Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
Will Biden’s Neo-Populist Economic Doctrine Support Gold? - 25th Sep 21
Markets Deflationary Winds Howling - 25th Sep 21
Crude Oil Price Piercing the Sky: Where Will We See the Black Gold by Xmas? - 25th Sep 21
Cryptocurrency policy choices and consequences - 25th Sep 21
The Next Emma Raducanu UK Tennis Star Pleasing the Crowds at Millhouses Park Sheffield - 25th Sep 21
Stock Market Rescued by the Fed Again? - 24th Sep 21
Are Amazon Best Cheap Memory Foam Mattresses Any good? Bedzonline £69 4ft Small Double ECO Example - 24th Sep 21
Evergrande not a Minsky Moment - 24th Sep 21
UK Energy Firms Scamming Customers Out of Their Best Fixed Rate Gas Tariffs - 23rd Sep 21
Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Should School Children be Jabbed with Pfizer Covid-19 Vaccine To Foster Herd Immunity? - UK - 23rd Sep 21
HOW TO SAVE MONEY ON CAR INSURANCE - 23rd Sep 21
Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
Trading Crude Oil ETFs in Foreign Currencies: What to Focus On - 22nd Sep 21
URGENT - Crypto-trader event - 'Bitcoin... back to $65,000?' - 22nd Sep 21
Stock Market Time to Buy the Dip? - 22nd Sep 21
US Dollar Bears Are Fresh Out of Honey Pots - 22nd Sep 21
MetaTrader 5 Features Every Trader Should Know - 22nd Sep 21
Evergrande China's Lehman's Moment, Tip of the Ice Berg in Financial Crisis 2.0 - 21st Sep 21
The Fed Is Playing The Biggest Game Of Chicken In History - 21st Sep 21
Focus on Stock Market Short-term Cycle - 21st Sep 21
Lands End Cornwall In VR360 - UK Holidays, Staycations - 21st Sep 21
Stock Market FOMO Hits September CRASH Brick Wall - Dow Trend Forecast 2021 Review - 20th Sep 21
Two Huge, Overlooked Drains on Global Silver Supplies - 20th Sep 21
Gold gets hammered but Copper fails to seize the moment - 20th Sep 21
New arms race and nuclear risks could spell End to the Asian Century - 20th Sep 21
Stock Market FOMO Hits September Brick Wall - Dow Trend Forecast 2021 Review - 19th Sep 21
Dow Forecasting Neural Nets, Crossing the Rubicon With Three High Risk Chinese Tech Stocks - 18th Sep 21
If Post-1971 Monetary System Is Bad, Why Isn’t Gold Higher? - 18th Sep 21
Stock Market Shaking Off the Taper Blues - 18th Sep 21
So... This Happened! One Crypto Goes From "Little-Known" -to- "Top 10" in 6 Weeks - 18th Sep 21
Why a Financial Markets "Panic" May Be Just Around the Corner - 18th Sep 21
An Update on the End of College… and a New Way to Profit - 16th Sep 21
What Kind of Support and Services Can Your Accountant Provide? Your Main Questions Answered - 16th Sep 21
Consistent performance makes waste a good place to buy stocks - 16th Sep 21
Dow Stock Market Trend Forecasting Neural Nets Pattern Recognition - 15th Sep 21
Eurozone Impact on Gold: The ECB and the Phantom Taper - 15th Sep 21
Fed To Taper into Weakening Economy - 15th Sep 21
Gold Miners: Last of the Summer Wine - 15th Sep 21
How does product development affect a company’s market value? - 15th Sep 21
Types of Investment Property to Become Familiar with - 15th Sep 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

You Must Understand These Two Cardinal Rules of Debt

Personal_Finance / Debt & Loans Mar 29, 2015 - 02:31 PM GMT

By: Investment_U

Personal_Finance

Andrew Snyder writes: It’s a tough subject. Nobody wants to admit they spent years of their lives - and thousands upon thousands of dollars - in an effort that may quite easily turn out to be detrimental to their financial well-being.

