WEBVTT - When Debt Makes Sense #141 0:00:00.080 --> 0:00:02.759 Welcome to How the Money. I'm Joel and I'm Matt, 0:00:02.800 --> 0:00:25.439 and today we're discussing when debt makes sense. Yeah, Joel, 0:00:25.480 --> 0:00:29.600 sometimes debt actually does make sense. Hopefully our listeners aren't 0:00:29.640 --> 0:00:32.239 blindsided by the fact that we don't hate debt, at 0:00:32.320 --> 0:00:34.720 least not all debts. Hopefully they don't think we've gone 0:00:34.720 --> 0:00:37.120 off the personal finance deep end here. That debt is 0:00:37.200 --> 0:00:39.280 kind of a necessity of modern life and it's something 0:00:39.400 --> 0:00:41.320 we have to talk about. Like, not all debt is 0:00:41.360 --> 0:00:45.160 created equally, right, It's important to distinguish Some debt is 0:00:45.159 --> 0:00:47.400 is good, some debt is worth taking on. Other debt 0:00:47.600 --> 0:00:50.360 is awful and you shouldn't even consider it. So, yeah, 0:00:50.360 --> 0:00:54.600 we're gonna kind of parse those specifics in this episode, Matt, 0:00:54.680 --> 0:00:57.000 before we get to that. There's a specific debt I 0:00:57.040 --> 0:00:59.640 wanted to talk to you about, all right, So we 0:00:59.720 --> 0:01:02.400 just had our boys right not too long ago. Regular 0:01:02.440 --> 0:01:05.119 listeners to the show will know that we are our 0:01:05.319 --> 0:01:08.440 our dad's We are proud parents. You've got three girls 0:01:08.480 --> 0:01:10.200 and and now boy. And I've got two girls and 0:01:10.240 --> 0:01:12.680 now a boy. And our boys were born born two 0:01:12.760 --> 0:01:15.080 days apart. But the hospital bills are starting to come 0:01:15.120 --> 0:01:18.119 in and so I wanted to talk about how you 0:01:18.200 --> 0:01:21.240 handle hospital bills when you get him in the mail, 0:01:21.520 --> 0:01:23.360 and I think it's important. I don't know if you've 0:01:23.400 --> 0:01:25.720 noticed this, Bunny, we're handling things differently. You're kind of 0:01:25.760 --> 0:01:28.600 more of a cash payer. And I have insurance through 0:01:28.760 --> 0:01:31.480 my job, and there is a humble brag I've got 0:01:31.520 --> 0:01:35.520 actual insurance. Not at all. I promised, I promised. But 0:01:35.520 --> 0:01:37.920 but you're you're on meta share. You've documented that as well, 0:01:38.360 --> 0:01:40.720 which is an awesome thing for people to consider and 0:01:40.720 --> 0:01:42.920 if they want to save money on health insurance, even 0:01:42.959 --> 0:01:46.280 though it's not technically health insurance. But but yeah, I'm 0:01:46.280 --> 0:01:50.360 starting to get the mail from from the hospital with 0:01:50.480 --> 0:01:53.800 the bills inside. And I will say one thing I've 0:01:53.840 --> 0:01:56.640 noticed through the years of receiving medical bills based on 0:01:56.720 --> 0:01:58.640 different you know, things we've had based on three person 0:01:58.640 --> 0:02:01.480 now at this point, is to never pay the bill 0:02:02.200 --> 0:02:05.200 the first time you see it. To always wait for 0:02:05.200 --> 0:02:08.400 that second bill to come in. There are always adjustments made. 0:02:08.800 --> 0:02:11.239 In particular with one of these bills from the hospital 0:02:11.320 --> 0:02:13.760 stay the first bill, it looked like we're gonna have 0:02:13.800 --> 0:02:16.839 to pay fifty just one of the bills for yeah, 0:02:16.840 --> 0:02:19.280 and I was like that's what you had insurance dog, right, 0:02:19.320 --> 0:02:21.680 I know. I was like, that seems crazy, that shouldn't 0:02:21.720 --> 0:02:23.600 be the way it is. And and then I just 0:02:23.720 --> 0:02:25.639 we just waited a month for the next bill to 0:02:25.680 --> 0:02:29.639 come in, and it was drastically four thousand dollars cheaper, basically, 0:02:30.080 --> 0:02:32.040 So you just kind of never know what's going to 0:02:32.120 --> 0:02:34.080 happen and how it's going to get adjusted, and so 0:02:34.120 --> 0:02:36.040 I kind of wait for things to shake out. So 0:02:36.240 --> 0:02:38.680 that's like one tip I have for people who are 0:02:38.720 --> 0:02:42.200 getting medical bills and just don't ever pay the first 0:02:42.240 --> 0:02:44.679 one wait for another one to command. I feel that 0:02:44.720 --> 0:02:47.519 this is maybe one instance in personal finance that it 0:02:47.600 --> 0:02:51.000 kind of pays a little bit to be a procrastinator. Yeah, 0:02:51.160 --> 0:02:53.000 but it's true. There's a lot of confusion when it 0:02:53.000 --> 0:02:56.119 comes to how to navigate the waters of our insurance. 