| What to do with an inheritance |
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littleroc02us
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By the way I threw more money into the market again today because my shares are so low. It's buying time people.
Romans 13:8 “Owe no man any thing, but to love one another: for he that loveth another hath fulfilled the law.”
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Tue Aug 09, 2011 2:52 pm |
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Tattersail
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quote:
Originally posted by artwest
I agree with litleroc02us. I don't understand why you would want to still be in debt.
You could be completely debt free, have $25,000 in an emergency fund and still have $1,000,000 invested in Mutual Funds that average 10-12% growth.
If I can average 10-12% growth with invested money, then instead of paying off the $25K I owe at 0.9%, shouldn't I invest it and come out 9.1 - 11.1% ahead? I could even invest it in something less risky, say a municipal bond paying 3.5%, and still be making 2.6% profit on my money.
I think being "debt free" has other intangible benefits as far as state of mind goes, but based on pure math, it doesn't make sense to pay off really low interest debt earlier than necessary.
Tattersail
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Tue Aug 09, 2011 2:54 pm |
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littleroc02us
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quote:
Originally posted by Tattersail
quote:
Originally posted by artwest
I agree with litleroc02us. I don't understand why you would want to still be in debt.
You could be completely debt free, have $25,000 in an emergency fund and still have $1,000,000 invested in Mutual Funds that average 10-12% growth.
If I can average 10-12% growth with invested money, then instead of paying off the $25K I owe at 0.9%, shouldn't I invest it and come out 9.1 - 11.1% ahead? I could even invest it in something less risky, say a municipal bond paying 3.5%, and still be making 2.6% profit on my money.
I think being "debt free" has other intangible benefits as far as state of mind goes, but based on pure math, it doesn't make sense to pay off really low interest debt earlier than necessary.
You must always quantify for risk. What if you don't average 10-12% there is no guarantee? Risk completely breaks down math and it's hard to compute. You only thinking of the positive results.
Romans 13:8 “Owe no man any thing, but to love one another: for he that loveth another hath fulfilled the law.”
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Tue Aug 09, 2011 3:19 pm |
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oldguy
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quote:
What if you don't average 10-12% there is no guarantee? Risk completely breaks down math and it's hard to compute.
Two things - (1) you don't want a guarantee. The no-risk guaranteed products (CDs, etc) are guaranteed to track inflation. They provide safe storage of money and they 'guarantee' that your purchasing power will not increase. So an invester in his wealth building years, would be avoiding guarantees. (2) hard to compute? I seem to recall that you have contributed some fairly heavy duty statistical calculations, I'm guessing that you can do a 'probable outcome' on a 30-yr investment?
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Tue Aug 09, 2011 4:25 pm |
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Tattersail
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quote:
Originally posted by littleroc02us
You must always quantify for risk. What if you don't average 10-12% there is no guarantee? Risk completely breaks down math and it's hard to compute. You only thinking of the positive results.
Agreed. I was just using the numbers you provided. Then I added a much lower number for a muni bond with much lower risk to show that it would still come out ahead of paying off a low interest secured debt.
And to Oldguy, I would point out that you might want a guarantee if you're planning to use that money in the near term. For example, I will be forking over college tuition for the next 5 years. I withdrew most of that money from stocks and put it into CDs about 6 months ago, and I am quite happy I did.
Cheers.
Tattersail
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Tue Aug 09, 2011 5:24 pm |
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littleroc02us
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quote:
Originally posted by oldguy
quote:
What if you don't average 10-12% there is no guarantee? Risk completely breaks down math and it's hard to compute.
Two things - (1) you don't want a guarantee. The no-risk guaranteed products (CDs, etc) are guaranteed to track inflation. They provide safe storage of money and they 'guarantee' that your purchasing power will not increase. So an invester in his wealth building years, would be avoiding guarantees. (2) hard to compute? I seem to recall that you have contributed some fairly heavy duty statistical calculations, I'm guessing that you can do a 'probable outcome' on a 30-yr investment?
Old Guy I have provided tons of 30 year outcomes that can happen in an ideal world where nothing happens to you or your family, but what that leaves out is the risk that I lose my job and cannot pay my bills or I become disabled or I get sued or I have a child who has a big medical problem or etc.... If you lose your job and you have no money then you can't continue to invest and you have to focus on eating and your livelehood and in the meantime you aren't able to stock money away because you have to make ends meet somehow. The list of Risk can go on and on. Most people seem to forget these factors and only work the mathematics and what good can happen if you put away money for 30 years and you might make 10%, nobody seems to calculate the worst case scenario.
Romans 13:8 “Owe no man any thing, but to love one another: for he that loveth another hath fulfilled the law.”
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Tue Aug 09, 2011 5:48 pm |
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coaster
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Remember that risk is a bell curve. Most outcomes are somewhere in the middle. If you prepare for something way out in the tail that has a 1% chance of happening, you're not making very efficient use of your assets. How far out on the curve should you go? I've never found any better indicator than the old "whatever makes you sleep well at night."
~Tim~
Eye Candy : Why Whimsy
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Wed Aug 10, 2011 4:27 am |
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jfurnish
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If you put your capital in the in the 4 companies I posted earlier then when they pay the dividends you can take that and pay down your debt. That way your capital is still there and your can become debt free.
Good luck
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Wed Aug 10, 2011 2:03 pm |
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oldguy
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quote:
Old Guy I have provided tons of 30 year outcomes that can happen in an ideal world where nothing happens to you or your family, but what that leaves out is the risk that I lose my job and cannot pay my bills or I become disabled or I get sued or I have a child who has a big medical problem or etc.... If you lose your job and you have no money then you can't continue to invest and you have to focus on eating and your livelehood and in the meantime you aren't able to stock money away because you have to make ends meet somehow. The list of Risk can go on and on.
