Daily Links: Outsourcing, Intentional Default, and The Simple Dollar
Published on - May 12th, 2010 (by J.D. Roth) It’s been a long time since I share links to other sites. That’s a shame, because there’s a lot of great stuff out there. Lately, I’ve been impressed with some articles from some of your fellow GRS readers.
For example, Tim at the Seattle Bubble blog just posted an article on misguided ethics and walking away from a mortgage. We’ve had several discussions around here about the morality of defaulting on a mortgage. There are a lot of GRS readers who think that defaulting is reprehensible. Tim lays out the case in favor of intentional default. “A mortgage is merely a legal contract, not some sort of sacred vow,” he writes. It’s a fascinating article, with 181 fascinating responses.
In February, Erica Douglass shared a controversial guest post with us about outsourcing life when you’re financially secure. She argues that if you can afford it, it’s actually very sensible to pay other people to do things for you. Over at her own site, Erica has just written an article to answer the question, “Is outsourcing worth the effort?” This will be of interest to a very small portion of GRS readers, but I think some of you will find this helpful.
Finally, Trent at The Simple Dollar posted several great articles recently, including:
- Why you shouldn’t buy gold as a hedge against devastation. Trent believes — and I agree — that gold will be useless in the event of a financial apocalypse. History and reason bear this out. I’ve been meaning to write a post on this subject (and probably still will), but this is a great intro.
- The myth of the tax deduction. A tax deduction is no reason to get a mortgage. Trent writes, “You’re far better off having a small debt load and perhaps missing a deduction or two than having a high debt load and getting those deductions.”
- Never co-sign a loan unless you want to pay for it yourself.
- Separating your goals and choices from those of other people. This is an awesome post with great advice: Don’t base your goals on the goals of other people. Make you own decisions based on your own preferences and priorities.
That’s it for this afternoon, folks! Time to enjoy some of that rare Oregon sunshine…
This article is about Spare Change
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If only Trent’s personal goals included proof-reading…
(speaking of which… “just posted” not “just post”)
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D’oh! Thanks, Nicole. Fixed it.
I used to feel bad about how many mistakes get through my own proof-reading efforts. I try hard to mash down mistakes. But then I wrote the book. It was comforting to see that everyone along the way makes errors — even the copy editor!
I’m not trying to justify my typos and mistakes. I’m just rationalizing them.
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Of all of the afforementioned links,
I found that of Trent’s to be very thought- provoking and J.D.-esque.
I truly enjoy a lively debate about passions and finances (especially when authors speak from personal experience making it much more personable to read) and the realism that with much compromise, both can go hand-in-hand.
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Thanks for the link! Hopefully people also read today’s follow-up: Did Banks Act in Good Faith During the Bubble?
Oh, and I wholeheartedly second the “Myth of the Tax Deduction.” I also happened to write on that same subject just a few days ago myself: "Tax Savings" Far Overshadowed by Interest Paid
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Gold isn’t a hedge against Financial Armageddon? Really?
Maybe not against Armageddon, but Financial funny games flee from gold.
Please Read Ayn Rand : Atlas Shrugged
Gold performs well as MONEY. You need to save it to have it. Its not like stocks, bonds or other Currencies. Once you spend it its gone. No cake & eat it too.
In Deflationary environments, the price may drop, but the price of goods will as well- This is the “Financial Armageddon” – Nothing gets economists like yelling “DEFLATION!”
Normal Inflationary Environments, this will preserve the WEALTH value you’ve put in. Silver in the 1940s: 1.40$ But that bought you a steak, potatoes & dink. – at 10-20$ now, same thing.
In a ‘Financial Armageddon” of the other sorts, Currency Crisis, There is no other asset that will protect you better then gold & silver. – This is why you should have SOME gold and silver in any portfolio.
Gold and Silver where NOT on the top of list of priorities:
1. 6-12 Months of Food Stored: Check.
2. Renewable Food Sources, Trees, Garden, Chickens: Check.
3. Lead & Lead Delivery Devices: Check.
4. Gold & Silver: Check
Rules to Remember:
1. Don’t Panic.
2. If you panic, be the first to panic. He who panics first, panics best.
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The article regarding walking away from mortgages was certainly intriguing. Many people seem to be under the impression that a mortgage is anything more than a financial contract. It is not some sort of moral indentured servitude statement.
I worry, however, that current home prices reflect the fading notion of moral obligation to paying. As people start to view it more in line with the business contract that it actually is, we may see house prices swing wildly. Or, they might just be priced rationally.
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Thanks for all the great links. I really enjoyed “The Myth of Tax Deduction” as it definitely cleared up tax deductions and made me really think about it.
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ive read all of them, and it really is great how much information is out there. i particularly liked the gold article, as i pretty much agree with the author that gold is not the money making machine that many out there want you to believe
Preferred Financial Services
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Kyle,
I wouldn’t worry about wild swings in house prices. Prices aren’t falling because people are walking away, people are walking away because prices are falling and they now owe more than the house is worth. Prices will continue to fall until they are back in line with fundamental supply and demand. Defaults may speed the fall because banks are more concerned with selling quickly than getting top dollar, which pushes prices down, but the ultimate destination of the market is still the same.
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Physical Gold is not a money making investment and should not been seen as such. Gold (and silver) are an effective way to preserve value of money.
Look to past financial crises to see how people in Argentina, Soviet Union and Brazil coped. Shopkeepers were generally happy to take silver (and not just coins) over paper currency for payment.
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One problem with intentional defaults:
If you go into a mortgage agreement with default in mind, you’re less likely to make extra payments to pay off the house early.
If you go into the agreement with the attitude that you’ll never walk away and you’re going to pay it off as soon as possible, you probably will.
Now who is better off? The you who walked away or the you who owns a home free and clear?
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Nelson,
While I agree completely with you on your point of the perspective one brings to paying down a mortgage, I only have a problem with the perception people have about people paying off the home mortgage and the stigma attached to it.
An individuals well being is just as, or more, important than the bottom line of a business. If a business can take a strategic default on a contractually obliged debt, then it would hold equally true that an individual should be able to do so as well (within the limits of their contract).
The problem I see most people having with this idea is that it affects their neighborhood and their house value. This leaves the person who wants to default living as a slave (not to sound too hyperbolic) to their neighbors. Maybe the tacit agreement that people in a community hold so dear was never actually an agreement at all.
Hmm, I think I should put my thoughts together on this topic together in a more coherent way. But, I felt as though I should comment.
Hooyah.
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My perspective applies to any purchase. If you go into agreements knowing you’ll pay it back you’ll be less likely to get in over your head to begin with.
I know people that ran up credit cards on consumer junk with the attitude “well, if worse comes to worse I’ll just declare bankruptcy”. People got more house than they needed with the attitude that they could just walk away if the house didn’t appreciate. It’s a horrible way to live financially speaking.
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