0:02:56.160 --> 0:02:58.200 And you know, like you found that you've had some 0:02:58.200 --> 0:03:01.639 confusion there. I mean with us having meta share, dude, 0:03:01.680 --> 0:03:03.440 we found it's even more confusing because there are a 0:03:03.440 --> 0:03:07.079 fewer healthcare providers who are familiar with meta share um 0:03:07.120 --> 0:03:08.720 And you know, I've written an article on the site, 0:03:08.720 --> 0:03:10.480 will link to that in the show notes, but essentially 0:03:10.480 --> 0:03:13.799 meta share it's very similar to insurance, but it's technically 0:03:13.840 --> 0:03:16.799 not insurance, you know, it's it's not regulated. There are 0:03:16.800 --> 0:03:19.160 different requirements that they have. But at the same time, 0:03:19.200 --> 0:03:21.680 we are also able to save a ton of money. 0:03:22.000 --> 0:03:23.480 But we have found, though, is that there is some 0:03:23.520 --> 0:03:25.480 additional work that we have to do in order to 0:03:25.560 --> 0:03:27.920 make sure things line up the way that they're supposed to, 0:03:27.960 --> 0:03:30.520 that they're actually submitted to the right place. It's not 0:03:30.560 --> 0:03:34.120 as familiar to most healthcare providers as like Humana or 0:03:34.200 --> 0:03:37.400 Blue Cross, Blue Shield right Now or whoever is exactly exactly. 0:03:37.720 --> 0:03:40.720 So you mentioned procrastinating and how maybe that's a little 0:03:40.760 --> 0:03:42.720 bit of a benefit here, But the thing that is 0:03:42.760 --> 0:03:45.160 not a benefit is to is to hide your head 0:03:45.200 --> 0:03:46.960 completely in the sand in regards to the bills that 0:03:47.000 --> 0:03:49.320 are coming in. And that's what some people do. They 0:03:49.400 --> 0:03:51.880 just don't open them. They chuck them, or or they 0:03:51.920 --> 0:03:54.240 open them and they look at them and they cry 0:03:54.400 --> 0:03:57.240 or scream or whatever whatever reaction they have to getting 0:03:57.240 --> 0:04:00.560 a massive bill that you can't afford. It's time to move, Yeah, exactly, 0:04:00.760 --> 0:04:02.760 we we can move to another country. They'll never find 0:04:02.800 --> 0:04:05.120 us something like that. And so one thing I want 0:04:05.120 --> 0:04:08.240 to stress too is that a lot of hospitals have 0:04:08.400 --> 0:04:11.080 something called a patient advocate, and that can be a 0:04:11.120 --> 0:04:14.680 great place to turn. Look on your hospital systems website, 0:04:14.920 --> 0:04:17.440 call the customer service number and ask if they have 0:04:17.560 --> 0:04:21.080 someone who is a patient advocate, and that patient advocate 0:04:21.120 --> 0:04:24.960 can walk through potential debt for giveness options or at 0:04:25.000 --> 0:04:27.600 least for giving a big chunk of the debt or 0:04:27.680 --> 0:04:30.760 a payment plan that is gonna potentially suit your income 0:04:30.800 --> 0:04:33.680 and your needs. And there are for these nonprofit hospitals, 0:04:33.720 --> 0:04:35.760 there are oftentimes lots of ways that you can have 0:04:36.279 --> 0:04:39.400 a portion or or maybe even all of your medical 0:04:39.440 --> 0:04:41.520 debt forgiven. But if you if you put your head 0:04:41.560 --> 0:04:43.960 in the sand, it's gonna go to collections. You're never 0:04:44.000 --> 0:04:46.760 going to have this option again if you don't tackle 0:04:46.800 --> 0:04:49.680 it within the first ninety days, because if you don't 0:04:49.680 --> 0:04:52.560 turn to the hospital to for help, they're gonna kick 0:04:52.600 --> 0:04:55.279 it to collections. And that's when you're in big trouble. Yeah, 0:04:55.360 --> 0:04:57.680 and when we say procrastinate, definitely don't wait longer than 0:04:57.760 --> 0:05:00.000 ninety days, right, like, maybe wait thirty days, forty five 0:05:00.000 --> 0:05:02.599 of days, maybe for the second time that bill shows up, right, 0:05:02.680 --> 0:05:04.080 But yeah, you definitely don't want to put your head 0:05:04.080 --> 0:05:06.200 in the sand. And you know you mentioned the patient advocate. 