| What to do with $2000/month |
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Kiaser
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| What to do with $2000/month |
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I have some debt that will be paid off soon which will leave me with an extra $2000+ per month todo whatever with. If you had no debt and very little monthly living expenses, what would you do with an extra $24,000 a year (I'm 25)?
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Sun May 14, 2006 12:44 am |
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Kiaser
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quote:
Originally posted by coaster
Well, I thought of all kinds of smart-ass replies, but seriously, I suppose I'd just continue to build my portfolio. Not with all of it; some of it would go for "stuff." 
Why hold back the smart-ass replies 
Maybe the better question would be what order of importance should money go towards? Living expenses, debts, savings, retirement, funds, real estate, frivolous spending, etc? Of course there would be a balance of dispersed money but what percentages/weight do the different areas to put money carry? I've never actually seen any good references for how to breakup and disperse your income into various categories.
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Sun May 14, 2006 4:11 am |
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Mike K
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I am pretty much in the exact same situation and I am interested in seeing some replies.
Right now my only bills are my Truck payment and storage fees in the states for my truck, car, and household goods. So i take most of the rest of my income in I am investing it, 401K with company matchin, maxed out last years Roth IRA and still working on this years, and stocks. It works out to be roughly $4,000 a month i am investing.
But once i get back to the states I wont have such a low income to debt ratio and would like to make sure i stay out of debt. So i am intrested in seeing some comments on your second post.
To try and add a question to your topic, is there a general rule of thumb saying how much devt vs imcome is good and at what point does it become a concern? For example, if you add up all your expenses and it equiates to 90% of my income then there should be concern, but if it is less then... say... 50% then you are safe.
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Sun May 14, 2006 9:25 am |
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Mike K
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quote:
Originally posted by coaster
I don't think any debt is "good" and so the best ratio would be zero. What's safe? There are so many variables to take into account, but I suppose earning potential and how permanent it is would be a major factor. Obviously if one's tenure is tenuous then debt is more risky.
Now what about a mortgage? I keep seeing it referred to as 'good debt'.
I was also bundling debt and bills as one. Obviously a high interest loan for a purposeless car is bad debt, and high interest credit cards used to buy groceries are bad. Some may even go as far as to say credit cards in general are bad. On the other hand your monthly food expense or monthly electricity bill is needed.
I guess I should have separated monthly expenses and debt.
You are right about there being too many variables to give such a general statement.
Back on to Kaiser's topic,
Is that $2,000 a month after your monthly expenses or after money is already taken out for investing?
IF it was me (and like I said I am in the same situation) and that $2,000 was before your investments, I would put half of that into investing, maybe more. I just started investing (at 25) so right now I am trying to do a little ‘catch-up’.
-Mike
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Sun May 14, 2006 1:57 pm |
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Kiaser
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quote:
Originally posted by Mike K
Back on to Kaiser's topic,
Is that $2,000 a month after your monthly expenses or after money is already taken out for investing?
-Mike
That would be $2,000 left over after I pay all living expenses but no investing.
As far as "good debt", I agree with coaster there's not really such a thing. However, some are better than others (such as mortgage or student loans). These could be considered good debts because the interest is tax deductible, and on the mortgage point the investment can appreciate and actually gain you money. Of course, the best option is to buy everything you need outright so you don't have to pay interest, but unfortunately for large purchases (cars, houses, education) this isn't always an option. It's kinda a weight between what is worth more, the opportunity to get into an investment (car, houses, or education) or the interest you would save on NOT paying interest towards those investments. Sometimes houses and education can far outway the interest you'll end up paying, which is another reason it could be considered "good debt".
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Sun May 14, 2006 4:20 pm |
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nkthen
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I would say:
20% to savings
20% to insurance
60% to investment
That's just a guideline. Depending on how much you are willing to 'stomach' for investment.
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Wed Jun 14, 2006 5:42 am |
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Stock Mama
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I think the reason that they call the mortgage "good" debt is that, under the best circumstances, the value of the house increases at a higher rate that the interest you're paying on the mortgage, so you (if all goes well) come out ahead at the end.
Better still, though, to get the mortgage paid off as quickly as possible so that the value of the house increases and you're not paying any interest at all.
Also, equity in the house can be leveraged to create other investment opportunities -- if you know what you're doing. Which I don't. Which is why I haven't.
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Thu Jun 15, 2006 4:36 am |
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richdadmoney
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Buy real estate or educate myself
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Sat Jun 17, 2006 8:18 am |
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more freedom
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I would invest the money. Either invest in real estate or invest in financial education
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Thu Jul 13, 2006 3:48 am |
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oldguy
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quote:
With respect to a mortgage being a "good debt" which would you prefer: own your house free and clear, or own a mortgage on it? A mortgage is debt. You're under an obligation to the mortgage company to pay them principal and interest.
I prefer a mortgage. About 20 years ago I had 2 of my houses free and clear - the Returns were substantially lower than the leveraged houses - soon after I put loans on them and invested the cash elsewhere, it was a very profitable move. Leveraged real estate can be a powerful tool, both as a stand-alone investment and as a money source for other investments.
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Fri Jul 14, 2006 12:18 am |
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Kiaser
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quote:
Originally posted by coaster
Well, I think there needs to be a separation between a house as a personal dwelling and real estate as an investment. As an investment, sure....leverage it. As far as a personal dwelling, I like the idea of a house being owned free and clear of obligation to a creditor. Then it's my refuge---nobody's gonna take it away from me!! Kiss off, you big impersonal banks that don't care two hoots whether I'm out on the street!! 
If you play your money right you can consider that you never "bought" a house, you simply change the money into one of the most non-liquid forms of investment. And if that's good or bad only depends on how well you did the research (was the house worth investing in), compared to other avenues of investment (mutual funds). But nonetheless, everyone HAS to live somewhere, so might as well make the money your putting into living be available later (either as an appreciating asset you finally sell or use as equity).
I always try to tell people that unless they pay for the house fully with their own money, never use it for equity or collateral, and live in it from when they bought it until they die (never sell it or rent it), that they aren't actually "buying" a house. Rather simply just turning their money into an asset for later use (either sale for profit, use as a line of credit, or loan collateral).
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Fri Jul 14, 2006 7:53 pm |
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