Comments on: The Nefarious Hidden Costs of Debt

By: Friday Finance Round Up – August 21, 2009 | Redeeming Riches

Friday Finance Round Up – August 21, 2009 | Redeeming Riches — Fri, 16 Oct 2009 12:44:06 +0000

[...] The Nefarious Hidden Costs of Debt - The Personal MBA [...]

By: Debt Free Blog » The Hidden Costs of Debt

Debt Free Blog » The Hidden Costs of Debt — Mon, 21 Sep 2009 01:56:28 +0000

[...] out “The Nefarious Hidden Costs of Debt” at The Personal MBA… it’s a great read. « Getting Out of Consumer [...]

By: Friday Finance Round Up – August 21, 2009 « Redeeming Riches

Friday Finance Round Up – August 21, 2009 « Redeeming Riches — Fri, 21 Aug 2009 10:36:22 +0000

[...] The Nefarious Hidden Costs of Debt - The Personal MBA [...]

By: Rob Gura

Rob Gura — Mon, 17 Aug 2009 21:10:59 +0000

I for one am glad that I never went back to school for an MBA. With the exception of my mortgage, I have been debt free for well over 10 years. I actually considered putting my career on hold and seeking an MBA full time.

Josh’s program persuaded me otherwise and I have since been able to accelerate my career on my own!

By: Keno Mullings

Keno Mullings — Mon, 17 Aug 2009 17:39:14 +0000

If the value of the asset(s) associated with the debt does not increase in value over the debt, then this is bad debt.

http://daveramsey.com has great practical steps on how to get out of debt.

By: Jack

Jack — Sat, 15 Aug 2009 12:54:57 +0000

I just got out of my undergrad and have started working at a big bank. I’m actually thinking of going back for an MBA at a top tier school because of how IT is being offshored and outsourced. I feel like the only way for me to switch careers is to go back to school. When employers look at my past work experience ( a few internships doing IT), I think they tend to assume I want more tech stuff, and that IT is the only thing I’m good at. How do I get myself out of that career “typecasting”.

By: Steve Miller

Steve Miller — Fri, 14 Aug 2009 01:56:27 +0000

Good article. Comparing debt to fire is a great analogy.

One problem with debt is that we don’t tend to consider worst-case scenarios. What happens if my salary goes down instead of up? What if I lose my job? What if something crazy happens to the economy, and it doesn’t recover for years?

While researching my recent book, I delved into the life of Thomas Jefferson. Here was a guy so brilliant that when John F. Kennedy entertained 49 Nobel Prize winners at the White House, he said,

“I think this is the most extraordinary collection of talent and of human knowledge that has ever been gathered together at the White House – with the possible exception of when Thomas Jefferson dined alone.”

So Jefferson inherited a thousand acres of land in his 20’s, but also some debt. He always felt that, if things got tight, he could sell off some of the land. But he didn’t pay close enough attention to his debts and spent his latter years – when he should have been basking in the glory of his remarkable life and playing with grand kids – fretting about how to not leave his children with his huge debts, which, in today’s money, would have been in the millions.

So why couldn’t he just sell his land? Well, drought had devastated his crops, followed by invasion of a destructive fly. The Panic of 1819 made money tight and nobody wanted to buy land.

Not even Jefferson could have predicted the chain of events that led to his financial demise. After reflecting upon that, I decided to sell a rental house that I had money borrowed on. If everything went fine in the coming years, it would be a great investment. But calculating worst-case scenarios made me realize it wasn’t worth the risk.

Steve Miller, author of Enjoy Your Money! How to Make It, Save It, Invest It and Give It – http://www.amazon.com/Enjoy-Your-Money-Make-Invest/dp/098187567X/ref=sr_1_2?ie=UTF8&s=books&qid=1237211789&sr=8-2

By: Kelsey

Kelsey — Fri, 14 Aug 2009 01:38:13 +0000

From “Your Money or Your Life,” my favorite concept is that by buying something with debt, you literally become a slave to that possession. Imagining yourself as a slave to an inanimate object feels so ludicrous that it makes it easier to turn off your habitual spending patterns.
The best thing I did when I was trying to get out of debt was to take out only as much cash as I had budgeted myself for any 2 week period. I had to be a strict enforcer of myself not to take any more out, thus prolonging the debt cycle for “necessary” things like schmancy balsalmic vinegar or (more) new shoes. Having the mental image that everything in my wallet had to last me for 14 days made me much more aware of little costs, and let me make some serious value judgements. Now, when I have space for the little things in the budget, they are total luxuries!

By: Kunal

Kunal — Thu, 13 Aug 2009 21:42:30 +0000

Another good financial website is http://www.gailvazoxlade.com, which helps the average person get out of debt.

By: Cesar

Cesar — Thu, 13 Aug 2009 20:43:31 +0000

Debt is a terrible thing to have upon you, yet at times there’s no other option, specially when you only have a window of opportunity that will not wait a year for you to get the money.

And so, it is a double-edged sword, and needs great care and responsibility for it can destroy all you’ve built in the blink of an eye. So, to handle it, it’s really a risk analysis and what you want to do in time. For example, I took a small school loan to pay my last year of college and that allowed me to have a lot more flexibility on how I used the money I was making, helping me make other investments and face other obligations without much worry. Of course, I took the risk of losing my income or not getting the raise I needed (luckily I did) but for that I had contingency plans in place.

So, is your goal so critical that you are willing to use the sword? Are you really prepared to use it? Are you commited enough to not long for a change mid-way? Answering these three might tell you if you are ready to use debt, and if you hesitate to take the risk, then seek investors willing to share the burden and danger.