Money and Finance

[mrpancake]

Are student loans "acceptable" debt?

I think most people will tell you that's okay debt, because it's ultimately an investment. Charging to your credit card and not paying it off monthly is always bad. Or maybe that's just propoganda my parents have fed me since I was about 4, but except for a few circumstances, I don't want to spend 20 percent more for an item just to have it immediately. So I pay off my credit card every month like a good kid!

[iceblink]

dwanollah said:

p.s. Buy real estate!

WORD.
(I haven't personally, but my parental units have invested a lot in real estate over the years, and they're SET.)

[topher]

p.s. Buy real estate!

If this was 2002, maybe. But, certainly not now.

[dwanollah]

Actually, it depends on what city. Los Angeles and New York (at least in the cities themselves, not in the suburbs) are likely to always be good investements; even if they take a bit of a beating short-term, they always rebound.

On the other hand, our condo in Milwaukee...? Still up for sale, almost TWO YEARS LATER.

[topher]

Just remember what goes up must come down.

Are student loans "acceptable" debt?

Yes. It is more of an investment.

[magazinewhore]

yeah, real estate's good. it's just hard to break into.

I had a lot of debt: about $40K in student loans, $10K in a car (now totaled), and about $20K in credit card debt (I was laid off for a couple years). So I rolled it all together and had my parents take out a low-interest equity loan on their paid-for house. So now, for the next 30 years, I pay about $577/ month. It sucks and it's why I'm so poor now. It's like having two rents.

Here's my advice: don't have kids if you can't or aren't willing to pay for their college (if you want them to go). Unless you're some kind of math/science whiz whose children will be able to get good-paying jobs upon graduation. Being strapped with so much debt is really crippling. Granted, I was an English undergrad and a journalism grad student, so I was in a field where finding work is hard. I don't regret grad school at all. I should have gotten an MFA in creative writing like I wanted to. The closest thing at Wisconsin at the time was journalism.

Anyway, if you don't get a job right away and or spend any time unemployed (and have to defer your payment), it compounds really fast.

ETA: But who knows, if my novel gets published, maybe I'll make a fortune.

[mrpancake]

Just remember what goes up must come down.

But isn't down sort of relative? In Southern California when real estate takes a hit it's still worth a zillion dollars. Even in a down economy, I don't know anyone in Southern California whose house was on the market for more than a few weeks and who didn't make a substantial profit. The only bad experience I've heard of is of my godparents who left California at exactly the wrong time. They had a beautiful home in a beach community and the broke even with it. If they could have waited it out just a tiny bit, they would have made a TON of money on the house.

[dwanollah]

But isn't down sort of relative? In Southern California when real estate takes a hit it's still worth a zillion dollars. Even in a down economy, I don't know anyone in Southern California whose house was on the market for more than a few weeks and who didn't make a substantial profit. The only bad experience I've heard of is of my godparents who left California at exactly the wrong time. They had a beautiful home in a beach community and the broke even with it. If they could have waited it out just a tiny bit, they would have made a TON of money on the house.

Totally. That's our experience, too. If you hang on to it for a few years, you're gonna come out ahead, and if not, wait six more months. Look at Malibu. Mudslides, a fire, rains... and a year later, the homes and properties were still/again selling for millions of dollars. It's a little different for the not-officially-Los-Angeles areas, like the Valley and Inland and even a lot of Orange County; those can be more volatile, and there'll be runs on, like, the new bunch of crappy McMansions in Riverside County, but five years later, they aren't going to hold their value quite as well as the house in Brentwood near UCLA and Santa Monica.

[topher]

Today there have been reports of people just walking away from their mortgages. The bubble is just about to be popped. It is going to be a slow fizz more than a popped balloon. Interest rates are rising. All those people with interest only loans or 2-5 Arm are going to get a shock. That $700k house with 1% down on a 5 year arm is going to a lot more expensive.

[deadduck]

mrpancake said:

Just remember what goes up must come down.

But isn't down sort of relative? In Southern California when real estate takes a hit it's still worth a zillion dollars. Even in a down economy, I don't know anyone in Southern California whose house was on the market for more than a few weeks and who didn't make a substantial profit. The only bad experience I've heard of is of my godparents who left California at exactly the wrong time. They had a beautiful home in a beach community and the broke even with it. If they could have waited it out just a tiny bit, they would have made a TON of money on the house.

Vancouver is a crazy market too. One year after we bought our house it was worth $100k more, and now four years after that it is worth $300K more. It is freaking scary here. Our market is finally starting to slow down (read interest rates rising, and no comparable price decrease). But you know what it will never go down to the level we bought at again. Lucky timing for us. Got in just as interest rates dropped, and market had not quite realized it yet. Wahoo!

ETA: Topher...you are so right. Some are in big ass trouble in the very near future. Way overspent on what they have bought. Thankfully we are not.