Why do Americans pretend they're not broke when most Americans are in debt?
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Sorry, I'm dense. For me being in debt and paying off something like a loan on a house has the purpose of paying something you do not have the funds for to pay off in one go. Seeing as the longer you take paying it off, the more you actually pay since rates increase or whatever, depends on contract specififcs.
How is it not a smart thing for you? Is this about US credit rating system or something else.
Edit: thanks to all replies, not gonna spam thank yous to you all. Didn't consider those options.
Besides what others have said, there is a mortgage interest deduction on taxes in the US. It’s basically the government saying “we want you to buy a house, so for the interest you pay on a home loan, you don’t have to pay taxes on it.” So combine that with a low rate, and it absolutely makes sense to have that debt and put the money to work elsewhere.
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I don't know anyone pretending they aren't broke in America...I know a lot of good people struggling paycheck to paycheck and that's it. I love how Lemmy has become this echo chamber of hate for Americans when y'all are just as fucked in Europe and other countries too with so many similar or different issues. Imagine a little compassion for all people rather than assuming "America bad because America". Just so incredibly sad and stupid to see how dumb so many people are.. that kind of thought process is exactly the same type of people that vote for trump that have this same attitude about "insert race or country here". Y'all need a reality check, yesterday...
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Debt, used properly, makes you wealthy. Every billionaire you know has debt because of the advantages.
I grew up middle class. To afford my prestigeous university, I took out debt (before grant only financial aid). The value of my education allowed me to earn a higher salary to pay it off in two years. I kept earning that salary and more after the debt was paid. It had a high present value.
I bought my latest house four years ago. Mortgage rates were so low I decided to finance part of it at 2% even though I had the cash. I now earn 4.5% in money markets. After taxes, I earn 0.72% every year not to pay off my mortgage. With $350,000 remaining, this is an extra $2,500/year right now.
I shop with credit cards that give me 2-5% back on purchases. I pay off my balance every month and have never paid one penny in interest or penalties in over a decade. My credit cards therefore pay ~$1,500/year tax free.
Larry Ellison likes controlling Oracle and being a billionaire. Rather than selling stock of Oracle to fund his lifestyle, he instead borrows against the value of the stock. As Oracle appreciated, he got to keep the gains he doesn't trigger capital gains taxes.
Most Americans do live paycheck to paycheck. They live at the ragged edge of their means and remain ignorant of finance. However, this is a global phenomenon. The difference is that much of the United States tax code is set up to benefit the wealthy. Adopt their habits and your wealth starts to snowball.
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Besides what others have said, there is a mortgage interest deduction on taxes in the US. It’s basically the government saying “we want you to buy a house, so for the interest you pay on a home loan, you don’t have to pay taxes on it.” So combine that with a low rate, and it absolutely makes sense to have that debt and put the money to work elsewhere.
That is still technically true, but it requires filing your taxes with "itemized deductions" wherein you provide a complete list of all the things that you can deduct from your taxable income before calculating the tax owed. Stuff like mortgage interest, charitable donations, medical and education expenses. Back in 2013 up to 30% of tax filers did that. Mostly this was done by higher income people who had enough income and deductions to put them over the default standard deduction.
The "standard deduction" was increased in big changes to our taxes in 2018, and since then only about 10% of filers itemized. So mortgage interest isn't usually paid with pre-tax money anymore by up to two thirds of those who did it before.
The other reasons for carrying a low interest rate mortgage are still true.
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That is still technically true, but it requires filing your taxes with "itemized deductions" wherein you provide a complete list of all the things that you can deduct from your taxable income before calculating the tax owed. Stuff like mortgage interest, charitable donations, medical and education expenses. Back in 2013 up to 30% of tax filers did that. Mostly this was done by higher income people who had enough income and deductions to put them over the default standard deduction.
The "standard deduction" was increased in big changes to our taxes in 2018, and since then only about 10% of filers itemized. So mortgage interest isn't usually paid with pre-tax money anymore by up to two thirds of those who did it before.
The other reasons for carrying a low interest rate mortgage are still true.
I didn’t realize the rate was so low now for people who itemize. I guess I’m outing myself when I say we still do it? I’m not loaded or anything, but we do enough giving and have mortgage interest to make it worthwhile.
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I didn’t realize the rate was so low now for people who itemize. I guess I’m outing myself when I say we still do it? I’m not loaded or anything, but we do enough giving and have mortgage interest to make it worthwhile.
It could just be that you are in a higher cost housing market, or have big charitable donations. But also, yeah, you're probably also kinda loaded.
(at least when compared with the median American)
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It could just be that you are in a higher cost housing market, or have big charitable donations. But also, yeah, you're probably also kinda loaded.
(at least when compared with the median American)
Well, we’ve been living the DINK lifestyle for a long time. It would be a very different story if we had only one income, or kids, or both. But yeah houses are pretty expensive where we are. Though from what I can tell, houses are expensive everywhere now 🫥
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who's pretending they aren't broke?
