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Did you see the cover of today's USA Today?
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It says the average share of the national debt equals $473,456 per household.

It also says the average household debt is $84,454.

That is obscene. I think my is about $3,000 give or take right now.

Very scary.

Tom Demerly
The Tri Shop.com
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Re: Did you see the cover of today's USA Today? [Tom Demerly] [ In reply to ]
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Does that average household debt include a mortgage? Or is that just stuff like car loans and credit cards?
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Re: Did you see the cover of today's USA Today? [Tom Demerly] [ In reply to ]
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Interesting

During my short stint in the credit card business, I think there were statistics that showed the average household credit card debt was 20,000 - 30,000. Add a couple of cars to that and you can quickly get to the 50 to 60k range. This is without a mortgage!

Compare that to the average household income of around 45k and you may consider that we are quickly going to run into a consumption starved recession. I say this, because disposable income is drying up for the middle class. With that in mind, you could create a few models with a very bleak outlook.

In a worst case scenario, the dynamics of prosperity will change for the US. Things we might want to consider.

1. Live on a big aquifer because the price of water is going up. Note: Minnesota has over 10,000 lakes.....move there, don't come to Michigan.

2. Debt free is the optimal way to go. If/when we run into another economic crisis, those without debt will weather it okay.

3. Have some cash reserves. In otherwords, save your money. I actually have a grad school chum who buys gold bullion on a regular basis. Of course, this guy is the one who predicted a big crash in the early 90s. His position makes a great debate topic. I'll have to tell him about the Lavender room!

4. Here's where I'm going to go to extremes ( if I haven't done so already). Make sure you have at least an acre of land so that you can raise crops and stock animals. My goal is to raise chickens and goats, free range of course! This is my evil design to drive my neighbors away and exercise my squatter rights to their land.
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Re: Did you see the cover of today's USA Today? [Rocketboy] [ In reply to ]
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1. Live on a big aquifer because the price of water is going up. Note: Minnesota has over 10,000 lakes.....move there, don't come to Michigan.


---Dude. Didn't you hear? Those 10,000 little ponds have all dried up. Best advice is to move to Michigan. Don't they have access to most of the great lakes? Yea, everyone, go to Michigan!




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but I can deal with the angels, cause it ain’t me they’re here to claim. it’s a good night for blowing ‘em off til some other day
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Re: Did you see the cover of today's USA Today? [Rocketboy] [ In reply to ]
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In Reply To:
Interesting



4. Here's where I'm going to go to extremes ( if I haven't done so already). Make sure you have at least an acre of land so that you can raise crops and stock animals. My goal is to raise chickens and goats, free range of course! This is my evil design to drive my neighbors away and exercise my squatter rights to their land.




Wow. You stole my idea. That's exactly what I plan on doing with a military pension. Though my acre of land will be on some Carib Island. The ability to plant, grow, raise, can, etc. your own food is a talent often underappreciated.




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but I can deal with the angels, cause it ain’t me they’re here to claim. it’s a good night for blowing ‘em off til some other day
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Re: Did you see the cover of today's USA Today? [minny expat] [ In reply to ]
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I'd be very tempted to go to some Carib island, but, knowing how I really am, I'd only end up going to the beach with a cooler of beer every day just to watch the topless women.
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Re: Did you see the cover of today's USA Today? [Peter826] [ In reply to ]
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Does that average household debt include a mortgage? Or is that just stuff like car loans and credit cards?

Does it matter that much? How much of the average person's income is sucked up by interest on their mortgage?

It's hard to argue that someone with that much debt is free, economically speaking.








"People think it must be fun to be a super genius, but they don't realize how hard it is to put up with all the idiots in the world."
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Re: Did you see the cover of today's USA Today? [vitus979] [ In reply to ]
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Of course it matters. If someone has $80,000 outstanding on a mortgage at 6% interest and $4,000 outstanding on a car loan at 7% interest, that person is in a lot better shape than someone carrying $84,000 in credit card debt at 20% interest.

I consider a mortgage to be "good debt" (my term), because a house is an investment that theoretically should increase in value, and you need a place to live anyway. You can leverage your equity to get a lower interest rate on things like a car (via home equity lines of credit), and write off interest. Sure, you're in debt, but it's not a bad thing, and a lot better than paying rent to live in an apartment.

I read the article. It doesn't specify if the debt level includes a mortgage.
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Re: Did you see the cover of today's USA Today? [vitus979] [ In reply to ]
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There's such a thing as "good" debt and "bad" debt.

In most cases, mortgage interest is tax deductible and is putting money towards something that is most likely appreciating in value. Credit card and automobile debts is not tax deductible or appreciating in value.

Since you need to live "somewhere" the money you pay is best put towards something that you can keep. This isn't always attainable of course or preferable.

It's my understanding that your credit score and financial health looks at these kinds of debt differently.
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Re: Did you see the cover of today's USA Today? [Brian286] [ In reply to ]
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Since you need to live "somewhere" the money you pay is best put towards something that you can keep.

Yeah, that's my point. Most of the money you earn and then pay a bank for your mortgage isn't money you keep in another form. It doesn't pay for the house- it pays for the interest. You end up paying, probably, three times the value of the house. Great deal!








