They chose financial independence over home ownership.

This is somewhat extreme but watch how this Canadian couple chose financial independence over home ownership.  They are in their 30s and,...

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"E-book" by AK

Second "e-book".

Another free "e-book".

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15% to 20% yield per year but only for some.

Tuesday, August 16, 2016

Hi AK,

Been a regular reader of your blog. Simply inspiring to me.

I merely have one question to seek your advice. I have approximately $30,000 of current liabilities (namely credit lines and long term debts) or what some would call unhealthy debt. 

I also have approximately $13,000 of assets in stock holdings. If it was you, would you liquidate your 6% to 7% yield assets to pay for debts that cost 15%-20%?

From an economical reason, it makes sense to ensure that you forked out as little money as possible to pay the cost of debts. 

However, spiritually, I was wondering if I ought to keep my yield generating assets in order to "force" myself to work harder to upkeep the debt and buy more assets.

For now, my job does pay me enough to meet my debt cost and investment capital. 

Would you do the mathematically smart thing and pay down the debts asap or build up the asset at the same time?

Hi J,

Compared to a 6 or 7% yield, if you were to pay off your debt, it is equivalent to generating 15% or 20% in extra money per month. This is money in the pocket.

"Once you get into debt, it's hell to get out. Don't let credit card debt carry over. You can't get ahead paying 18 percent.

- Charlie Munger

What about being forced to work harder and all that? 

Be pragmatic. There is more certainty in money saved now than money to be earned in future.

Gambatte! :)

Best wishes,


Related post:
An unbeatable level of certainty in wealth building.


TG said...

Totally agree with that. When there is money to be saved then it is a better approach. However if you have housing loan that you are servicing interest at 1.6% and assets that generate 5 to 6 % then it make sense to still carry the housing loan debt as there is money in the pocket. Until such time when the housing interest goes up to be higher then dividends from assets. This is smart leveraging. So not all debts are bad.

AK71 said...

Hi TG,

A fine example of how money should go to where it is treated best. :)

Capricon said...

I am in a similar situation many years ago and I stop all investments and repay the loans over 2-3 years from my bonus.

You can't really save and invest when you have debts.

My advice is to clear the debts first. The nest will build up faster after that.

Just my 2cts.


AK71 said...

Hi Capricon,

Thanks for sharing your story here. I am sure it will encourage the reader to do the right thing! ;)

Capricon said...

Sorry, to add on more clarity. I don't mean to tell the reader to sell away the 6-7% yield generating assets. If those yield can sustain or better still, increasing, then keep them.
Though his job is able to meet his new investment capital and cost for the debts, I think the priority should be clearing the debts as quick as possible.

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