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Some say that debt is the gateway to your goals, others say it’s a ball and chain that will drag you down… So who’s right?
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Two Cents was created by Katie Graham, Andrew Matthews, Philip Olson CFP® and Julia Lorenz-Olson and is brought to you by PBS Digital Studios. We love dropping some knowledge on all things personal finance and helping you make better money decisions.
sources:
http://archive.boston.com/bostonglobe/ideas/articles/2011/08/21/which_came_first_money_or_debt/
https://www.debt.org/advice/good-vs-bad/#:~:text=What’s%20the%20difference%3F,for%20it%2C%20it’s%20bad%20debt.
https://www.richdad.com/how-to-start-a-business-without-money-part-1#at_pco=smlrebh-1.0&at_si=5edeae9a55751dc1&at_ab=per-2&at_pos=0&at_tot=4
https://thecollegeinvestor.com/4726/ultimate-hypocrite-robert-kiyosaki-companys-bankruptcy/
https://www.gpb.org/news/2011/07/24/the-evolution-of-debt-from-mesopotamia-to-america
https://www.aplu.org/projects-and-initiatives/college-costs-tuition-and-financial-aid/publicuvalues/employment-earnings.html#:~:text=On%20an%20annual%20basis%2C%20bachelor’s,is%20a%20high%20school%20diploma.&text=The%20earnings%20gap%20between%20college,less%20education%20continues%20to%20widen.&text=For%20high%20school%20graduates%20the,earnings%20are%20%2430%2C000%20a%20year.
Two Cents is hosted by Philip Olson, CFP® and Julia Lorenz-Olson
Directors: Katie Graham & Andrew Matthews
Written by: Philip Olson, CFP® and Julia Lorenz-Olson
Executive Producer: Amanda Fox
Produced by: Katie Graham
Edited & Animated by: Andrew Matthews
Images by: Shutterstock
Music by: APM
Lots of Dave Ramsey fans here, so wanted to address a common refrain re: Dave's stance on mortgages. Many have pointed out that Dave teaches it's okay to get a mortgage if it's a 15-year fixed with 20% down. We knew this going into writing this episode, and wanted to provide some context.
On Daveramsey.com, it reads, "If you’ve been following Dave for long, you know his favorite way to buy a home is the 100%-down plan—paying cash up front, no mortgage needed." We took this at face value, and that Dave's best and preferred way to buy a home is without debt — hence why his critics take issue with it. https://www.daveramsey.com/blog/3-steps-to-pay-cash-for-home
While it's true that Dave repeatedly advises people that can't pay cash for a home (virtually everyone) to get a mortgage, this is contradictory to his overall message of living 100% debt free. It comes across to many as confusing, essentially "You should buy a house with cash, all debt is bad. But if you HAVE to use a mortgage, then get a 15-year fixed with 20% down, and do it with the one debt company that advertises on our show".
Critics of Dave have pointed out that paying for a house in cash is unrealistic for most. What we didn't have time to point out in the video is that feeling shame or guilt about compromising in getting a mortgage also isn't helpful. And for many people in most cities, 20% down on a 15-year mortgage (while keeping housing costs under 25% of your income) really isn't within reach either. Our point was simply to present popular critiques of Dave's anti-debt stance
As always, thanks for your Two Cents, guys!
I really wish you would speak about the impact debt has in your credit score. My parents pay their bills in full every month- and paid their mortgage off 15 years ago. They went from a high 800 credit score to the 720s now. As they only have 1 credit card they now don't have enough if a credit mixture to validate a higher score. I myself am now in the position to pay off my student loans but am apprehensive because I, too, only have one credit card.
I feel like this really should have been mentioned when considering a debt good or bad. It could also be a separate video. Is there a ratio that is recommended to adhere to in order to have a reasonable amount of debt vs income (annual income vs total debt)? How long will my payment history matter if I do pay off my loans? How often should I take out new credit in order to remain viable (if I pay off my student loans in one year, is it a good idea to take out a small loan in another 1 or 5 years to continue proving reliability)?
Guys, I just want to say that your videos are great. I love how you explain personal finance in a fun and entertaining way. You guys present the content in a the most impartial and engaging way. Also, kudos to you, coming up with a clever name for the channel. Keep it up .
I really enjoy watching you guys and I appreciate the sensible approach you take. I like Dave Ramsey but I really hate his hardline approach on certain things. For example, 20% down on a 30 year mortgage is really tough, never mind 20% on a 15 year or 100%. My hubby and I make a pretty good income and live frugally but struggle with this. How is a single mom with half or a quarter of our income suppose to do this? Also keeping payment at 25% of your income is just not going to happen for most people. Dave would probably say move to a cheaper area but that of course that ignores other important factors that are just as important as financial peace, ie. Family/ kids schools, job locations/ career advancement/ lifestyle choice etc. College debt, like mortgage debt is not always a bad thing. We can agree that 100k debt for an average BS degree is ridiculous but 10k or 30k can be a sensible amount of debt to take to get you through school and career options. It's all about calculating your risk vs reward, and being realistic and well informed.
Great presentation! In terms of the credit card usage, after chasing points for a long time I have abandoned credit cards altogether and will never go back. There are many viewpoints on the subject, but i encourage everyone to at least try both ways. As I did, you will probably find that it feels great to not have a credit card bill to pay in full every month. Also, I would bet that you’ll notice it is harder to pay cash because credit cards reward you for overspending and debit cards do the opposite.
At 3:42…doesn't look like "good" debt worked out for Robert Kiyosaki's company. So after thinking about it, I would say that the VAST majority of debt is bad.
Great video 🙂
A good debt is an interest-free debt, anything else is not.
5:45 that's it, no run the numbers today, guys.
🙂 Awesome presentation. Hey which video editing tool do you use?
all debt is bad, atleast for the consumer. debt is slavery.
Owning your own house is expensive but going around the world is cheaper
Very impressed with this channel. Oversimplifying such complex topics, for free. Damn you deserve more subs
Debt is slavery