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Kenb
| | Posted on Wednesday, July 18, 2007 - 10:27 am: | 
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guess anybody who owns their own home and has a mortgage is dumb then. |
Xl1200r
| | Posted on Wednesday, July 18, 2007 - 01:20 pm: |
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guess anybody who owns their own home and has a mortgage is dumb then.
Kind of my thoughts. Does this mean I might be a genius because I throw money at my landlord every month that I'll never earn any equity with?
The way some interest rates are, how can you NOT afford to borrow money? Granted, I bought my last bike cash straight up, but I make payments on the car. Got a killer deal and killer rate through my credit union.
I guess I must be pretty stupid because I had to borrow money so I could get an education... sort of a catch 22, don't you think?
Why pay for an education when you can stay dumb for free? |
Court
| | Posted on Wednesday, July 18, 2007 - 02:44 pm: |
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I consider myself a trailblazer . . . I didn't wait until I was broke to be stupid. . . I charged boldly ahead and went where stupid had never gone.
I think we're playing with what happens when words, opinions and ideas get flavored with experiences, good and bad, mixed in the bowl and related as "fact".
My wife works for three young billionaires (yes, that's a "B") and I assure you the "broke" have no monopoly on stupid. No personal reflection on any or all of them but an observation. Over my years of dealing with a wide range of folks I've yet to discover the elusive element of the DNA helix that links the wallet to the brain.
I go to an Ivy Leuge, Leauge, League school and can add that I'm not sure "well educated" is as related to "smart" as we may have been trained.
That's just my $0.02 |
Barker
| | Posted on Wednesday, July 18, 2007 - 02:46 pm: |
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Naustin,
If you would make money on the spread of invest/finance. Why not go mortgage your house @ 110%(now a days these 110% loans are easy to get.) and go invest it.
Would you do that?
How bout take out a 2nd mortgage and invest that?
If not, why? |
Barker
| | Posted on Wednesday, July 18, 2007 - 02:52 pm: |
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Court,
I agree personal finance is about behavior, not math or smarts. We all pay a great deal of stupid tax in our life.
Some people get in really bad places in their life, because of stupid tax, debt, and things some cant control like huge medical bills. Debt is a slippery slope to attacking your marriage, family, home, friends, and the peace that you live with. So many people in the US are in debt and/or living paycheck to paycheck.
Image what your life would be like with out payments.
My Behavior: Live on less than you make, don't buy anything unless you have the cash to pay for it.
I warned yall, "Dont get me started"
(Message edited by barker on July 18, 2007) |
Court
| | Posted on Wednesday, July 18, 2007 - 04:08 pm: |
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>>>>If you would make money on the spread of invest/finance.
Careful . . . betting the daily spread between various currencies and derivatives around the world is what finances a lot of my habits. Yesterday, for clients like the Yale Endowment Fund and a host of private individuals, those tiny "portions of pennies" added up to a $50,000,0000 net (although I will hasten to add she didn't leave the office until 8:00 and rushed home for a 9:00PM EST conference call with Singapore and I had to cook!) profit for the very small (less than 40 employees) firm that my wife is with.
Bottom line is that, you can't generalize about finance. Personal finance is not a leverage game, but having and managing debt is a huge part (you are talking to a Father who's two sons graduated in the same year) of our personal lives.
It's a lot like anything else . . . it boils down a rudimentary responsibility. At some time in our lives we all, I submit, will have been heroes and idiots. I'm a bit unbalanced toward the idiot side. . . but, hey. |
Naustin
| | Posted on Wednesday, July 18, 2007 - 05:40 pm: |
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Barker,
It depends on so many things, I couldn't say. I wouldn't rule it out catagorically and would second what Court said. |
Jayvee
| | Posted on Wednesday, July 18, 2007 - 07:21 pm: |
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Wife and I just considering this same choice. Want to buy a new car, have the cash in savings ($18K.)
Car Dealer offers 0.0% financing for 3 years(!)
We have various CD accounts that pay around 5% interest.
Choices: 1. We can put the cash in a CD and earn 5% interest while borrowing the "free" money to buy the car. Then pay the 'balloon payment' at the end, and wind up with $2,900 in earned interest cash left over.
