WEBVTT - Good Debt vs Bad Debt #022 0:00:00.080 --> 0:00:02.920 Welcome to How to Money. I'm Joel and I'm Att, 0:00:03.000 --> 0:00:24.880 and today we're talking about good debt. First, bad debt. Yeah, Mat. 0:00:24.880 --> 0:00:27.280 Today on the show, we're gonna define good debt, bad debt, 0:00:27.360 --> 0:00:29.680 and then give some tips on managing your debt. Some 0:00:29.720 --> 0:00:32.040 people don't even believe there is such a thing as 0:00:32.040 --> 0:00:34.839 bad debt, and we'll let them know, yes there is. So, man, 0:00:34.880 --> 0:00:37.479 have you saved any money this week? So? I mentioned 0:00:37.520 --> 0:00:40.239 on a recent episode, uh, the one about cutting your 0:00:40.240 --> 0:00:42.560 monthly bills, that I was paying way too much for 0:00:42.640 --> 0:00:45.320 my internet service because I decided, oh, yeah, because you 0:00:45.360 --> 0:00:47.720 got the Primo service. But then it kind of sucked. Yeah, 0:00:47.760 --> 0:00:49.680 I tried to. I decided to try out the gig 0:00:49.760 --> 0:00:51.880 speed that they were floating in our neighborhood, and I 0:00:51.920 --> 0:00:54.080 was like, Oh, this is gonna be great, and life 0:00:54.080 --> 0:00:56.600 on gig speed. I'm never gonna go back. And I 0:00:56.800 --> 0:00:59.920 just realized that it didn't provide much value over regular 0:01:00.040 --> 0:01:03.400 internet speeds for me, and so I took my own medicine. 0:01:03.960 --> 0:01:06.240 I tweeted at the A, T and T folks. They 0:01:06.280 --> 0:01:09.000 got back to me pretty quick. I had to pick 0:01:09.080 --> 0:01:10.520 up the phone and talk to him, because you know, 0:01:10.520 --> 0:01:14.119 the old school like that. Uh. But ultimately, dude, I'm 0:01:14.120 --> 0:01:17.440 saving seventy dollars a month on my internet bill. That's 0:01:17.440 --> 0:01:20.120 over eight hundred dollars a year. Wait, what were you 0:01:20.120 --> 0:01:22.320 paying if you if you're saving seventy So when I 0:01:22.360 --> 0:01:24.280 initially signed up, it was eighty dollars a month, and 0:01:24.280 --> 0:01:26.640 then they just last month pumped it up to ninety, 0:01:26.680 --> 0:01:28.600 which was that kick in the pants that I was 0:01:28.720 --> 0:01:32.120 I needed to to totally destroy. Down to twenty bucks 0:01:32.160 --> 0:01:37.680 a month for Wicked speed fifty megs. Ye okay, that's 0:01:37.720 --> 0:01:40.800 pretty good, dude, that's how I roll. Man, that's got 0:01:40.800 --> 0:01:42.840 that locked in for a year a year, man, that's 0:01:42.840 --> 0:01:44.839 really good. I was gonna say for maybe six months. 0:01:45.080 --> 0:01:48.200 There's uh, not much better than just acting seventy dollars 0:01:48.200 --> 0:01:49.960 out of your monthly budget. Yeah, dude, that's huge and 0:01:49.960 --> 0:01:52.240 being able to reallocate it. So yeah, I'm pretty pumped 0:01:52.240 --> 0:01:56.160 about that right now. Beers on you for the next year. Yeah. Uh. 0:01:56.200 --> 0:01:58.600 Speaking of beers, we've been tailgating a little bit here, 0:01:58.760 --> 0:02:02.440 a little pregame a little pre podcast beer. Uh and 0:02:02.520 --> 0:02:05.200 a listener of the show, Austin thanks man. He uh 0:02:05.240 --> 0:02:08.240 he dropped these by my house the other week. And 0:02:08.280 --> 0:02:11.519 so we're drinking some wicked weed Lieutenant dank, which is 0:02:11.800 --> 0:02:14.320 a solid I p A. But don't worry, that's not 0:02:14.400 --> 0:02:16.040 the only beer we're having tonight. We're about to pop 0:02:16.080 --> 0:02:18.400 another one. No, yeah, that's just our that's our pregame beer. 0:02:18.480 --> 0:02:20.280 But real quick, you wanted to tell me about some 0:02:20.360 --> 0:02:23.160 razors you recently bought. Yeah, please fill me in. So 0:02:23.240 --> 0:02:26.520 the razors I didn't buy because my parents came and visited. 