Pay down debt or ???

[Jarhead77]

Did you mean for this to be in Purple?!

Do you actually have a clue what your taxes pay for or are you just spouting off...

Been paying them for 35 years, yes I know what they go to. Just using some of the examples he chose.

 

[teddy12b]

On the topic of taxes I would agree with the sentiment that any money taken from us through the threat of force more than once is completely immoral. It's not that most people out there don't agree that taxes provide services. It's that not everyone out there agrees that all these services net out to a value add.

I don't see what's wrong with fire departments charging for their services and I don't see what's wrong a person deciding that the cost of paying a yearly fee to the fire department is too much if they man up and accept the consequences of those risks. Most of us would agree that paying $100 over the course of a year is a very wise choice to have fire department coverage, but if that same cost was $15,000 per year I would argue that people shouldn't be forced to pay it under the penalty of the law if they're willing to watch their house being burned down and held liable for the damage to their property and what it causes to their neighbors property.

Personally, one of the reason I really really liked the fair tax (consumption based) was because it simplified the tax code enough to where a common person might have a chance to understand it. What we've currently got is a system that nobody but the thief understands and once we gain an understanding the thief changes the rules. In a much simpler explanation, the government is a pimp and you don't pay up for the services it provides you can expect a black eye or worse.

Off my rant and back to the topic. The amount of debt we all chose to carry is up to us. We could all agree that debt free is a big goal and an outstanding acheivement. However, there's also something to be said for living out your dreams. If you dream of 500 acres and a log cabin and have a means to make that happen, then go for it. You're getting into debt, but you have something you can put your hands on too. It's all a personal choice at the end of the day so long as you're going to accept responsibility for your decisions I don't see a problem either way.

 

[Jarhead77]

On the topic of taxes I would agree with the sentiment that any money taken from us through the threat of force more than once is completely immoral. It's not that most people out there don't agree that taxes provide services. It's that not everyone out there agrees that all these services net out to a value add.

I don't see what's wrong with fire departments charging for their services and I don't see what's wrong a person deciding that the cost of paying a yearly fee to the fire department is too much if they man up and accept the consequences of those risks. Most of us would agree that paying $100 over the course of a year is a very wise choice to have fire department coverage, but if that same cost was $15,000 per year I would argue that people shouldn't be forced to pay it under the penalty of the law if they're willing to watch their house being burned down and held liable for the damage to their property and what it causes to their neighbors property.

Personally, one of the reason I really really liked the fair tax (consumption based) was because it simplified the tax code enough to where a common person might have a chance to understand it. What we've currently got is a system that nobody but the thief understands and once we gain an understanding the thief changes the rules. In a much simpler explanation, the government is a pimp and you don't pay up for the services it provides you can expect a black eye or worse.

Off my rant and back to the topic. The amount of debt we all chose to carry is up to us. We could all agree that debt free is a big goal and an outstanding acheivement. However, there's also something to be said for living out your dreams. If you dream of 500 acres and a log cabin and have a means to make that happen, then go for it. You're getting into debt, but you have something you can put your hands on too. It's all a personal choice at the end of the day so long as you're going to accept responsibility for your decisions I don't see a problem either way.

Thanks. Much better than how I said it.

 

[Indy317]

The OP brings up some good points to think about. There are many ways one can go about this. For starters, if you have enough to pay off debt, it wouldn't be a bad thing to do. Right now, I just don't trust "the market." A home, shelter, is a person's biggest investment. If a household can pay off the shelter, then I would advise to do so. Once a decent sum is saved up, then we get to these questions again: What to do with a decent amount of savings that comes as a result of minimal bills? We are easily talking about people who will quickly find themselves with mid ten figures saved, and before they know it, six figures in savings.

Given the economic issues we are facing, I again wouldn't put it in the market. I would consider hard assets. For survival types, maybe some land further out and away from any metro areas and interstates/highways. Once the land is purchased, consider building a small structure on the property. Could be used as weekend retreats, bug out location, etc.. For the non-survival minded types, I would say seriously consider upgrading your home. Some will say that investing money into more home is risky, and that might be. However, it will still be a hard asset, and could keep value better than just having debased currency. For those who don't want to get another home, consider splitting the savings into hard assets and various financial assets. This would be where one might buy $1,000-$10,000 in gold, silver, tools/supplies, additional firearms, $10K in Canadian currency, $10K in New Zealand currency, etc..

I feel that hard assets are better than paper investments (includes stocks, options, savings accounts) today. The #1 rule: If you go hard assets, don't speak to no one about them. Loose lips sink ships is very true. Make sure you separate the hard assets as well. If one buys silver and gold coins, in addition to foreign currency, break it up into fractions and hide the stuff in walls, buried in jars, etc..