2. Or we could pay cash for the car, to not have this hanging over our heads for the next three years (and forego earning the $2,900)
My cousin got into to their "live with no debt" philosophy to the extent they would pre-pay their utility and other bills (by estimation.) I don't know if when they went to a restaurant they would pay the bill before they ate. Wouldn't surprise me.
(Message edited by jayvee on July 18, 2007) |
Court
| | Posted on Wednesday, July 18, 2007 - 07:36 pm: |
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Prudence and reason are the stars that lives are navigated by. . . loose sight and the ship wanders.
I recently did a similar thing. My tuition, each semester, is more than my entire college undergraduate education cost. There is a killer deal where I can divide it in 5 monthly installments with a simple $25 admin fee. I was all over that deal.
Again, all folks' decisions will reflect their personal philosophy, values and situation at the moment, I doubt there's a right or wrong.
My Grandfather, who at 87 decided to finally sell his groceries stores that grew out of his fruit and vegetable cart in Eudora, KS (at the munitions plant) for the sum of $873M. It was one of the largest in the country and he continued to buy used 2 year old Lincoln Town Cars. He and my Dad, also retired, share the same thinking . . . so I break down on the highway and have to wait an hour for a ride? . . what's the problem with that?
Of course, Dad was the one who jumped in my new "old" car with window cranks and asked "what the hell's this lever do?"
Another funny you'd enjoy . . . they throw a 87th b-day party for Lou as the first store he ever opened. The press is there, his buddy Sam Walton and the whole slew of folks . . comes time to cut the cake. . . he's nowhere to be found. Some goes looking for him and he's at a check out counter bagging groceries. He left me with TONS of stories! Had the walls of his workshop papered with worthless stock certificates from his "moments of misdirected genius". . .
Wealth is a mental condition unrelated to rich. Find your star, set a course and sail. |
Madduck
| | Posted on Wednesday, July 18, 2007 - 07:43 pm: |
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I had a different experience last year. Ear infection turned into something much nastier, one of those "drug resistant" bugs. The question became, how do you want to live the last few months of your life??
1) Pay off everything and give away your stuff to the most significant of your friends and relative so that your heirs have less to deal with on your passing.
2) Max out evry source of credit and experience everything possible with what little life remains.
I settled on assuming I would get better and made no real changes except the "health care" I received chewed up my salt flat racing budget. Planning for the future always assumes that there will be a future. The thought that it might not has changed me in ways I had not imagined. Spend a lot more time with nephews kids and making moms life better. Still hav e debt but I did get a new F150 with a five year 0% loan as a compromise. My mom really started to worry when she saw me paying off things, she really thought the end was near if I was making that kind of plans. Long term loans can be reassuring. |
Danger_dave
| | Posted on Wednesday, July 18, 2007 - 08:05 pm: |
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Actually - family aside - when I think about it - the only thing in my life bigger than my ego is my overdraft.
And yes - it's a substantial overdraft ;-P |
Ft_bstrd
| | Posted on Wednesday, July 18, 2007 - 08:48 pm: |
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Blanket statements regarding debt are virtually never correct.
Just like good ole Dave Ramsey.
"You should never have permanent insurance."
Really? Tell that to the children of the client with the $50M estate who used it to provide for the taxes on their estate at pennies on the dollar.
Care to factor how long it would take for you to buy the average price house?
Let's assume it's $100,000. Let's assume you could save $1,000 per month earning 8%.
8% after tax would be 6.4%. Let's assume that houses are growing in value at a rate of 4.5%. That would give you a net after-tax Rate of Return of 1.9%.
It would take 93 months.
Let's assume at the same time you were also paying rent of $500 per month (with no increase). You would have paid $46,500 in rent. The gross funds required to service the rent cost would be $58,125.
Let's assume that your home mortgage was for 6.5% and you used the same $1,000 in savings, you'd have the house paid off in 144 months (12 years). The interest paid would be $44,276. The after-tax costs would be $35,421.
Therefore your net cost of waiting on a house would be $22,704.
This goes for appreciating assets only. Bikes do not count (in the short run anyway).
The same leveraging is used for financing building, company growth, etc. Debt isn't bad, it's how it's used that causes problems.