0:02:26.760 --> 0:02:28.600 And I don't do your parents show up with a 0:02:28.639 --> 0:02:33.320 box of crap from no night really, well they show 0:02:33.360 --> 0:02:36.040 from your childhood, uh, from your like in your closet 0:02:36.080 --> 0:02:38.560 or whatever. No, they just usually show up with presents 0:02:38.600 --> 0:02:41.880 for my daughters. So yeah, we are your parents. Awesome 0:02:43.320 --> 0:02:47.000 shout out. Yeah, I mean my things do that too. However, 0:02:47.040 --> 0:02:49.640 they're starting to clear out my room and so they 0:02:49.639 --> 0:02:51.400 show up every now and then with like a massive 0:02:51.440 --> 0:02:54.720 fruit box from Costco full of like books and just 0:02:54.840 --> 0:02:56.440 tons of other stuff. What do they like? Keep it 0:02:56.480 --> 0:02:58.280 the same? Kind of like Ray Finkel's mom or Na 0:02:58.320 --> 0:03:00.720 Sventure a pet Detective. I don't like I've ever watched 0:03:00.760 --> 0:03:05.160 a spintro all the way through. Man, shut Sorry, I'm 0:03:05.200 --> 0:03:09.840 not a huge Jim carry van. It's the best scene. 0:03:09.960 --> 0:03:12.560 His mom like leaves the room like the way it 0:03:12.680 --> 0:03:15.440 was when he was I've heard of people teenager and 0:03:15.600 --> 0:03:17.440 uh and a spincher walks into the room and it's 0:03:17.440 --> 0:03:20.080 just all creepy and stuff, and it's so I'm imagining 0:03:20.080 --> 0:03:23.079 that your Oh yeah, so I'm imagining that your mom 0:03:23.160 --> 0:03:25.600 kept the room in that exact way, and now she's 0:03:25.600 --> 0:03:28.360 starting to make some changes. Yeah. No, so yeah, they 0:03:28.360 --> 0:03:31.760 show up with a box full of stuff and they say, here, 0:03:31.840 --> 0:03:33.240 here's a bunch of your stuff. You can toss it 0:03:33.360 --> 0:03:35.520 or keep it whatever. And so I was going through 0:03:35.520 --> 0:03:38.840 one of the boxes recently and my razor handle, you know, 0:03:38.880 --> 0:03:41.280 like the metal aluminum handle and something. A little tray 0:03:41.320 --> 0:03:43.600 of razors were in there from when I was like 0:03:43.640 --> 0:03:46.440 sixteen years old. Man, from when I was in high school? Dude, 0:03:46.680 --> 0:03:49.160 can you're gonna start using that stuff? Do I look 0:03:49.200 --> 0:03:51.800 like freshly shaven? I don't see toilet paper all over 0:03:51.840 --> 0:03:54.840 your face? So exactly. So I saw it and I thought, well, 0:03:54.840 --> 0:03:57.080 first of all, the handle is like old school. It was. 0:03:57.120 --> 0:03:58.720 I think it was my dad's from like the eighties 0:03:59.000 --> 0:04:00.720 when I hit the big pie and started having to 0:04:00.800 --> 0:04:03.680 shape Uh. I think he just gave me his and 0:04:03.680 --> 0:04:05.400 he got a new one and so it's kind of cool. 0:04:05.440 --> 0:04:06.840 It's like they don't make him like that anymore. It's 0:04:06.840 --> 0:04:10.160 like solid and heavy. Yeah, but yeah, I was just 0:04:10.200 --> 0:04:11.840 like I popped one of the razors on there, and 0:04:11.840 --> 0:04:13.720 I was like, I think this is still sharp, And 0:04:13.760 --> 0:04:15.920 so I shaved last night. Dude, it looks good. But 0:04:16.160 --> 0:04:18.040 those razors are gonna ask me for like another two 0:04:18.080 --> 0:04:19.920 or three years because I don't have to shave very often, 0:04:20.040 --> 0:04:22.440 and it's way smoother than like shaving with kates like 0:04:22.520 --> 0:04:26.520 leg razors, which totally irritate my skin. What's the difference 0:04:26.600 --> 0:04:29.320 between male and female razors? Because I feel like men 0:04:29.400 --> 0:04:31.920 can't really use the women's razors that that they can. 0:04:32.200 --> 0:04:33.960 There's it's like a different angle or something. Is it 0:04:34.080 --> 0:04:37.400 the angle? Because Emily is trying to use my razors before, 0:04:37.560 --> 0:04:39.440 and you know, she gets cut up a little bit 0:04:39.480 --> 0:04:41.080 more and I've tried to use hers and just have 0:04:41.080 --> 0:04:42.880 a hard time with him. I don't know. Is it 0:04:43.640 --> 0:04:46.200 someone knows out there? And I know the internet let 0:04:46.279 --> 0:04:48.440 us know, Yeah, holler rat us. All I know is 0:04:48.480 --> 0:04:51.640 that it it felt way smoother and way better using 0:04:51.680 --> 0:04:54.680 that razor than using Kate's disposable. So and by the way, 0:04:54.720 --> 0:04:57.480 speaking of hollering at us, we just got an email 0:04:57.600 --> 0:05:02.480 from a listener in Western Australia, a Perth, Perth, Australia. Man, 0:05:02.560 --> 0:05:05.479 it's so awesome, dude, it's so fun. Uh. Probably my 0:05:05.480 --> 0:05:08.479 favorite part of doing this podcast, even above drinking the 0:05:08.520 --> 0:05:12.680 beer and hanging out with your well shaven face smooth, 0:05:13.120 --> 0:05:15.560 is getting emails. Is is hearing from the people that 0:05:15.640 --> 0:05:17.720 listen to the show. And that's a that's a lot 0:05:17.760 --> 0:05:21.520 of fun hearing people stories why they listen, what they're learning, 0:05:21.520 --> 0:05:24.120 and how they're implementing some of these strategies into their 0:05:24.120 --> 0:05:27.159 lives in order to reach their financial goals. Man, I yeah, 0:05:27.160 --> 0:05:30.039 I completely agree. Shout out to Craig he uh was Yeah, 0:05:30.080 --> 0:05:31.440 he shared with us some of the things that sort 0:05:31.440 --> 0:05:33.080 of resonated with him even on the other side of 0:05:33.120 --> 0:05:35.359 the world, and it just it's crazy, but it just 0:05:35.400 --> 0:05:37.480 makes it the world seems so small because there's people 0:05:37.480 --> 0:05:39.719 all over the world that shared the same values you 0:05:39.720 --> 0:05:41.520 do and and and enjoy the same things. And it 0:05:41.560 --> 0:05:43.400 makes you think that you could kind of get together 0:05:43.800 --> 0:05:45.920 even though you've never met, and have a great time. 0:05:45.960 --> 0:05:47.600 You know, It's like let's just get together and hang 0:05:47.640 --> 0:05:49.440 out all you people. Yeah, it seems like a small 0:05:49.440 --> 0:05:51.440 world until you jump on the airplane for that sixteen 0:05:51.480 --> 0:05:53.520 hour flight and then you're like, oh wait, that's a 0:05:53.520 --> 0:05:56.960 long way away. Uh. But was someone someone sounds spoiled? Man, 0:05:56.960 --> 0:06:00.440 I've never been to Australia. It was nice. Uh. But 0:06:00.520 --> 0:06:02.440 I will say to Craig, it's awesome. I love that. 0:06:02.480 --> 0:06:05.440 He told us that he listens to the podcast while 0:06:05.560 --> 0:06:08.200 riding his bike along the river. Yeah. Yeah, he was 0:06:08.240 --> 0:06:12.080 literally listening to our episode on y com Meeting will 0:06:12.160 --> 0:06:15.120 Kill You and he was listening to that one while 0:06:15.160 --> 0:06:17.039 he was biking home from work. That can't help but 0:06:17.240 --> 0:06:20.479 make you crack a smile, right, it's perfect. So alright, Matt. 0:06:20.520 --> 0:06:23.960 So today on the show, we're drinking Hopping Frog Infusion 0:06:24.040 --> 0:06:26.960 a coffee porter. So where did you get this? Because 0:06:27.480 --> 0:06:31.200 because I've never even heard of this brewery, Hopping Frog, 0:06:31.680 --> 0:06:35.320 so I will say, because of their branding is really bad. 0:06:35.440 --> 0:06:39.080 So the label is complete trash. I really don't like it. 0:06:39.120 --> 0:06:41.320 In the first time I ever had a Hopping Frog 0:06:41.360 --> 0:06:43.560 beer was when a friend shipping me one. They're based 0:06:43.560 --> 0:06:46.640 out of Ohio and they distribute now where we are, 0:06:46.680 --> 0:06:49.480 and so we have a little more access to them. So, actually, 0:06:49.480 --> 0:06:53.040 I got this beer on the discount rack at my 0:06:53.640 --> 0:06:56.000 local beer store. Dude, I need to go there. He's 0:06:56.000 --> 0:06:58.000 always putting the good stuff on the discount on the 0:06:58.000 --> 0:07:00.320 discount rat. Why is he? Why is he unloading these bears? 0:07:00.440 --> 0:07:02.200 He just wants to move them. I guess, yeah, yeah, 0:07:02.200 --> 0:07:04.400 I guess just beers that don't sell super well or 0:07:04.880 --> 0:07:06.359 that's put on the shelf for a little while longer. 