OT debt/money management

[CoryC]

haha dave ramsey has people on his show that have done what he calls a "debt snowball" i take it that seth was in some debt, started working hard and paying cash to get off of financing everything. it's a good model, dave ramsey is a good financial motivator but dear god dont listen to him when he talks about mutual funds and other investment advice.

 

[Spongie]

Good for you man!

Thanks man!

Debt free scream?

Like Cory said, if you pay off all of your debt (with the exception of your mortgage) then you can go on his show and yell "We're debt free!" Sounds kinda cheesy when I type it out, but I can't tell you how much less stressful life has been since we started doing it.

haha dave ramsey has people on his show that have done what he calls a "debt snowball" i take it that seth was in some debt, started working hard and paying cash to get off of financing everything. it's a good model, dave ramsey is a good financial motivator but dear god dont listen to him when he talks about mutual funds and other investment advice.

He has worked great for our family and most mutual funds are starting to make a comeback and have always been fairly "safe" choices for a long term strategy. That said if you have the kinda cash to really play the market then you probably aren't listening to him worrying about debt. If you are, then you have totally put the cart before the horse, as debt costs much more than any short term market plays will ever earn.

 

[Gladfelter]

Inbox cleaned out. Also the blue and red hornets are down to one polyp also. I tried to frag the reds but due to the placement of the polyps I lost one and massacred one of the other soooo back to one polyp growing back out (sorry doing these with my dremel is tough). Hopefully I will be getting the club saw (still needs a replacement part to get it up and running) back from Rob this week when I go to Nashville to do our debt free scream on the Dave Ramsey show! I have some extra blues personally though if someone can't wait on a blue hornet to grow out.

Wow congrats! Me and the wife wanna do that. Already knocked out 33k in student loans

 

[k2parkstar]

Wow congrats! Me and the wife wanna do that. Already knocked out 33k in student loans

Nice!

Congrats Seth. Maybe we can have an off topic discussion at the next meeting

 

[Engloid]

He has worked great for our family and most mutual funds are starting to make a comeback and have always been fairly "safe" choices for a long term strategy. That said if you have the kinda cash to really play the market then you probably aren't listening to him worrying about debt. If you are, then you have totally put the cart before the horse, as debt costs much more than any short term market plays will ever earn.

TO CONTRIBUTE TO THE HIJACKING OF THIS THREAD.......First off, congrats on being better money manager than probably 95% of the country. Some reason I can't use Enter to start a new paragraph... anyway, I'm a Dave Ramsey fan...good guy and he's helped a lot of people. However, I do disagree with some of his teachings. For one, his approach to the debt snowball is backwards. Paying off highest interest loans first is cheaper than paying off smallest loans first. Secondly...I don't agree much with his concept of paying off your house as soon as possible. If I can borrow money at 2.85% (yeah, I have a house at that rate), and invest the money at 12%, I'm making over 9% gains. In other words, if I can service (pay) a loan off and have 9% left over, I'll borrow all I can get. I've actually got one investment that makes me OVER 20% return on investment each year. If you all like talking investing and stuff, and somebody can break some posts off into another thread, it may be a good topic.

 

[Gladfelter]

TO CONTRIBUTE TO THE HIJACKING OF THIS THREAD.......First off, congrats on being better money manager than probably 95% of the country. Some reason I can't use Enter to start a new paragraph... anyway, I'm a Dave Ramsey fan...good guy and he's helped a lot of people. However, I do disagree with some of his teachings. For one, his approach to the debt snowball is backwards. Paying off highest interest loans first is cheaper than paying off smallest loans first. Secondly...I don't agree much with his concept of paying off your house as soon as possible. If I can borrow money at 2.85% (yeah, I have a house at that rate), and invest the money at 12%, I'm making over 9% gains. In other words, if I can service (pay) a loan off and have 9% left over, I'll borrow all I can get. I've actually got one investment that makes me OVER 20% return on investment each year. If you all like talking investing and stuff, and somebody can break some posts off into another thread, it may be a good topic.

His concept is let your income be your wealth. If you have no debt and your bills are utilities, phone, cable, the rest of your paycheck goes to investments and such. Live poor now so you can live rich later. To quote "Live like no one else, so that you can live like no one else"

 

[NanoPoseidon]

His concept is let your income be your wealth. If you have no debt and your bills are utilities, phone, cable, the rest of your paycheck goes to investments and such. Live poor now so you can live rich later. To quote "Live like no one else, so that you can live like no one else"

And to go deeper in the weeds... The bigger picture is not about the most strategic and logical way to "handle" your money.... The debt snowball is more about setting yourself up to be successful and if it costs you a few extra dollars, then so be it! Its not a race against others, its a race against your habits and actually being able to change them! Great job Seth! I commend you and yours!