I finance cars because my company reimburses me for mileage. Why would I want to plunk down 100% of the price in cash and remove the potential to use these assets elsewhere?
It's liquidity and use of capital not absolute right and wrong. |
Bmonty72
| | Posted on Wednesday, July 18, 2007 - 10:39 pm: |
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Hey Court, would that be the Sunflower Army Ammunitions Plant?? I was a firefighter that covered that area several years ago. That made some kind of rocket propellant there.
Living Debt Free would be an awesome achievement.
My wife and i used to play the credit card game. 0.0% rate for so many months on balance transfers...when the rate was up we would find another. Lots of work and headache. Now we are working towards removing our debt. LONG HaRD PROCESS!!! |
Road_thing
| | Posted on Thursday, July 19, 2007 - 09:15 am: |
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It's hard to beat 0% financing...
...unless there's a substantial discount for paying cash!
rt |
Rainman
| | Posted on Thursday, July 19, 2007 - 10:22 am: |
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Hi, I'm in debt up to my eyeballs. I've got a kid in college, a house, two cars and car payments (didn't have much choice, see the two kids in college)credit card bills (took me to 47 to realize I cannot handle credit cards) and work three jobs to make ends meet (MSF/Riders Edge, senior citizen tai chi).
My Blast, however, is paid for. In a three years everything but the college education and house will be paid for. Then I will buy a new Buell to keep the Blast company and be back in debt.
Life is just like that, I guess. |
Terribletim
| | Posted on Thursday, July 19, 2007 - 03:59 pm: |
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quote:Barker - Image what your life would be like with out payments.
I'd probably have a heart attack! 
My "extra" money gets funneled into this -->http://haywire-racing.8m.com<--
My wife & I own 3 Harley's & 1 Buell between us, all of them fully paid for. As for taking money out of our home equity and "
investing", I'm going with the theory that my bikes "invest" in my current sanity which helps me live longer. So i guess that's what we did. To each his own, right? Just don't tell me how "your own" is the "right way". If I want that, I'll chat with the Mormons that keep showing up. . . |
Barker
| | Posted on Thursday, July 19, 2007 - 04:27 pm: |
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Tim I never said borrow money against your house to invest. I was just asking all those people that think they can make a money off the spread. I get this all the time.
"I can barrow @ 3% to buy the bike and invest my cash and make 10%. So I make 7%"
Yes the math is right, but personal finances is not about math.
Then I ask why dont they get one of those 110%-125% loans on their home and go invest and make money off the difference. I have yet to get anyone to admit they would do that.
Yes I have toys too! Im not saying live in a cave and only come out on double coupon days. My bikes are great. I just dont like having alot of money in something that goes down in value like cars/bikes do.
(Message edited by barker on July 19, 2007) |
Barker
| | Posted on Thursday, July 19, 2007 - 04:47 pm: |
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My way is the right way. I believe in it. That is why I do it. I never said anybody had to do it.
I just hope your way serves you well long term. I just hope you all have peace in your life and finances.
Myth: Debt is a tool and should be used to help create prosperity.
Truth: Debt is not a tool; it is a method to make banks wealthy, not you.
Debt is dumb. Most normal people are just plain broke because they are in debt up to their eyeballs with no hope of help. If you're in debt then you're a slave, in the sense that you do not have the freedom to use your money to help change your family tree. According to a recent USA Today article about debt, 78 percent of baby boomers have mortgage debt, 59 percent have credit card debt, 56 percent have car payments.
It takes a lot of will, discipline, courage and help to slay the debt monster. But it can be done. Imagine how much you could put toward retirement if you just didn't have a stinking car payment? This is how the wealthy build their wealth. Debt is really dumb. Welcome to the real world!
(Message edited by barker on July 19, 2007) |
Rainman
| | Posted on Thursday, July 19, 2007 - 05:28 pm: |
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DEBT IS NOT A TOOL; IT IS A METHOD TO MAKE BANKS WEALTHY, NOT YOU.
