NationStates Jolt Archive

One of my favorite topics is investing and personal finance. Everyone should have their own personal financial plan. Every married couple should also have their own plan. Without a plan you are more likely to drift with the short term economic forces.

What are your personal financial plans? Does anybody else here have plans that are perhaps not the norm for someone your age?

My wife and I are in our low 30s. We primarily invest in stock mutual funds in our retirement accounts. We try to contribute at least an eighth of our gross income to our retirement accounts. We participate in an investment club with contributions of about $4 a day. If there is anything left over we either make prepayments on our mortgage or pay for home improvements.

It is probably silly to payoff mortgages so early in our lives but I insist on it for no good reason. I have ok reasons for this but nothing spectacular. It makes me feel kinda naughty to "break the rules" and invest conservatively for a portion of our assets instead of being 100% in riskier investments. It is also fun to collect mortgage prepayment receipts.

So feel free to reveal your own naughty little personal finance moves. It will make the conversation more interesting.

i give her money and she spends it, then she spends more money and i have to work harder to pay it off - dad

i give her money and she spends it, then she spends more money and i have to work harder to pay it off - dad

That does not sound like a plan. That sounds more like a problem that needs a plan to solve. What does the "-dad" refer to?

That does not sound like a plan. That sounds more like a problem that needs a plan to solve. What does the "-dad" refer to?

my dad

I'm a student, so I personally plan to be in as much debt as is necessary to be crapped out the British higher education system with as good a degree as I can get. That way, I'm well equipped to get a good job that doesn't exist.

my dad

So you are saying that your plan is to get money from your dad? Ok. What do you intend to do with that money and why?

I'm a student, so I personally plan to be in as much debt as is necessary to be crapped out the British higher education system with as good a degree as I can get. That way, I'm well equipped to get a good job that doesn't exist.

And when you get that job that hopefully will exist, what do you plan on doing with your money?

One of my favorite topics is investing and personal finance.

Thankyou.

I actually feel better about my obsession with eclectic German experimental music, now.

my dad

thats hardly a good way to work things, but that is a whole 'nother thread.

I'm currently in massive debt, well not really. But it is substantial, so no investing or anything like that until I pay off my student loans. My financial plan consists of being really cheap... thats about it.

I've always been really good at getting/staying out of debt, keeping up to date with my bills, and never maxing out any of my accounts, but I have always totally sucked at planning for a financial future. I am always far more interested in doing things than in doing things for/about money. Money bores the shit out of me. I know that's not wise of me, but after decades of effort, I have not yet succeeded in changing my thinking.

Anyway, now, nearing middle age, I am taking another stab at doing something, which will be satisfying in the attempt, infinitely more satisfying if it is successful in its outcome, and have a slightly more shiney sheen to that satisfaction if it also happens to yield enough money for me to invest in something someday, or buy something someday, like a house...or something...

Or maybe I'll just plow any money back into more projects that interest me.

And when you get that job that hopefully will exist, what do you plan on doing with your money?
Saving. I'm thrifty enough to avoid the mountains of debt that other students seem to get into, although that's not saying much, given that I know someone who bought a car with a student loan. How I do it probably depends on what job I get and whether there is a pension scheme, although I intend to avoid shares as much as possible. I've seen my parents lose quite a bit through the banking collapse.

Having a mortgage will complicate things, but I'd like to think I'd pay the damned thing off ASAP.

Thankyou.

I actually feel better about my obsession with eclectic German experimental music, now.
/Win. :D

thats hardly a good way to work things, but that is a whole 'nother thread.

I'm currently in massive debt, well not really. But it is substantial, so no investing or anything like that until I pay off my student loans. My financial plan consists of being really cheap... thats about it.

So why do you want to payoff your student loans before investing some different way? I respect your plans to be cheap. If you can be cheap when you can afford not to be, you will build wealth if you invest the difference in a way that beats inflation after taxes.

What is the opportunity cost of not paying off your student loans and doing something else with your money?

keeping up to date with my bills
I discovered that my housemate, who is responsible for paying the bills (he wants to build up his credit rating-ha!) leaves it until a letter comes through from a debt collection agency. This is not good.

I discovered that my housemate, who is responsible for paying the bills (he wants to build up his credit rating-ha!) leaves it until a letter comes through from a debt collection agency. This is not good.
Wow. Yeah, uh, not good for everyone in that house, and not good for his credit rating, either. Um...gosh...so, he's not a financial genius then, eh?

I've always been really good at getting/staying out of debt, keeping up to date with my bills, and never maxing out any of my accounts, but I have always totally sucked at planning for a financial future. I am always far more interested in doing things than in doing things for/about money. Money bores the shit out of me. I know that's not wise of me, but after decades of effort, I have not yet succeeded in changing my thinking.

Anyway, now, nearing middle age, I am taking another stab at doing something, which will be satisfying in the attempt, infinitely more satisfying if it is successful in its outcome, and have a slightly more shiney sheen to that satisfaction if it also happens to yield enough money for me to invest in something someday, or buy something someday, like a house...or something...

Or maybe I'll just plow any money back into more projects that interest me.

It sounds like you need to identify one or more goals to save for. Everybody who is not dying of some disease has to prepare for retirement. Also you could save for a downpayment on a house or rental property. You could set a goal of replacing your present salary through passive investing over 20 years. It is up to you. We could even talk about your goals and how to save for them here to help get you started.

Thankyou.

I actually feel better about my obsession with eclectic German experimental music, now.

I admit it that I am a geek. I just hope that my geekiness makes me rich.

Everybody who is not dying of some disease has to prepare for retirement.

Most people that live in economic reality had to face the realisation, long ago, that 'retirement' is something that happened in previous generations.

Saving. I'm thrifty enough to avoid the mountains of debt that other students seem to get into, although that's not saying much, given that I know someone who bought a car with a student loan. How I do it probably depends on what job I get and whether there is a pension scheme, although I intend to avoid shares as much as possible. I've seen my parents lose quite a bit through the banking collapse.

Having a mortgage will complicate things, but I'd like to think I'd pay the damned thing off ASAP.

You sound like a conservative investor. Conservative investing is better than no investing. I encourage you to try to accept greater risk for a portion of your assets espescially while you are still young.

Most people that live in economic reality had to face the realisation, long ago, that 'retirement' is something that happened in previous generations.

It can be done. Nobody else is going to take care of you. I really doubt the truth of your view. Our parents and grandparents did not have all of the tax friendly retirement fund options that we have. Sure they had those options but not for their entirely lives. I think that tax deferred savings plans started in the 1970s. Of course, pension plans were more common in the past but I do not think that this is a huge problem for young people who start early and take their retirement investing seriously.

I admit it that I am a geek. I just hope that my geekiness makes me rich.

How could it not? If you ever actually get a date, just explain to her the intoxicating worlds of non-interest-bearing-accounts and triple net leases, and then slip out when she falls face-first into the lobster.

You'll never have to pay for a meal!

It can be done. Nobody else is going to take care of you.

Which is why most Americans will be working until they drop.

It sounds like you need to identify one or more goals to save for. Everybody who is not dying of some disease has to prepare for retirement. Also you could save for a downpayment on a house or rental property. You could set a goal of replacing your present salary through passive investing over 20 years. It is up to you. We could even talk about your goals and how to save for them here to help get you started.

What about the goal of being happy now?

Financial planning is all very well - and I do it pretty well myself - but it is just a means to an end, not an end in itself. What you have to ask yourself is what end is it the means to in your case? If it is to be free of worries about how you will pay the bills when you retire, then fine - go ahead and build up a decent savings plan - if however you couldn't care less about that, and are much more interested in extending you current collection of eclectic German experimental music - then a savings plan is not for you.

You can set the type of goals you identify in your post, but there is nothing inherently good about them - they are goals that YOU happen to approve of, not necessarily goals that Muravyets or I may have any interest in.

How could it not? If you ever actually get a date, just explain to her the intoxicating worlds of non-interest-bearing-accounts and triple net leases, and then slip out when she falls face-first into the lobster.

You'll never have to pay for a meal!

I am too cheap to have a date that involves lobster dinners. Any lady in my life has to accept cheap chinese take out (woah I just realized tonight's dinner plans) as a romantic dinner.

I am too cheap to have a date that involves lobster dinners.

She's going to pay, anyway.

When she wakes up.

Which is why most Americans will be working until they drop.

Unfortunately, yes. The wierd thing is that they do not realize it. A lot of Americans who have saved little or nothing are very confident that they will have a comfortable retirement. It is really wierd and scary.

What about the goal of being happy now?

Financial planning is all very well - and I do it pretty well myself - but it is just a means to an end, not an end in itself. What you have to ask yourself is what end is it the means to in your case? If it is to be free of worries about how you will pay the bills when you retire, then fine - go ahead and build up a decent savings plan - if however you couldn't care less about that, and are much more interested in extending you current collection of eclectic German experimental music - then a savings plan is not for you.

You can set the type of goals you identify in your post, but there is nothing inherently good about them - they are goals that YOU happen to approve of, not necessarily goals that Muravyets or I may have any interest in.

There is nothing wrong with buying music. I am not here to say that someone has good or bad goals. Do you want to talk about your plan? I will say though that we all cannot live in a fairy tale world where we think that long term goals like retirement will magically take care of themselves. If someon's goal is to be a pauper in their dotage that is a goal that can be achieved by being a spendthrift.

Financial planning is absolutely a means to an end. I think that people should be happy and enjoy life with their money. They also must save for the future if they do not want to be beggars when they are older and unable to work.

