Good Debt vs Bad Debt #022

have you saved any money this week? So? I mentioned on a recent episode, uh, the one about cutting your monthly bills, that I was paying way too much for my internet service because I decided, oh, yeah, because you got the Primo service. But then it kind of sucked. Yeah, I tried to. I decided to try out the gig speed that they were floating in our neighborhood, and I was like, Oh, this is gonna be great, and life

on gig speed. I'm never gonna go back. And I just realized that it didn't provide much value over regular internet speeds for me, and so I took my own medicine. I tweeted at the A, T and T folks. They got back to me pretty quick. I had to pick up the phone and talk to him, because you know, the old school like that. Uh. But ultimately, dude, I'm saving seventy dollars a month on my internet bill. That's

over eight hundred dollars a year. Wait, what were you paying if you if you're saving seventy So when I initially signed up, it was eighty dollars a month, and then they just last month pumped it up to ninety, which was that kick in the pants that I was I needed to to totally destroy. Down to twenty bucks a month for Wicked speed fifty megs. Ye okay, that's pretty good, dude, that's how I roll. Man, that's got that locked in for a year a year, man, that's

really good. I was gonna say for maybe six months. There's uh, not much better than just acting seventy dollars out of your monthly budget. Yeah, dude, that's huge and being able to reallocate it. So yeah, I'm pretty pumped about that right now. Beers on you for the next year. Yeah. Uh. Speaking of beers, we've been tailgating a little bit here, a little pregame a little pre podcast beer. Uh and a listener of the show, Austin thanks man. He uh

he dropped these by my house the other week. And so we're drinking some wicked weed Lieutenant dank, which is a solid I p A. But don't worry, that's not the only beer we're having tonight. We're about to pop another one. No, yeah, that's just our that's our pregame beer. But real quick, you wanted to tell me about some razors you recently bought. Yeah, please fill me in. So the razors I didn't buy because my parents came and visited.

And I don't do your parents show up with a box of crap from no night really, well they show from your childhood, uh, from your like in your closet or whatever. No, they just usually show up with presents for my daughters. So yeah, we are your parents. Awesome shout out. Yeah, I mean my things do that too. However, they're starting to clear out my room and so they show up every now and then with like a massive fruit box from Costco full of like books and just

tons of other stuff. What do they like? Keep it the same? Kind of like Ray Finkel's mom or Na Sventure a pet Detective. I don't like I've ever watched a spintro all the way through. Man, shut Sorry, I'm not a huge Jim carry van. It's the best scene.

His mom like leaves the room like the way it was when he was I've heard of people teenager and uh and a spincher walks into the room and it's just all creepy and stuff, and it's so I'm imagining that your Oh yeah, so I'm imagining that your mom kept the room in that exact way, and now she's starting to make some changes. Yeah. No, so yeah, they show up with a box full of stuff and they say, here, here's a bunch of your stuff. You can toss it

or keep it whatever. And so I was going through one of the boxes recently and my razor handle, you know, like the metal aluminum handle and something. A little tray of razors were in there from when I was like sixteen years old. Man, from when I was in high school? Dude, can you're gonna start using that stuff? Do I look like freshly shaven? I don't see toilet paper all over your face? So exactly. So I saw it and I thought, well, first of all, the handle is like old school. It was.

I think it was my dad's from like the eighties when I hit the big pie and started having to shape Uh. I think he just gave me his and he got a new one and so it's kind of cool. It's like they don't make him like that anymore. It's like solid and heavy. Yeah, but yeah, I was just like I popped one of the razors on there, and I was like, I think this is still sharp, And

so I shaved last night. Dude, it looks good. But those razors are gonna ask me for like another two or three years because I don't have to shave very often, and it's way smoother than like shaving with kates like leg razors, which totally irritate my skin. What's the difference between male and female razors? Because I feel like men can't really use the women's razors that that they can. There's it's like a different angle or something. Is it