Wish I'd met you in 1982. Probably wouldn't have listened anyway. I've been socially brainwashed until age of 47 when I got smart enough to realize I was in trouble. |
Barker
| | Posted on Thursday, July 19, 2007 - 05:48 pm: |
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Rainman,
I assumed I was doing the right thing too. My family congratulated my when I first went into debt. I thought it was normal or how it was done. I was so wrong. I was a big baby. Lets just say from age 19 to 21 I racked up $45,000 in debt. Now, I dont have any debt.
Normal=Broke
P.S. I was born 1982, I would have given bad advice at that time. I would have cried, moaned and pitched a fit, similar to how some grown-ups act when they NEED a new car/vacation/house/bike/TV/etc.
(Message edited by barker on July 19, 2007) |
Paint_shaker
| | Posted on Thursday, July 19, 2007 - 06:02 pm: |
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My 2 cents...
I save a little, I spend a little... I have a lot of fun!!!
As far as the topic of this thread "Stick it to the man", who is really getting the stick??
P.S. Speaking of sticking... I plan to stick a 2008 Firebolt in the stable.. Anyone interested in 1990 H-D FXSTS springer for sale?? |
Jayvee
| | Posted on Thursday, July 19, 2007 - 08:01 pm: |
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Hey Barker, did you ever see the movie "It's A Wonderful Life" ?
Just wondering... |
Barker
| | Posted on Thursday, July 19, 2007 - 08:09 pm: |
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yep, seen it. |
Gschuette
| | Posted on Thursday, July 19, 2007 - 10:23 pm: |
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Harley Credit is probably one the Forbes 50 smartest companies. I applied for a loan on a TT and they wanted at least 10% down (no problems there) and 21%! Holy crap. I turned it down. If I wasn't a finance major I would have a $20,000 Buell right now. Damn my common sense! |
Wile_ecoyote
| | Posted on Thursday, July 19, 2007 - 10:46 pm: |
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Man, I'm glad I'm not the man either!!! |
Oldog
| | Posted on Friday, July 20, 2007 - 09:17 am: |
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Wow some real diverse stuff here, Question FB, did you ever attend a Dave Ramsey course?
For me it was an education I needed.
In your examples you show a finnancial institution paying 8% on savings. Who are they? I would love to get a pass book savings account that paid 5% and not APY ( my modest savings made $4.50 interest last year)
I'm with Barker Borrowing money for some purchases is not a good idea.
I applied for a loan on a TT and they wanted at least 10% down (no problems there) and 21%! Holy crap. I turned it down. I also had a similar experience and untill the rates and product get better any future buells for my stable will be used and be C.O. } |
Terribletim
| | Posted on Friday, July 20, 2007 - 04:10 pm: |
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See, that's why you don't want to be "the man"! Every time someone says "You da' man!" tell them "I don't want to be 'The Man'! No one likes the man, most try to hide from 'The man'. I want to be 'The Dude' or 'The Guy'! Everyone loves 'The Dude' and they always know 'The Guy'. I want to be one of them, not 'The Man'."  |
Naustin
| | Posted on Friday, July 20, 2007 - 04:27 pm: |
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personal finances is not about math.
That is ridiculous.
If it isn't about math, what is it about then? Hope, prayer and bankruptcy??
Also, your example about taking a mortgage to then invest is unfair. Risking one's Home and using the proceeds of an inflated mortgage borrowing for investment purposes is fundamentally different, and borderline desperate compared to forgoing a cash transaction in favor of purchase money financing.
There is a huge personal debt crisis in this country, that is true. But, that isn't because debt itself is fundamentally bad. And, it isn't because credit card companies are evil or because its the government's fault. Its because people are financially ignorant, irresponsible, and feel that they are entitled to Satallite TV, Cellphones, $20,000 cars, flat screen TV's and all the other things they see in advertisements.
(Message edited by naustin on July 20, 2007) |
Barker
| | Posted on Friday, July 20, 2007 - 04:54 pm: |
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Finances is not 100% about math, it is about behavior and the peace your $ situation brings you.
If it was simply about math. You would go get that 125% loan and invest it.
You dont want to 125% loan on your home because of risk. Right?
Every time you go into debt you are increasing your risk.
Yeah, sure you want go bankrupt borrowing a little here and there. Thats what most people say that end up in bankruptcy or huge amount of debt.
