"wealthy people do not pay interest"

[Susie Q]

rent versus keep paying mortgage

Hi everyone,
I can't tell if I started a new thread as this was my intention! I am feeling so stressed and tired of being in debt. I feel what is the point of having a house if we have no extra funds for the up keep and my priority is to live with less and be able to enjoy a nice vacation once a year. After bills there is nothing left. Now if we sold the house, got $60 000, we could pay off the debt, ($24 000) and live in an appartment and have less expensives as all the debt min payments would be gone. My husband thinks that renting is throwing money in the air but at this point there is not a high quality of living, just bills and then no money for anything else. Just so tired of this and I feel we can re buy a house in 3-4 years after putting money aside and no debt. thoughts?

[sv2007]

Hi everyone,
I can't tell if I started a new thread as this was my intention! I am feeling so stressed and tired of being in debt. I feel what is the point of having a house if we have no extra funds for the up keep and my priority is to live with less and be able to enjoy a nice vacation once a year. After bills there is nothing left. Now if we sold the house, got $60 000, we could pay off the debt, ($24 000) and live in an appartment and have less expensives as all the debt min payments would be gone. My husband thinks that renting is throwing money in the air but at this point there is not a high quality of living, just bills and then no money for anything else. Just so tired of this and I feel we can re buy a house in 3-4 years after putting money aside and no debt. thoughts?

So are you a Thrump support or not?
: )

Renting has its advantages... for one, it should bring less stress and headaches.

[Nutria]

Hi everyone,
I can't tell if I started a new thread as this was my intention!

No. You replied to an existing one.

I am feeling so stressed and tired of being in debt. I feel what is the point of having a house if we have no extra funds for the up keep and my priority is to live with less and be able to enjoy a nice vacation once a year. After bills there is nothing left. Now if we sold the house, got $60 000, we could pay off the debt, ($24 000) and live in an appartment and have less expensives as all the debt min payments would be gone. My husband thinks that renting is throwing money in the air but at this point there is not a high quality of living, just bills and then no money for anything else. Just so tired of this and I feel we can re buy a house in 3-4 years after putting money aside and no debt. thoughts?

Mostly questions, and a couple of comments.

• How old are you two? (Young and on the upswing, or empty nesters, or DINKs, etc, etc.)
• How expensive is that "nice vacation once a year"?
• Very important: do you two live within your means?
• Tell him that all those extra debt interest payments are throwing money in the air, too.
• Is $60K a realistic payout?
• Are you early in the mortgage -- paying lots of interest -- or somewhere else?
• Is re-buying in 4 years actually reasonable?
• Naturally I don't know your husband, but men are stereotypically driven by facts in this situation. So work up a spreadsheet showing how selling the house is fiscally better than paying the mortgage.

Since we don't know your family income, location, circumstances, etc, we can't give solid advice.

[sv2007]

Chapter 11 affords a window of time to reorganize. Trust me, the creditors want them to reorganize.

Trump no more owned the companies than Warren Buffett owns Berkshire Hathaway. All of the companies were publicly traded, with thousands of shareholders. Trump is a shareholder, although I would be very surprised if he holds anything more than a fraction of the outstanding shares. You're confusing a person with a company that bears his name.

It is not that I don't trust you; what you wrote is so far fetched that I going to have to ask for proof that creditors like chapter 11.

A lot of bond holders depends on the bond's promise of regular payments; old folks need that for food and meds (or smokes). You get the drift. A person with true integrity will make up the inconvenience (with personal assets) even if the company he/she manages is legally another entity.

Sorry for the delayed response, didn't see your post.

[Jovanny]

Wealthy people have cash to buy their own property or car. Why would they need to take a loan and pay interest?

[sv2007]

Wealthy people have cash to buy their own property or car. Why would they need to take a loan and pay interest?

In some ways corporations are like people who lives forever.
Here's a major news a while back:

https://www.bloomberg.com/news/articles/2016-02-16/apple-said-to-plan-dollar-bond-sale-for-capital-return-program

We all know Apple is rich with a lot of cash, why bonds?

Rich people (real humans) also take on debt; a lot of it has to do with cash flow and investment returns.

For example, if Thump has $ tied up in a renal duplex earning him better ROI than his borrowing rate; he may not want to pull $ out to fund xyz. But instead, he'll borrow to make more money.

I don't know why, but there's a lot of talk about Trump and bankruptcies lately.

[TexasHusker]

It is not that I don't trust you; what you wrote is so far fetched that I going to have to ask for proof that creditors like chapter 11.

A lot of bond holders depends on the bond's promise of regular payments; old folks need that for food and meds (or smokes). You get the drift. A person with true integrity will make up the inconvenience (with personal assets) even if the company he/she manages is legally another entity.

Sorry for the delayed response, didn't see your post.