Exactly. And it brings up a good point. Pessimists & Optimists. Give that same list to each of them - the pessimist looks at each one and says 'way too much risk, I'm going to avoid taking a chance on that project.' And the optimist says 'yes, those are all possible, but probably only 1 of the 10 horrors will happen to my family, so I'll go ahead with the project and try to manage atround the 1 disaster when/if it happens.
And there is nothing wrong with either, both positions are correct for that person - and we need both kinds of people.
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Wed Aug 10, 2011 3:13 pm |
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littleroc02us
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quote:
Originally posted by oldguy
quote:
Old Guy I have provided tons of 30 year outcomes that can happen in an ideal world where nothing happens to you or your family, but what that leaves out is the risk that I lose my job and cannot pay my bills or I become disabled or I get sued or I have a child who has a big medical problem or etc.... If you lose your job and you have no money then you can't continue to invest and you have to focus on eating and your livelehood and in the meantime you aren't able to stock money away because you have to make ends meet somehow. The list of Risk can go on and on.
Exactly. And it brings up a good point. Pessimists & Optimists. Give that same list to each of them - the pessimist looks at each one and says 'way too much risk, I'm going to avoid taking a chance on that project.' And the optimist says 'yes, those are all possible, but probably only 1 of the 10 horrors will happen to my family, so I'll go ahead with the project and try to manage atround the 1 disaster when/if it happens.
And there is nothing wrong with either, both positions are correct for that person - and we need both kinds of people.
Totally not where I was going with that. Securing your families future in case you lose your job or dies is not being Pessimistic it's being responsible. I am an optimist all day long when it comes to work, family, sports, and finances. IMO since I know its a fact that I can be 100% debt free and invest to make millions in the stock market that is the way I will always give people advice because it involves the least amount of risk, for those who choose to gamble more, they may have higher rewards but their downwards spikes can lead them to total ruin. It can go both ways and that's a fact. For every winner there is a loser when it comes to risky investing.
Romans 13:8 “Owe no man any thing, but to love one another: for he that loveth another hath fulfilled the law.”
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Wed Aug 10, 2011 3:35 pm |
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oldguy
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quote:
Securing your families future in case you lose your job or dies is not being Pessimistic it's being responsible.
LOL - I almost added (to my last post) that when you suggest to a pessimist that he is a pessimist, the answer is always "I'm being realistic". But you gave it a new twist - responsible. But like I said - there is nothing wrong with either position.
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Wed Aug 10, 2011 4:09 pm |
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CaliChristian
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Perfect timing...I heard there's some stocks going for really cheap right now.
Non-Profit credit counseling. Over 20 years experience, we have helped over 200,000 families and individuals become debt free.
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Wed Aug 10, 2011 5:44 pm |
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kate032
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quote:
Originally posted by littleroc02us
IMO since I know its a fact that I can be 100% debt free and invest to make millions in the stock market that is the way I will always give people advice because it involves the least amount of risk,
Maybe this isn't what you intended, but you are saying that it's a fact that investing millions in the stock involves the least amount of risk. News of the past week has demonstrated something quite differently.
The problem with any financial advice is that one generic stock answer will not fit everyone's needs. Unfortunately, we're being conditioned that all debt is bad. I think most will agree that credit card debt is very bad, especially with the gigantic interest rates that are charged. However, for someone who has weighed the risks and benefits and seriously studied the situation, strategic debt such as oldguy has, can be used to one's benefit. That isn't the answer for everyone, of course, just as "no debt" is also not the answer for everyone.
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Thu Aug 11, 2011 4:52 am |
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littleroc02us
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quote:
Originally posted by kate032
quote:
Originally posted by littleroc02us
IMO since I know its a fact that I can be 100% debt free and invest to make millions in the stock market that is the way I will always give people advice because it involves the least amount of risk,
Maybe this isn't what you intended, but you are saying that it's a fact that investing millions in the stock involves the least amount of risk. News of the past week has demonstrated something quite differently.
The problem with any financial advice is that one generic stock answer will not fit everyone's needs. Unfortunately, we're being conditioned that all debt is bad. I think most will agree that credit card debt is very bad, especially with the gigantic interest rates that are charged. However, for someone who has weighed the risks and benefits and seriously studied the situation, strategic debt such as oldguy has, can be used to one's benefit. That isn't the answer for everyone, of course, just as "no debt" is also not the answer for everyone.
No that isn't what I said at all, I stated in many of the post that it is less risk adversed to be completely debt free and investing tons of money in a balanced manner that is the best approach in my opinon versus someone who never has found a loan or debt they didn't like and used it to leverage out investments and that when something goes wrong you will have more issues. Again no one seems to consider all things that could go wrong, they invest and borrow as though nothing could ever happen. So apparently most people are 100% sure that nothing will ever go wrong.
Romans 13:8 “Owe no man any thing, but to love one another: for he that loveth another hath fulfilled the law.”
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Thu Aug 11, 2011 7:29 pm |
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littleroc02us
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quote:
Originally posted by oldguy
quote:
Securing your families future in case you lose your job or dies is not being Pessimistic it's being responsible.
LOL - I almost added (to my last post) that when you suggest to a pessimist that he is a pessimist, the answer is always "I'm being realistic". But you gave it a new twist - responsible. But like I said - there is nothing wrong with either position.
yes it's always responsible to plan ahead for emergencies and to take care of your family. 
Romans 13:8 “Owe no man any thing, but to love one another: for he that loveth another hath fulfilled the law.”
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Thu Aug 11, 2011 7:34 pm |
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