0:07:06.360 --> 0:07:10.000 And so this one is a coffee porter with chocolate 0:07:10.040 --> 0:07:12.040 and peanut butter. And I don't know if you could 0:07:12.040 --> 0:07:14.960 tell right when we popped it, did your nostrils fill 0:07:15.000 --> 0:07:17.720 with peanut butter? Smells a little bit, not nearly like 0:07:17.800 --> 0:07:20.200 some of the bourbon barrel stuff that we have, but yeah, 0:07:20.200 --> 0:07:22.680 bourbons just a more powerful sent in general. But yeah, 0:07:22.680 --> 0:07:24.559 now that I've got my nose up in it full 0:07:24.640 --> 0:07:28.240 on chocolate, smell some of that coffee like a nuttiness. Yeah. 0:07:28.240 --> 0:07:30.720 So this is a porter, and porters are definitely a 0:07:30.720 --> 0:07:34.560 bit thinner in mouth field and viscosity than a stout, 0:07:34.840 --> 0:07:37.600 and this particular beer it retains a lot of that 0:07:37.680 --> 0:07:41.360 porter thinness, but it does have some really nice peanut 0:07:41.360 --> 0:07:43.640 butter notes, uh, and in a little bit of coffee 0:07:43.680 --> 0:07:46.560 in there as well, super nutty. Yeah, I completely agree. Man. Yeah, 0:07:46.600 --> 0:07:49.160 pour is a really dark brown as you're pouring it, 0:07:49.200 --> 0:07:52.240 but now that's here in the glass, it's like pitch black. 0:07:52.800 --> 0:07:55.559 But yeah, but it's thinner. It kind of wiggles around 0:07:55.560 --> 0:07:58.960 there in the glass, not like a thick barrel aged stout, 0:07:59.160 --> 0:08:00.560 and it feels a little bit enter in your mouth 0:08:00.600 --> 0:08:02.560 as well, a little easier to drink. Yeah. So I 0:08:02.560 --> 0:08:06.400 think it's a certainly a solid representation of the coffee porter. 0:08:06.640 --> 0:08:08.440 And you know, a couple of adjuncts in there, which 0:08:08.640 --> 0:08:10.960 just means additions like chocolate and peanut butter, and that 0:08:11.000 --> 0:08:12.400 kind of rounds it out and gives it, you know, 0:08:12.400 --> 0:08:14.440 a little more flavor, a little more interest. You know. 0:08:14.480 --> 0:08:16.360 Porters are not my go to. It's not something I 0:08:16.480 --> 0:08:22.080 usually enjoy, but even with their terrible labels, I always 0:08:22.080 --> 0:08:25.160 give Hopping Frog a chance, because man, they make some 0:08:25.200 --> 0:08:27.760 of the best stouts out there. I've had some really 0:08:28.040 --> 0:08:31.160 really good stuff from them before, and this one definitely 0:08:31.200 --> 0:08:34.120 worth a shot. It's solid, although not top tier in 0:08:34.160 --> 0:08:36.719 my opinion. Yeah. The fact that this is a porter though, too, 0:08:36.760 --> 0:08:39.040 it's makes it definitely easier to drink in the summer. 0:08:39.280 --> 0:08:41.920 You know, like some of those huge stylets, it's tough 0:08:41.960 --> 0:08:44.600 to drink those in the summer, like maybe once, like 0:08:44.679 --> 0:08:46.960 once the summer, or like once a month or something 0:08:46.960 --> 0:08:48.640 like that. You know. Yeah, when it's in the eighties 0:08:48.640 --> 0:08:54.280 and nineties, you don't want this giant, oily machine gloopy beer. Yeah, 0:08:54.400 --> 0:08:56.720 whereas this this still drinks it feels it feels light 0:08:56.760 --> 0:08:59.200 in your mouth, but it gives you those darker chocolate 0:08:59.240 --> 0:09:01.960 e listed flavors, so you kind of get that profile 0:09:02.120 --> 0:09:04.240 without getting weighed down by the heaviness of the of 0:09:04.480 --> 0:09:06.680 a boozy beer. I'm with you, not my favorite, but 0:09:06.920 --> 0:09:09.439 uh I dig it all right, Matt. So let's tackle 0:09:09.520 --> 0:09:12.160 the topic good debt versus bad debt, and I guess 0:09:12.160 --> 0:09:15.040 the ultimate question and the debate rages in the personal 0:09:15.040 --> 0:09:18.760 finance community. Is there such a thing as good debt? Yeah? Man, 0:09:18.800 --> 0:09:20.800 And for your listeners out there as well, I'm sure 0:09:20.800 --> 0:09:23.280 that's something you've heard of, right, Like you've heard plenty 0:09:23.280 --> 0:09:25.000 of people say that, oh, debt's bad. You want to 0:09:25.000 --> 0:09:27.120 try to avoid debt as much as possible, But then 0:09:27.280 --> 0:09:28.480 kind of the more you get into it and the 0:09:28.480 --> 0:09:31.000 more you maybe research, you start seeing folks saying, well, 0:09:31.040 --> 0:09:33.160 oh there's you know, there's maybe some good debt out there. 