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Does Good Debt Exist?
A long while ago, I wrote about the idea of good debt and bad debt:
There are several fairly similar definitions of each kind of debt, but generally they either revolve around the terms of the debt (low interest rate debts – usually below 7% or so – would be “good debt”) or the purpose of the debt. For example, debt taken on that allows you to purchase an asset that retains value (such as a house or an education) is often considered “good debt” while debt that is used to purchase things that rapidly decrease in value or have no tangible value at all (like credit card debt) is considered “bad debt.”
My take? I think the idea that there is debt that is inherently “good” and there is debt that is inherently “bad” is wrong. It’s fairly simple to find example where a debt that is “good” in one situation is “bad” in another.
The Simple Dollar Weekly Roundup: One Percent Edition
One interesting part of writing a blog on personal finance is that I’m constantly on the periphery of ideas like “the 1%” – the idea that the people in the world who are in the top 1% in terms of wealth have different motivations than the remaining 99%.
The advice I give is all about encouraging people to move up that ladder and that process changes your perspective. Eliminating debt, building up savings and investing, and establishing some financial independence for yourself is going to change your perspectives on the world, at least to a degree.
The challenge comes from balancing the two. How do you reward people who have worked hard without punishing people who haven’t had opportunities? It’s a problem that society is struggling to answer, particularly today.
My goal is simply to help people take advantage of whatever opportunities and resources they have to get themselves into a better position.
Five Steps You Need to Take If Bill Collectors Are Contacting You
This article first appeared at U.S. News and World Report Money.
You failed to pay a bill when you were out of work or you forgot about an old debt. Suddenly, debt collectors are contacting you through the mail and on the phone. It can be frightening, particularly if you’ve never been in such a situation before.
The most important thing is to know your rights. Debt collectors cannot take money out of your pay check without having obtained a legal settlement in court. Only courts can garnish your pay. Debt collectors cannot threaten you or demean you. You do not have to put up with insulting or demeaning behavior from them. Here’s a quick summary of the legal limits of debt collection behavior.
Here are five key actions you can take to put yourself in control of the situation.
The Crossover Point and Frugality
A long time ago, I wrote about a concept called the “crossover point”. The “crossover point” describes the point at which the returns from your investments exceed your living expenses, which means you can begin to fully live on your investment income and not have to work.
To give you an idea of what the crossover point is all about, here’s a key excerpt from that earlier post:
Let’s look at another example, that of Fran. Fran has the same job as Joe, but is a very frugal lady: she’s committed to only spending 70% of her take home pay each year. Let’s see how she does:
Letting Up
When people find themselves first recovering from financial disaster, they often bear down very hard on every dime. They scrutinize every expense and every receipt, looking for a way to squeeze a few more dollars out of their life so that they can push down those debts a little bit.
At that point, fear is often a big motivator. Their finances pushed them close to the edge of losing a lot of things that they cared about and they didn’t like that helpless feeling at all, so they’re motivated by fear of that situation and desire to get as far away as possible.
Reader Mailbag: Dreams and Ideas
What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to five word summaries. Click on the number to jump straight down to the question.
1. Comparing passive investments
2. Handling mistakes
3. Turning down guardianship
4. Am I being paranoid?
5. Disposable homes
6. How much for retirement?
7. To move or not?
8. Negotiating a raise at work
9. Lease or finance new car?
Seven Tactics to Avoid Wasting Food
I was stunned by this article in the Washington Examiner that states that Americans waste 133 billion pounds of food each year. That adds up to about 400 pounds of food wasted per American man, woman, and child each year.
If our family met that American average, the five of us would waste a ton of food this year. No exaggeration, either – we’d waste 2,000 pounds of food.
That is a lot of food simply going to waste. Not only does that have a huge environmental and social impact, it has a serious financial impact. Food that you toss instead of eating directly results in money falling out of your wallet because almost all of the food you order or bring into your home has a cost.
Failing at Frugality … or at Life?
It’s easy to look back on my history of frugal experiments and see a lot of failures.
Not too long ago, I attempted to fix the toilet on our main floor. After three hours of grumbling and several broken pieces, I wound up calling the plumber, which would have been cheaper to begin with.
Once, I bought some toilet paper in bulk when the deal seemed incredible. The stuff was like sandpaper. Our entire family hated it.
We planted a bunch of heirloom tomatoes one summer. We put up fencing to protect them and did everything we could do to keep them healthy. Just as tomatoes were starting to appear, some sort of blight took them straight to the ground, completely wasting all of our expense and effort.
I got a great deal on some glasses at a Goodwill store. I carried a box of them out to the car. Just as I was unlocking the door, the box slipped from my hands. None of the glasses made it home with me.
The Fleeting Luxury
I’m not a big fan of sweet stuff. I’ve always been the type of person that prefers savory flavors, and my favorite thing in that regard is cheese. I love trying new kinds of cheeses.
Every once in a while, I’ll splurge and buy a chunk of cheese that I’ve never tried before. Extra mature Wensleydale? Let’s try it! Fresh Pantysgawn? What’s that going to taste like? Crottin de Chavignol?
These little chunks of imported cheese can be really expensive. Price tags of $20 a pound are pretty common when you’re splurging on imported cheese. Higher price tags exist, too.
Here’s the thing, though: cheese is a fleeting luxury. It’s a splurge that you consume fairly quickly and then it’s completely gone. The same thing is true of a $5 coffee or a chocolate bar or a pint of quality ice cream.
I don’t need these things for nutrition’s sake. I simply want them as a splurge, no different than a splurge on an entertainment item.
Ten Pieces of Inspiration #167
Each week, I highlight ten things each week that inspired me to greater financial, personal, and professional success. Hopefully, they will inspire you as well.
March is Women’s History Month. Over the last week, I’ve been researching information about various women who have taken strong roles in the world to share with my daughter throughout the month. My plan was to tell her about one of them each day this month. I never want her to feel limited in her goals because of her gender. I thought I’d share five of the most interesting (to me, anyway).
1. David Goggins on stubbornness
“Everybody comes to a point in their life when they want to quit. But it’s what you do at that moment that determines who you are.” – David Goggins
When the chips are down, do you stand up?
2. Margaret Thatcher
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