 

[CoryC]

i just hate working my face off to make some other guy wealthy, going deep in debt just to have the possibility of getting a decent job, when people my age in germany and other european countries you basicically go to college for free, and when you get out and start working pay a small tax to send the next generation to school. what a perfect idea! but i'm sure it's somewhat socialist and no one wants that. if if you look at how far income has risen at the top, and in the middle class it's barely moved in like 40 years, and will likely barely move by the time i retire, you're just born to fail. i've been reading lots of psychological/sociological studies about wealth and perceived wealth and it's just downright disturbing and ruthless behavior. i'll try to find a link to the video of that study, it's very interesting stuff. sorry for the rambling post. talk of this abstract idea called money fires me up!

 

[k2parkstar]

Move this discussion to a new thread

 

[Gladfelter]

i just hate working my face off to make some other guy wealthy, going deep in debt just to have the possibility of getting a decent job, when people my age in germany and other european countries you basicically go to college for free, and when you get out and start working pay a small tax to send the next generation to school. what a perfect idea! but i'm sure it's somewhat socialist and no one wants that. if if you look at how far income has risen at the top, and in the middle class it's barely moved in like 40 years, and will likely barely move by the time i retire, you're just born to fail. i've been reading lots of psychological/sociological studies about wealth and perceived wealth and it's just downright disturbing and ruthless behavior. i'll try to find a link to the video of that study, it's very interesting stuff. sorry for the rambling post. talk of this abstract idea called money fires me up!

Easy tiger LOL. We have found Cory's hot topic

 

[Spongie]

Wow congrats! Me and the wife wanna do that. Already knocked out 33k in student loans

WOW! That is outstanding!

 

[Engloid]

His concept is let your income be your wealth. If you have no debt and your bills are utilities, phone, cable, the rest of your paycheck goes to investments and such. Live poor now so you can live rich later. To quote "Live like no one else, so that you can live like no one else"

The problem is its although its better than what most people do its far from the best way. In other words a poor guy goes in debt. The rich LEVERAGE debt. ....meaning they use debt to create profit. If I can borrow at 3 percent and earn 12 percent on it I will borrow all they will loan me because my investment services the debt and gives me 9 percent profit....and thats basically like me making interest off somebody else's money. Notice how I didnt even mention saving or paying anything out of my working income? In other words I can be making 9 percent off the banks money they lent me AND the same 12 percent Dave says you will get by investing in mutual funds.

 

[Engloid]

i just hate working my face off to make some other guy wealthy, going deep in debt just to have the possibility of getting a decent job, when people my age in germany and other european countries you basicically go to college for free, and when you get out and start working pay a small tax to send the next generation to school. what a perfect idea! but i'm sure it's somewhat socialist and no one wants that. if if you look at how far income has risen at the top, and in the middle class it's barely moved in like 40 years, and will likely barely move by the time i retire, you're just born to fail. i've been reading lots of psychological/sociological studies about wealth and perceived wealth and it's just downright disturbing and ruthless behavior. i'll try to find a link to the video of that study, it's very interesting stuff. sorry for the rambling post. talk of this abstract idea called money fires me up!

Here's the problem with our govt paying for college...and it's the problem we're experiencing now.... When the govt becomes the primary payer of any product, the price skyrockets. The govt has "helped" so many people get college education that it's not worth what it used to be. We have more college graduates working waiting tables than ever before. We also have student debt that's greater than ever. We pay more than ever for education and it's worth less than ever. Our govt needs to get out of paying for college. In order to get the value of college education to increase, demand must increase, relative to supply. Right now, supply is greater than demand, partially due to it being "easier than ever" to get college loans and grants. Lets say the govt suddenly decides they will pay $10,000 more towards everybody's college, effective January. How long do you think it will be till schools begin charging $10,000 more?

 

[Engloid]

Think back about when the govt was giving $50 vouchers towards the digital tv converters... The cheapest converters were $50. A cheap dvd player was ony $20. As soon as the vouchers expired and the market controlled the price on its own funds, the cheapest converters dropped to $20. When the govt becomes the primary purchaser of any product, the price goes up and the value goes down.