0:09:33.240 --> 0:09:35.160 There's some different rules. So we're gonna talk about this 0:09:35.280 --> 0:09:37.319 more generally, I guess, but we're gonna talk about the 0:09:37.320 --> 0:09:40.079 differences between what we would characterize as good debt and 0:09:40.559 --> 0:09:43.360 what we'd characterize as bad debt. Yeah, And I wonder 0:09:43.400 --> 0:09:45.800 if even good debt is the best term to use, 0:09:46.040 --> 0:09:49.640 just not awful debt maybe, right, And so I wouldn't 0:09:49.640 --> 0:09:51.760 say there's any debt that you that could be characterized 0:09:51.760 --> 0:09:53.360 as good where I would say, go get some of 0:09:53.360 --> 0:09:56.640 that debt right now. It's great. But yes, I agree, 0:09:56.720 --> 0:09:59.720 but at least it's not awful debt, right, So, and 0:09:59.760 --> 0:10:01.640 I think there is a big difference to be made. 0:10:01.679 --> 0:10:03.080 And then I think we can parse out some of 0:10:03.080 --> 0:10:05.920 the details of you know, debt that you should consider 0:10:06.440 --> 0:10:09.200 terrible debt that you need to attempt to eliminate as 0:10:09.280 --> 0:10:11.720 quickly as possible, and then other debts that you might 0:10:11.760 --> 0:10:14.400 be carrying that you can afford to pay the minimums on, 0:10:14.640 --> 0:10:17.920 or at least just afford to pay off a little 0:10:17.920 --> 0:10:21.000 more slowly over time. Yeah, man, that's good. Also a 0:10:21.040 --> 0:10:23.559 good way that maybe think about it is that debt 0:10:23.600 --> 0:10:26.760 and loans are tools, and they can be used poorly 0:10:26.800 --> 0:10:29.880 and unwisely, and that could take somebody further into debt 0:10:30.080 --> 0:10:33.199 and kind of on this downward cycle of spending and consumption. 0:10:33.400 --> 0:10:34.959 But at the same time, it went in the hands 0:10:34.960 --> 0:10:36.960 of somebody that knows what they're doing, right, that has 0:10:37.320 --> 0:10:40.040 the knowledge and experience and knows how to use the debt, 0:10:40.040 --> 0:10:43.360 how to leverage it, then perhaps that same product, like right, 0:10:43.400 --> 0:10:45.920 like that same loan or that same debt could could 0:10:45.920 --> 0:10:48.400 be very beneficial. Yeah, I mean, I think one good 0:10:48.480 --> 0:10:51.559 episode that we've done that kind of correlates to this 0:10:51.760 --> 0:10:55.200 is our episode on using credit cards like a pro. Yeah, 0:10:55.400 --> 0:10:58.640 the credit cards obviously our debt or their tools of debt. 0:10:58.800 --> 0:11:00.679 And so in the hands of one person, a credit 0:11:00.679 --> 0:11:03.959 card can be this awesome tool to get frequent flyer 0:11:04.000 --> 0:11:06.360 miles and like the sign of bonuses that's my favorite, yeah, 0:11:06.559 --> 0:11:09.800 Jet said, or get some awesome cash back bonuses and 0:11:09.960 --> 0:11:13.040 still never be accruing any interest at all. And then 0:11:13.080 --> 0:11:15.360 in the hands of someone else, they can be using 0:11:15.360 --> 0:11:19.040 it essentially to buy lifestyle and paying the minimums every 0:11:19.040 --> 0:11:22.839 month and essentially digging themselves in a bigger hole month 0:11:22.920 --> 0:11:25.320 after month after month because they don't know how to 0:11:25.440 --> 0:11:28.400 use it properly. So in the same way as we 0:11:28.480 --> 0:11:31.520 approach this episode, again, it's not necessarily good debt, but 0:11:31.559 --> 0:11:34.480 that's how we're gonna refer to it. And in the 0:11:34.480 --> 0:11:36.640 hands of one person it can be used wisely. In 0:11:36.640 --> 0:11:38.560 in the hands of another, it can be used for 0:11:38.760 --> 0:11:42.360 great harm. Yeah, man, that's right. So, generally speaking, good 0:11:42.400 --> 0:11:45.680 debt is borrowing money for something that will appreciate over 0:11:45.720 --> 0:11:48.440 time