Retirement really is not optional. There will come a day when we are too old to work. A lot of other stuff is optional though. I would rather not say whose goals are better but I would love to discuss the planning that gose into reaching those goals.

Unfortunately, yes. The wierd thing is that they do not realize it. A lot of Americans who have saved little or nothing are very confident that they will have a comfortable retirement. It is really wierd and scary.

It's not weird - the pool of Americans that are going to make enough money OVER their costs of living has been dropping for decades, which is why the government has been so furiously trying to unload the responsibility for offering returns on that investment.

What is the opportunity cost of not paying off your student loans and doing something else with your money?

Unless he's exceptionally good at investing his money, he's unlikely to get a rate of return anything rivalling the interest payment he's probably paying on those loans.

Do you know what is the interest rate on those loans? Are there tax deductions on those loans? It might make more sense to invest them money. That being said, I am the first to admit that I payoff my mortgage debt with some of my savings when I should probably invest the money differently.

It's not weird - the pool of Americans that are going to make enough money OVER their costs of living has been dropping for decades, which is why the government has been so furiously trying to unload the responsibility for offering returns on that investment.

What do you mean? What investment? What responsibility?

It sounds like you need to identify one or more goals to save for.
I do have goals to save for. I save for them. Then they arrive, and I spend for them. Then I start saving for the next goal.

Everybody who is not dying of some disease has to prepare for retirement.
I am not planning to retire. I am planning to pursue new goals until I die. The envisioned role of money in that is like gas running through an engine.

Also you could save for a downpayment on a house or rental property.
I don't desire property. I desire cash to spend on working goals that interest me.

You could set a goal of replacing your present salary through passive investing over 20 years.
Is that fun and interesting? Or is it as boring as it sounds?

It is up to you. We could even talk about your goals and how to save for them here to help get you started.
Why the fuck would I want to talk to anyone here about that?

I do have goals to save for. I save for them. Then they arrive, and I spend for them. Then I start saving for the next goal.


I am not planning to retire. I am planning to pursue new goals until I die. The envisioned role of money in that is like gas running through an engine.


I don't desire property. I desire cash to spend on working goals that interest me.


Is that fun and interesting? Or is it as boring as it sounds?


Why the fuck would I want to talk to anyone here about that?

Ok, how do you save for your goals then?

Whwether something is fun and interesting is subjective and I cannot answer that for you. I hoewver, like the idea of making moeny without having to work for it. Maybe that is not exciting to you.

You might want to talk about identifying savings goals for advice on how to reach those goals and for advice on what goals might make you richer.

It's not weird - the pool of Americans that are going to make enough money OVER their costs of living has been dropping for decades, which is why the government has been so furiously trying to unload the responsibility for offering returns on that investment.

To the extent that I understand what you are trying to say, it seems that you are talking about why people do not save. The wierd thing to me is why these nonsavers believe that they will have a comfortable retirement.

To the extent that I understand what you are trying to say, it seems that you are talking about why people do not save. The wierd thing to me is why these nonsavers believe that they will have a comfortable retirement.

They don't. They imagine they'll be working till someone buries them.

They try to save, then their kid gets sick. They try to save, and then the transmission falls out of the van halfway down I-94. They try to save, and then their job lays off half the workforce.

The wealth in America has been concentrated in the hands of a decreasing pool. Unless the new administration does something pretty serious, this is actually going to be vastly exacerbated by the current economy.

What that means is - an increasingly small group of people in America are going to be able to actually 'retire'. The disparity you're seeing, is between the people who have already realised this, and the people that haven't.

What do you mean? What investment? What responsibility?

Americans have been 'investing' in 'retirement' for decades. But the cupboard is now bare - so the government is full of good ideas... like 'privatise pensions'... divesting the government of the responsibility of paying returns on the investments.

Financial planning is absolutely a means to an end. I think that people should be happy and enjoy life with their money. They also must save for the future if they do not want to be beggars when they are older and unable to work.

Retirement really is not optional. There will come a day when we are too old to work. A lot of other stuff is optional though. I would rather not say whose goals are better but I would love to discuss the planning that gose into reaching those goals.

Well, at least you are now making saving for retirement conditional upon the desires of the individual.

How would you like to discuss the planning that goes into my obtaining a non financial goal - say losing 20Kgs in weight - for example. You are still assuming that all planning and goals are financial in nature - they very much are not.

(Oh I had better indicate some of my work background here - as it underlies some of what I am saying - I work for one of the largest credit cooperative groups in Brazil - specialising in risk management. Financial planning is something I do on a scale that would be alien to most people)

To the extent that I understand what you are trying to say, it seems that you are talking about why people do not save. The wierd thing to me is why these nonsavers believe that they will have a comfortable retirement.

They don't. The most recent generation enterring the workforce long lost the idealistic hope that retirement would be possible or comfortable. At least in the US, we've heard since grade school that the social welfare programs (Social Security, Medicare) that took care of our grandparents and will take care of our parents will have long since collapsed by the time we're of an age to take advantage of them. This generation has had to deal with the reality that "retirement" is a pipe dream for most of us.

Take me as an example. In 2007, I had a 25.2% return on my 401(k) based on some wise decisions and a bit of luck. In 2009, not only has that all been wiped out, but I now literally have less in my 401(k) now than I have actually contributed. Not only have I lost three years worth of return on my investments, but I've actually lost real money that I put into it. Now I face the prospect that I will likely not regain the pace I was on for the next five years at least while I wait for our economy to recover from crippling greed and its consequences. That's the reality that myself and people of my generation face. The mirage of a 1950s retirement belongs in the 1950s.

They don't. They imagine they'll be working till someone buries them.

They try to save, then their kid gets sick. They try to save, and then the transmission falls out of the van halfway down I-94. They try to save, and then their job lays off half the workforce.

The wealth in America has been concentrated in the hands of a decreasing pool. Unless the new administration does something pretty serious, this is actually going to be vastly exacerbated by the current economy.

What that means is - an increasingly small group of people in America are going to be able to actually 'retire'. The disparity you're seeing, is between the people who have already realised this, and the people that haven't.

Wealth will always be concentrated in the hands of older investors. This is because they own the economy and have had more time to take advantage of compound interest. There is nothing bad about this except for the idea that somehow we should become discouraged by the concentration of wealth.

The only people that can afford retirement are those who prepared for it. This is all a bit off topic though.

My financial plans only stretch for about a year. After that I should have a job. At any rate, the point is that I don't plan to do much complicated investing beyond my job - firstly the banks actually prevent you from putting money into the markets (insider trading and all that) and secondly any returns I could earn from other investments would be insignificant compared to the (pretty much riskless) rewards one gets from career advancement.

Let's put it this way: I could just work, and pay off my mortgage a little earlier. Or I could focus on doing well in a career (and if I do sufficiently well, any career) and just buy the house with cash.

Ok, how do you save for your goals then?
By careful budgeting. Careful budget planning allows me to work at a day job for 1-2 years, then work at dayjobbing only part time or not at all for up to 3 years. Then I get another dayjob, fill up the accounts, and do it again.

Meanwhile I work at what I consider my "real" work constantly, all the time. Sometimes it makes money, sometimes it doesn't. Profit has never been the motive for it. However, every now and then I think about commercializing it in some way, though I've never really been serious about that before. Now, though, dayjobbing is such a fucking chore and unprofitable in terms of time consumed versus money gained, that I am making a more serious attempt at commercializing my creative work. We will see where that gets me.

But my benchmark for outrageious success in that would be an average personal income of maybe $35K. If that.

Whwether something is fun and interesting is subjective and I cannot answer that for you. I hoewver, like the idea of making moeny without having to work for it. Maybe that is not exciting to you.
Nothing about money is exciting to me. Money is just a tool. It is no more interesting to me than a screwdriver. Tending it, manipulating it, etc, has no interest, entertainment or satisfaction for me.

You might want to talk about identifying savings goals for advice on how to reach those goals and for advice on what goals might make you richer.
You missed the emphasis of my question: Why would I want to talk to ANYONE (i.e. you) HERE (i.e. the internet) about my financial goals?

My amazing financial planning has kept me in good shape over the years. What's my secret?

I don't have the patience or the stomach for mutual funds. I don't gamble. So I stuck my savings in GICs, with shitty interest rates that nonetheless have remained safe. I bought real estate and paid it down as quickly as I could, like socking money away in a bank account. Then I sold after the value went up enough to make $20,000 or higher in profit, and fuck the market...sure, I could have made more, but I also could have made nothing if I'd held onto things too long. I keep my debt low by paying it off when I can rather than going for higher credit, and I don't trust the banks. I'm not rich, I'm not poor, and the financial crash hasn't affected me.

Wealth will always be concentrated in the hands of older investors.


That's not only illogical, but fairly obviously untrue.


There is nothing bad about this except for the idea that somehow we should become discouraged by the concentration of wealth.


There is nothing bad about this... in what way?

It's circling the drain. If you don't think that's bad...


...But, it's not a matter of being 'discouraged by the concentration of wealth' - it's a matter of most people in this generation looking at the horizon and figuring where they are going to hit it. Most of them, aren't going to end up in the shiny city on the hill - they're going to end up in the slums below the walls. Or worse.

And as that pool of wealth contracts, the hill gets higher, and the proportion of people that can fit within it's walls gets smaller.