0:05:06.240 --> 0:05:08.279 I think that's important as well. For you know, you 0:05:08.320 --> 0:05:10.239 kind of were teasing about me being a cash payer 0:05:10.440 --> 0:05:12.520 because a lot of what we are is paying cash 0:05:12.560 --> 0:05:15.160 because we're at such a high deductible. Yeah, that wasn't 0:05:15.200 --> 0:05:16.599 a tease. That's just like kind of what it is 0:05:16.640 --> 0:05:20.440 the reality. But for folks who don't have health insurance, man, 0:05:20.480 --> 0:05:22.640 make sure you talk to that patient advocate ahead of time. 0:05:22.680 --> 0:05:25.240 If you can talk with them in advance of the procedure, 0:05:25.640 --> 0:05:28.440 they will totally work with you find ways to you know, 0:05:28.440 --> 0:05:30.760 split those payments up or even cut you that cash 0:05:30.800 --> 0:05:33.160 deal on the front end. So so yeah, keep that 0:05:33.200 --> 0:05:35.400 in mind. And that's definitely the you know, complete opposite 0:05:35.400 --> 0:05:37.080 of sticking your head in the sand. That's you being 0:05:37.120 --> 0:05:40.240 proactive and making sure you've got things lined up. Healthcare 0:05:40.400 --> 0:05:44.080 so easy to understand. It's the best now. It truly 0:05:44.120 --> 0:05:46.240 is terrible. I wish it was it was an easier system. 0:05:46.680 --> 0:05:48.760 I wish, For instance, Matt, I was getting a quote 0:05:48.800 --> 0:05:51.640 on a procedure the other day, Uh, A procedure that 0:05:51.920 --> 0:05:54.640 means that I will have no more children. I don't 0:05:54.640 --> 0:05:56.360 know if that's t m I For everyone out there, 0:05:56.600 --> 0:06:00.920 but this you're getting castrated. Uh some, that's totally similar 0:06:01.200 --> 0:06:05.720 lesson basi, Yeah exactly. But basically the thing that shocked 0:06:05.760 --> 0:06:08.120 me was the amount that I have to pay after 0:06:08.440 --> 0:06:10.920 submitting the claim through insurance is more than what I 0:06:10.920 --> 0:06:13.760 would pay as a cash payer. So sometimes that's an 0:06:13.800 --> 0:06:17.480 interesting dynamic, too involved in the whole process. It frustrates 0:06:17.520 --> 0:06:20.400 me to a great deal that that's the case. I 0:06:20.440 --> 0:06:22.480 don't think that's how it should be. That's the case 0:06:23.120 --> 0:06:26.400 for getting up prescription oftentimes, which is a real pain. 0:06:26.760 --> 0:06:29.480 And the only way to combat that is to check 0:06:29.560 --> 0:06:32.680 and see if paying cash with an app, specifically like 0:06:32.680 --> 0:06:34.800 good r x, which is an awesome app for for 0:06:34.839 --> 0:06:37.960 shopping prescriptions. You know what, I found so many times 0:06:38.000 --> 0:06:40.240 that offering to pay cash and not going through my 0:06:40.279 --> 0:06:42.720 insurance is better when I'm getting up prescription. Well, it 0:06:42.760 --> 0:06:45.440 can be the same for medical procedure. And that's why 0:06:45.600 --> 0:06:48.200 insurance and that whole health insurance game can be a 0:06:48.200 --> 0:06:52.040 little bit shady. All right, Joel, my unique friend, introduce 0:06:52.080 --> 0:06:55.200 our beer for this episode. Alright, we're drinking one from 0:06:55.240 --> 0:06:58.159 our friends, the Yeast Atlanta Brewers, and this one is 0:06:58.160 --> 0:07:01.200 a check pilsner. So week thanks to our friend John 0:07:01.240 --> 0:07:04.240 Francis for for tossing this one our way. We're really 0:07:04.240 --> 0:07:06.760 excited to have this one on the show. Yeah, thanks John. 0:07:06.880 --> 0:07:09.680 All right, let's get into the topic at hand. Today. 