and so so an example of this definitely would 0:11:48.440 --> 0:11:51.360 be mortgages. Right, you buy a house or you know, 0:11:51.360 --> 0:11:53.160 you mortgage with the house, and over time you expect 0:11:53.200 --> 0:11:56.200 it to go up and value. Generally speaking, we would 0:11:56.200 --> 0:11:57.880 call that a good debt. Again, we don't want to 0:11:57.920 --> 0:12:01.079 put up this blanket statement because if someone hears that, oh, 0:12:01.120 --> 0:12:03.400 mortgage debt is a good debt, we don't want to 0:12:03.440 --> 0:12:06.640 encourage someone to go out and rack up a massive 0:12:06.679 --> 0:12:10.080 mortgage payment, right, because that might be bad for their situation. 0:12:10.120 --> 0:12:13.400 It just depends on the individual. But generally speaking, a 0:12:13.440 --> 0:12:26.080 mortgage is considered good debt. Yeah, So let's dig a 0:12:26.080 --> 0:12:28.559 little bit deeper into that map, especially in this interest 0:12:28.679 --> 0:12:32.200 rate environment, having a mortgage at a low interest rate, 0:12:32.280 --> 0:12:35.040 and many people out there listening that have a home 0:12:35.120 --> 0:12:37.839 with a mortgage are probably paying somewhere between three and 0:12:37.880 --> 0:12:40.640 a half and four and a half percent on that mortgage. 0:12:40.720 --> 0:12:44.199 Record lows for mortgage interest rates. Yeah, and so considering 0:12:44.360 --> 0:12:47.800 where rates are headed and the fact that you probably 0:12:47.800 --> 0:12:50.560 have something locked in for a long period of time, 0:12:50.960 --> 0:12:54.240 that makes it really smart to actually hold onto that 0:12:54.360 --> 0:12:57.719 low interest rate debt and use the surplus that you 0:12:57.800 --> 0:13:01.120 might have put towards paying it down more quickly into 0:13:01.160 --> 0:13:04.400 something that is even more beneficial. So something like you 0:13:04.480 --> 0:13:07.600 and I would say investing in more real estate, buying 0:13:07.640 --> 0:13:11.040 something that will also appreciate in value over time and 0:13:11.160 --> 0:13:13.600 provide cash flow every month. And if you're not interested 0:13:13.640 --> 0:13:17.520 in that, well, then putting more away in your retirement accounts, 0:13:17.520 --> 0:13:19.120 in your four o one K or your wrath Hi ray, 0:13:19.360 --> 0:13:22.679 those would be better uses of your extra funds to 0:13:22.880 --> 0:13:26.160 save for the future than to try and pay down 0:13:26.240 --> 0:13:28.880 your low interest rate mortgage more quickly. Yeah. And so 0:13:28.960 --> 0:13:33.360 basically what what you're describing is leveraging debt. And so essentially, 0:13:33.400 --> 0:13:36.080 when you have, say specifically a mortgage that's locked in 0:13:36.120 --> 0:13:39.880 at a low rate four percent these days, right around there. 0:13:40.320 --> 0:13:42.000 And if you can, say, make ten percent in the 0:13:42.040 --> 0:13:44.680 stock market, well you're you've got a spread of six percent. 0:13:45.120 --> 0:13:48.480 And so instead of taking your money and paying it 0:13:48.520 --> 0:13:52.679 down towards your mortgage, which is essentially and effectively gonna earn, 0:13:52.720 --> 0:13:54.559 earn you four percent, right, because if you're paying four 0:13:54.559 --> 0:13:57.560 percent and you're able to eliminate that mortgage, you're saving 0:13:57.559 --> 0:14:01.040 yourself four percents. You're making four percent um. Instead of 0:14:01.080 --> 0:14:03.559 doing that, you're gonna make six percent. But yeah, that's 0:14:03.600 --> 0:14:05.640 the general idea. Yeah, and I think that doesn't even 0:14:05.679 --> 0:14:08.800 take into account, you know, the potential tax implications where 0:14:08.920 --> 0:14:14.040 your home mortgage is tax deductible and your four percent 0:14:14.200 --> 0:14:17.800 interest rate is actually effectively much lower than that. And 0:14:17.840 --> 0:14:19.960 then on top of that, investing in the stock market 0:14:20.240 --> 0:14:23.360 in tax advantage accounts could save you money on taxes 0:14:23.400 --> 0:14:26.760 either now or in the future, and that creates an 0:14:26.760 --> 0:14:28.680 even greater spread. Yeah, it's like a double w amy 0:14:28.920 --> 0:14:32.360 where yeah, where the spreads even wider. Yea. So the 0:14:32.360 --> 0:14:34.320 main thing I would tell people to be cautious of 0:14:34.600 --> 0:14:38.040 is overleveraging themselves and taking on more debt than they 0:14:38.040 --> 0:14:40.480 can actually afford to pay off on a monthly basis. 