It's not a matter of being 'discouraged', it's a matter of looking at what you can expect to do, and focusing on it... and allowing for the fact that that means you're working for the rest of your life. And - in THIS generation, your partner is probably working, too - or you can't afford to raise that family.

Maybe THAT should be worrying. If a family needs two working parents in this generation, what should we expect for the next?


The only people that can afford retirement are those who prepared for it.

Sorry, but this is trite bullshit. I know people who 'prepared for it', and are now working towards a future where they'll work till they die. Those who will actually be ABLE to retire, and those who worked for it (some of them, for decades) are very different things.


This is all a bit off topic though.

Retirement is off-topic?

Oh yeah, retirement. Meh, I'm going to be hooped by then, I'm sure. That's okay though...at that point I move into an old RV with GoG and we become gypsies, stealing gas at night and hunting during the day. Mmm...squirrel stew.

Retirement is off-topic?
Of course. Any topic that an OP cannot get agreement on is off-topic. Thus retirement is off-topic in a thread about financial planning.

I'm not rich, I'm not poor, and the financial crash hasn't affected me.

Then you've been lucky, so far. Lots of people who were neither 'rich' nor 'poor' have found themselves 'displaced' by the crash. If we're all lucky, the job markets won't spiral too much, and will recover quickly.

If we're not lucky, a lot of us might see ourselves being directed by the shockwaves of the crash, even if we were not in the market to be hit by the initial blast.

Oh yeah, retirement. Meh, I'm going to be hooped by then, I'm sure. That's okay though...at that point I move into an old RV with GoG and we become gypsies, stealing gas at night and hunting during the day. Mmm...squirrel stew.

Just don't eat the brains.

The gypsy thing, though... my wife and I were actually talking about that, about a half a week ago... Great minds think alike, or something.

Then you've been lucky, so far. Lots of people who were neither 'rich' nor 'poor' have found themselves 'displaced' by the crash. If we're all lucky, the job markets won't spiral too much, and will recover quickly.

If we're not lucky, a lot of us might see ourselves being directed by the shockwaves of the crash, even if we were not in the market to be hit by the initial blast.

I suppose the biggest thing is...I can live quite happily and support my children, on a very meagre income. I have a great education...but I'm not going to die if I can't get a job in my field. I don't mind bussing tables if that's what pays the rent...and I haven't overextended myself credit-wise requiring me to make a certain amount of money or else. I saw no point in socking away money in RRSPs and mutual funds when the money was better spent paying off debt, and I've been proven right on that count.

Just don't eat the brains.

The gypsy thing, though... my wife and I were actually talking about that, about a half a week ago... Great minds think alike, or something.
Once the girls are on their own, why stay in one place? I'll be a crusty old woman playing guitar and singing at summer festivals, and drinking moonshine the rest of the time. I can't wait!

Oh yeah, retirement. Meh, I'm going to be hooped by then, I'm sure. That's okay though...at that point I move into an old RV with GoG and we become gypsies, stealing gas at night and hunting during the day. Mmm...squirrel stew.
Here ya go. I first heard about this on "Make Me a Supermodel." It's glamorous!

http://www.cooks.com/rec/search/0,1-0,squirrel_gravy,FF.html

Here ya go. I first heard about this on "Make Me a Supermodel." It's glamorous!

http://www.cooks.com/rec/search/0,1-0,squirrel_gravy,FF.html

Ha, thanks! I wasn't kidding though, I actually like squirrel stew...it's just hard to find people who will eat it with you. Argh, that's got me craving breaded moose nose and chicken hearts.

I am relatively young and my wife is still in her 20's. We live a different life than the regular joe for sure. We own rental properties and are either full owners or partners in four different businesses. We live a decent life however we do save 50% of our after tax income. I split the investments between more real estate or stocks. I am also branching off into futures however a different method from the norm. Our plan is to build enough wealth to do some serious living later on and setting up our kids for a good start.

A bank account.

I'm retired. My personal finance plan was to work until I was sick of it, while investing $50/mo for 20 years in a 403B (like a 401K) and buying a house. When I retired, I sold the house took my nearly $200,000 in equity and bought, for cash, a house in a much nicer, much less expensive area. the remaining money was used to furnish the house and have fun. My current plan is to spend as little as possible and still be comfortable, not to buy on credit, but to save for major expenses (I can do this to the tune of about $200-$250/mo), pay off what little credit card debt I have (I have about three months to go there, then I can start saving to the tune of $300-$350/mo). So far the economic crisis has impacted me only slightly - my 403B is with Fidelity and they've lost very little money - I think my personal loss has been less than $300 out of nearly $40,000. I figure that I'm about as well set as anyone and I'm hoping that things are on the upswing.

Damn, I sound complacent, don't I. I just hope things don't blow up in my face.

my 403B is with Fidelity and they've lost very little money - I think my personal loss has been less than $300 out of nearly $40,000.

:(

My 401(k) with Fidelity, from my employment at Fidelity, has lost about 20% off the high balance of about $18,000.

I suppose the biggest thing is...I can live quite happily and support my children, on a very meagre income. I have a great education...but I'm not going to die if I can't get a job in my field. I don't mind bussing tables if that's what pays the rent...and I haven't overextended myself credit-wise requiring me to make a certain amount of money or else. I saw no point in socking away money in RRSPs and mutual funds when the money was better spent paying off debt, and I've been proven right on that count.


If you could get by on bussing tables, more power to you! :)

I'd do whatever jobs I could get, but that kind of paycut would make big problems for me. Maybe you're just a hell of a waitress. :D

I live relatively cheaply and save up as much money as I can. When I'm able to settle down into a regular job, I hope to have enough money for a 10-20% downpayment on a house. The closest thing I do to investing is having a high interest savings account.

Ha, thanks! I wasn't kidding though, I actually like squirrel stew...it's just hard to find people who will eat it with you. Argh, that's got me craving breaded moose nose and chicken hearts.
Ha, the model who won season 1 of "Supermodel" wasn't kidding, either. She was some wacked-out hillbilly who really did eat something she called "squirrel gravy" back home in the holler. She would even act out the shooting of the squirrels. It all came out when she made fun of another model who, in one of the greatest restaurants in New Orleans, would not eat turtle soup because he had a pet turtle named Clark. The hillbilly girl couldn't stop laughing at such squeamish sentimentality, and that was when the whole squirrel gravy story happened. I think it actually carried her over the top in viewer voting. :D

Oh, and "breaded moose nose"? What that fuck is that -- a selection from the Great Canadian Joke Cookbook? Do you eat that with your fricassee of otter's nipples? :p

My plan for the future is to die in the middle of the desert wearing a dirty Hawaiian shirt. In my right hand I shall have a sawn-off shotgun, and in my left I shall be clutching my last dollar.
I've already got the dollar and the shirt, so I'm 2/3s of the way there, which is a lot closer to retirement than most people my age.

A bank account.

We must have the same financial adviser.

Having skimmed over this thread I can conclude that I am destined for a similar lifestyle as Muravyets. Work for what I want, get what I want, end of story. I don't need to be rich, nor really want to be.

By the way, this is something that found it's way into my email a few months ago. ;)

If you had purchased $1,000 of Delta Air Lines stock one year ago, you would have $49 left.

With Fannie Mae, you would have $2.50 left of the original $1,000.

With AIG, you would have less than $15 left.

But, if you had purchased $1,000 worth of beer one year ago, drunk all of the beer, then turned in the cans for the aluminum recycling REFUND, you would have $214 cash.

Based on the above, the best current investment advice is to drink heavily and recycle.

Right now my personal finance plan is to save enough money to buy either Bioshock 2 or Mass Effect 2 when they come out.

We must have the same financial adviser.

Having skimmed over this thread I can conclude that I am destined for a similar lifestyle as Muravyets. Work for what I want, get what I want, end of story. I don't need to be rich, nor really want to be.

By the way, this is something that found it's way into my email a few months ago. ;)

If you had purchased $1,000 of Delta Air Lines stock one year ago, you would have $49 left.

With Fannie Mae, you would have $2.50 left of the original $1,000.

With AIG, you would have less than $15 left.

But, if you had purchased $1,000 worth of beer one year ago, drunk all of the beer, then turned in the cans for the aluminum recycling REFUND, you would have $214 cash.

Based on the above, the best current investment advice is to drink heavily and recycl
Two years ago, there would have been a flaw in that reasoning. Now, I'm not so sure... :D

Careful budgeting and part time work got me through uni without a student loan (damn resisdency requirements grumble grumble) and I have been putting bits of money aside from the my PhD grant in a safe but low interest account. But this has mostly been because I've just not had that much money to think about saving/financial planning.

However, once I finished my PhD I will be starting work for the civil service (at least technically)- which means a nice civil service pension (yes they do still do them) and I can start looking at saving up to buy a house whilst the housing market is still low. After that, I will probably look at other investiment options. I will also look to keep a decent level of safe savings as back-up finances in case of emergencies.

My plan for the future is to die in the middle of the desert wearing a dirty Hawaiian shirt. In my right hand I shall have a sawn-off shotgun, and in my left I shall be clutching my last dollar.
I've already got the dollar and the shirt, so I'm 2/3s of the way there, which is a lot closer to retirement than most people my age.

Interesting however I know you could come up with something better. I always figure if I'm going out I don't want it in my sleep. Fiery car crash or eaten by a polar bear sounds much more interesting.

Interesting however I know you could come up with something better. I always figure if I'm going out I don't want it in my sleep. Fiery car crash or eaten by a polar bear sounds much more interesting.
Eaten by polar bear gets easier by the year. Soon, you could do it in practically any Canadian city.

