on the other line I am dying, and need them to help me with my will...
I will be the biggest bastard ever...
...and , for extra income, I will be a Wal-Mart greeter.
" Thanks, come again!" See , I have been practiceing!
By the way , I am sorry to those who know what I am talking about. It has been crazy here. I'll keep my word , though.
This topic captivated me , as I have been planning my retirement for several years now ( even though it seems to be a million years away ).
I will drive in the fast lane, about 30 mph or so, untill about 7:00am, then I will go to Hardees and wait untill some one comes in. I will then cut in line in front of them to complain about the ," Rotten coffee from the bottom of the pot...".
Then I will go back to the highway, and drive about 30mph in the fast lane untill about 6:30, then I will go tho the movie theater, and pretend that I don't understand the prices.The rest of the day will be filled with prank calls to whoever will answer the phone.
For example, I will call a random number, tell the person on the other line I am dying, and need them to help me with my will...
I will be the biggest bastard ever...
...and , for extra income, I will be a Wal-Mart greeter.
" Thanks, come again!" See , I have been practiceing!
By the way , I am sorry to those who know what I am talking about. It has been crazy here. I'll keep my word , though.