the angle? Because Emily is trying to use my razors before, and you know, she gets cut up a little bit more and I've tried to use hers and just have a hard time with him. I don't know. Is it someone knows out there? And I know the internet let us know, Yeah, holler rat us. All I know is that it it felt way smoother and way better using that razor than using Kate's disposable. So and by the way, speaking of hollering at us, we just got an email

from a listener in Western Australia, a Perth, Perth, Australia. Man, it's so awesome, dude, it's so fun. Uh. Probably my favorite part of doing this podcast, even above drinking the beer and hanging out with your well shaven face smooth, is getting emails. Is is hearing from the people that listen to the show. And that's a that's a lot of fun hearing people stories why they listen, what they're learning, and how they're implementing some of these strategies into their

lives in order to reach their financial goals. Man, I yeah, I completely agree. Shout out to Craig he uh was Yeah, he shared with us some of the things that sort of resonated with him even on the other side of the world, and it just it's crazy, but it just makes it the world seems so small because there's people all over the world that shared the same values you

do and and and enjoy the same things. And it makes you think that you could kind of get together even though you've never met, and have a great time. You know, It's like let's just get together and hang out all you people. Yeah, it seems like a small world until you jump on the airplane for that sixteen hour flight and then you're like, oh wait, that's a long way away. Uh. But was someone someone sounds spoiled? Man, I've never been to Australia. It was nice. Uh. But

I will say to Craig, it's awesome. I love that. He told us that he listens to the podcast while riding his bike along the river. Yeah. Yeah, he was literally listening to our episode on y com Meeting will Kill You and he was listening to that one while he was biking home from work. That can't help but make you crack a smile, right, it's perfect. So alright, Matt. So today on the show, we're drinking Hopping Frog Infusion

a coffee porter. So where did you get this? Because because I've never even heard of this brewery, Hopping Frog, so I will say, because of their branding is really bad. So the label is complete trash. I really don't like it. In the first time I ever had a Hopping Frog beer was when a friend shipping me one. They're based out of Ohio and they distribute now where we are, and so we have a little more access to them. So, actually, I got this beer on the discount rack at my

local beer store. Dude, I need to go there. He's always putting the good stuff on the discount on the discount rat. Why is he? Why is he unloading these bears? He just wants to move them. I guess, yeah, yeah, I guess just beers that don't sell super well or that's put on the shelf for a little while longer. And so this one is a coffee porter with chocolate and peanut butter. And I don't know if you could tell right when we popped it, did your nostrils fill

with peanut butter? Smells a little bit, not nearly like some of the bourbon barrel stuff that we have, but yeah, bourbons just a more powerful sent in general. But yeah, now that I've got my nose up in it full on chocolate, smell some of that coffee like a nuttiness. Yeah.

So this is a porter, and porters are definitely a bit thinner in mouth field and viscosity than a stout, and this particular beer it retains a lot of that porter thinness, but it does have some really nice peanut butter notes, uh, and in a little bit of coffee in there as well, super nutty. Yeah, I completely agree. Man. Yeah, pour is a really dark brown as you're pouring it, but now that's here in the glass, it's like pitch black.

But yeah, but it's thinner. It kind of wiggles around there in the glass, not like a thick barrel aged stout, and it feels a little bit enter in your mouth as well, a little easier to drink. Yeah. So I think it's a certainly a solid representation of the coffee porter. And you know, a couple of adjuncts in there, which just means additions like chocolate and peanut butter, and that kind of rounds it out and gives it, you know, a little more flavor, a little more interest. You know.

Porters are not my go to. It's not something I usually enjoy, but even with their terrible labels, I always give Hopping Frog a chance, because man, they make some of the best stouts out there. I've had some really really good stuff from them before, and this one definitely worth a shot. It's solid, although not top tier in my opinion. Yeah. The fact that this is a porter though, too, it's makes it definitely easier to drink in the summer.