What do people think about what to invest in at the moment? As stocks are low, surely they'll only rise in the long-term? (assuming they don't go bankrupt)

What do people think about what to invest in at the moment? As stocks are low, surely they'll only rise in the long-term? (assuming they don't go bankrupt)
Big assumption there. It used to be that there were some companies, the "Blue Chips", that you could always count on to come back, so they were a good long-term investment no matter what the circumstances. Now? Who knows how badly they are being managed, nor whether they will survive this crisis or not? Normally, I'd be one of those who sees a bear market as a time to go stock shopping, but now I'd have no idea what to gamble on.

Big assumption there. It used to be that there were some companies, the "Blue Chips", that you could always count on to come back, so they were a good long-term investment no matter what the circumstances. Now? Who knows how badly they are being managed, nor whether they will survive this crisis or not? Normally, I'd be one of those who sees a bear market as a time to go stock shopping, but now I'd have no idea what to gamble on.

For most this is true, however, things like supermarkets having continued growing. And would you say we've been through the most of the bankruptcies or are there many more to come?

For most this is true, however, things like supermarkets having continued growing. And would you say we've been through the most of the bankruptcies or are there many more to come?
What makes you think there is any foundation on which to base any answer to such a question?

What makes you think there is any foundation on which to base any answer to such a question?

Optimism in the revival of the markets, or else a complete collapse which seems less likely.

I have an IRA and my wife has a 401(k) and pension plan. Our investments weathered the storm fairly well and if we can invest properly now, I think we'll be much better off than we were before the crisis. I'm still deciding when and where to diversify.

Optimism in the revival of the markets, or else a complete collapse which seems less likely.
That's not a foundation on which to base a prediction, that's just another pair of speculative positions. On what would you base either optimism or pessimism at this point? On what do you base the statement that a complete collapse is less likely? And less likely than what -- a partial collapse? Like the one we're already in? Well, I guess that's a big no-duh -- something that might happen is going to be less likely than something that has already happened.

This kind of fuzzy thinking, applied to money, is what gets us into trouble.

That's not a foundation on which to base a prediction, that's just another pair of speculative positions. On what would you base either optimism or pessimism at this point? On what do you base the statement that a complete collapse is less likely? And less likely than what -- a partial collapse? Like the one we're already in? Well, I guess that's a big no-duh -- something that might happen is going to be less likely than something that has already happened.

This kind of fuzzy thinking, applied to money, is what gets us into trouble.

Indeed, it is a good thing I'm not an economist. But your original reply seemed to make out that investing was unwise given that many will still go bankrupt, so I'd ask what companies/industries are more likely to succeed in this climate? (This would be directed to anyone)

Indeed, it is a good thing I'm not an economist. But your original reply seemed to make out that investing was unwise given that many will still go bankrupt, so I'd ask what companies/industries are more likely to succeed in this climate? (This would be directed to anyone)
I think you read a lot into my actual remarks. All I said was that I can't figure out which companies to have confidence in. I never said there were going to be more bankruptcies, only that there is too much uncertainty to make a confident decision.

Indeed, it is a good thing I'm not an economist. But your original reply seemed to make out that investing was unwise given that many will still go bankrupt, so I'd ask what companies/industries are more likely to succeed in this climate? (This would be directed to anyone)

That's the real question, isn't it? What's safe? People have a bad habit of looking to what's fast rather than what's safe. I suspect that some stocks are going to shoot up un the next few months, but that doesn't mean they're sound investments in the long-term.

I think you read a lot into my actual remarks. All I said was that I can't figure out which companies to have confidence in. I never said there were going to be more bankruptcies, only that there is too much uncertainty to make a confident decision.

Ok, fair enough, I had read a general distrust of investing in your posts.

That's the real question, isn't it? What's safe? People have a bad habit of looking to what's fast rather than what's safe. I suspect that some stocks are going to shoot up un the next few months, but that doesn't mean they're sound investments in the long-term.

I agree, and this is why I'm reticent to start an account linked to stocks, I think for now I'll stick to my current account despite the lowered interest rate.

That's the real question, isn't it? What's safe? People have a bad habit of looking to what's fast rather than what's safe. I suspect that some stocks are going to shoot up un the next few months, but that doesn't mean they're sound investments in the long-term.
But even the standard slow and steady investments seem unstable nowadays. I mean, who would ever have thought Lehman Bros would have fallen apart the way it did? The rot that was revealed seems systemic. What other bedrock investments might be crumbling beneath the surface? I think that uncertainty is one of the things really hurting economic turnaround.

I've always been of the mind that stock market numbers are not real until you sell. It does not matter what a stock is worth today or tomorrow, only what it's worth when you sell it. That is what it's real value will be. So if you are invested in a solid, "safe" stock, you should hold it during downturns and wait for prices to come again before selling. But now it seems like there are more and more companies that never will come back up in value.

I don't know what could be done to change that perception.

You missed the emphasis of my question: Why would I want to talk to ANYONE (i.e. you) HERE (i.e. the internet) about my financial goals?

I do not know why you would want to do anything. I am not you. I enjoy talking about finances so maybe you might too.

I don't know what could be done to change that perception.

Drugs? ;)

Americans have been 'investing' in 'retirement' for decades. But the cupboard is now bare - so the government is full of good ideas... like 'privatise pensions'... divesting the government of the responsibility of paying returns on the investments.

I still am not sure what you are talking about. Are you talking about government employees' pensions like CALPERS?

Well, at least you are now making saving for retirement conditional upon the desires of the individual.

How would you like to discuss the planning that goes into my obtaining a non financial goal - say losing 20Kgs in weight - for example. You are still assuming that all planning and goals are financial in nature - they very much are not.

(Oh I had better indicate some of my work background here - as it underlies some of what I am saying - I work for one of the largest credit cooperative groups in Brazil - specialising in risk management. Financial planning is something I do on a scale that would be alien to most people)

I never said that all goals are financial ones. Nor did I read anyone else writing anything like that here.

That's not only illogical, but fairly obviously untrue.

There is nothing bad about this... in what way?

It's circling the drain. If you don't think that's bad...


...But, it's not a matter of being 'discouraged by the concentration of wealth' - it's a matter of most people in this generation looking at the horizon and figuring where they are going to hit it. Most of them, aren't going to end up in the shiny city on the hill - they're going to end up in the slums below the walls. Or worse.

And as that pool of wealth contracts, the hill gets higher, and the proportion of people that can fit within it's walls gets smaller.

It's not a matter of being 'discouraged', it's a matter of looking at what you can expect to do, and focusing on it... and allowing for the fact that that means you're working for the rest of your life. And - in THIS generation, your partner is probably working, too - or you can't afford to raise that family.

Maybe THAT should be worrying. If a family needs two working parents in this generation, what should we expect for the next?

Sorry, but this is trite bullshit. I know people who 'prepared for it', and are now working towards a future where they'll work till they die. Those who will actually be ABLE to retire, and those who worked for it (some of them, for decades) are very different things.

Retirement is off-topic?

Why do you think that wealth is not concentrated among older people? Maybe you thought I meant among the oldest people in society in which case you would have a point. Wealth is not concentrated among the young but tends to be concentrated in the older people because they had the most time to aquire wealth and take advantage of compounding interest.

There is nothing circling the drain. There is still a good concentration of wealth I believe. What are you talking about?

We have a lot more investment opportunities than previous generation did. We have a lot of tax smart ways to invest. We have index investments. We should be fine if we save and invest of course.

I am relatively young and my wife is still in her 20's. We live a different life than the regular joe for sure. We own rental properties and are either full owners or partners in four different businesses. We live a decent life however we do save 50% of our after tax income. I split the investments between more real estate or stocks. I am also branching off into futures however a different method from the norm. Our plan is to build enough wealth to do some serious living later on and setting up our kids for a good start.

Good job! That is great that you can save 50% of your after tax income. Keep up the great work! Futures eh? That sounds a little complex and risky for me but if you know what you are doing and do not put to much money into futures you can make money but I consider that to be more like gambling than investing but maybe that is just because I do not really understand them. Want to share anything about your use of futures?

I live relatively cheaply and save up as much money as I can. When I'm able to settle down into a regular job, I hope to have enough money for a 10-20% downpayment on a house. The closest thing I do to investing is having a high interest savings account.

This is not a bad way to save up a downpayment for a house. Is a high interest savings account the same thing as a money market fund account? Good luck with your savings.

What do people think about what to invest in at the moment? As stocks are low, surely they'll only rise in the long-term? (assuming they don't go bankrupt)

I like index funds for stocks and reits myself. The again, I always like these sort of things.

I have an IRA and my wife has a 401(k) and pension plan. Our investments weathered the storm fairly well and if we can invest properly now, I think we'll be much better off than we were before the crisis. I'm still deciding when and where to diversify.

It is always a good time to be diversified. Does you term "where" mean how you want to allocate your assets or what?

That's the real question, isn't it? What's safe? People have a bad habit of looking to what's fast rather than what's safe. I suspect that some stocks are going to shoot up un the next few months, but that doesn't mean they're sound investments in the long-term.

You can never have a completely safe high yielding investment. I think the best bet is to diversify and keep to a financial plan despite what the markets do.

It is always a good time to be diversified. Does you term "where" mean how you want to allocate your assets or what?

Well, in early 2008, I withdrew from certain high risk funds and stocks and put more into safer funds, stocks and bonds.

Now I'm trying to decide when the best time to branch out again is.

