Is Debt Consolidation Dumb?

You know, I wonder if there’s a financial echo chamber (much like there’s a tech echo chamber)? I’ve never really written that much about finances in the past, but I’d imagine that credit and debt are much more important subjects to master than hardware and software. Hey, this is a personal blog – so just about anything goes. I can’t think of anything more personal than this right now, if only because Ponzi and I have dealt with debt most of our lives (and are facing a mortgage payment with our new house).

I wish I had made better decisions when I was younger, and I guess that’s why I’ve been spending so much time writing about credit and debt recently. Young men come in and out of our chat room and ask me questions like “what’s your favorite mouse” and “which is better, NVIDIA or ATI?” So, maybe a little bit of financial advise would do ‘em good? If only so they may be able to afford a new video card every once in a while. ;)

From earlier threads, Roger Wong added the following clarification:

“Debt is dumb” if you are using it to buy things you can’t afford. Using debt to make more money than the debt is owed is smart. =) If you have a 3.9% loan and put that money into an ING Orange Account (4.9% interest), you would make more than you have to pay in interest monthly. My thoughts.

Charles Williams:

To quote Dave Ramsey, “Debt is Dumb”. I attacked all of my debt mercilessly. I even took on a second job (delivering pizzas in a nice neighborhood) to get an extra $500 or so a month to put directly to debt. It takes a bit of pride swallowing, but debt will destroy your future. The average Japanese adult saves 18% of his post tax income. The average American saves -6%. Think about that.

Peter Wyro:

Practical approach. First of all, debt is debt. The lower the interest rate, the better the debt. The way that I treated my student loans was just like any other debt: auto loans, mortgages, credit cards – I divided the total amount available to pay on debts every month, according to the interests rates being charged to me (obviously including the minimums on all debts). If my student loan was 6% and my credit card was 10% and I had $1,000 a month to pay on debts – the student loan got the minimum and the credit card got the most.

Okay, so to put a tech spin on it (for those who feel that I’m less human just because I’m a geek): I don’t like buying new hardware to replace old hardware unless I can find a way to offset the costs of the new hardware. Meaning, I try to sell my old stuff before acquiring new stuff. Not only does it keep my closet clean – but it also makes my pocketbook happier.

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