You know, like some of those huge stylets, it's tough to drink those in the summer, like maybe once, like once the summer, or like once a month or something like that. You know. Yeah, when it's in the eighties and nineties, you don't want this giant, oily machine gloopy beer. Yeah, whereas this this still drinks it feels it feels light in your mouth, but it gives you those darker chocolate e listed flavors, so you kind of get that profile without getting weighed down by the heaviness of the of

a boozy beer. I'm with you, not my favorite, but uh I dig it all right, Matt. So let's tackle the topic good debt versus bad debt, and I guess the ultimate question and the debate rages in the personal finance community. Is there such a thing as good debt? Yeah? Man, And for your listeners out there as well, I'm sure that's something you've heard of, right, Like you've heard plenty

of people say that, oh, debt's bad. You want to try to avoid debt as much as possible, But then kind of the more you get into it and the more you maybe research, you start seeing folks saying, well, oh there's you know, there's maybe some good debt out there. There's some different rules. So we're gonna talk about this more generally, I guess, but we're gonna talk about the differences between what we would characterize as good debt and

what we'd characterize as bad debt. Yeah, And I wonder if even good debt is the best term to use, just not awful debt maybe, right, And so I wouldn't say there's any debt that you that could be characterized as good where I would say, go get some of that debt right now. It's great. But yes, I agree, but at least it's not awful debt, right, So, and I think there is a big difference to be made.

And then I think we can parse out some of the details of you know, debt that you should consider terrible debt that you need to attempt to eliminate as quickly as possible, and then other debts that you might be carrying that you can afford to pay the minimums on, or at least just afford to pay off a little

more slowly over time. Yeah, man, that's good. Also a good way that maybe think about it is that debt and loans are tools, and they can be used poorly and unwisely, and that could take somebody further into debt and kind of on this downward cycle of spending and consumption.

But at the same time, it went in the hands of somebody that knows what they're doing, right, that has the knowledge and experience and knows how to use the debt, how to leverage it, then perhaps that same product, like right, like that same loan or that same debt could could be very beneficial. Yeah, I mean, I think one good episode that we've done that kind of correlates to this is our episode on using credit cards like a pro. Yeah, the credit cards obviously our debt or their tools of debt.

And so in the hands of one person, a credit card can be this awesome tool to get frequent flyer miles and like the sign of bonuses that's my favorite, yeah, Jet said, or get some awesome cash back bonuses and still never be accruing any interest at all. And then in the hands of someone else, they can be using it essentially to buy lifestyle and paying the minimums every month and essentially digging themselves in a bigger hole month after month after month because they don't know how to

use it properly. So in the same way as we approach this episode, again, it's not necessarily good debt, but that's how we're gonna refer to it. And in the hands of one person it can be used wisely. In in the hands of another, it can be used for great harm. Yeah, man, that's right. So, generally speaking, good debt is borrowing money for something that will appreciate over time and so so an example of this definitely would

be mortgages. Right, you buy a house or you know, you mortgage with the house, and over time you expect it to go up and value. Generally speaking, we would call that a good debt. Again, we don't want to put up this blanket statement because if someone hears that, oh, mortgage debt is a good debt, we don't want to encourage someone to go out and rack up a massive mortgage payment, right, because that might be bad for their situation. It just depends on the individual. But generally speaking, a

mortgage is considered good debt. Yeah, So let's dig a little bit deeper into that map, especially in this interest rate environment, having a mortgage at a low interest rate, and many people out there listening that have a home with a mortgage are probably paying somewhere between three and a half and four and a half percent on that mortgage.

Record lows for mortgage interest rates. Yeah, and so considering where rates are headed and the fact that you probably have something locked in for a long period of time, that makes it really smart to actually hold onto that low interest rate debt and use the surplus that you might have put towards paying it down more quickly into

something that is even more beneficial. So something like you and I would say investing in more real estate, buying something that will also appreciate in value over time and provide cash flow every month. And if you're not interested in that, well, then putting more away in your retirement accounts, in your four o one K or your wrath Hi ray, those would be better uses of your extra funds to save for the future than to try and pay down your low interest rate mortgage more quickly. Yeah. And so

basically what what you're describing is leveraging debt. And so essentially, when you have, say specifically a mortgage that's locked in at a low rate four percent these days, right around there. And if you can, say, make ten percent in the stock market, well you're you've got a spread of six percent.