Well, in early 2008, I withdrew from certain high risk funds and stocks and put more into safer funds, stocks and bonds.

Now I'm trying to decide when the best time to branch out again is.

Well you cant really predict what the future holds (which is why we diversify). Are you looking to rebalance your portfolio between bonds and stocks or even within those asset classes as well? It is not a bad idea to do that once or twice a year.

My wife and I are almost debt free except our mortgage. For the record, there is NO downside to a paid off home. Its our next objective.

We have no car payments, and only minimal credit card payments (recent lack of work though I am employed...), we are 3-4 months from totally debt free (with some money in the bank) and we have my military pension.

So far, not bad.

Well you cant really predict what the future holds (which is why we diversify). Are you looking to rebalance your portfolio between bonds and stocks or even within those asset classes as well? It is not a bad idea to do that once or twice a year.

More of when than what. I know what I want to do, I'm just wondering when to do it.

Well you see, I date a lot of older men.

don't make enough money to have a "plan", and certainly not enough to invest. i try to put as much as i can each month into a savings account, but lately with the recession, i've been taking money out more than i have been putting it in. waiting to see what this month will be like...

My wife and I are almost debt free except our mortgage. For the record, there is NO downside to a paid off home. Its our next objective.

We have no car payments, and only minimal credit card payments (recent lack of work though I am employed...), we are 3-4 months from totally debt free (with some money in the bank) and we have my military pension.

So far, not bad.

Whether or not to prepay a mortgage, is a pretty contraversial subject. I make the prepayment of mortgage principal a major component of my financial plan and I recognize that there is an opportunity cost downside. Why are you so convinced that it is the right thing to do?

More of when than what. I know what I want to do, I'm just wondering when to do it.

I do not know what you are waiting for. Your bonds probably did well and your stocks probably went down. Maybe you should sell some bonds and buy some stock now?

My wife and I do not own any publicly traded bonds. I am not really a fan of bonds. I also do not really understand the whole concept of bonds being worth more when interest rates drop. This is why I use reits as the main driver for the income component of my portfolios.

I do not know why you would want to do anything. I am not you. I enjoy talking about finances so maybe you might too.
I don't talk about my money for fun. I only discuss it in depth seriously and practically, and I'm not going to do that with some bunch of faceless nutjobs on the intertubes. I'll do that with financial professionals whose resumes and references I have already checked out. Thanks anyway.

Whether or not to prepay a mortgage, is a pretty contraversial subject. I make the prepayment of mortgage principal a major component of my financial plan and I recognize that there is an opportunity cost downside. Why are you so convinced that it is the right thing to do?
Okay, just for a laugh, and because I won't talk about my own real money, let me toss you a general question:

What do you think of buying a house cash, i.e. no mortgage?

Okay, just for a laugh, and because I won't talk about my own real money, let me toss you a general question:

What do you think of buying a house cash, i.e. no mortgage?

I assume that you mean buying your personal residence with cash and without using a mortgage.

First, if somebody were to do this, particularly if it was their first home, this would be a great financial accomplishment because it typically costs a significant amount of money to buy a house. I read about people that lived very frugally in order to save up the money to buy a house with cash because they were highly adverse to taking on any debt.

There are two things to consider in determining whether this is a good idea. These are debt aversion and opportunity cost. Some people have an adversion to debt as a fundamental financial principle. For these folks, there is no such distinction between what many people consider good debt or bad debt. For such a personality, it makes sense to buy a house with cash because otherwise they would not be owning their own home unless they received one as a gift or inheritance. This is of course an example of extreme debt aversion. Many of us, including myself have a mild debt aversion bias that is emotional and not nearly as logical as a straight up opportunity cost analysis.

The question of opportunity cost is a little more complex. Here, instead of the emotional and irrational debt aversion we have the logical comparison of opportunities to use money in a way that provides the greatest probability of highest returns on the investment principal.

In order to compare the opportunity costs, we need to understand what is really going on here. We are really not talking about 100% of the purchase price. We are only talking about the purchase price (including transaction costs aka closing costs) less the minimum downpayment needed to obtain financing for the remainder. This might hypothetically be 80% of the purchase price + closing costs.

To make it easy lets imagine that the sum of the purchase price and closing costs $100,000. Assuming tha tthe investor would buy a house anyway, the question becomes: what is the most efficient use of $80,000?

In order to answer this there are only really two factors that we need to consider, taxes and other investment opportunities.

Some IRAs may be used to purchase a residence. I assume that this is not where the cash is coming from. This would require its own opportunity cost analysis. I consider this to fall under the topic of taxes.

Mortgage interest is tax deductible. I itemize my deductions and do not know if you can claim this deduction if you use standard deductions. Assuming that you can deduct the mortgage interest, the idea of purchasing a home with cash seems like less of a good move the higher your income bracket is. This is because the tax savings are biggest if you are in the highest tax bracket.

So, on the basis of this factor alone, if it would make sense to buy a house with cash, it would be likely that this would make more sense for someone of a lower tax bracket than a higher one.

If the homeowner uses the residence as his residence for 2 out of the past 5 years he can claim most or all of the gain as a long term tax exempt capital gain. This makes it a potentially smarter move to mortgage the house because the gain expressed as a return on principal would be higher due to the effect of leveraging on gains. One's comfort with using leveraging is a subjective part of this analysis.

The other factor is what else would you do with the money and what return could you expect and how sure are you that you would get that return? From a long term perspective, the only thing that matters is the after taxes apples to apples comparison so to speak. However, you still have to pay the bank every month in before tax dollars so there is the issue of what would this do to your cash flow?

I am getting tired so I will conclude by saying that a purchase of a home for cash would make sense for a conservative investor with a lower income. It would make less sense for an aggressive investor with a higher income.

I don't talk about my money for fun. I only discuss it in depth seriously and practically, and I'm not going to do that with some bunch of faceless nutjobs on the intertubes. I'll do that with financial professionals whose resumes and references I have already checked out. Thanks anyway.

Something can be discussed seriously and it can be fun. I enjoy talking seriously about money issues. You can get pretty honest answers from annoymous folks, even from us nutjobs :wink:

Something can be discussed seriously and it can be fun. I enjoy talking seriously about money issues. You can get pretty honest answers from annoymous folks, even from us nutjobs :wink:
Yeah, I picked up on the fact that you think this is fun the first 2, 3, or 6 times you said it.

I assume that you mean buying your personal residence with cash and without using a mortgage.
Wow, that's a brave assumption you're making there. /sarcasm.

First, if somebody were to do this, particularly if it was their first home, this would be a great financial accomplishment because it typically costs a significant amount of money to buy a house. I read about people that lived very frugally in order to save up the money to buy a house with cash because they were highly adverse to taking on any debt.
In various jobs as a legal secretary working for real estate attorneys, I have drawn up documents for people of means purchasing second or third homes, cash on the barrel head. I have also drawn up docs for businesspeople purchasing commercial properties for cash as well. Just FYI.

There are two things to consider in determining whether this is a good idea. These are debt aversion and opportunity cost. Some people have an adversion to debt as a fundamental financial principle. For these folks, there is no such distinction between what many people consider good debt or bad debt. For such a personality, it makes sense to buy a house with cash because otherwise they would not be owning their own home unless they received one as a gift or inheritance. This is of course an example of extreme debt aversion. Many of us, including myself have a mild debt aversion bias that is emotional and not nearly as logical as a straight up opportunity cost analysis.

The question of opportunity cost is a little more complex. Here, instead of the emotional and irrational debt aversion we have the logical comparison of opportunities to use money in a way that provides the greatest probability of highest returns on the investment principal.
Why do you assume that everyone's debt aversion is irrational?

Why do you assume (if this is what you are assuming) that paying for a property in full up front cannot be the best possible use of a person's money at a given time, under given circumstances?

Above I mentioned instances of people who are wealthy and have bought and sold multiple properties choosing to buy properties sometimes close to $1million in value and pay cash rather than take a mortgage. Do you assume that they are acting irrationally, or do you think it is possible that your assumptions about what goes into property buying decisions might be missing some possibilities.

<snip a lot of rather circular verbiage>
From that long and rambling math class, I conclude that you think it is a bad idea to pay cash for a house.

I understand the idea of a home as a stable and secure location for oneself and their family, but as a means of increasing personal wealth? I simply think there are far better options...and most people never bother because they are convinced they "need" a house.

To me, it seems like it can often be a better long term idea to rent, and use income saved on home-owners insurance, maintenance and upkeep, property taxes, and mortgage interest, (to say nothing of the actual principal on the house), to invest in a diversified manner...am I alone here?

I understand the idea of a home as a stable and secure location for oneself and their family, but as a means of increasing personal wealth? I simply think there are far better options...and most people never bother because they are convinced they "need" a house.

To me, it seems like it can often be a better long term idea to rent, and use income saved on home-owners insurance, maintenance and upkeep, property taxes, and mortgage interest, (to say nothing of the actual principal on the house), to invest in a diversified manner...am I alone here?

Yes, you're probably alone.

1. Taxes and interest are often tax deductible.
2. Homeowner's insurance isn't that expensive, and renters are, more and more, buying renter's insurance.
3. Maintenance, is built into things like security deposit, raises in rent, lawsuits ...
4. You don't accrue equity in a rental.
5. You can't decorate or remodel a rental to your taste.
6. If you have a fixed interest loan, your mortgage won't go up, rent will.
7. Even in a condo or townhome, you have more privacy than in a rental - no snoopy landlords.
8. Reverse mortgages.