0:14:41.360 --> 0:14:43.600 So it's not wise to take out low interest rate debt, 0:14:43.640 --> 0:14:46.960 even just for the purpose of trying to finagle a spread. 0:14:47.240 --> 0:14:50.880 And if the stock market experiences a prolonged trough, that 0:14:50.880 --> 0:14:52.720 could certainly create a lot of worry and a lot 0:14:52.720 --> 0:14:55.120 of sleepless nights for you. But I guess the main 0:14:55.400 --> 0:14:59.120 key here is if you have a mortgage that is 0:14:59.160 --> 0:15:02.040 at a low interest straight and you have extra cash 0:15:02.120 --> 0:15:04.680 to pay it off, is that the wisest use of 0:15:04.720 --> 0:15:08.520 your funds? Yeah? Man, So again this is how a 0:15:08.560 --> 0:15:11.480 mortgage can be considered a good debt. Uh. It makes 0:15:11.520 --> 0:15:14.000 sense if you're looking at it from a number standpoint, right, 0:15:14.040 --> 0:15:17.480 because if you're locked in to a lower rate, you 0:15:17.520 --> 0:15:19.320 can do a lot of other things with that money 0:15:19.400 --> 0:15:22.200 than paying down that low interest debt. It's tough to 0:15:22.240 --> 0:15:25.120 say these sort of general blanket statements of like mortgage 0:15:25.160 --> 0:15:28.120 debt is good, but generally speaking, you know, the numbers 0:15:28.600 --> 0:15:31.720 can make sense for you to maintain your mortgage and 0:15:31.880 --> 0:15:34.560 to not pay that off, and ultimately you're going to 0:15:34.600 --> 0:15:37.880 budget for a place to live every month, whether that's 0:15:37.960 --> 0:15:40.520 rent or a mortgage, right, And so the thing I 0:15:40.600 --> 0:15:44.080 want to warn people away from is from paying down 0:15:44.200 --> 0:15:46.360 low interest rate debt more quickly than they need to 0:15:46.400 --> 0:15:49.480 when their money could be allocated better elsewhere. That's right, 0:15:49.800 --> 0:15:51.840 I think, at least at this point in time where 0:15:51.840 --> 0:15:55.360 we're at with interest rates, Mortgages are just the perfect 0:15:55.360 --> 0:15:58.560 example of that. To have something that is locked in 0:15:58.720 --> 0:16:01.040 at such a low rate for such a long period 0:16:01.080 --> 0:16:03.400 of time, there's a good chance that as you earn 0:16:03.480 --> 0:16:06.680 more in your job or as you cut back your expenses, 0:16:06.680 --> 0:16:10.800 that those extra savings should go more towards appreciating assets 0:16:10.920 --> 0:16:13.600 or towards investing in the stock market than just towards 0:16:13.640 --> 0:16:16.960 servicing your debt at a faster rate. Yea man. So, 0:16:17.080 --> 0:16:20.440 in the end, good debt is borrowing for things that 0:16:20.480 --> 0:16:23.000 will go up and value. When you're locked into a 0:16:23.000 --> 0:16:25.560 low rate, that allows you to free up that money 0:16:25.600 --> 0:16:28.200 to then invest in other things that are going to 0:16:28.280 --> 0:16:30.720 earn more than what you're paying against that debt. So 0:16:30.760 --> 0:16:33.040 that's good debt, Joel, you want to talk something about 0:16:33.120 --> 0:16:36.800 bad debt, yeah, Matt, So, bad debt is essentially borrowing 0:16:36.840 --> 0:16:40.360 money to pay for something that depreciates and usually at 0:16:40.400 --> 0:16:44.320 a higher interest rate. For example, in our episode about cars, 0:16:44.960 --> 0:16:47.200 we said that taking out loans for an automobile is 0:16:47.320 --> 0:16:50.920 a terrible idea because of the rapid rate of depreciation, right, 0:16:51.440 --> 0:16:54.560 And so ultimately it's a bad debt because even though 0:16:54.600 --> 0:16:56.920 you might get a super low interest