And so instead of taking your money and paying it down towards your mortgage, which is essentially and effectively gonna earn, earn you four percent, right, because if you're paying four percent and you're able to eliminate that mortgage, you're saving yourself four percents. You're making four percent um. Instead of doing that, you're gonna make six percent. But yeah, that's

the general idea. Yeah, and I think that doesn't even take into account, you know, the potential tax implications where your home mortgage is tax deductible and your four percent interest rate is actually effectively much lower than that. And then on top of that, investing in the stock market in tax advantage accounts could save you money on taxes either now or in the future, and that creates an even greater spread. Yeah, it's like a double w amy

where yeah, where the spreads even wider. Yea. So the main thing I would tell people to be cautious of is overleveraging themselves and taking on more debt than they can actually afford to pay off on a monthly basis. So it's not wise to take out low interest rate debt, even just for the purpose of trying to finagle a spread. And if the stock market experiences a prolonged trough, that could certainly create a lot of worry and a lot

of sleepless nights for you. But I guess the main key here is if you have a mortgage that is at a low interest straight and you have extra cash to pay it off, is that the wisest use of your funds? Yeah? Man, So again this is how a mortgage can be considered a good debt. Uh. It makes sense if you're looking at it from a number standpoint, right, because if you're locked in to a lower rate, you can do a lot of other things with that money

than paying down that low interest debt. It's tough to say these sort of general blanket statements of like mortgage debt is good, but generally speaking, you know, the numbers can make sense for you to maintain your mortgage and to not pay that off, and ultimately you're going to budget for a place to live every month, whether that's rent or a mortgage, right, And so the thing I want to warn people away from is from paying down low interest rate debt more quickly than they need to

when their money could be allocated better elsewhere. That's right, I think, at least at this point in time where we're at with interest rates, Mortgages are just the perfect example of that. To have something that is locked in at such a low rate for such a long period of time, there's a good chance that as you earn more in your job or as you cut back your expenses, that those extra savings should go more towards appreciating assets or towards investing in the stock market than just towards

servicing your debt at a faster rate. Yea man. So, in the end, good debt is borrowing for things that will go up and value. When you're locked into a low rate, that allows you to free up that money to then invest in other things that are going to earn more than what you're paying against that debt. So that's good debt, Joel, you want to talk something about bad debt, yeah, Matt, So, bad debt is essentially borrowing money to pay for something that depreciates and usually at

a higher interest rate. For example, in our episode about cars, we said that taking out loans for an automobile is a terrible idea because of the rapid rate of depreciation, right, And so ultimately it's a bad debt because even though you might get a super low interest rate, it's just not smart to finance things that are going to depreciate that weekly. Yeah, man, that's right. It's just consumption, you know. Or oftentimes it's called consumer debt because literally you're just

consuming it, like it's just something that you're eating. You're just like feeding your belly, and nothing ever comes of it, you know this, It's nothing that grows at all. Yeah. So other examples of that would be credit card debt, title loans, buying a boat, right or a jet ski. Uh, there are I don't think I hear anyone that ever

is happy about buying a boat. You know, well they you know, they say that the best day two best days in your life for the days you bought the boat in the day you sold it, so in the day that it sinks right to collect the insurance check. But just like good debt can create a positive spread between the low interest rate debt and the higher interest rate you can earn on investing, bad debt does pretty much the exact opposite. And creates a gap of loss

that you just can't overcome. A lot of times people think that they can take that money that they would have put down to paying for whatever that they're purchasing in cash, and instead of paying for that kind they think, oh,

I can take this now and invest it. But what they're not really taking into account is that, well, first of all, you've got your interest payments on that, right, But then on top of that, you've got that rate of depreciation, and say specifically for a car, you're looking at close to a year in depreciation on a new vehicle.

And so if you've got say I don't even know if this is a current interest rate for a car, but say you're paying five percent in a car and you're looking at fift and percent and depreciation, you're looking at needing to make at least in some investment in order to even break even, right, And that's really not possible.