 

[Engloid]

Now...here's an example of how you can make much more money investing now than paying off all your debt first: You can buy smaller homes for about $40k, that are in rentable condition. The payment on that loan would be roughly $250/month. You may say, "But if I put that $250 towards my bills and pay them off earlier...." Here's the key...you BORROW the huge majority of the money so YOUR money still is paying off your debt. You rent the house at $700, and profit $450 a month. Lets say your downpayment and "upfront" costs were $5000. It takes you about one year to get ALL that money back. That's a 100% return on investment!! From that point, you have an EXTRA $450 a month to pay on your bills. You also are gaining (avg) 4% on the property value and have NOTHING invested in it anymore. So after the first year, you are making what ROI? Well, with nothing invested in it anymore, how do you want to calculate it. On the other hand, if you took that $5000 and paid it on a bill...lets say that bill was at 20% interest. You would save $1000 in interest in that first year, less in the second, and so on. Compare that to getting all your $500 investment back in the first year and making $5400 a year the second, plus increases in property value. How much faster could you pay off your house if you had an additional $5400 every year to pay on it? Myself, I choose not to because the money I don't pay to the bank on a low interest loan, I can invest somewhere that I make a higher return on investment.

 

[NanoPoseidon]

Now...here's an example of how you can make much more money investing now than paying off all your debt first: You can buy smaller homes for about $40k, that are in rentable condition. The payment on that loan would be roughly $250/month. You may say, "But if I put that $250 towards my bills and pay them off earlier...." Here's the key...you BORROW the huge majority of the money so YOUR money still is paying off your debt. You rent the house at $700, and profit $450 a month. Lets say your downpayment and "upfront" costs were $5000. It takes you about one year to get ALL that money back. That's a 100% return on investment!! From that point, you have an EXTRA $450 a month to pay on your bills. You also are gaining (avg) 4% on the property value and have NOTHING invested in it anymore. So after the first year, you are making what ROI? Well, with nothing invested in it anymore, how do you want to calculate it. On the other hand, if you took that $5000 and paid it on a bill...lets say that bill was at 20% interest. You would save $1000 in interest in that first year, less in the second, and so on. Compare that to getting all your $500 investment back in the first year and making $5400 a year the second, plus increases in property value. How much faster could you pay off your house if you had an additional $5400 every year to pay on it? Myself, I choose not to because the money I don't pay to the bank on a low interest loan, I can invest somewhere that I make a higher return on investment.

Those are some mighty fine #'s.... And I would agree with you in principal. But nothing is guaranteed and full proof. The only thing I would caution about is risk. It has to be a factor in your decision making. Borrowing money most always takes collateral which coincides with risk. You buy 3 houses @ 40k a piece and you are in the hole for $120k. For whatever reason, 2 of your houses aren't renting or they become delapidated, etc. (Maybe something happens that falls through the cracks on your insurance, who knows) Now your stuck with 120k in debt and only 1 rental property to cover it. Of course, the chances of it going that awry is low, but so is the chances that everything goes perfect. A lot of the Ramsey priciples are more about peace of mind and true freedom from money issues. Its not only about "living like no other", its more about "giving like no other." Which is a true blessing!

 

[Engloid]

Those are some mighty fine #'s.... And I would agree with you in principal. But nothing is guaranteed and full proof. The only thing I would caution about is risk. It has to be a factor in your decision making. Borrowing money most always takes collateral which coincides with risk. You buy 3 houses @ 40k a piece and you are in the hole for $120k. For whatever reason, 2 of your houses aren't renting or they become delapidated, etc. (Maybe something happens that falls through the cracks on your insurance, who knows) Now your stuck with 120k in debt and only 1 rental property to cover it. Of course, the chances of it going that awry is low, but so is the chances that everything goes perfect. A lot of the Ramsey priciples are more about peace of mind and true freedom from money issues. Its not only about "living like no other", its more about "giving like no other." Which is a true blessing!

One factor of risk is knowledge. By learning the market and property values, you can greatly reduce risk. For example...I have a property I bought less than a year ago. Most insurance companies wanted to insure it for replacment cost, which would increase insurance cost and reduce profits. One agent asked what i would do if I didn't insure for replacement cost, and something happened. I told her that I was insuring my money I invested, not a property. If it burned to the ground, it was insured for more than the purchase cost. I would pocket a profit and sell the land for a couple thousand dollars.

Even mutual funds have risk. I do invest some in the stock market, but I prefer investments that *I* have more control over than leaving it up to big market makers and corporations. I don't see that I have any more risk in real estate than I do in the stock market. People are fearful of rental property because people fear what they don't know. I had a renter recently move out after 4 months. It cost me about $500 to put the place back in condition to attract a new renter. Still yet, in that time, I made a profit andproperty value increased.

As an example on the stock market....One of my favorite stocks is Rite Aid. I've made a total of about $16% in about 4 months. Not bad for stocks. ...but I can do better in rentals. I see a lot more ups and downs in my stocks than in property value. Personally, I think the sotck market is just as risky as real estate, if not more.. it's just that you can't start in real estate with an automatic payment from your paycheck (like a 401k), or with a couple hundred bucks in an online account.

 

[NanoPoseidon]

One factor of risk is knowledge. By learning the market and property values, you can greatly reduce risk. For example...I have a property I bought less than a year ago. Most insurance companies wanted to insure it for replacment cost, which would increase insurance cost and reduce profits. One agent asked what i would do if I didn't insure for replacement cost, and something happened. I told her that I was insuring my money I invested, not a property. If it burned to the ground, it was insured for more than the purchase cost. I would pocket a profit and sell the land for a couple thousand dollars.

Even mutual funds have risk. I do invest some in the stock market, but I prefer investments that *I* have more control over than leaving it up to big market makers and corporations. I don't see that I have any more risk in real estate than I do in the stock market. People are fearful of rental property because people fear what they don't know. I had a renter recently move out after 4 months. It cost me about $500 to put the place back in condition to attract a new renter. Still yet, in that time, I made a profit andproperty value increased.

As an example on the stock market....One of my favorite stocks is Rite Aid. I've made a total of about $16% in about 4 months. Not bad for stocks. ...but I can do better in rentals. I see a lot more ups and downs in my stocks than in property value. Personally, I think the sotck market is just as risky as real estate, if not more.. it's just that you can't start in real estate with an automatic payment from your paycheck (like a 401k), or with a couple hundred bucks in an online account.

Agreed!

 

[Esage]

Now...here's an example of how you can make much more money investing now than paying off all your debt first: You can buy smaller homes for about $40k, that are in rentable condition. The payment on that loan would be roughly $250/month. You may say, "But if I put that $250 towards my bills and pay them off earlier...." Here's the key...you BORROW the huge majority of the money so YOUR money still is paying off your debt. You rent the house at $700, and profit $450 a month. Lets say your downpayment and "upfront" costs were $5000. It takes you about one year to get ALL that money back. That's a 100% return on investment!! From that point, you have an EXTRA $450 a month to pay on your bills. You also are gaining (avg) 4% on the property value and have NOTHING invested in it anymore. So after the first year, you are making what ROI? Well, with nothing invested in it anymore, how do you want to calculate it. On the other hand, if you took that $5000 and paid it on a bill...lets say that bill was at 20% interest. You would save $1000 in interest in that first year, less in the second, and so on. Compare that to getting all your $500 investment back in the first year and making $5400 a year the second, plus increases in property value. How much faster could you pay off your house if you had an additional $5400 every year to pay on it? Myself, I choose not to because the money I don't pay to the bank on a low interest loan, I can invest somewhere that I make a higher return on investment.

In theory this is correct and looks good on paper. I'm currently doing this and it hasn't worked out like I thought. You need to factor in taxes, repair/maintenance, insurance, vacancy, and renter not paying rent. I ended up breaking even last year and should actually make a small profit this year, but the small profit is not worth the stress, for me. That's why I'm considering selling.

 

[CoryC]

It's not the "gov't" paying for your college, it's everyone. everyone who goes to college pays a tax when they get a job, that tax pays for the next generation's education. it's not like a student loan that accrues interest. it keeps the rates down, it's worked for generations in germany. they have one of the best education systems, and economies in the world. do you realize how many professional, well paying jobs here go unfilled, or we have to bring in people from other countries for because the people here aren't educated enough to do them? you increase the value of an education by increasing what you get from it and put back into the economy. instead of someone paying off a $50k plus loan for decades, at like $50-$200 a month, they pay like $23 a month once they get out and get employed, and are able to put that money back into the economy. Most of the rest of the developed world receives a better education than we do, and those people come here to fill the jobs we cant. Yet their education costs are much less expensive than ours. We're never going to be able to compete on the global scale if we don't do something with our education system. I'm not deeply in debt because of it, but i didn't get to finish because i couldnt afford it.