Live Frugally or Die Broke

Where Do These People Come From?

I am getting slightly more annoyed with those out there who make the argument mortgages and student loans are “good” debt. I would like to meet the person who coined the phrase “Good Debt” and give them a piece of my mind. So these types of investments are good debt? Oh really? What do you think the college grad, working at a cash register at Macys, with $57,000 in Sallie Mae debt would say to that? What about the countless number of Americans holding underwater mortgages, walking away from their family home, would say to that? Where do these people come from? It seems when the winter ends and the ground thaws, the worms come out and slither up out of the ground.

Last week I had an interesting conversation with a gentleman over a drink, while signing for an apartment. We were talking about a lease (my roommate and I later backed out of) when the conversation switched to investments. I guess the gentleman was wondering if we had any money set aside for a rainy day, so he knew we weren’t at risk of bailing the apartment. I casually mentioned my Prosper investment was close to achieving double digit returns last year and I had dabbled in commodity trades. Interestingly enough this man was an investment banker and had never heard of prosper.com. I told him he should check it out, I explained what it was and where I thought it was headed. In my mind, micro-lending will eventually destroy the banking system all together. The kinks still need to be worked out and the information needs to be improved but it will prevail.

What If….?

I have been invested in Prosper for a small amount of money for over a year. I started slamming money away into it beginning in 2008 and have increased contributions since then. Besides investing, I have declared war on debt and have been aggressively working on that, instead of buying stocks like many of my friends. I mentioned I was very lucky I hadn’t gone with my alternative investment decision of a Roth IRA when the market was toying with 14,000 DOW points. He disagreed and said that would have been the best decision I had ever made and aggressively paying off debt was “stupid”. I silently choked on my drink and then looked at him in amazement. This guy was dead serious and others like him are convinced that the market will only go higher. I don’t know if these types watch too much CNBC or take investment advice solely from Cramer but it scares me how much conviction these people have. Not only do they mock you for not seeing the light, but they try to tell you to ignore debt like student loans and invest in index funds to make an arbitrage.

What Happened To Producers?

At some point in America’s history people started getting the idea that you could work from home, live solely off investments, and make a living with playing the Forex markets. Life was great back in this day but reality soon came back and smacked America in the face. During this time debt was seen as a means to an end and a necessary evil. If you were using a HELOC to reinvest in the stock market, you were congratulated by your peers as a wise and sophisticated individual. The problem with these types is they don’t believe in hard work or (gasp) getting a second job. Now as our economy teeters on the brink of a recession within a recession, they are still playing the same tune. I don’t get it and I would love to hear your opinions. Remember paying down debt on a loan at 5% guarantees you a 5% rate of return. I would take that interest rate any day of the week, in this economic environment.