0:07:09.720 --> 0:07:12.720 We're talking about when debt makes sense, which is so weird. 0:07:12.840 --> 0:07:14.760 It doesn't sound like something the guys from How the 0:07:14.800 --> 0:07:17.160 Money should be talking about, and being debt free sounds 0:07:17.240 --> 0:07:19.960 nice in theory, but who can actually live a debt 0:07:20.000 --> 0:07:22.400 free existence. Most of us decided to take on debt 0:07:22.440 --> 0:07:24.840 at certain points in our lives to achieve goals that 0:07:24.880 --> 0:07:27.280 we have. Debt can allow us to accelerate our goals 0:07:27.320 --> 0:07:29.920 and see them come to fruition far sooner than the 0:07:30.000 --> 0:07:32.200 otherwise would have. If you really want to own a 0:07:32.240 --> 0:07:34.840 home or get an advanced degree, well it's really hard 0:07:34.880 --> 0:07:38.920 to save for either of those in full right beforehand, Yeah, Juel, 0:07:38.960 --> 0:07:41.520 that's rights and debt, right. Everyone knows what debt is, 0:07:41.520 --> 0:07:43.720 but I think it's helpful to to look at debts 0:07:43.720 --> 0:07:47.000 in the context of time. Specifically, When you do that, 0:07:47.040 --> 0:07:48.640 you can see that debt is basically the act of 0:07:48.680 --> 0:07:51.800 exchanging something in the future in order to secure it now. 0:07:52.280 --> 0:07:55.280 But obviously you're gonna pay a cost there's a price 0:07:55.280 --> 0:07:59.120 to pay that interest rate associated with your loan. Well, 0:07:59.200 --> 0:08:01.360 that is literally the price that you have to pay 0:08:01.400 --> 0:08:03.600 if you're not able to or maybe you're not willing 0:08:03.640 --> 0:08:07.160 to save up and pay in cash. And as we'll discuss, 0:08:07.240 --> 0:08:09.680 you know, the interest rate you can secure that has 0:08:09.680 --> 0:08:11.800 an impact on the amount of debt that you'll want 0:08:11.840 --> 0:08:14.080 to consider taking out as well. I don't know why, 0:08:14.080 --> 0:08:16.560 but everything every time I think about debt, I think 0:08:16.560 --> 0:08:19.720 about the story of Rumble steel skin and like putting 0:08:19.800 --> 0:08:22.920 up your firstborn child in exchange for the spending that 0:08:23.120 --> 0:08:25.760 straw into gold. Yeah, that's a terrible wager, but that's 0:08:25.840 --> 0:08:28.720 kind of how debt can be, right, Like, you're usually 0:08:28.800 --> 0:08:32.640 sacrificing something good in the future, you know, those payments 0:08:32.640 --> 0:08:34.400 that you'll make over a long period of time for 0:08:34.520 --> 0:08:36.440 something that you can get right now. Yeah, your baby. 0:08:36.480 --> 0:08:39.679 It's like the ultimate payday loan. That's the worst payment 0:08:39.720 --> 0:08:42.560 if that existed. That's totally against the law, right why 0:08:42.600 --> 0:08:46.080 it's a fable. So before we launch into the different 0:08:46.120 --> 0:08:48.320 reasons when debt might make sense for you, well, let's 0:08:48.320 --> 0:08:50.600 talk quickly, Matt about some of the things we would 0:08:50.640 --> 0:08:53.559 recommend you avoiding taking debt out on. Yeah, man, let's 0:08:53.600 --> 0:08:55.560 kick it off with car loans, right, Like you often 0:08:55.600 --> 0:08:59.320 hear folks mention their car payment. It's so commonplace these days, 0:08:59.360 --> 0:09:01.760 like you might actually expected that it's normal to have 0:09:02.040 --> 0:09:04.040 and maybe even a good idea to sign up for 0:09:04.160 --> 0:09:07.280 a car loan. I'm paying for the reliability and the safety. 