On Friday, I spoke to a small church group about what it takes to build lasting, liberating wealth. It was the second time we met and I knew going into the evening that it wouldn’t be easy.


I learned during our first session that the majority of the folks I was talking to were swimming in student debt.

They weren’t looking for riches... they simply want some breathing room.

There is no doubt student debt is a quiet yet dangerous headwind for the American economy. Students are graduating from school with huge piles of debt and job prospects that can barely afford them groceries, let alone allow them to tackle a stack of loans.

One young couple I talked with has six figures’ worth of debt and a couple of great-sounding degrees on the wall... yet only the wife has been able to find full-time work in the two years since graduating.

There are plenty of folks responsible for this mess.

Uncle Sam certainly deserves a poke in the chest. Washington has caught flak in recent months because it readily admits it’s lost track of the issue. Sure, it backs most of the loans and creates the slippery conduit that allows students to pile on loan after loan with a few clicks of a mouse... but it can tell us virtually nothing about delinquency rates or who is eligible for loan relief.

In fact, when the Federal Reserve recently went searching for data about the issue, it was forced to go to credit-tracking firm Equifax... not the Department of Education right down the street.

Then, of course, plenty of blame needs to go to our education system that’s more about prestige and connections than actual education.

For example, the University of Pittsburgh is often touted as the most expensive public university in the country. In-state tuition runs a student nearly $17,000 per semester. Meanwhile, students at Bismarck State College pay just over $4,000.

Why the huge gap?

Some would say the value of the diplomas (the “resume value”) from each school is different. But it’s hard to argue the actual education is all that different. It’s not as if the expensive schools have access to better textbooks.

The difference in price is largely a function of a greater perceived value. That’s a major problem America must tackle.

Finally, I suppose, we need to blame the students for simply not knowing any better.

It’s hard to blame an ambitious young student for getting sucked into the vague and glitzy promise of higher education, but most college borrowers break a cardinal rule of debt.

That’s what I focused on with the church group. No matter the circumstance, no matter the promise, the rules of debt are the same.

They are incredibly powerful... and they’re simple.

In fact, there are only two rules. Abide by them and you’ll never have to worry about being smothered by debt.

Rule No. 1: Never take on debt that you don’t have the income to pay off.

It sounds simple, right? Yet every day countless students lock in decades’ worth of monthly payments... with little more than a hope and a prayer that they’ll have a job.

Sadly, it’s not just students. Much of the mortgage crisis came thanks to homebuyers with budgets dependent on rising incomes to pay the bills. They took on a loan with no concrete way to pay it back.

One kink in their plans... and it’s hell.

Rule No. 2: Don’t borrow money for assets that don’t produce income or have any chance of appreciation.

This is why I beg readers to understand that mortgages aren’t bad and yet car loans should be despised. It’s also why credit cards should be outlawed.

Sure, we can argue a student loan creates an appreciating asset... your education. But that’s not always the case and the value of an education is slipping by the week.

At this point, I’d rather my kid be a trade-school-educated plumber than a debt-burdened art historian searching for a job.

We argue America is not facing a student loan crisis. Yes, more than a trillion dollars’ worth of debt on an intangible, potentially depreciating asset is surely a problem.

But the real crisis is that most folks don’t understand why this situation is so dangerous and, more importantly, how to protect themselves.

Good investing,

Andrew Snyder

Editorial Director

Source: http://www.investmentu.com/article/detail/44552/two-cardinal-rules-of-debt

http://www.investmentu.com

Copyright © 1999 - 2015 by The Oxford Club, L.L.C All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Investment U, Attn: Member Services , 105 West Monument Street, Baltimore, MD 21201 Email: CustomerService@InvestmentU.com

Disclaimer: Investment U Disclaimer: Nothing published by Investment U should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Investment U should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Investment U Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in