And anyone that's promising you that runaway, and exactly exactly, And so just keep in mind that what characterizes bad debt is borrowing for things that depreciate and value that ultimately will have no value and ultimately in the end make you poor. Yeah, And the tough thing is that in our culture right now, there's access to cheap debt for all sorts of things, and we can find ourselves paying monthly payments on a crazy variety of items. At this point. You can take out a loan for dental work,

or a new air conditioner or a sofa. There's a million things out there right that you can quickly and easily take out a loan for. But with some thoughtfulness and discipline, you can avoid that consumer culture and that idea that taking on debt willy nilly for every little inconvenience that you encounter or every little thing that you consider buying, staying away from taking on debt just because

it's cheap, I mean, that's just smart cool Joel. Yeah, So those are generally speaking, the kind of differences that you're going to see between good debt in between bad debt. Again, these are sort of relative terms, So we're a little hesitant to categorize some debt as always being good debt or categorizing some debt as always being bad, because so much of it depends on what you're gonna do with that money, right, you know, it's a tool, like it's

not necessarily good or bad. It kind of depends on what you're going to do with that. And in the hands of a smart investor who knows what they're doing with their money, that can leads to more wealth for them, And on the coentrary and the hands of someone who is just using that sort of financing to basically finance their life to pay for a consumption and their lifestyle,

that is not going to lead to more wealth. If you're considering taking on more debt, I want you to be skeptical, I want you to be wary, and I want you to be prudent. We're trying to cut through the nuances of debt and how it affects you, what's good, what's bad, and we're about to get into some more

practical tips on on how you actually apply these principles. Ultimately, some of the debt that's in your life that you might be trying to pay down more quickly, you might want to hold off on paying down, but don't let this episode be an excuse to go out and take on debt that you don't need and that you can't afford right to pay for things that are going to depreciate in value and even if you're taking out debt to to buy something like a home or to go

back and get something like a master's even on smarter debt choices like that, you're going to want to crunch the numbers and make sure that that purchase makes sense for you as an individual. Yeah, man, this is tricky, right, Like this is hard. It's it's kind of hard to talk about because yes, there are generally speaking things and products out there, right, tools that are good, and there are other products out there that are generally bad. But so much of this depends on the individual at the

stage of life they're in. It's such a personal decision and so much of this comes down to the individual that Yeah, like Joel said, just be careful because even the smartest thing on paper for you as an individual could be terrible for your finances. Yeah, and just a quick example, I read this great article in the New York Times just last week about people that decided to go to college and take on student loans but then

didn't finish college. And so most financial experts would say, taking on student loans to go to college, that's a wise debt to take on, right, But if you're not able to finish college. If you take on more loans than you can handle and you don't graduate and find a job in that profession, well, that decision to take out student loans for an education that you didn't finish well actually end up harming you more. Yeah. So that's why these debt decisions do come down to you as

a person in so many ways. Chedel It's good that you mentioned student loans because that's an area where it's kind of gray, right, Like a lot of folks would say that, yes, this is a great thing. Like you said, a lot of financial advisors would say, certainly, this is going to increase potential earnings down the road. You know, it's ten years down the road, you're gonna make way more money. Well it could, you know. And and like you said, there's so many people that are getting saddle

with tons of student loan debt. I mean it's in the trillions right now in the United States. Yeah, I mean, statistics bear out, Matt that if you get a college education, you will more than make your money back on that

investment over the long term. A couple of the keys when you're thinking about taking out student loans are trying to keep them to a minimum and try to take out as much low interest rate student loan debt as you can and ultimately get a degree in something that interest you and that will actually help you in the real world. I think if you stick to those principles when you're taking out student loan debt, there's a really

good likelihood that that is a smart decision for you. Yeah, man, that's a good word, Like, actually consider how much he might be making, right, It's sort of like, I mean, it's a business decision. It's like how much money am I willing to invest now? And what will the end