0:09:07.440 --> 0:09:09.120 Do you hear that? Right? And that seems like a 0:09:09.160 --> 0:09:12.800 noble mantra maybe to get behind. But don't convince yourself 0:09:12.800 --> 0:09:16.040 that car debt is okay. Financially speaking, You're almost always 0:09:16.040 --> 0:09:18.960 going to be in a losing situation when you finance 0:09:19.040 --> 0:09:23.160 a depreciating asset. Paying more today for something that will 0:09:23.200 --> 0:09:26.559 be worth less tomorrow is something you want to always 0:09:26.600 --> 0:09:30.000 try and avoid. Yeah, man, I've broken this rule just once, 0:09:30.480 --> 0:09:32.760 and that was the Nissan Leaf that I bought and 0:09:32.800 --> 0:09:34.439 I still owned. And it was because I had a 0:09:34.520 --> 0:09:37.320 zero percent loan option when I purchased the vehicle. But 0:09:37.400 --> 0:09:39.280 I also did have the cash to pay for the 0:09:39.280 --> 0:09:43.120 car in full, and so really that debt actually seemed 0:09:43.240 --> 0:09:47.000 like not a big deal because I had enough cash 0:09:47.280 --> 0:09:50.079 reserve to pay for the car outright. I wasn't financing 0:09:50.080 --> 0:09:52.839 something that I couldn't actually afford. But really typically, I 0:09:52.880 --> 0:09:56.040 would say for most people, if you're looking to finance 0:09:56.080 --> 0:09:58.480 a car, well, the better option is to buy a 0:09:58.559 --> 0:10:02.120 cheaper car. And most expensive car I'd ever purchased before 0:10:02.120 --> 0:10:04.800 I bought my Niece on Leaf was at Niecean Ultima 0:10:04.840 --> 0:10:07.440 that lasted me seven years. So it's not like you 0:10:07.480 --> 0:10:10.439 can't find an affordable ride that actually will get the 0:10:10.480 --> 0:10:12.760 job done for you over a long period of time. 0:10:12.960 --> 0:10:15.720 It's just that we think we can't, and so we 0:10:16.000 --> 0:10:18.760 just take the easier path, which it seems easier, but 0:10:18.840 --> 0:10:21.280 ultimately we're sacrificing a lot in the future by taking 0:10:21.280 --> 0:10:23.880 on debt for a nicer car. So debt, even with 0:10:23.920 --> 0:10:26.439 a fairly low interest rate, it's not a great idea 0:10:26.480 --> 0:10:30.200 on a rapidly depreciating asset. And if you do take 0:10:30.240 --> 0:10:32.880 out debt on a car, the rule that we would 0:10:33.000 --> 0:10:35.839 say you should never break is to never take out 0:10:35.840 --> 0:10:38.040 a loan longer than four years. Man, so many people 0:10:38.120 --> 0:10:40.720 Matt get into trouble when they finance a car and 0:10:40.760 --> 0:10:43.080 they finance it for six or seven years. I mean, 0:10:43.080 --> 0:10:45.680 the link on a typical car loan has been lengthening 0:10:46.000 --> 0:10:48.360 over time. Folks want to get those payments down. Yeah, 0:10:48.400 --> 0:10:50.160 if they want the payment down, and so they're willing 0:10:50.160 --> 0:10:51.720 to take out a seven year loan to do it, 0:10:51.840 --> 0:10:53.720 and then they end up upside down for a long 0:10:53.800 --> 0:10:56.000 period of time. And if something goes wrong with their 0:10:56.000 --> 0:10:58.160 car or they decide they want a new one, well 0:10:58.240 --> 0:11:00.320 they're in a really bad situation when a comes to 0:11:00.320 --> 0:11:03.160 getting another car. So true, man, another debt we want 0:11:03.200 --> 0:11:06.760 you to avoid taking on as any credit card debt. Basically, 0:11:07.080 --> 0:11:10.520 credit card debt usually stems from poor spending habits, and 0:11:10.600 --> 0:11:13.280 that's why you often hear credit cards painted in such 0:11:13.320 --> 0:11:16.439 a terrible light. It's not that the cards themselves are bad, 0:11:16.800 --> 0:11:19.320 but it's the credit card debt that is so terrible. 0:11:19.520 --> 0:11:22.920 We talked about this in episode with Brad Barrett. That's 0:11:22.920 --> 0:11:25.440 where we discussed how credit cards are just a tool 0:11:25.720 --> 0:11:28.360 that we can gain a ton of benefit from if 0:11:28.440 --> 0:11:30.760 we use them properly. Yeah, Brad talked a lot about 0:11:30.920 --> 0:11:33.839 travel rewards and sign up bonuses, and you know, we've 0:11:33.880 --> 0:11:36.160 got an article up on our site about some of 0:11:36.160 --> 0:11:39.080 our favorite credit cards, and yeah, credit cards can be 0:11:39.760 --> 0:11:42.800 really awesome. They can provide a lot of rewards for 0:11:43.000 --> 0:11:45.840 people that use them well, for people that sign up 0:11:45.880 --> 0:11:47.800 for the right cards for their type of spending. But 0:11:48.080 --> 0:11:51.319 the problem is when you use a credit card and 0:11:51.480 --> 0:11:53.400 you can't pay it off in full every month, and 0:11:53.440 --> 0:11:55.959 that's when it becomes just a truly terrible cycle. The 0:11:56.320 --> 0:11:59.199 reason that they're so popular is due to how convenient 0:11:59.400 --> 0:12:01.720 they are to throw expenses on. And if you've got 0:12:01.720 --> 0:12:03.839 a credit card with a twenty two or twenty four 0:12:03.880 --> 0:12:07.960 or seven interest rate, well, these cards they become debt vehicles. 