How to live within your means (and be happy)...
#41
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
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
#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.
#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 World’s “consumers”. 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. I’ll 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 he’s 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. He’s 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 (that’s the second guy’s 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: I’m 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 son’s Masters at Plano from our own resources.
Your thread got me thinking as to why we don’t 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, you’re 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; I’m very scared about the medium and long term prospects of the Dollar and the US economy. It is a fact that you’ll 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
On a personal level, I think there are plenty of ways to get to where you are. I’ll 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 he’s 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. He’s 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 (that’s the second guy’s 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: I’m 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 son’s Masters at Plano from our own resources.
Your thread got me thinking as to why we don’t 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, you’re 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; I’m very scared about the medium and long term prospects of the Dollar and the US economy. It is a fact that you’ll 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
#44
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!
#45
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?
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?
#47
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.
#49
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?
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?
#51
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.
#52
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.
My plan of attack is student loans --> mortgage --> investments.
#53
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?
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?
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
#55
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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...
#56
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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.
#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.
#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.
#59
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 05:14 PM.
#60
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.
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.