profit potential be? Look at it that way. You know, if you're going into it from like an art history major standpoint, no offense to all the art history majors out there, but obscure Russian literature major, but know what the potentials are for that and treat it like a business because essentially it is. Because in the end, if you're stuck with loads of debt and you have a degree that doesn't earn you the type of income to make those payments, then you're gonna be in a world

of hurt from a financial standpoint. Angel. So you just mentioned some practical tips for student loans you want to mention some other ones for folks. Ultimately, when you're considering what debts you want to pay down, the first thing you always have to be careful to do is to at least pay the minimums on every monthly payment of

debt that you have. If you are late or you miss a payment for your credit card bill, your student loan payment, your mortgage, those things have consequences that can ultimately add interests and penalties to the debt you already have, and you don't want to be in that position. So paying the minimum on everything is the place to start. Yeah, man, that's right. Make sure that those minimum payments are met.

That's the first thing. The next thing, though, if your employer is offering a company match towards your retirement savings, that is something you pretty much always want to continue to fund pretty much regardless of what your interest rates are on any other debt that you have. Right A lot of employers will match up to six percent of what you contribute. Some will even match a pent up to six percent. It's not as common, but I mean, you can't beat that fifty to on your money, even

if you have the highest credit card debt. Hopefully, you're not paying anywhere near that would be insane. So even though it might feel you're under a high percentage rate, make sure that you're continuing to contribute to your four one K if your company is offering a match, before you start looking at pain down some of that high interest debt. Hopefully you don't have any high interest debt that is greater than if you do that, that's probably first in line, but hopefully that's not the case, so

make sure you get that match. After that, the next step you'll want to take with extra funds that you have is to start paying down the highest interest rate debt, which is likely a credit card that you have in your life. Nice, So, Joel, I think a big question that folks would have then is to differentiate between what makes up a low interest payment versus like a high interest payment, like you said right, like a credit card that has a high percentage rate. What is that like?

Where does that need to land before someone starts really attacking that high interest rate? Sure, I think there's a good kind of rule of thumb that people can work with, and I think the maybe line of demarcation is somewhere in that six eight percent range and between six and eight is kind of this gray area that you kind of have to exercise some wisdom on. But really, any debt that you have above an eight percent interest rate is debt that you want to be working to pay

off as quickly as possible pretty seriously. Yeah, and so in particular, the highest interest rate debt that you have first. So example, you have three credit cards, each with balances of four thousand dollars for a total of twelve dollars in debt, and one credit card has an interest rate of another has an interest rate of nineteen percent, and the other one has an interest rate of twelve percent

because it's with a credit union. Um, it's such a nerd. Ultimately, you're gonna want to start paying off the first, paying

the minimums on the nineteen and the fourteen. Once you get the percent credit card paid off, you'll move on to the nineteen percent credit card and and funnel as much extra money as you can towards that debt until you pay that off while paying them in on the fourteen percent credit card, and then you'll move on to the fourteen percent paying that off as quickly as possible.

But any debts that you have kind of below that six eight percent rate, Those are going to be debts that you're going to want to continue to pay just the minimum amount on. So if in addition to those credit cards, you have a mortgage and student loans that are both below five or six percent, you don't even think about starting to pay those down more quickly until you've eliminated all of that credit card debt. Yeah, man, certainly,

and that could even be considered good debt. Right Like those mortgages and the different payments that you have at say four or five like, those are the rates where you might say, you know what, I'm just gonna pay this out to the end of the term, you know, as agreed upon, because I know that I can take that money instead of paying that down and invest that elsewhere.

So specific example, in my life, Matt, I have a home mortgage at three point seven five percent for a thirty year term, and on top of that, the interest that I pay on that mortgage is tax deductible, which makes my effective rate even lower than that. So if I have four dollars extra a month, well, there's no reason for me to pay down my mortgage more quickly.

