Thread by @Trinhnomics

Back to my millennial musing. Read an article today in the WSJ (financial advice column) that didn't even mention interest rates. Wuat???

How to get a mortgage w/ student loans: author suggested a bunch of quick fixers to "look good" to get more debt!

wsj.com/articles/what-…

https://twitter.com/Trinhnomics/status/1273844447470424064

First, if u have a financial adviser that tells you a bunch of stuff without discussion with you the following:

a) Opportunity costs of time & money, as in interest rates
b) You ability to manage your debt

BUT emphasize your getting more debt then u should be very very waried!

This article reflects everything that is wrong about our American culture that promotes you getting more debt! Buying more things!!! (This time a house you may not afford). No where does it say, buy a house when you can afford it.

Nuts!!!

If I were to write such an article & I care for ur financial future & debt sustainability (WSJ only published a lengthy piece on how Americans up to their nose w/ all sorts of household debt), then I'd say: If can't get an investment return higher than cost of debt, pay the debt.

If u have graduate student loan debt, which is unsubsidized, then that means you are paying very high rates about 7-8%.

Very unlikely u get an investment return higher than that w/o a lot of risks so pay OFF UR STUDENT LOAN DEBT.

If u have credit card debt, pay that off before!

Why? Because your cost of funding credit card debt is DOUBLE DIGITS in interest rate & there is NO WAY you can get a return to your investment at the rate in which it costs you to fund your consumption behavior.

In the order of importance: Pay off the highest rate debt 1st.

Btw, if you are the sort that have a balance on your credit card & you don't pay it off entirely every month, then don't bother getting a house.

You are just not responsible enough b/c will likely get a mortgage u can't afford & buy a bunch of stuff u can't afford to fill it up.

And so this column should be like this:

a) Pay off your credit card debt
b) You shouldn't have an auto loan but if u do, max 1 car
c) Pay off your graduate student loan
d) Save for a mortgage & rainy days
e) Buy only a house u can afford & don't borrow to renovate & consume!!!

By the time you are 65, should be already have PAID OFF YOUR HOUSE.

In CA, even if you have, still have a massive property tax bill + insurance.

Social security pays for ur medicare but need savings to cover costs of maintaining the house.

And that doesn't include spending $.

You are young now but one day you can't make the same income (US labor market is very flexible so if u become old & expensive likely there are younger, cheaper & more eager people to replace you).

Will you age gracefully? Only if u understand time value of $ & act accordingly.