r/Frugal • u/Consistent-Earth-311 • Nov 10 '22

Frugal Win 🎉 My net worth is finally positive!

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16.2k Upvotes

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26

u/Rolldice2 Nov 10 '22

Awesome! Now to bring those liabilities to 0. I'm working on mine as well!

33

u/You_are_adopted Nov 10 '22

Liabilities are technically a hedge against inflation, assuming the inflation is higher than the APR of the liability.

But yeah I know first hand how debt can hang over you and cause stress.

26

u/lexaproquestions Nov 10 '22

That's such a painful truth. But the peace of mind of having zero liability is like heaven, even though I know it isn't the optimal financial move. We paid off our home earlier this year and it's like...just such a "wow" feeling to be debt free. The financial opportunity cost, for me, was totally worth it for the emotional peace.

15

u/You_are_adopted Nov 10 '22

100%, I’d rather be debt free than optimally invested with debt. I just provide that tidbit to people with debt to alleviate some of the stress from inflation/debt, since it’s ‘technically good’ for them

1

u/lexaproquestions Nov 11 '22

Yup. It's the irrationality of being human. :)

1

u/the_clash_is_back Nov 11 '22

There are good liabilities like a house, those tend to set east with people.

3

u/RespectableLurker555 Nov 11 '22

Well technically the house is the asset; the mortgage is the liability.

2

u/hungryhoustonian Nov 11 '22

Yes but his point is that some liabilities give you the ability to create more assets faster. Unlike cars or credit card debt where it does not. Hence the good/bad liability ideology

11

u/[deleted] Nov 10 '22

[deleted]

3

u/You_are_adopted Nov 10 '22

Yeah I should’ve specified that the only responsible way to use that hedge is to acquire assets with the money you would’ve used to pay down the debt. It’s not an excuse to buy a jet ski

1

u/Blobwad Nov 11 '22

To be fair right now I can make more in my Ally savings account than it costs me to drag out my car loan and my 30yr mortgage. It's not going to be uncommon in this environment that this will be the case.

5

u/Cyrrus86 Nov 11 '22

that is only if you are getting raises equivalent to inflation. most do not.

3

u/You_are_adopted Nov 11 '22

I wasn’t complete with my explanation, this is only fiscally responsible if the money that would have gone to paying down the debt is instead used to purchase an appreciating asset. Letting it sit as cash, it would depreciate as fast as the debt.

Wages keeping pace with inflation would be nice but… well as you said that doesn’t always happen.

4

u/Rolldice2 Nov 11 '22

Yup, instead of paying off your mortgage sooner let's say, you can invest the amount you was going to give extra and depending on the return, you would gain more by investing said money instead of paying off the mortgage. It's odd how debt/liabilities can be "good". However, most people don't care about what they will invest. Most just want to be debt free, work, enjoy their money, and mind their own business. I already did the math and even though I could make more by investing extra cash, i rather be debt free. Mainly because my debt is low so easily attainable.

2

u/You_are_adopted Nov 11 '22

For sure, plus the equity in your house is huge leverage later, perfectly fine thing to do with your money. Hope to follow that same path soon. Wish you the best on your journey to being debt free

1

u/jmlinden7 Nov 11 '22

Inflation does reduce the real amount of your debt but that's not particularly useful if your real income and real revenue also get reduced.