Even in an unstable economy, there are more advantages to owning than there are in renting.

I'm useless with money.
I understand the "earn it", the "save it" and the "spend it" aspects of it, but everything beyond that is just gobbledegook to me.

my "financial plan", uneffective as mine typically are, is to pray for enough of the established order to fall to be no longer able to enforce its ban on living in improvised shelter as my permanent address.

What do you think of buying a house cash, i.e. no mortgage?

great idea, but i don't think its feasable for most people unless you're very rich. round here, a one bedroom apartment is typically around $150,000, and, compared to the rest of the south here, we're on the cheap side.

i'd love to find some stats as to how many people in this country actually own their house outright, vs those with a mortgage.

and btw, i'm one of those debt-adverse people... but when it comes to houses, there isn't much choice (apart from renting, of course... but that's pretty stupid)


To me, it seems like it can often be a better long term idea to rent, and use income saved on home-owners insurance, maintenance and upkeep, property taxes, and mortgage interest, (to say nothing of the actual principal on the house), to invest in a diversified manner...am I alone here?

not if rent payments, minus expenditure, leaves nothing to invest. this is why i'd rather buy and mortgage - if i rent, until i get a fairly considerable pay rise, i won't have any spare cash to save or invest. at least if i'm paying the same in mortgage repayments, i'm paying more towards an asset.

great idea, but i don't think its feasable for most people unless you're very rich. round here, a one bedroom apartment is typically around $150,000, and, compared to the rest of the south here, we're on the cheap side.



Ugh, don't remind me, I need to move down to Hampshire from the North in September and housing costs are making me shudder (even coming from York, which isn't the cheapest bit of the north).

Ugh, don't remind me, I need to move down to Hampshire from the North in September and housing costs are making me shudder (even coming from York, which isn't the cheapest bit of the north).

Yeah, there's a reason I don't want to stay in Bucks where my parents live when I graduate. And it's been nice not to have to worry about housing while I've been at uni.

My plans? Win the lottery.

My backup plan? Invest, save, and live below my means.

Ugh, don't remind me, I need to move down to Hampshire from the North in September and housing costs are making me shudder (even coming from York, which isn't the cheapest bit of the north).

luckily for me, Southampton is a fair bit cheaper than most of the rest of Hampshire... i guess nobody wants to live here, lol :P
its good for me though, even if it is still stupidly expensive for a first-time buyer :(

side note: i had a great curry up in York the other day :D

luckily for me, Southampton is a fair bit cheaper than most of the rest of Hampshire... i guess nobody wants to live here, lol :P
its good for me though, even if it is still stupidly expensive for a first-time buyer :(


Well at least it's not Portsmouth :p This said, my new job is based about half-way between Fareham and Portsmouth - I'm trying to figure out somewhere in decent commuting distance I could actually stand to live around there.

Wow, that's a brave assumption you're making there. /sarcasm.


In various jobs as a legal secretary working for real estate attorneys, I have drawn up documents for people of means purchasing second or third homes, cash on the barrel head. I have also drawn up docs for businesspeople purchasing commercial properties for cash as well. Just FYI.


Why do you assume that everyone's debt aversion is irrational?

Why do you assume (if this is what you are assuming) that paying for a property in full up front cannot be the best possible use of a person's money at a given time, under given circumstances?

Above I mentioned instances of people who are wealthy and have bought and sold multiple properties choosing to buy properties sometimes close to $1million in value and pay cash rather than take a mortgage. Do you assume that they are acting irrationally, or do you think it is possible that your assumptions about what goes into property buying decisions might be missing some possibilities.


From that long and rambling math class, I conclude that you think it is a bad idea to pay cash for a house.

There is no need to be sarcastic here. You asked me about buying a house with cash. You never said what the house would be used for. A rental property has different tax aspects than a primary residence.

Debt aversion is irrational because it comes from the soul and not from the mind. This does not mean that it is bad. It also does not mean that I look down on debt adverse people. I am debt adverse myself because of the effect that debt has on cash flow.

I never assumed that buying a house with cash is never the best use of the investor's money. For a conservative investor (ie risk adverse) who is debt adverse and in a low tax bracket it makes a huge heep of sense and probably is one of the best investments such a person could make.

I also have clients who purchased real estate with cash. In fact, I sort of do the same thing every time that I make a prepayment on the principal of one of my mortgages.

I do not think that it is a bad idea for anybody to buy a house with cash. It makes more sense for some people to do it than for others.

Yeah, I picked up on the fact that you think this is fun the first 2, 3, or 6 times you said it.

I am kinda sensing a little hostility here and with some of your posts here. If I have said anything that offended you, I am sorry. What, if anything, did I say that got you upset? I suspect that you might have read too much into something that I wrote. I never meant to offend you or anybody else here.

I understand the idea of a home as a stable and secure location for oneself and their family, but as a means of increasing personal wealth? I simply think there are far better options...and most people never bother because they are convinced they "need" a house.

To me, it seems like it can often be a better long term idea to rent, and use income saved on home-owners insurance, maintenance and upkeep, property taxes, and mortgage interest, (to say nothing of the actual principal on the house), to invest in a diversified manner...am I alone here?

I do not think it typically makes more sense to rent but it certainly does make a lot of sense to live in the cheaperst house you can afford to buy so that you have cash available to max out your retirement accounts and build up an emergency savings account instead of having all of your monthly income go to necessities and housing costs.

My plans? Win the lottery.

My backup plan? Invest, save, and live below my means.

I wish you good luck with that lottery. What do you invest in, how do you live below your means?

Retirement plan=Rob a bank

I understand the idea of a home as a stable and secure location for oneself and their family, but as a means of increasing personal wealth? I simply think there are far better options...and most people never bother because they are convinced they "need" a house.

To me, it seems like it can often be a better long term idea to rent, and use income saved on home-owners insurance, maintenance and upkeep, property taxes, and mortgage interest, (to say nothing of the actual principal on the house), to invest in a diversified manner...am I alone here?

No, you're not alone. Whether buying property is a good move for any given person is entirely up to that person, their lifestyle, goals, income, etc.

Personally, I would not buy a property as an investment or to build equity. I would buy it to use it -- for home, business or both. Its value would matter little to me except at tax assessment time and if and when I ever chose to sell it. But I would be unlikely to borrow against it except if in dire need. That's me and how I roll.

At this time in my life, I don't need a house, so I have no plans to buy one. When I do, I will, but it will not be as part of a financial plan. Rather it will be part of a career and/or lifestyle plan.

EDIT: And needless to say, but I'll say it anyway -- I think we've all learned that a house you can't afford is a bad investment. If a mortgage would be pushing the limits of one's earnings, then renting is the better choice at that time.

There is no need to be sarcastic here. You asked me about buying a house with cash. You never said what the house would be used for. A rental property has different tax aspects than a primary residence.

Debt aversion is irrational because it comes from the soul and not from the mind.
The above is an assumption. You have no basis on which to assume that anyone other than you experiences debt aversion as coming from the soul rather than the mind.

This does not mean that it is bad. It also does not mean that I look down on debt adverse people. I am debt adverse myself because of the effect that debt has on cash flow.

I never assumed that buying a house with cash is never the best use of the investor's money. For a conservative investor (ie risk adverse) who is debt adverse and in a low tax bracket it makes a huge heep of sense and probably is one of the best investments such a person could make.

I also have clients who purchased real estate with cash. In fact, I sort of do the same thing every time that I make a prepayment on the principal of one of my mortgages.

I do not think that it is a bad idea for anybody to buy a house with cash. It makes more sense for some people to do it than for others.

Okay, fine, that clears that up.

I am kinda sensing a little hostility here and with some of your posts here. If I have said anything that offended you, I am sorry. What, if anything, did I say that got you upset? I suspect that you might have read too much into something that I wrote. I never meant to offend you or anybody else here.
I'm not upset. I'm just a tad impatient with repetition of basic statements. Sorry.

I wish you good luck with that lottery. What do you invest in, how do you live below your means?
I invest in sector ETFs, like IYZ (telecom), as well as individual stocks that return good dividends. My choices are JNJ, SO, and KO for those. I plow a lot into index funds, too.

As far as living below my means, I have a 1995 E300 that I fix, rather than replace. My wife has a 2000 VW Cabrio that gets the same treatment. We don't eat out a lot. We didn't spend a lot on our house. We don't have credit card bills that carry over from month to month.

We just spend less that we make and save the rest. It's simple.

The above is an assumption. You have no basis on which to assume that anyone other than you experiences debt aversion as coming from the soul rather than the mind.

Debt aversion is totally a spiritual and emotional thing and not a logical thing. Debt aversion is the idea that debt is bad regardless of the interest rate, the tax deductions, and the opportunity costs. There are many people who feel that they are the servant to the lender. People quote scripture over this. Dave Ramsey is probably the most vocally debt adverse guy out there (he wrote The Money Makeover and has a personal finance talk radio program. There is nothing wrong with being debt adverse. Although I do not strictly adhere to Ramsey's advice, I recognize that his financial plan for people is reasonable. One of the things that I like about the Ramseyan approach is that his debt adverse "debt payoff snowball" balances out the aggressive stock advice in other parts of the plan.

Even Dave Ramsey admits that his debt repayment snowball does not make sense mathematically but instead makes sense psychologically. People payoff their debts in order of smallest to largest and then apply the additional cash flow from debt repayment to the next debt on their list. This builds a record of success that is good for motivational purposes.