"People think it must be fun to be a super genius, but they don't realize how hard it is to put up with all the idiots in the world."
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Re: Did you see the cover of today's USA Today? [Brian286] [ In reply to ]
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If you own a home and have equity in it, your "bad debt" credit cards and auto debt can be restructured to enable you to deduct the interest as well. This restructuring may lower your interest rate and reduce your payments. I would suggest talking to your financial advisor to see if this type of arrangement fits your situation.
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Re: Did you see the cover of today's USA Today? [vitus979] [ In reply to ]
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Since you need to live "somewhere" the money you pay is best put towards something that you can keep.

Yeah, that's my point. Most of the money you earn and then pay a bank for your mortgage isn't money you keep in another form. It doesn't pay for the house- it pays for the interest. You end up paying, probably, three times the value of the house. Great deal!



That's true, you do pay 3+ times the value of the home over 30years. While it may not be a great deal, it is the price of borrowing money. Some people don't/can't build enough savings for a downpayment. So it's the only way to at least start building some equity. That's why prepayments are so important. Pay the bank as little as possible in interest!!! That said, it's still probably a wiser investment than renting. But not always.

My opinion is that it's not all that money in interest that is bad. (I'm talking for a mortgage, not credit cards and other crap.) It's that most Americans are buying more home than they actually should/can afford. I know I read that somewhere! Just don't expect me to quote a source for it.




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but I can deal with the angels, cause it ain’t me they’re here to claim. it’s a good night for blowing ‘em off til some other day
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Re: Did you see the cover of today's USA Today? [minny expat] [ In reply to ]
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[reply]
It's that most Americans are buying more home than they actually should/can afford. I know I read that somewhere! Just don't expect me to quote a source for it.
[/reply]

I think I read this in Fortune but have heard it elsewhere related to a possible housing bubble. The old standard was people lived in a house ~2-2.5x income but now in places like Cali, Boston, NY/NJ people are buying houses that are 4-6 times hosehold yearly income. These same people can't afford the payments on a 30yr fixed mortage and so they go for a 'interest only' or 3/1 ARM to get a lower payment but will find themselves in trouble when interset rates go up.

I think that the 80k tom mentions to start this thread does not include a mortage, I think that it is for unsecured debt.

Andrew
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Re: Did you see the cover of today's USA Today? [NJbiker] [ In reply to ]
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I wondered about that too.

As far as the housing thing goes, a house is something I have never wanted to own. It has become a financial necessity, so I bought a cheap "fixer upper" in an expensive neighborhood. It is pretty hit. My first project has been the roof. That's done. Looks nice.

Next: Windows. then siding, then we go inside for a new bathroom. I'm pulling out the stops on the new bathroom. It is going to be big and have a really nice shower. Then back outside for a new garage, then....

Damn thing. It sucks $10,000 like it was $1.00. Money hole.

Tom Demerly
The Tri Shop.com
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Re: Did you see the cover of today's USA Today? [Tom Demerly] [ In reply to ]
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I hear ya, big buy. We bought the place thinking we'd put in new carpet and slap some paint on....

20 months later... I've got some exposed framing... bare sheetrock... disconnected plumbing... trim needing cut... texture needing put on...

You've got the right idea taking it one project/room at a time. We got industrious and tore everything down first then started building it back up. Whole house.

This thing could take every single spare hour I have if I let it.
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Re: Did you see the cover of today's USA Today? [robb] [ In reply to ]
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I love houses....see what I am into:

http://www.thisoldcrackhouse.com
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Re: Did you see the cover of today's USA Today? [vitus979] [ In reply to ]
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Make 1 extra payment a year to pay down the principal faster and you save a lot of money in interest over the course of the loan. Plus if you own something you have more leverage with your invested money.
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Re: Did you see the cover of today's USA Today? [ECE] [ In reply to ]
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Make 1 extra payment a year to pay down the principal faster and you save a lot of money in interest over the course of the loan. Yep. Better yet, split that extra payment into 12 payments, and pay it monthly. Here's an online calculator that lets you plug different amounts in to see how much money you'd save:

http://www.jeacle.ie/mortgage/

Plus if you own something you have more leverage with your invested money. It isn't about leverage, it's about security, and the resulting freedom. Try not paying your mortgage, and see who really owns your house.








"People think it must be fun to be a super genius, but they don't realize how hard it is to put up with all the idiots in the world."
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Re: Did you see the cover of today's USA Today? [vitus979] [ In reply to ]
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Try not paying your mortgage, and see who really owns your house.


Mortgage payments eventually end, rent payments don't.
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Re: Did you see the cover of today's USA Today? [robb] [ In reply to ]
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amen to that - anyone who would choose to rent rather than own is doing themself a disservice. Sure if you can't afford a mortgage and live in a rooming house that costs $150 a month then you may not have a choice. But anyone who pays $1000/month rent can afford to buy, plain and simple. Buy a condo for $150,000 for crap sake, you'll pay less than $1000/month in mortgage and you'll be able to write it off - plus, lazy people won't have to mow the lawn.
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