The only "investment" I could see one making is if they had no debt, and savings of at least $250K. The best investment that I see would be that of a vacation home/cabin. I personally don't like the idea of beach homes. With hurricanes, just too risk. I would rather look for a mountain retreat near a large lake (for fishing) and some wooden acreage. People are buying these places up and doing their own leasing on VRBO. After taking a trip to the mountains of NC and seeing what people rent these places for, gotta say it isn't a bad "investment." A bonus is that the place could serve as a bug out location so long as one could reach it within a days drive. The only downside to these investments is that these homes usually cost upwards of $250-$300K in the more popular areas of the country.

 

[88GT]

I'm not paying down any debt right now except one of my wife's student loans that is still north of 5%.

I anticipate inflation will far out-pace my mortgage rate so it will be beneficial to hold onto the mortgage and buy other thing that will otherwise be rapidly inflating in price (food, fuel, and other "goods").

Normally, this would be my answer. Use the higher-buying-power dollars we have before inflation hits to buy what you want/need. ($10 gets you 3 bottles of shampoo instead of 2 or 1.) When the value of the dollar crashes, pay off that $100K debt with worthless dollars. Maybe even in one payment.

However, in the absence of items to purchase, paying off debt is probably the next best place to put your money.

Caveat: this is a strictly highest-and-best-use argument. Personal realities and priorities will negate any and all of this. Some people are obsessed with no debt. Whatever. But if that's a priority, then that's what one needs to put a focus on. It's a question of opportunity cost. If you do A, you can't do B. Which one is your priority?

 

[CBR1000rr]

I was fortunate enough to punch my debt square in the dick this year. That being said, I am kind of biased. regardless of the economic situation, eliminating debt is always the best option. When you have very little to no debt at all, the economy can nearly crap out without it imposing too much of an impact on you.

Unfortunately, a couple months after we paid off our last vehicle, we had to buy a new one. We now have another vehicle payment and our house but we were again modest with our choice of vehicle and it should be paid off well before the loan matures. We are still able to save and live the lifestyle we enjoy.

At the end of the day, I would rather be debt free when the fiscal cliff comes to pass than stressed about who I owe what and when. Heaven forbid the end is truly upon us but if it is, you will have much more stress on your plate and this is one less burden!

 

[EvilElmo]

I'm just about ready to cash out some 401K, pay the penalty, and pay off my house. The value of money keeps getting to be less and less...so why not? I'd still have to pay the state property taxes or they will rape my dog and throw me off MY property. Property taxes on primary residences is nothing more than theft.

I've been considering the same thing but my 401 isn't enough to pay off the house. It would pay off my only car loan though but I hate taking that money for a car. Been thinking about using it to stock up though.

 

[teddy12b]

With all this talk of cashing out 401K's, maybe we should talk about some 401K benchmarks to see where people are at before they start talking about cashing them in.

For example, by age XX your 401K should equal a years wage, or half a years wage, or twice a years wage, or you should start contributing. Or another example, would be that your 401k should equal half your house market price, a quarter of your house market price, a tenth of the market price. I don't think people can really talk about cashing in 401K's without something to compare to.

Personally, I don't have my 401K up to a years wage yet so I don't feel that comfortable with the idea of just pulling $$ out for good. With our plan I don't think that you can take the penalty & just cash out the money, but we can take loans.

 

[ATOMonkey]

If you have additional funds available, I wouldn't have any problem diverting cash to durable goods and/or food rather than debt.

Buying Food is always a good hedge. You'll need it and it will likely go up in price.

If you are hand to mouth, I would pay off smaller debts as fast as possible in order to get a better cash flow, as taxes ARE GOING TO GO UP, and you may find yourself short of cash in your budget.

Once you get some breathing room in your budget, I would stand pat on current debts and use any extra funds to purchase food and durable goods. I wouldn't borrow additional money though, unless it was a small fund and still allowed you some wiggle room in your budget.

I would definitely NOT be saving any additional money past 3 months of expenses.

Leveraging buying power of low interest rates and high inflation only really works if your income paces inflation.

My income DOES NOT pace inflation.

 

[mikedippert]

I just bought a house w/ a 3.875% 30yr loan. We put the minimum down since it made such a minuscule difference to the big picture. I used an Excel spreadsheet to calculate a quicker payoff plan that we could afford comfortably. End result, our 360 payments are reduced to 256. We save 15% on the final cost of the mortgage. It averages out to an extra 22% to the payment (excluding Escrow payments). Last payment will be on Dec 1, 2033. Hopefully we will bring in 2034 100% debt free.

It helps that we don't have car payments. There is a 36mo no interest credit line for a tempurpedic mattress. I'm just paying the minimum on that since it is 0% interest. Obviously one can always calculate inflation as a form of interest, but on a $3.28/day short term loan, it doesn't amount to much. And applying money to the mortgage yields better savings long-term.

All future car purchases will be cash only. If a loan gets us a dealer promotion, it will be paid off ASAP.

 

[dom1104]

Huh, I am late to the party on this.

I think, since mortgages are so cheap, just toss that monay into the bank, get a COLLASSAL emergency fund, and then if you have enough to pay off your house in big chunks, do it.

In the meantime, if you come upon hard times, your giant emergency fund would pay the mortgage PAYMENT for a real long time.

All you are saving by paying your house off is the interest rate on the money, which has never, EVER, been lower.

So I vote for enormous 50 grand plus emergency fund.

 

[rockhopper46038]

My thoughts are similar to those of dom1104. The only recurring debt I have is my mortgage, and its a 3.75%. While the mortgage interest deduction stays in effect, it's really more like 2.50%. I still have other places to put money that will return better than that. If I didn't, I would weigh very carefully the benefit of a 2.50% return and the building of very illiquid equity against having ready cash/commodities in hand. Currently I'm willing to service the mortgage loan and keep large sums of money available for emergencies/opportunities. As someone mentioned, you can always throw large chunks at the mortgage later. My financial strategy is more complex than this, but the philosophy stays the same - mortgages are historically cheap; if yours is fixed look hard at other opportunities before defaulting to paying it off.

 

[Fletch]

Wanna know what's worse than having money in the bank that's lost value?

Having no money in the bank that's lost value.

Get out of debt and save like a mofo. If you think you're going to lose 50% of your value, save 200% of what you need. You'll still be better off than those who didn't do anything.

 

[PistolBob]

First of all, I would think long and hard before you cash in your 401K. Cashing it in the pay down your mortgage will not benefit you that greatly financially. Even if your 401k isn't making much, your true benefit will be relatively small unless you absolutely must be debt free.

Also, since you brought it up property tax isn't theft. It's a tax, just like all the other taxes. They're designed to help pay for the "services & conveniences" that you experience every day. Such as, your child going to school, you driving down the road, the fire-department that will respond to your house if it's burning down. That stuff has to be paid for somehow and they've determined that the burden should be shared relatively equally based upon your property value. IMHO that's a pretty fair way of doing it.

If we didn't have property taxes then we wouldn't have public schools so you would have to pay for private schools. If we didn't have property taxes you wouldn't have police, fire, or in some cases EMS services. You would have to pay to be a "member" of private fire districts etc such as they have in other states. Forgot to pay your membership fee this year? The firedepartment will stand there and watch your house burn down. The only reason they responded was to make sure the neighbors house doesn't catch fire; the neighbor paid his annual membership fees. That is a true story by-the-way. Happened in KY or TN IIRC. Guy forgot to pay the membership fees to the local private FD and they watched his house burn down while keeping the neighbors house safe from the fire.

Do you really want a life without any public services?

Property tax IS theft. It is the state denying the citizens the right to property ownership. I haven't had any kids in a public school in decades, I'd prefer to see the schools all go for-profit, then if they produce they stay in business, if they fail, well we need ditch diggers too. There are other ways to pay for a fire department and police without stealing my home. Use your head.

When a man and woman work their lives to pay for a primary residence and a piece of real estate, why should they be denied the right to own it free and clear? What gives the state the right to steal from my heirs when it comes to my home?

Get real.

 

[PistolBob]

Same for police, protect me and my property from intrusion, violence, etc...I pay, show up after and take a report? Nothing!

Police are not here to protect. They are here to enforce the law. That's it. Nothing more.

 

[PistolBob]

So I vote for enormous 50 grand plus emergency fund.

See, and that's another thing...to some of us $50K is a enormous emergency fund, possibly a years wages or maybe two years after taxes....to others of us, $50K won't begin to cover us.

I think we all agree, SHTF or not, it's always going to be better if you have some dough on you. Regardless of the amount. Some is better than none.

 

[CountryBoy19]

My thoughts are similar to those of dom1104. The only recurring debt I have is my mortgage, and its a 3.75%. While the mortgage interest deduction stays in effect, it's really more like 2.50%. I still have other places to put money that will return better than that. If I didn't, I would weigh very carefully the benefit of a 2.50% return and the building of very illiquid equity against having ready cash/commodities in hand. Currently I'm willing to service the mortgage loan and keep large sums of money available for emergencies/opportunities. As someone mentioned, you can always throw large chunks at the mortgage later. My financial strategy is more complex than this, but the philosophy stays the same - mortgages are historically cheap; if yours is fixed look hard at other opportunities before defaulting to paying it off.

This is my plan too...

Just service the loan, making my payment, and keep a big emergency fund on hand that will carry me through many months of bad inflation, loss of job, big medical expenses etc... my emergency "fund" isn't only in cash. It's in the way of food stores (bought with pre-inflation dollars) so that if something bad happened, I can stop buying food and suffice on my stores to make my cash reserves last longer yet. I can do that with many of the preps I have.

Property tax IS theft. It is the state denying the citizens the right to property ownership. I haven't had any kids in a public school in decades, I'd prefer to see the schools all go for-profit, then if they produce they stay in business, if they fail, well we need ditch diggers too. There are other ways to pay for a fire department and police without stealing my home. Use your head.

When a man and woman work their lives to pay for a primary residence and a piece of real estate, why should they be denied the right to own it free and clear? What gives the state the right to steal from my heirs when it comes to my home?

Get real.

I don't like taxes anymore than you do, but its the way the system works. Nothing is free, EVER. While privatizing all of the services that your property taxes go to pay for would probably mean more efficiency, it won't necessarily mean you pay less money. It merely gives you the option of paying it...

To be honest, looking at the public school system from a glimpse it gives everybody an equal oppurtunity to excel as long as they put their minds to it and they have the support of their parents etc. It doesn't matter how much their parents make, how much they own, they all have an equal oppurtunity to learn. To completely privatize education (which is one of the largest portions of your property tax) would be very discriminatory against poor families unless the "private" schools were subsidized by the rich families that send their kids there in the way of charging rich families more than poor families.

Don't get me wrong, I don't like "spreading the wealth" around more than you, but I don't think the enemy is in the very county you live in. It's in D.C. in the form of income taxes. I want to see my neighbors, my friends, my fellow residents in my county have a chance to succeed. Even though I own a huge house and it's assessed for way more than it's valued at, my property taxes don't make a dent in what I pay for my state or federal income taxes. I'd rather see the Federal govt start being fiscally responsible before I start griping about the "atrocious theft" that you're making property taxes out to be.

 

[PistolBob]

I don't like taxes anymore than you do, but its the way the system works. Nothing is free, EVER. While privatizing all of the services that your property taxes go to pay for would probably mean more efficiency, it won't necessarily mean you pay less money. It merely gives you the option of paying it...

Wrong. What it would mean is that when I am old and too sick to work, the state can't come in and throw me off my property that I have worked hard to pay for, improve, and make MINE. It has nothing to do with paying for public services, and everything to do with owning my own property, and being safe in the idea of knowing NO ONE, NO KING, NO SOLDIER, NO TAX MAN can come and take it away from me or mine. That is what is wrong and immoral about property taxes...and some people just never get that.

To be honest, looking at the public school system from a glimpse it gives everybody an equal oppurtunity to excel as long as they put their minds to it and they have the support of their parents etc. It doesn't matter how much their parents make, how much they own, they all have an equal oppurtunity to learn. To completely privatize education (which is one of the largest portions of your property tax) would be very discriminatory against poor families unless the "private" schools were subsidized by the rich families that send their kids there in the way of charging rich families more than poor families.

I don't care about public education, my kids are educated, grown, married, and raising their own families. None of them put their children in a government school system, they home school and attend private schools. So the property taxes being stolen from me and them are being given to a failing education system and our families are NOT getting the benefit of our own tax money. So tell me what is right about any of that? Pay for public education with another means and abolish property taxes on primary residences. It's plain theft.

 

[ATOMonkey]

I agree with pistol bob

Public services should be funded through some other taxing mechanism, either income or sales.

 

[CountryBoy19]

I agree with pistol bob

Public services should be funded through some other taxing mechanism, either income or sales.

I don't entirely disagree with him. I'm just making a point that things aren't free. Either way, it's all going to work out the same for the most part.

Rich people = more income = more income taxes, you will just pay them earlier in your life when you're making the income vs. paying later in life when you still own your property but aren't making much income.

I certainly agree that nobody should have a right to throw you off your property that you paid for, but that's the way it is right now. I don't like it, but that's the way it is. I would rather a 1% property tax over my entire life than a 5-10% income tax hike during the time when I'm making income... You and I both know that if the system changes to no property taxes there is no way they will be able to keep the tax rate as low as it is.