rate, it's just 0:16:57.040 --> 0:16:59.760 not smart to finance things that are going to depreciate 0:16:59.800 --> 0:17:02.800 that weekly. Yeah, man, that's right. It's just consumption, you know. 0:17:03.200 --> 0:17:06.359 Or oftentimes it's called consumer debt because literally you're just 0:17:06.520 --> 0:17:10.000 consuming it, like it's just something that you're eating. You're 0:17:10.000 --> 0:17:14.399 just like feeding your belly, and nothing ever comes of it, 0:17:14.520 --> 0:17:16.920 you know this, It's nothing that grows at all. Yeah. 0:17:16.920 --> 0:17:19.240 So other examples of that would be credit card debt, 0:17:19.640 --> 0:17:24.439 title loans, buying a boat, right or a jet ski. Uh, 0:17:24.480 --> 0:17:26.680 there are I don't think I hear anyone that ever 0:17:26.920 --> 0:17:29.440 is happy about buying a boat. You know, well they 0:17:29.480 --> 0:17:31.480 you know, they say that the best day two best 0:17:31.520 --> 0:17:32.879 days in your life for the days you bought the 0:17:32.880 --> 0:17:34.240 boat in the day you sold it, so in the 0:17:34.280 --> 0:17:37.640 day that it sinks right to collect the insurance check. 0:17:38.920 --> 0:17:41.800 But just like good debt can create a positive spread 0:17:42.119 --> 0:17:45.200 between the low interest rate debt and the higher interest 0:17:45.280 --> 0:17:48.280 rate you can earn on investing, bad debt does pretty 0:17:48.359 --> 0:17:50.960 much the exact opposite. And creates a gap of loss 0:17:51.040 --> 0:17:53.639 that you just can't overcome. A lot of times people 0:17:53.680 --> 0:17:55.480 think that they can take that money that they would 0:17:55.480 --> 0:17:57.840 have put down to paying for whatever that they're purchasing 0:17:57.920 --> 0:18:00.560 in cash, and instead of paying for that kind they think, oh, 0:18:00.600 --> 0:18:02.800 I can take this now and invest it. But what 0:18:02.920 --> 0:18:04.960 they're not really taking into account is that, well, first 0:18:04.960 --> 0:18:07.640 of all, you've got your interest payments on that, right, 0:18:07.920 --> 0:18:09.240 But then on top of that, you've got that rate 0:18:09.240 --> 0:18:12.120 of depreciation, and say specifically for a car, you're looking 0:18:12.160 --> 0:18:15.719 at close to a year in depreciation on a new vehicle. 0:18:16.040 --> 0:18:18.560 And so if you've got say I don't even know 0:18:18.560 --> 0:18:20.440 if this is a current interest rate for a car, 0:18:20.480 --> 0:18:22.000 but say you're paying five percent in a car and 0:18:22.040 --> 0:18:24.680 you're looking at fift and percent and depreciation, you're looking 0:18:24.680 --> 0:18:28.199 at needing to make at least in some investment in 0:18:28.280 --> 0:18:32.359 order to even break even, right, And that's really not possible. 0:18:32.520 --> 0:18:37.200 And anyone that's promising you that runaway, and exactly exactly, 0:18:37.560 --> 0:18:40.480 And so just keep in mind that what characterizes bad 0:18:40.520 --> 0:18:44.240 debt is borrowing for things that depreciate and value that 0:18:44.359 --> 0:18:47.160 ultimately will have no value and ultimately in the end 0:18:47.520 --> 0:18:49.919 make you poor. Yeah, And the tough thing is that 0:18:50.000 --> 0:18:53.160 in our culture right now, there's access to cheap debt 0:18:53.200 --> 0:18:57.000 for all sorts of things, and we can find ourselves 0:18:57.040 --> 0:18:59.679 paying monthly payments on a crazy variety of items. At 0:18:59.680 --> 0:19:02.960 this point. You can take out a loan for dental work, 0:19:03.480 --> 0:19:07.240 or a new air conditioner or a sofa. There's a 0:19:07.280 --> 0:19:09.600 million things out there right that you can quickly and 0:19:09.640 --> 0:19:12.680 easily take out a loan for. But with some thoughtfulness 0:19:12.720 --> 0:19:15.399 and discipline, you can avoid that consumer culture and that 0:19:15.520 --> 0:19:18.600 idea that taking on debt willy nilly for every little 0:19:18.640 --> 0:19:21.399 inconvenience that you encounter or every little thing that you 0:19:21.640 --> 0:19:24.760