A rational investor would use "good debt" whenever this was warranted by opportunity cost analysis. Being adverse to "good debt" is irrational but it is not all that bad because it might prevent someone from becoming wealthier but it will not necessarily leave them destitute either.

I invest in sector ETFs, like IYZ (telecom), as well as individual stocks that return good dividends. My choices are JNJ, SO, and KO for those. I plow a lot into index funds, too.

As far as living below my means, I have a 1995 E300 that I fix, rather than replace. My wife has a 2000 VW Cabrio that gets the same treatment. We don't eat out a lot. We didn't spend a lot on our house. We don't have credit card bills that carry over from month to month.

We just spend less that we make and save the rest. It's simple.

Sounds like a good plan. It really is that simple. Do you only invest in retirement accounts? If you max out your retirement accounts (or if you dont but hypothetically were able to) what do you do with any additional savings? Do you buy stocks or bonds outside of a retirement account?

I'm useless with money.
I understand the "earn it", the "save it" and the "spend it" aspects of it, but everything beyond that is just gobbledegook to me.

The basic concept here is that you identify savings goals. Then you figure out where you are in your savings goal. Then you find out when you would like to be access the money to pay for the goal. Then you determine what type of investment would give you the greatest chance of reaching that goal (there are online calculators to help with all of this).

Debt aversion is totally a spiritual and emotional thing and not a logical thing. Debt aversion is the idea that debt is bad regardless of the interest rate, the tax deductions, and the opportunity costs. There are many people who feel that they are the servant to the lender. People quote scripture over this. Dave Ramsey is probably the most vocally debt adverse guy out there (he wrote The Money Makeover and has a personal finance talk radio program. There is nothing wrong with being debt adverse. Although I do not strictly adhere to Ramsey's advice, I recognize that his financial plan for people is reasonable. One of the things that I like about the Ramseyan approach is that his debt adverse "debt payoff snowball" balances out the aggressive stock advice in other parts of the plan.

Even Dave Ramsey admits that his debt repayment snowball does not make sense mathematically but instead makes sense psychologically. People payoff their debts in order of smallest to largest and then apply the additional cash flow from debt repayment to the next debt on their list. This builds a record of success that is good for motivational purposes.

A rational investor would use "good debt" whenever this was warranted by opportunity cost analysis. Being adverse to "good debt" is irrational but it is not all that bad because it might prevent someone from becoming wealthier but it will not necessarily leave them destitute either.
All of that is an assumption. It may be true for many people, but it is equally not true for many others. I avoid debt so assiduously that I should be described as "debt averse" yet I have no emotional response to the idea of debt, nor any sense of being burdened by obligations or any other especially negative thoughts about it. I just like to manage my money a different way and keep to a pay-as-you-go system. That works best for me in managing my accounts. There is nothing emotional -- let alone spiritual -- about it.

Just about everyone else I have ever known has talked the same way, and the all of the banking professionals I have dealt with over time have advised me that such an approach is rational.

The more you talk about this, the more it seems to me that you are completely set in a very narrow groove of thought about how people relate to money. It seems almost as if nothing outside that groove exists for you. If called on one point or another, you will acknowledge that, yes, what you are saying does not apply to everyone, but then you carry on making these grand statements as if they do apply to everyone.

For example, in the above post, you start out by saying that "debt aversion is totally X", then acknowledge that it is not so for everyone, but then carry on to argue as if it is. You seem to be all over the map.

I feel better now about my decision not to discuss my own finances with you.

Sounds like a good plan. It really is that simple. Do you only invest in retirement accounts? If you max out your retirement accounts (or if you dont but hypothetically were able to) what do you do with any additional savings? Do you buy stocks or bonds outside of a retirement account?
I'm investing in anything I can to defer taxes, either pre or post retirement. So our investments in Roth IRAs are maxed. My 401K is maxed, including the catch-up money. Yes, I'm that old. My wife contributes as much to her 403b as she is allowed. There aren't that many choices in the company retirement plans, so that's where I look at index funds. I invest in stocks and ETFs outside of retirement, as well. I've been doing DRIPs since the late '90s.

The funny thing is that we don't feel deprived. We go on vacations, we do eat out and see movies -- it's just more of a treat than a regular event.

All of that is an assumption. It may be true for many people, but it is equally not true for many others. I avoid debt so assiduously that I should be described as "debt averse" yet I have no emotional response to the idea of debt, nor any sense of being burdened by obligations or any other especially negative thoughts about it. I just like to manage my money a different way and keep to a pay-as-you-go system. That works best for me in managing my accounts. There is nothing emotional -- let alone spiritual -- about it.

Just about everyone else I have ever known has talked the same way, and the all of the banking professionals I have dealt with over time have advised me that such an approach is rational.

The more you talk about this, the more it seems to me that you are completely set in a very narrow groove of thought about how people relate to money. It seems almost as if nothing outside that groove exists for you. If called on one point or another, you will acknowledge that, yes, what you are saying does not apply to everyone, but then you carry on making these grand statements as if they do apply to everyone.

For example, in the above post, you start out by saying that "debt aversion is totally X", then acknowledge that it is not so for everyone, but then carry on to argue as if it is. You seem to be all over the map.

I feel better now about my decision not to discuss my own finances with you.

No problem. I just want to point out that being debt adverse (I am not talking about risk aversion when I talk about being debt averse) is irrational but it is not stupid or crazy. I wonder why your banker said it was rational? Is it because you might be the sort of person who gets pissed off by having your irrational aspects pointed out to you. Probably the banker does not want to risk pissing off customers. I think that recognizing our own irrational aspects is healthy. We do not need to cure our irrational aspects. We just need to make informed decisions. If we choose to act irrationally after making the informed decision to do so, fine. We are free to make our own financial decisions.

Would you point out where I was inconsistent about debt aversion?

I'm investing in anything I can to defer taxes, either pre or post retirement. So our investments in Roth IRAs are maxed. My 401K is maxed, including the catch-up money. Yes, I'm that old. My wife contributes as much to her 403b as she is allowed. There aren't that many choices in the company retirement plans, so that's where I look at index funds. I invest in stocks and ETFs outside of retirement, as well. I've been doing DRIPs since the late '90s.

The funny thing is that we don't feel deprived. We go on vacations, we do eat out and see movies -- it's just more of a treat than a regular event.

I max out my SEP IRA usually. My wife contributes to her 403(b) plan but does not max them out. She also can contribute to a 457 plan if she ever maxes out her 403(b). She also has a pension that she and her employer contribute to. We are 30 and 31. I am hopeful that we will be able to retire comfortably even if social security does not give us a nickel.

I do not like her plans because there are a lot of costs. They are sure better from a tax perspective than investing outside of retirement accounts though. My SEP gives me a lot of flexibility of what to invest in. I want to open another SEP account with Vanguard so I do not get creamed on ETF commissions. I think that ETFs are wonderful.

When I was in my 20s I told myself that I should take all kinds of crazy investment risks because I have lots of time in case I do stupid stuff. I did venture capital with junk bonds and LLC ownership shares. I bought penny stock. I bought rental properties. When I turned 30 I cut myself off from the craziness.

Now when I invest outside of our retirement accounts I just buy stock and reits through our investment club, improve my residential and rental properties, and payoff my debts. I was so proud when I paid my car loan off last January because we put every extra dollar we could scrounge up on that loan and got it paid off in 13 months. That was a really nice sense of accomplishment.

We go out and see movies occassionally but I am quite the cheapskate. We tend to go to inexpensive restaraunts.

Well at least it's not Portsmouth :p

lol, indeed :D

This said, my new job is based about half-way between Fareham and Portsmouth - I'm trying to figure out somewhere in decent commuting distance I could actually stand to live around there.

can't help you much, i'm afraid - i tend to stick to the Soton side of things. Fareham itself is quite nice though, i think.

I avoid debt so assiduously that I should be described as "debt averse" yet I have no emotional response to the idea of debt, nor any sense of being burdened by obligations or any other especially negative thoughts about it. I just like to manage my money a different way and keep to a pay-as-you-go system. That works best for me in managing my accounts. There is nothing emotional -- let alone spiritual -- about it.


So you never had a student loan? You never had a mortgage? Nothing wrong with that.

No problem. I just want to point out that being debt adverse (I am not talking about risk aversion when I talk about being debt averse) is irrational but it is not stupid or crazy. I wonder why your banker said it was rational?
Hm... I suppose it is not possible that they said it because it is not an irrational point of view...?

Is it because you might be the sort of person who gets pissed off by having your irrational aspects pointed out to you.
And now you are just insulting me. Maybe that hostilit you sensed coming from me was projected a bit.

Probably the banker does not want to risk pissing off customers. I think that recognizing our own irrational aspects is healthy. We do not need to cure our irrational aspects. We just need to make informed decisions. If we choose to act irrationally after making the informed decision to do so, fine. We are free to make our own financial decisions.
And now you are annoying me. What was it you find fun again? Talking about other people's money, or armchair psychoanalysis -- neither of which you seem to have a very deep grasp of?

Would you point out where I was inconsistent about debt aversion?
I told you precisely where you were inconsistent in the post you are responding to. Are you deciding that my bankers tell me things just to mollify me and that I am motivated by irrational thinking all the basis of NOT reading my posts?

My sense about you sticking only to your own narrow thought-groove and acting as if nothing outside of it exists is only being reinforced.

So you never had a student loan? You never had a mortgage? Nothing wrong with that.