I'd rather take that money and funnel it into my four oh one k at work, essentially saving more for my future and at the same time creating even more tax advantages for myself. Yeah. Or taking that money and putting that towards a down payment maybe on another property that is going to be an investment, right, And so that's what's so important and what's so key in this in this situation is that if you take that additional money,

you need to invest it. Because if you instead just take that additional money and you eat it, like you put that to what your lifestyle, than from a number standpoint, that extra fours would be better spent paying down that three point seven mortgage because at least in that case you'd be earning almost four percent. That's the biggest difference is that you need to be disciplined and you kind

of need to know yourself. Let's follow off my example and say I had an extra four dollars a month, but instead of putting it towards four oh one k or towards another investment property, I was setting it aside in a Bank of America checking account, earning an annual rate of return of point zero one oh, you mean basically zero. That is a terrible idea, and my money would be put to much better use paying down that

mortgage more quickly. You would at least be making close to four percent in that example, and I also wouldn't be paying taxes on the eight cents I would earn throughout the year right on that checking account with the big bank Yemen. On that note, I think it's worth mentioning, uh that, instead of putting it in the Bank of America checking account where it's earning basically zero percent. Mentioning the money market account that even using recently, right the

c I T money market account. Yeah, and when I signed up for it, the rate was one point seven five and they've already bumped it up again to one point eight five, which is kind of unheard of these days. But yeah, that's awesome. So if you want to know more about that, check out the article on our site Poor Not Poor dot com. Yeah, you should easily be able to find the article on our website, but if not, just search c I T in the search bar. Yeah.

Mat So, when it comes down to that order of paying off debt, you know, some people decide that they're going to pay off their mortgage as quickly as possible, even though it's what we would consider to be good debt. Yeah, for some folks, it seems like it kind of weighs on them, you know, like they can't sort of stomach it, Like in their heads, it's like this big, terrible thing. But what we're trying to encourage folks to do is to think about it, because in reality, keeping that debt

around might be much smarter from a financial standpoint. We can't speak to the emotions of it, because I mean, ideally we want you to try to remove your emotions from the situation and truly just look at the numbers and to think, Okay, what does this actually mean if I were to keep this debt around, what could I

actually do without money? Instead, there's a natural sort of tendency to try to avoid debt because generally speaking, that's good advice, Like I don't want to discount in one that says, oh, yeah, you should pay off your debts, because for a lot of folks out there in the world today, that might be what they need to do.

But if you kind of want to take it to the next level, and that's what we're here talking about, look at the numbers and actually consider what you could do with that money instead of paying down that low interest debt man. And I think another argument that a lot of folks have for wanting to just go ahead and be done with debt and paying it down is because they want to simplify even what we might consider

to be a good debt, right like a mortgage. They say, Oh, I just want to kind of simplified where I don't have to worry about it. Well, you know, if it's on auto pay, you don't really have to think about it like it's it's getting drafted every month, you know the amount. It's not like it's going to be a surprise. And then again, you can decide what you want to do with that additional money. It doesn't have to necessarily be a super complicated thing. You can just invest it

in the market, fairly simple. I think when people say that they want to simplify their life from a financial standpoint, I just think that argument is overused. So, yeah, if you are already in debt, don't be in a rush to pay that off necessarily. Yeah, I remember the rule of thumb six percent. It's kind of a good figure to go off of, and debts that you have that are a lot higher than that, Well, those are debts

you're gonna want to tackle more quickly. Non variable interest rate debts that you have below that six percent line, well, those are debts that you can afford just to pay as agreed over time. But if you're considering taking on new debt, here's a couple of things to consider. Try and keep your debt to a minimum and make sure that your debt to income ratio doesn't get out of whack. Ultimately, you want to be really really careful to shop around for the best rates and find banks who are keeping

costs down. Make sure to compare lots of different options when you're financing a home. Whatever you can do to lower the rates and carrying costs of your debt is pretty much always a good thing, Dude. I feel like

that's something that you are actually really good at. I think you always end up shopping in around a bunch, and I think that a lot of people don't do that, and they kind of just go with the very first bank that they call, or you know, like the first mortgage mortgage lender that they're real to recommends because they're like, oh, yeah, I talk to so and so. They do they do great work and then they end up paying half a point higher and the closing costs are a lot more. Yeah,