0:12:08.240 --> 0:12:10.160 And it's what's often spent and put on the credit 0:12:10.160 --> 0:12:12.080 cards that we have a big issue with. Two. It's 0:12:12.120 --> 0:12:15.120 so spur the moment consumption purchases. Credit cards make it 0:12:15.160 --> 0:12:18.120 easy to spend without thinking. But you want to spend 0:12:18.120 --> 0:12:20.319 with a plan, and if you can't do that well 0:12:20.360 --> 0:12:22.440 with a credit card, well then you're gonna find yourself 0:12:22.440 --> 0:12:26.160 in some serious having some serious issues, Enjoel. The worst, 0:12:26.440 --> 0:12:28.920 absolute worst kind of debt are going to be paid 0:12:28.920 --> 0:12:32.280 a loans card, title loans, and those are the worst. 0:12:32.880 --> 0:12:35.040 You're gonna want to avoid these at all costs, as 0:12:35.040 --> 0:12:37.959 they can have a range of anywhere from four hundred 0:12:39.120 --> 0:12:41.280 a p r when you kind of attack in all 0:12:41.280 --> 0:12:43.840 the different fees, and that's just ridiculous, man. You know, 0:12:43.880 --> 0:12:45.760 if we thought that the credit cards made it convenient 0:12:45.840 --> 0:12:49.280 to pay high levels of interest petty loans, title loans. 0:12:49.360 --> 0:12:51.760 You know, they easily have them beat. And a big 0:12:51.760 --> 0:12:54.000 reason for that too is that they are you know, 0:12:54.040 --> 0:12:56.240 they're there in person. And so like you apply for 0:12:56.240 --> 0:12:58.040 a credit card and guess what, it takes time for 0:12:58.120 --> 0:13:00.280 that card to get to you before you can start 0:13:00.400 --> 0:13:03.040 misbehaving with your money, right, But with like with a 0:13:03.040 --> 0:13:05.480 paid a loan or a car title loan, like it's 0:13:05.559 --> 0:13:07.280 right there in person, And so if you are in 0:13:07.320 --> 0:13:10.160 a pinch, folks are gonna feel tempted to walk through 0:13:10.200 --> 0:13:11.800 those doors and see what kind of loan that they 0:13:11.800 --> 0:13:13.640 can get, and in the end they might go with 0:13:13.760 --> 0:13:16.640 something that is going to really drag them down financially. 0:13:16.800 --> 0:13:19.680 Once you open your eyes to see how many paid 0:13:19.720 --> 0:13:23.120 a loan or title lending places there are around you, 0:13:23.520 --> 0:13:25.720 it'll start to overwhelm you at how many there actually are. 0:13:26.400 --> 0:13:28.240 Just driving up a couple of our main throw for 0:13:28.280 --> 0:13:30.400 your fairs, Matt here in our part of town where 0:13:30.400 --> 0:13:33.440 we live, I'm amazed at how many paid a loan 0:13:33.480 --> 0:13:36.520 shops there are. There's one within every square mile, if 0:13:36.559 --> 0:13:39.600 not multiples. And there's some towns where there's like three 0:13:39.679 --> 0:13:42.120 on one street corner that and it just bums me 0:13:42.120 --> 0:13:44.679 out to see that's a sign of the fact that 0:13:44.760 --> 0:13:46.960 a lot of people that live in that area are 0:13:47.000 --> 0:13:49.200 are certainly hitting them up. They're taking advantage. And the 0:13:49.200 --> 0:13:52.319 commercials that you see for these companies, they make it 0:13:52.360 --> 0:13:54.680 sound like it's super simple and it's a short term loan. 0:13:54.920 --> 0:13:57.240 But the problem is the vicious cycle that people get into, 0:13:57.600 --> 0:13:59.840 in particular with with these paid a loans, with these 0:14:00.080 --> 0:14:02.600 the loans and inability to pay it back that quickly, 0:14:02.600 --> 0:14:04.240 because if you need that quick cash, how in the 0:14:04.240 --> 0:14:05.559 world are you gonna be able to pay that back 0:14:05.559 --> 0:14:07.600 in a week or two? And so oftentimes people get 0:14:07.640 --> 0:14:09.560 stuck in a rut and it's the worst place they 0:14:09.559 --> 0:14:11.000 can go. That's like the worst kind of debt that 0:14:11.040 --> 0:14:13.600 you can take on. Yeah, dude, it truly is pretty terrible. 