No, I have never had either of those things, but only because I have not needed to borrow money for those purposes. Not because I am opposed to borrowing money for such purposes.

Hm... I suppose it is not possible that they said it because it is not an irrational point of view...?


And now you are just insulting me. Maybe that hostilit you sensed coming from me was projected a bit.


And now you are annoying me. What was it you find fun again? Talking about other people's money, or armchair psychoanalysis -- neither of which you seem to have a very deep grasp of?


I told you precisely where you were inconsistent in the post you are responding to. Are you deciding that my bankers tell me things just to mollify me and that I am motivated by irrational thinking all the basis of NOT reading my posts?

My sense about you sticking only to your own narrow thought-groove and acting as if nothing outside of it exists is only being reinforced.



No, I have never had either of those things, but only because I have not needed to borrow money for those purposes. Not because I am opposed to borrowing money for such purposes.

I did not insult you. It seems that you view "irrational" as an insult. This might explain a lot. I was hoping that you might quote the language that I used where you claim that I was inconsistent. I am asking you to use the quote button.

I do not know what you are talking about with this narrow thought groove business.

I am suggesting that your bankers may have told you that avoiding debt is ok and perhaps even that it is a good way to do things. I would be surprised if it was described as rational though. I was never all that good with economics (I hated the charts and the graphs) but I recall a lot of theoretical talk about what the rational consumer does. I think that the rational investment consumer tries to maximize gains and minimize the risk of loss. I think that debt aversion had its roots in our society in religious teachings and then became quite popular during the Great Depression.

Families used to have mortgage burning parties after the Great Depression. Families passed down stories of how Uncle so lost his house in a foreclosure. The next generation learned that debt was bad and passed this down to the next generation. This is irrational because mortgages were very different in those days as they were subject to call without default. This made them quite risky at the time but mortgages on residential properties are not like that anymore. I do not even think you see that a lot anymore on commerical mortgages either.

No, I have never had either of those things, but only because I have not needed to borrow money for those purposes. Not because I am opposed to borrowing money for such purposes.

Did you buy a house or go to college? If you did this without loans you might be debt adverse. If you did not do those things because you do not want to take out loans you are probably debt adverse. If you did not do those things you are probably not debt adverse. You probably merely avoided taking on bad debts like credit card debts. This is not debt aversion at all.

If you stay away from high interest loans, this is a perfectly rational decision because few investments have a good chance of beating the interest that you would have to pay to a credit card company.

Being debt adverse (I might just have invented this term by the way) means being against debt as matter of principal. It does not matter if the interest is low or that interest is tax deductible or that you could use it as leverage to get an asset that would increase in value beyond the interest rate. This is irrational but it is not bad.

The fact that you said that you are not opposed to borrowing for those purposes shows that you are probably not debt adverse.

Did you buy a house or go to college? <snip>
In all seriousness, GF, the things you are saying to me strike me as silly -- either plonkingly obvious or pointlessly redundant to what you have already said or unrelated to what I have been saying.

Since I have stated very clearly that I have no intention of discussing my actual personal finances on this forum, I am not going to spend any more time being fake-analyzed by you on the basis of no information.

I will leave it at this:

1) I have no debt at this time.

2) I prefer to operate on a cash basis.

3) I have nothing against the idea of debt, I just prefer not to use it. My preference is strong enough that I would plan to buy a house without a mortgage if possible rather than take out a mortage loan.

4) A number of banking professionals have told me that this is a rational approach for me to take.

5) I think you are being non-responsive to what I say to you, so I'm going to stop saying things to you now.

In all seriousness, GF, the things you are saying to me strike me as silly -- either plonkingly obvious or pointlessly redundant to what you have already said or unrelated to what I have been saying.

Since I have stated very clearly that I have no intention of discussing my actual personal finances on this forum, I am not going to spend any more time being fake-analyzed by you on the basis of no information.

I will leave it at this:

1) I have no debt at this time.

2) I prefer to operate on a cash basis.

3) I have nothing against the idea of debt, I just prefer not to use it. My preference is strong enough that I would plan to buy a house without a mortgage if possible rather than take out a mortage loan.

4) A number of banking professionals have told me that this is a rational approach for me to take.

5) I think you are being non-responsive to what I say to you, so I'm going to stop saying things to you now.

I tried to respond to your points. Sorry that you were unhappy.

Now when I invest outside of our retirement accounts I just buy stock and reits through our investment club, improve my residential and rental properties, and payoff my debts. I was so proud when I paid my car loan off last January because we put every extra dollar we could scrounge up on that loan and got it paid off in 13 months. That was a really nice sense of accomplishment.

My goal at 45 was to retire by 60. The only way I could figure out how to do that was to save like crazy. Now, I don't think I'm going to retire that early, but it's because I like what I'm doing. I think I will be able to afford it, though. After 60, I'll have a whole different perspective toward work, though.

I'm 51. Back in late 2006 I started working for a friend who got elected to the Victorian Parliament here in Australia. At the time I was living about 50km away - there was an urgent need to move into the electorate.

In my new job I rapidly learned how appalling public housing was in Melbourne. What's more, some of the people had worked hard all their lives but, for one reason or the other, had not bought a house or saved. The pension was not enough to pay for private rental.

This spooked me so I decided to buy a flat in the electorate. I had some savings and not much debt. My sister lent me some money to get more of a deposit and, amazingly, I was able to get a thirty year (!!!) loan. (Remember, I'm 51 - I was 49 when I bought the unit.) Then I got even more risky - I renovated the kitchen (it was in a pretty bad state) on my credit card. The kitchen turned out to be rather more expensive than I had budgeted.

Well, it was time for a long term finance plan.

First, pay my sister. Done.

Second, get that thirty year payment period down. Thanks to a huge drop in interest rates (yeay, global financial meltdown!) and my determination to pay more than the minimum home repayments, I've got the loan down to 15 years on my current repayments and current interest rates.

Third, get the credit card debt down - on the way.

I've been living an austere live compared with some, but, like other people here, I hate debt.

A couple of other points to note.
1. I believe I have some equity in my flat so, if I had to sell, I wouldn't be in big trouble.
2. Employers in Australia must pay 9% of an employee's wage into an approved superannuation scheme.

My goal at 45 was to retire by 60. The only way I could figure out how to do that was to save like crazy. Now, I don't think I'm going to retire that early, but it's because I like what I'm doing. I think I will be able to afford it, though. After 60, I'll have a whole different perspective toward work, though.

At age 60 I want to retire and work part time low responsibility minimum wage jobs for fun. I always wanted to work at Taco Bell, an aquarium store, and at a deli. I cant afford to work at a job like that now but I can wait.

I'm 51. Back in late 2006 I started working for a friend who got elected to the Victorian Parliament here in Australia. At the time I was living about 50km away - there was an urgent need to move into the electorate.

In my new job I rapidly learned how appalling public housing was in Melbourne. What's more, some of the people had worked hard all their lives but, for one reason or the other, had not bought a house or saved. The pension was not enough to pay for private rental.

This spooked me so I decided to buy a flat in the electorate. I had some savings and not much debt. My sister lent me some money to get more of a deposit and, amazingly, I was able to get a thirty year (!!!) loan. (Remember, I'm 51 - I was 49 when I bought the unit.) Then I got even more risky - I renovated the kitchen (it was in a pretty bad state) on my credit card. The kitchen turned out to be rather more expensive than I had budgeted.

Well, it was time for a long term finance plan.

First, pay my sister. Done.

Second, get that thirty year payment period down. Thanks to a huge drop in interest rates (yeay, global financial meltdown!) and my determination to pay more than the minimum home repayments, I've got the loan down to 15 years on my current repayments and current interest rates.

Third, get the credit card debt down - on the way.

I've been living an austere live compared with some, but, like other people here, I hate debt.

A couple of other points to note.
1. I believe I have some equity in my flat so, if I had to sell, I wouldn't be in big trouble.
2. Employers in Australia must pay 9% of an employee's wage into an approved superannuation scheme.

Why not payoff the high interest credit card debt first and then take on the mortgage?

Why not payoff the high interest credit card debt first and then take on the mortgage?

I've ruminated frequently on that one. I could, in fact, draw on the mortgage to pay of the credit card. Similarly, I could have delayed paying my sister as she wasn't charging interest. (Nice sister!)

I think the answer is psychological. The 30 year loan period on the house was bothering me far more than the interest rate on the credit card. I felt like I was not in control of my future until the loan period was brought down.

With my sister, I felt morally bound to pay her first.

I've ruminated frequently on that one. I could, in fact, draw on the mortgage to pay of the credit card. Similarly, I could have delayed paying my sister as she wasn't charging interest. (Nice sister!)

I think the answer is psychological. The 30 year loan period on the house was bothering me far more than the interest rate on the credit card. I felt like I was not in control of my future until the loan period was brought down.

With my sister, I felt morally bound to pay her first.

Yeah it is pretty obvious that you would want to pay your sister off first. I paid off all of my non tax deductible debt first. I consider my debt reduction efforts as less of a priority than funding my retirement. I sometimes just view my efforts to pay down my debts as something like a hobby. One thing that I do is put all of the change and any refunds and most gift money toward the mortgage repayment. When I go to the bank and feel wierd that I am only making a prepayment of $7.50 in rolled up change, I usually throw a $20 bill on top of it. Since October of 2006, I have kept all of the mortgage and car loan receipts in boxes with a rubber band around the receipts from each calendar year. I have a collection of debt prepayment receipts. I know that I am a geek everybody.:wink: