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Old 12-17-2009, 10:27 AM   #41
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Another place to save. Since most here are DIYers on their cars, learn the other **** you can do to save money once you buy a house. Electrical, plumbing, drywall, improvements. Plenty of websites to do that.

It's pretty retarded if you can spend 5 weekends to learn about your car and install a turbo, then pay Joe the plumber $200 for a house call to fix a backed up toilet because your wife/girlfriend decided to flush 20 tampons down the toilet all at once.

Frank
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Old 12-17-2009, 10:52 AM   #42
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I was going to agree with Rob's post except for the mortgage and then I saw your post with which I agree %100. I just refied to 30 years at the same rate as you for the same reasons and I had about 13 left on my old mortgage. Couldn't give up the great investment opportunities with the market over this last year.
Again, my decision to pay off the house was not a financial one and it is where most people would argue with me. After all, 4.25% mortgage is hardly any money at all. BUT, there are a lot of people out there who think they can beat the market but end up broke with a large house payment. Personally, I kicked *** for many years and then lost a LOT. My thread title is "How to live within your means and be happy" (not "How to take risks and make a fortune"). Happiness comes from the security that my wife and I have living in a paid off house @ 40 years old. The market tumble that we just went through and the layoffs in the work force have a lot of 60 year olds with no job, a $600,000 mortgage and no hope. My wife and I will NEVER be in that situation. NEVER. No one can tell me with 100% certainty that the Dow won't be 3000 by the end of next year. However, I can tell you with 100% certainty that my wife and I will not be living on the street because our house got repo'd.
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Old 12-17-2009, 11:49 AM   #43
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Robert; I wanted to first congratulate you on a very useful thread for all the youngsters. One of the problems the US is facing as a country is the fact that you have become the Worldís ďconsumersĒ. Every other developed nation has reached that status through your market. I can cite Germany, Japan, Korea and more recently China as clear examples of that trend.

On a personal level, I think there are plenty of ways to get to where you are. Iíll cite you two examples of very close friends. One of these friends used to be a banker for many years. He has 3 kids and heís 53 years old. He spent more than 20 years living on 30% of his net income and today I would call him financially secure (I know for a fact his net worth is over US$3,000,000.00). The other friend is an engineer by trade and has 4 kids. Heís been married 5 times and all of his kids (now independent and adults) live in the States. He is very organized and has traveled around the world. Anyone would have assumed that this second friend would be in a worst financial position than the first one. That is not the case. Gabriel (thatís the second guyís name) owns 2 homes; one very close to Santo Domingo (the capital) in about 40 acres of land and a second home at the Punta Cana Beach & Golf Resort. No debt whatsoever.

On to my case: Iím 56, 3 kids, married for 31 years (the day before yesterday ) and also have no debt whatsoever. I own a translating business along with one of my sisters and my wife has her own business. Her business is completely debt free and she has been open for more than 13 years now. I own a penthouse (about to sell it for around US$450,000.00) totally debt free. My oldest kid is married and the other 2 are single. We're paying for our youngest sonís Masters at Plano from our own resources.

Your thread got me thinking as to why we donít carry any debt and end up with savings and why that is not the case in the States. I have to say that the answer is the cost of such debt. In Dominican Republic, the prime interest rate hovers around 20%. This just means that if you have some common sense, youíre not going to go into debt no matter what. I would consider the current moment in US history very dangerous for this generation given how low interest rates are. Such low interest rates only promote more irrational consumption and more financial debt.

Finally; Iím very scared about the medium and long term prospects of the Dollar and the US economy. It is a fact that youíll be facing high inflation in the not too distant future. I urge you to think about that when planning for your own future.

Sorry for the ramblings,

Rafa
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Old 12-17-2009, 12:15 PM   #44
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Yes, the cost of living in NJ is more than SC but you guys make a shitload more than we do too. If not, no one could afford those $800K houses or the crappy taxes you pay. Personally, I'd get out of that hell hole if I were you but that is just me.
i had a sneaky suspicion you might be from SC. My folks moved there abut 5 yrs ago.....they went from about $6k/yr (20+ yr old 3br home in Pennsylvania) in taxes to sub $1k/yr (brand new 4br home on a pond).

there is no doubt that salaries increase here.....imho they in no way match up to the increased cost of living.

in my parents example they could lose one persons salary, buy a nicer/newer home, and still be ahead. it's F'd up here. NJ is the worst. i'm outahere first chance i get!
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Old 12-17-2009, 01:57 PM   #45
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I do think that paying off your house early is a wise financial decision either way...and not just for Robert's reasons.

We consistently send in an extra $60 principal payment each month (and stay at least 3 months ahead). We don't do the "extra payment" crap, but a set principal payment that I calculated would pay off our loan in 19 years instead of 30, and save us $45K.

That is a lot of money to be saved, basically and entry level luxury car, or a nice sports car...and all it costs is one less night out each month for 19yrs. That's 228 dinners at Outback/Pappadeaux. Now tell me seriously...would you rather go out to eat every night for 8 months, or buy a new car (or better yet have an extra $45K to invest) at the end of that same time?
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Old 12-17-2009, 02:10 PM   #46
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Great advice here guys, really reinforces a point that I have been slowly learning.


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Although NJ costs a ton, it also provides you with many opportunities that other states may never see.
The People's Republic of New Jersey does that? LOL
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Old 12-17-2009, 02:54 PM   #47
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On cars, I also never buy new. If you get it at 5-7 yrs old it is 60 to 70% less money, and if you pick the right car, it'll last 10 more years with regular maintenance and still look/drive nice if you take good care of it. I hear morons constantly say "I wanna car with a warranty." Then they spend $20-30k more than they should for their needs. Why do you need a warranty when an engine or tranny is $600-800 and it costs $500-600 to get it installed in most "normal" cars. That is a lot less than $20-30k, but the truth is people are just looking for an excuse to buy new cars.
Or people drive alot for work, and appearances matter in their profession. Yes in an ideal world, someone would respect me driving my 91 miata as much as they respected me driving a new BMW, but thats not the case, first impressions matter.
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Old 12-17-2009, 02:56 PM   #48
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(long story)
I must say, reading this has made me feel like quite the profligate individual.
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Old 12-17-2009, 03:00 PM   #49
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Originally Posted by gospeed81 View Post
I do think that paying off your house early is a wise financial decision either way...and not just for Robert's reasons.

We consistently send in an extra $60 principal payment each month (and stay at least 3 months ahead). We don't do the "extra payment" crap, but a set principal payment that I calculated would pay off our loan in 19 years instead of 30, and save us $45K.

That is a lot of money to be saved, basically and entry level luxury car, or a nice sports car...and all it costs is one less night out each month for 19yrs. That's 228 dinners at Outback/Pappadeaux. Now tell me seriously...would you rather go out to eat every night for 8 months, or buy a new car (or better yet have an extra $45K to invest) at the end of that same time?
errr... mortgages are cheap. Id would rather invest my money in other places.
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Old 12-17-2009, 03:01 PM   #50
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I must say, reading this has made me feel like quite the profligate individual.
Yeah its embarrassing.
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Old 12-17-2009, 03:15 PM   #51
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errr... mortgages are cheap. Id would rather invest my money in other places.
How so?

I understand that car loans are cheap, student loans are cheap, and that mortgage isn't a "bad" debt...but it's still compound interest, with a weighted payment schedule, on a large principal.

Even with a "low" interest rate you still end up paying more than twice the actual purchase price of your house over a 30yr term. I don't consider that cheap in any way, shape or form.

There may be better places to put the money if you've got a lot of it. But for the average Joe sacrificing $60/month can save a LOT of money.
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Old 12-17-2009, 03:23 PM   #52
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And even with rates so low right now (just locked in at 5.25%), it's hard to beat that by much in any reasonably safe investment. Even if you can get 10%, the fees and taxes often knock the effective rate down a bit. And, if you have less than 20% equity, you are probably paying PMI, another reason to chip away at the mortgage first.

My plan of attack is student loans --> mortgage --> investments.
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Old 12-17-2009, 03:42 PM   #53
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Originally Posted by gospeed81 View Post
I do think that paying off your house early is a wise financial decision either way...and not just for Robert's reasons.

We consistently send in an extra $60 principal payment each month (and stay at least 3 months ahead). We don't do the "extra payment" crap, but a set principal payment that I calculated would pay off our loan in 19 years instead of 30, and save us $45K.

That is a lot of money to be saved, basically and entry level luxury car, or a nice sports car...and all it costs is one less night out each month for 19yrs. That's 228 dinners at Outback/Pappadeaux. Now tell me seriously...would you rather go out to eat every night for 8 months, or buy a new car (or better yet have an extra $45K to invest) at the end of that same time?
You lose your marginal tax rate deduction on that $45k, plus you don't take into account any investment from the $60 each month.

But I've strayed too far. Rob's intent was living within your means and my posts are with regard to putting my money where it serves me best in the future.

I'd guess most of the young guys this thread applies to don't have mortgages anyway.

Frank
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Old 12-17-2009, 03:53 PM   #54
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I read this. I'm 18.

Moral of the story is don't spend money you don't have. And if neccesary, slang some cane to make ends meet.
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Old 12-17-2009, 04:39 PM   #55
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I read this. I'm 18.

Moral of the story is don't spend money you don't have. And if neccesary, slang some cane to make ends meet.
I've been working at the same place for 20 years (started there when I was 22). The NUMBER ONE regret that all the old guys who had already been working here for 10+ years (when they first opened) is that they didn't invest like they should have. I can remember when we first got some retirement investment options (was in '89) that most people did not contribute. Do yourself a favor. Whatever it takes, stick 10% of your $$$ in the S&P. You WILL be working a long time, you WILL get old, you WILL be a millionaire if you follow that simple rule - OR you can just go buy a nice set of rims and live for today.

35 years from now when your friends are working at Walmart to pay the bills you will be driving your Ferrari. Don't screw up...
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Old 12-17-2009, 04:57 PM   #56
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You lose your marginal tax rate deduction on that $45k, plus you don't take into account any investment from the $60 each month.
I never got to take a dime of tax deduction for my interest. My income and interest payments just were not high enough to not go with the standard deduction. The whole "pay the bank Thousands so you don't have to pay the IRS Hundreds" never worked for me. I can tell you that the day I paid off my house in 2007 (with that 401K loan) I saved about $35,000 in interest.

For the record, the S&P was $1418 on 1/1/07 (around the time I took out the loan) and it is $1099 right now. I never figured out the actual amount but I made money by selling my S&P when it was high and buying it back over the next 2 years (paying myself 8% interest on the balance). The only 100% guaranteed investment that I have ever had was paying off my house loan and not giving the bank 5.75%.

If anyone does have a guaranteed investment that they would like to share with us then please feel free to do so. In fact, I'll give you a finders fee of $10,000 in cash right now if you can guarantee me a modest 10% yearly return on an investment. Of course, you'll have to put up some heavy duty collateral in the event the investment doesn't work out and I lose money. The only person I have ever seen that won every time in the market was Bernie Madoff.
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Old 12-17-2009, 05:43 PM   #57
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I call bullshit on the tax writeoff on the mortgage interest also. That was a ploy marketed by the National Association of Realtors for years to keep people buying houses. If you repeat a lie long enough someone will believe it. Using Robert's example of $35,000 in interest he saved over the life of the loan, would it have been better for him to have paid that $35,000 and gotten a $11,000 tax break for a net loss of $24,000? Of course not. It is a ploy to sell homes and mortgages and to encourage borrowing. Nothing more.
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Old 12-17-2009, 05:56 PM   #58
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I call bullshit on the tax writeoff on the mortgage interest also. That was a ploy marketed by the National Association of Realtors for years to keep people buying houses. If you repeat a lie long enough someone will believe it. Using Robert's example of $35,000 in interest he saved over the life of the loan, would it have been better for him to have paid that $35,000 and gotten a $11,000 tax break for a net loss of $24,000? Of course not. It is a ploy to sell homes and mortgages and to encourage borrowing. Nothing more.
As I said, I never could have taken that tax write-off anyway. Well, I could have but I would have lost money because the standard deduction is more. Ploy indeed! <G>
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Old 12-17-2009, 05:57 PM   #59
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Originally Posted by rmcelwee View Post
If anyone does have a guaranteed investment that they would like to share with us then please feel free to do so. In fact, I'll give you a finders fee of $10,000 in cash right now if you can guarantee me a modest 10% yearly return on an investment. Of course, you'll have to put up some heavy duty collateral in the event the investment doesn't work out and I lose money. The only person I have ever seen that won every time in the market was Bernie Madoff.


If you think that's a fluke:



Let me know when you can send the money.

Last edited by Nagase; 12-17-2009 at 06:14 PM.
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Old 12-17-2009, 06:42 PM   #60
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The reason that I am paying off the house early is peace of mind. The fact that I could lose my job, quit my job, wife could lose or quit her job and the world will go on without interruption is why I am doing it.

Also, the comment above about needing to make 10% to cover costs and taxes is right about on. So, I'm taking my guaranteed savings and going forward.
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