shop it around. That's that's that's huge. Yeah, and that could end up meaning hundreds or more than a thousand dollars on the day of closing, and then they could end up meaning tens of thousands of dollars over the life of your mortgage easily. All right, Matt. Back to the beer, Hopping Frog's Infusion A coffee porter. Wait, what's called infusion A as in like A like Canadian A. I wish no, just the letter oh, as in like this is infusion A and there's an infusion be yep, okay, sweet,

have you had an Infusion B or ce? No? But if Hopping Frog wants to send us some, we'll totally take it. Yeah, man, I don't want to put too much weight on a brewery's labeling and like they're they're braining, But I gotta be honest, not my favorite at all. That being said, the beer is really good though. Yeah. Even though porters aren't necessarily one of my favorite styles, this is really nice. It's got that kind of peanut butter chocolate coffee almost has like a recist cup kind

of quality, very nice like that. Even though the mouth feel is a little bit thin, it's still a kind of fun beer to drink. Yeah, I think for a lot of folks out there that aren't drawn to the hobby sort of bitter I p a S that they've had out there. If you know you don't like I PA s, then porters are are definitely kind of the porters and stouts or beers you want to try and yeah, look this one up. This might be one that you

find yourself drawn to. Let's go ahead and do a wrap up first, we want to challenge you listeners to not blindly pay off debt. Specifically, don't blindly pay off low interest debt that you have locked in at that low rate. That's right, there's such a thing as good debt, like mortgages and student loans that are typically borrowed at pretty low interest rates and are actually creating value in your life at the same time, and then contrary to that is bad debt. So typically this is debt where

you're borrowing money to pay for something that depreciates. And essentially what this is is consumer debt. This is stuff that you are just consuming, you're using it to pad your lifestyle. It is not growing and is not increasing your wealth. This is the kind of debt that you want to avoid at all costs. Yeah. Ultimately, debt is kind of like a tool, and it can be used really well or really poorly. Take student loans for an example, and students can kind of fall on that fence. Right.

You can definitely be good, right, and it can also be really bad for someone that doesn't have a plan. Yeah. Just like ice cream is good, if you have three cartons of it, it's pretty bad, right, And same thing with with student loans. If you're judicious about the amount of student loans that you take out and to benefit the ultimately receive from having that college degree translates well into the workforce, well then bam, you just made a

great debt decision. But just make sure that you're wielding that debt tool thoughtfully. Yeah, man, that's right. So a good rule of thumb then for folks if you're considering paying down debt is if you have any debt that is below six percent, you want to think twice about paying that that down. That might be debt that would be considered good that you could keep around where you could use any additional money that you have an intead of paying that down to instead invest, And that's what's key.

You want to invest that additional money. Yeah, but if you've got debts with higher interest rates above that six percent line of demarcation, you're gonna want to go hard at those things. Yes, So create a strategy, a plan of attack to get rid of those super high interest

rate debts first and as quickly as possible. But conversely, don't be in a rush to pay off that fixed rate, low interest debt because there's a strong likelihood that you could be putting your money to work for you in places that will earn you a better return a few matt That's what This one is A tough one, right, dude. Not the easiest topic to discuss because so much of this comes down to the individual. It's hard to say that there are hard and fast rules for calling certain

debt bad and certain debt good. You need to know yourself, You need to know if you are actually going to invest or not. Yeah. That being said, I think we gave some really good general principles for people to follow. And if you're gonna put that money aside and savings account, dude, better to pay down even the three and a half percent rate mortgage than just stashing it in a savings account, earning you next to nothing. Yeah, you may as well just bury it in the ground, which is a bad idea,

or under your mattress, right, it's just as bad. Thanks everyone for listening. Our home on the web is how to money dot com. We'll have shown notes up there for this episode. Yea, and if you like what you hear, please review and subscribe us on Apple Podcasts or on cast Box. Cheers, Buddy, Cheers Man, best Friends Out, Best Friends Out,