0:14:13.720 --> 0:14:16.360 And let's talk as well about consumption because at the 0:14:16.400 --> 0:14:18.480 core of all these different types of debt that don't 0:14:18.480 --> 0:14:20.880 make sense for you is the fact that they are 0:14:20.960 --> 0:14:24.120 all consumption based. They might pad your lifestyle in the 0:14:24.200 --> 0:14:27.160 short term a little bit, but they drastically hurt your 0:14:27.160 --> 0:14:30.320 ability to grow your wealth in the long term. You're 0:14:30.400 --> 0:14:33.960 essentially sticking your future self with today's tab. It's essentially 0:14:34.000 --> 0:14:36.920 a punishment for your future self, right that it is 0:14:36.960 --> 0:14:40.120 only focused on the here and now. If if consumption 0:14:40.200 --> 0:14:42.160 had like a motto or like a slogan, it would 0:14:42.160 --> 0:14:47.680 be yellow. Yeah, exactly. You know. Actually, in episode one eight, 0:14:47.880 --> 0:14:50.320 when we brought j. D Roth on from Get Rich Slowly, 0:14:50.680 --> 0:14:53.360 he has this article about the stages to financial freedom, 0:14:53.640 --> 0:14:55.720 and he actually mentioned that that first stage, where you 0:14:55.760 --> 0:14:58.840 are in debt. He said, it's essentially like you're a slave. 0:14:59.080 --> 0:15:02.200 When you don't have any assets whatsoever to speak of, 0:15:02.440 --> 0:15:05.120 and you're in debt and you owe people money, whether 0:15:05.200 --> 0:15:09.040 it's owing your girlfriend and your significant other, your your parents, 0:15:09.320 --> 0:15:11.840 or the credit card company. You've essentially become a slave 0:15:11.920 --> 0:15:14.560 to the decisions that you've made. And the only way 0:15:14.640 --> 0:15:16.960 to get out of that is to take action and 0:15:17.040 --> 0:15:19.160 to get rid of that debt as quickly as possible 0:15:19.400 --> 0:15:22.720 so that you're not under any sort of enslavement anymore. Yeah, 0:15:22.760 --> 0:15:24.680 and I agree, Matt. Consumption is at the heart of 0:15:24.720 --> 0:15:27.960 that for most people. That's how we typically get into that. 0:15:28.000 --> 0:15:29.920 We we see something Chinese, we see something that we like, 0:15:30.160 --> 0:15:32.480 we see something even that we think that we need 0:15:32.840 --> 0:15:35.640 we buy it, and then it leads to heartache as 0:15:35.640 --> 0:15:38.080 we're enslaved the payments for it over a long period 0:15:38.120 --> 0:15:40.440 of time. But the title of this episode is when 0:15:40.480 --> 0:15:43.800 debt makes sense. And we've covered the really terrible things 0:15:44.040 --> 0:15:46.600 that debt can do when it does not make sense, Yeah, 0:15:46.720 --> 0:15:48.400 when it invades your life. But we have to talk 0:15:48.400 --> 0:15:50.800 about when debt does typically make sense, our folks, and 0:15:50.840 --> 0:16:02.160 we'll get to that right after the break. Alright, Joe, 0:16:02.240 --> 0:16:04.360 we are back from the break. We've talked about when 0:16:04.360 --> 0:16:07.200 not to debt. Now we're gonna talk about when to debt. 0:16:08.120 --> 0:16:10.120 Let's talk about when debt might make sense for you. 0:16:10.240 --> 0:16:13.480 But here's the thing. Just because something might fall into 0:16:13.520 --> 0:16:15.880 the smart debt category that we're gonna talk about here, 0:16:16.120 --> 0:16:18.480 you don't want to go hog wild. Right. We'll talk 0:16:18.560 --> 0:16:20.920 more about some special considerations that you want to keep 0:16:20.960 --> 0:16:24.040 in mind, but for now, here are some instances when 0:16:24.080 --> 0:16:26.720 debt can make sense. Well, it's just like beer, Matt. 0:16:26.760 --> 0:16:29.200 Good debt is like a good beer, And you know what, 0:16:29.240 --> 0:16:30.840 you put a good beer in front of me, it 0:16:30.880 --> 0:16:32.600 doesn't mean I want six of them, right, And so 0:16:32.680 --> 0:16:35.000 even good debts, it doesn't mean you want to get 0:16:35.000 --> 0:16:38.200 crazy and go overboard. There's a nice, healthy limit. I 0:16:38.240 --> 0:16:40.200 think even with good debt, we need to make analogies 0:16:40.240 --> 0:16:42.960 to beers more often. Why have we not done that? Actually? Alright, 0:16:42.960 --> 0:16:45.960 a new rule for the podcast every episode, have the 0:16:46.000 --> 0:16:48.800 beer analogy. Yes, yes, we'll make it happen. It's like 0:16:48.840 --> 0:16:50.840 the SuDS, it's like the foam. I don't know, there's 0:16:50.840 --> 0:16:52.760 a lot of the aroma of the beer that you appreciate. 0:16:52.880 --> 0:16:56.440 That's the secondary benefits. All right, So let's talk about 0:16:56.480 --> 0:16:59.560 some of those times where debt might make sense for you. Well, 0:16:59.680 --> 0:17:02.400 getting in education is is one that's often touted and 0:17:02.680 --> 0:17:05.000 one that Matt and I agree with. We covered this 0:17:05.119 --> 0:17:07.160 just the other week on the show. We talked about 0:17:07.440 --> 0:17:09.840 when college is worth it? Like, we asked the question 0:17:09.920 --> 0:17:12.119 is college worth it? And we came down on the 0:17:12.119 --> 0:17:14.639 fact that lots of times, for lots of people, it 0:17:14.920 --> 0:17:17.520 is a smart move, and a college education can be 0:17:17.600 --> 0:17:20.040 worth it even with debt if you take out a 0:17:20.080 --> 0:17:23.159 smart amount. Don't overdo it. But an education is a 0:17:23.200 --> 0:17:26.280 solid reason to accrue debt in your life. And that's 0:17:26.359 --> 0:17:30.160 especially because most people going into debt for a college education, well, 0:17:30.280 --> 0:17:32.640 they're youngsters. They're seventeen or eighteen. They don't have any 0:17:32.680 --> 0:17:35.880 assets to their name in almost all circumstances, so how 0:17:35.960 --> 0:17:39.120 how are they going to pay for college? It's it's 0:17:39.240 --> 0:17:42.120 just basically an impossibility to pay for college on your 0:17:42.119 --> 0:17:45.680 own as a youngster in almost all circumstances, and education 0:17:45.760 --> 0:17:47.720 is actually getting you somewhere, it's moving you in in 0:17:47.760 --> 0:17:50.119 the right direction. A good rule of thumb, though, so 0:17:50.160 --> 0:17:52.399 as to not take out too much debt on a 0:17:52.480 --> 0:17:55.520 college education, is to not take out more than you'd 0:17:55.520 --> 0:17:58.719 earn your first year after graduating from school, in your 0:17:58.760 --> 0:18:01.640 first job, your first year salary, don't take out more 0:18:01.640 --> 0:18:03.439 money in debt than you're actually going to make in 0:18:03.440 --> 0:18:06.120 that first year of working. And something else too. I'm 0:18:06.119 --> 0:18:09.760 thinking about different school like quote unquote school expenses. Make 0:18:09.800 --> 0:18:12.520 sure that you're not using your student loan money to, say, 0:18:12.600 --> 0:18:14.800 buy that new car because you think, oh, I need 0:18:14.880 --> 0:18:18.040 reliable transportation to get to class, or even like going 0:18:18.080 --> 0:18:19.760 on spring break right like, just because it's on the 0:18:19.800 --> 0:18:22.160 school calendar like that, that doesn't make it a school event, 0:18:22.720 --> 0:18:25.240 right I think you know, if you were to do that, 0:18:25.440 --> 0:18:28.360 if you were to spend money on things not actually 0:18:28.560 --> 0:18:31.600 going towards your education, you're only fooling yourself. So just 0:18:31.680 --> 0:18:34.520 make sure you're using your actual student loans for education. 0:18:34.840 --> 0:18:38.160 So education. Another area where we think that debt can 0:18:38.200 --> 0:18:40.320 make sense is if you're going to start a business. 0:18:40.359 --> 0:18:44.280 Just like getting an education is investing in yourself, starting 0:18:44.280 --> 0:18:47.640