What if you have lots of debt (>$50k us) and no investments or assets?
Is attempting to pay off a debt still the same as a “risk free” investment if you’ve had the experience of attempting to pay off a debt, only to have the owed party accept your money and then not lower the debt? I.e., if you have a known and verifiable risk that handing the owed party money won’t lower your debt (say, due to perfectly legal bureaucratic shenanigans), is that the same as a high-risk anti-debt?
If you have no assets and no liquidity, are your debts even real?
1. Briefly, you’d want to establish some minimum amount to cover emergencies (maybe $10-$20k), because the opportunity cost of not having available cash to deal with an emergency is huge. After that, I’d recommend paying off the debt if you think you’ll almost certainly pay it off eventually (rather than declaring bankruptcy).
2. I guess that would be like an investment that’s risk-free, but sometimes the money you want to invest in it gets stolen. In any case, my model is about debt/investment trade-offs, not about dealing with scammers. Don’t pay scammers, that’s the only model I have.
3. I think it’s quite useful to assess an actual probability of you declaring bankruptcy, perhaps by multiplying the chance of you not having enough income to cover living expenses over some time frame. I think income also matters a lot more for debt repayment than assets, let alone liquidity.
Can’t tell if you’re just being snarky/self-pitying, or if you’re serious. I’ll try to answer.
1) Do you include future earnings in your “no assets” description? If you’re off the grid and not dealing with money, this post probably isn’t for you. If you plan long-term not to make more than you spend, you’re probably also not ready to optimize on these dimensions. If you expect to make more than you spend during some future time period, you will have an asset about which to make choices.
2) You need to include risk of fraud and mistakes in any decision you make. This advice isn’t “make payments that might get swallowed”, it’s “pay down debt”. If you’re not actually reducing your debt, there are probably better investments.
3) Debts that you honestly expect to never pay are not real debts. It doesn’t follow that if you have no monetary assets and no liquidity that you never will, though.
What if you have lots of debt (>$50k us) and no investments or assets?
Is attempting to pay off a debt still the same as a “risk free” investment if you’ve had the experience of attempting to pay off a debt, only to have the owed party accept your money and then not lower the debt? I.e., if you have a known and verifiable risk that handing the owed party money won’t lower your debt (say, due to perfectly legal bureaucratic shenanigans), is that the same as a high-risk anti-debt?
If you have no assets and no liquidity, are your debts even real?
1. Briefly, you’d want to establish some minimum amount to cover emergencies (maybe $10-$20k), because the opportunity cost of not having available cash to deal with an emergency is huge. After that, I’d recommend paying off the debt if you think you’ll almost certainly pay it off eventually (rather than declaring bankruptcy).
2. I guess that would be like an investment that’s risk-free, but sometimes the money you want to invest in it gets stolen. In any case, my model is about debt/investment trade-offs, not about dealing with scammers. Don’t pay scammers, that’s the only model I have.
3. I think it’s quite useful to assess an actual probability of you declaring bankruptcy, perhaps by multiplying the chance of you not having enough income to cover living expenses over some time frame. I think income also matters a lot more for debt repayment than assets, let alone liquidity.
Can’t tell if you’re just being snarky/self-pitying, or if you’re serious. I’ll try to answer.
1) Do you include future earnings in your “no assets” description? If you’re off the grid and not dealing with money, this post probably isn’t for you. If you plan long-term not to make more than you spend, you’re probably also not ready to optimize on these dimensions. If you expect to make more than you spend during some future time period, you will have an asset about which to make choices.
2) You need to include risk of fraud and mistakes in any decision you make. This advice isn’t “make payments that might get swallowed”, it’s “pay down debt”. If you’re not actually reducing your debt, there are probably better investments.
3) Debts that you honestly expect to never pay are not real debts. It doesn’t follow that if you have no monetary assets and no liquidity that you never will, though.