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Oh that too. We make sure to remind the poor white folk they are still better than rich black people
As President Lyndon B(ig dick) Johnson once said
"If you can convince the lowest white man he's better than the best colored man, he won't notice you're picking his pocket. Hell, give him somebody to look down on, and he'll empty his pockets for you."
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What's important is how much you can buy, not how much money you have.
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That's called Modern Monetary Theory. It's a fun game until the underlying physics of our little civilizational project fails, that is to say the energy return on pumping oil out of the ground.
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Debt, used properly, makes you wealthy. Every billionaire you know has debt because of the advantages.
I grew up middle class. To afford my prestigeous university, I took out debt (before grant only financial aid). The value of my education allowed me to earn a higher salary to pay it off in two years. I kept earning that salary and more after the debt was paid. It had a high present value.
I bought my latest house four years ago. Mortgage rates were so low I decided to finance part of it at 2% even though I had the cash. I now earn 4.5% in money markets. After taxes, I earn 0.72% every year not to pay off my mortgage. With $350,000 remaining, this is an extra $2,500/year right now.
I shop with credit cards that give me 2-5% back on purchases. I pay off my balance every month and have never paid one penny in interest or penalties in over a decade. My credit cards therefore pay ~$1,500/year tax free.
Larry Ellison likes controlling Oracle and being a billionaire. Rather than selling stock of Oracle to fund his lifestyle, he instead borrows against the value of the stock. As Oracle appreciated, he got to keep the gains he doesn't trigger capital gains taxes.
Most Americans do live paycheck to paycheck. They live at the ragged edge of their means and remain ignorant of finance. However, this is a global phenomenon. The difference is that much of the United States tax code is set up to benefit the wealthy. Adopt their habits and your wealth starts to snowball.
Larry Ellison likes controlling Oracle and being a billionaire. Rather than selling stock of Oracle to fund his lifestyle, he instead borrows against the value of the stock. As Oracle appreciated, he got to keep the gains he doesn't trigger capital gains taxes.
I never really understood this. He still has to pay the loan, and he isn’t doing that with his symbolic $1/year salary. What part am I missing?
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Larry Ellison likes controlling Oracle and being a billionaire. Rather than selling stock of Oracle to fund his lifestyle, he instead borrows against the value of the stock. As Oracle appreciated, he got to keep the gains he doesn't trigger capital gains taxes.
I never really understood this. He still has to pay the loan, and he isn’t doing that with his symbolic $1/year salary. What part am I missing?
Debt interest below investment yield means infinite money.
You're missing the taxes they aren't paying on the yield of the investment. That's only taxed when sold. So if you borrow against investments tied up in the market then it never triggers the tax.
Theoretically their estate would get taxed on the value resulting in a nice cascade of tax triggers but they're doing away with that asap.
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Stupidity and the art of flexing.
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Debt interest below investment yield means infinite money.
You're missing the taxes they aren't paying on the yield of the investment. That's only taxed when sold. So if you borrow against investments tied up in the market then it never triggers the tax.
Theoretically their estate would get taxed on the value resulting in a nice cascade of tax triggers but they're doing away with that asap.
You need to pay that loan with cash, right? I get that your assets secure the loan, but without another source of cash, how you pay back the loan and not sell your assets?
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I don't know anyone pretending they aren't broke in America...I know a lot of good people struggling paycheck to paycheck and that's it. I love how Lemmy has become this echo chamber of hate for Americans when y'all are just as fucked in Europe and other countries too with so many similar or different issues. Imagine a little compassion for all people rather than assuming "America bad because America". Just so incredibly sad and stupid to see how dumb so many people are.. that kind of thought process is exactly the same type of people that vote for trump that have this same attitude about "insert race or country here". Y'all need a reality check, yesterday...
wrote last edited by [email protected]In previous centuries with colonialism Europe was the cause of much disgrace in the world.
After WWII with neo colonialism it was either us or ussr imposing their way of life and values over the media, but overly exploiting resources and weakening both local economy and healthy politicians and putting dictators everywhere.
us bad fame still didn't catch up with all the bad stuff they did and are still doing.
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You need to pay that loan with cash, right? I get that your assets secure the loan, but without another source of cash, how you pay back the loan and not sell your assets?
Just keep borrowing and pay with that. Debt interest lower than yield.
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I've dealt with people that made it to adulthood not really understanding that if they have cash in their pocket, but more debt than that, they don't really have money available to spend on frivolous things. Some of them are my friends.
They will be "broke" 5 days of the week, but spend freely from when then cash their paycheck (or get that next payday loan!) until all they have is change.
But, I've been lucky. I got a degree without taking on debt AND the worst CC hole I had to dig myself out of was not even to the limit of one card. I think most people have to ignore student or medical or other debt just to function...
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It's actually curious to read this comment while several others state how they could manage to pay their debt, but they choose to be in debt because it's somehow convenient for them. I believe them, it's just curious because anyone could say the same.
are you talking about the comment mentioning it makes financial sense to not pay off their mortgage?
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How else are we supposed to know who's better than who?