Yes, some "banks" are bad, most are shut down, but there are alot of scumbag sub-prime lenders (HD credit is a big sub-prime lender). Or these debt CON-solidation companies are scum too. |
Ryker77
| | Posted on Saturday, July 21, 2007 - 09:44 am: |
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Myth: Debt is a tool and should be used to help create prosperity.
Truth: Debt is not a tool; it is a method to make banks wealthy, not you.
Soo true.
Also living within your paycheck is vital. Yes the BANK might say you can afford to make that payement on a 200k house. But you really should have bought a 100k house and paid more in payments.
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The more you you owe the bank - THE MORE YOU THROW AWAY.
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A 20k car or bike that is bank owned is not a 20k car. It's 20k PLUS interest. Then of course you Loose on the actuall value of the that item. Be it a car or a pair of sneakers.
Just think about the TOTAL cost before you toss out the credit card or sign that loan |
Danger_dave
| | Posted on Saturday, July 21, 2007 - 10:06 am: |
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'Oh, I knew one guy, he never went off his diet - he never drank, he never smoked, he never did anything wrong ... he was in perfect health - right up 'til the time he killed himself.' - Dangerfield, R. |
Mr_grumpy
| | Posted on Saturday, July 21, 2007 - 10:11 am: |
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Circumstances alter cases, sometimes debt is a useful tool for cost planning etc, other times , yes, it's just a dumb "live now pay later" trap.
I'm lucky I have no mortgage any more so I'm financially secure but I won't hesitate to go into debt if there's a bob or two to be made.
Example, my wifes workplace have internal share schemes & they'll sometimes let you put in lump sums, I know it's not going to pay less than 11% from past experience & this year kicked 22%! so I'll take a few grand off the bank at 5 or 6 & pocket the diff ta. |
Iamike
| | Posted on Saturday, July 21, 2007 - 12:39 pm: |
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Court- They still make cars with crank windows? I should get out more often.
Barker- +1 By not going into serious debt, I know I can buy things without worry. |
Jayvee
| | Posted on Monday, July 30, 2007 - 01:17 pm: |
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Well, this is close to beating an expired horse, but,
"personal finances is not about math."
"If it isn't about math, what is it about then? Hope, prayer and bankruptcy??"
That's about it. For example, say you want to make a budget to make sure you live within your means. Making the budget add up is math. But sticking to the budget, that's the harder part, you might have to add psychology, religion, philosophy, prayer, etc.
I'm taking it that way, anyway.
You guys talk about $100K house, ha ha, not here... We did get a 15 year loan at 4.75% at least. And just like Ft_bstrd said, it did take us about 7 years to save our 20% downpayment of $100K.
And I do know two couples who borrowed against their house to finance a down payment on another house, hoping it would appreciate and they would flip it at a profit. Wrong! They regret it now!
Both strenuously advised us to copy their strategy, too, but we're conservative with money. We have 0 credit card debt, by the way, and right now 0 car payment too. Also my previous math was wrong, I would only earn about half what I said before, I forgot the reverse compounding. But it looks like we'll just pay cash for a used one now anyway.
But IMHO neither Barker's "Myth" nor "Truth" are accurate, the stated myth is not a myth, and the stated truth isn't the truth. Yes, these statements are true for him, at his tender age, and his admitted prior monetary indiscretion. It's admirable he learned something from his experience, but the world is a very very big place.
My point about the movie "It's A Wonderful Life" is what is says about home ownership, the natural apiration for it, its benefits, and particularly that it can be achieved without making a bank rich. A credit union, for example, is real people pooling their money to enable those those who desire to, to buy a house. This is debt, not for the sake of creating prosperity, not make a bank rich, but to have a place of your own to live. And in the long run you save money. That's not a myth, it's Econ 101. The other way debt can be used to create prosperity, and not to make a bank rich, is the work done by the Grameen Bank, and it's ilk. If you are truly a Christian, you can't begrudge these poor people and tell them to "suck it up and save it up, debt it bad." If you are unfamiliar with their work, you owe it to yourself to see: http://www.grameenfoundation.org/what_we_do/
(Message edited by jayvee on July 30, 2007) |
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