No creditor prefers that a borrower take chapter 11. But often, it is either chapter 11 or default. Creditors want their money back - default means there is zero chance of that.

With corporations, it would be impossible for an officer to ignore his fiduciary obligation to shareholders and instead impose his own, personal, moral obligation. It's against the law.

Most folks hear "bankrupt" and assume that the company is defaulting on their obligations. It is actually the opposite : Chapter 11 is in fact the vehicle by which the debt is restructured so that it CAN in fact be repaid. It provides a temporary shield in order for the corporation to meet with creditors and come up with a solution they can both live with.

[TexasHusker]

Wealthy people have cash to buy their own property or car. Why would they need to take a loan and pay interest?

Wealthy people are wealthy because they have learned to leverage (borrow) other people's money to make money for themselves.

Poor people borrow money to buy cars and TVs. Wealthy people borrow money to make money.

[Singuy]

Wealthy people are wealthy because they have learned to leverage (borrow) other people's money to make money for themselves.

Poor people borrow money to buy cars and TVs. Wealthy people borrow money to make money.

I agree that certain wealthy people leverage to make money...such as getting a bank loan to start a small business, getting a home equity line and invest that into the stock market for a higher return, or like what you did with mortgage loans. However, there are inherently built in risks to this type of wealth. It's definitely not as guaranteed vs the slow but surely saving/paying off debt method.

So you have certain amount of wealthy people who pays no interest...and are instead earning interest with their own nest egg.

"Compound interest is the eighth wonder of the world. He who understands it, earns it...He who doesn't..pays it"
--Albert Einstein.

[Nutria]

"Compound interest is the eighth wonder of the world. He who understands it, earns it...He who doesn't..pays it"
--Albert Einstein.

This was so true 45 years ago when Savings and Loan associations paid... 4+%. Of course, mortgage rates were 7.5% back then, too.

Interestingly, the spread between savings accounts and mortgage rates was about 3.5% then, too.

[TexasHusker]

I agree that certain wealthy people leverage to make money...such as getting a bank loan to start a small business, getting a home equity line and invest that into the stock market for a higher return, or like what you did with mortgage loans. However, there are inherently built in risks to this type of wealth. It's definitely not as guaranteed vs the slow but surely saving/paying off debt method.

So you have certain amount of wealthy people who pays no interest...and are instead earning interest with their own nest egg.

"Compound interest is the eighth wonder of the world. He who understands it, earns it...He who doesn't..pays it"
--Albert Einstein.

It all depends upon how you define wealth. You can raise a $ million over a lifetime with diligent saving, but you can't get into the multi-millions without taking risk, by using leverage. And everyone investing in the stock market - through stocks, mutual funds, or even index funds - is also leveraging whether they know so or not: That is because EVERY publicly traded company is using leverage, themselves.

[sv2007]

With corporations, it would be impossible for an officer to ignore his fiduciary obligation to shareholders and instead impose his own, personal, moral obligation. It's against the law.

I wasn't saying no bankruptcy, I said I'd pay back even after bankruptcy.
Let's bring it to a more personal level, perhaps easier to understand:
If I owe money that's discharged via bankruptcy, I'd still pay it back.

[Singuy]

It all depends upon how you define wealth. You can raise a $ million over a lifetime with diligent saving, but you can't get into the multi-millions without taking risk, by using leverage. And everyone investing in the stock market - through stocks, mutual funds, or even index funds - is also leveraging whether they know so or not: That is because EVERY publicly traded company is using leverage, themselves.

According to the book Millionaires next door, those with 10 mil+ all had a business and probably once used leverage to get them where they are at..but also through very hard work and massive amounts of risks(since most small businesses will fail).

Getting multi-million is pretty easy if you play the compounding interest correctly...especially if you start very young.

[TexasHusker]

Getting multi-million is pretty easy if you play the compounding interest correctly...especially if you start very young.

I'm in. Can you point me to a vehicle paying sufficient interest to make an infant a multi-millionaire by age 60? I need to get my kids hooked up.

30 year US Treasury is paying a solid 2.71%. That means my money will double every 27 years !

[TexasHusker]

I wasn't saying no bankruptcy, I said I'd pay back even after bankruptcy.
Let's bring it to a more personal level, perhaps easier to understand:
If I owe money that's discharged via bankruptcy, I'd still pay it back.

I guess I'm not following. The idea of Chapter 11 is to find a path to pay back the debt.

Are you saying that whomever the company is named after is morally - and personally - responsible for the entirety of the debt of the company, which has thousands of owners (shareholders) ?

And are you going to pay back this discharged debt with interest? If so, what amount? And when? Will you decide what is morally right? What if the creditors demand double that amount for all of the trouble?

This is precisely the purpose of Chapter 11...