Stock Market is the bottom in?

[chummer]

I have never understood the logic of car loans. My wife and I have never taken out a car loan. Taking a loan out for more than you can afford and paying interest on an asset that loses value everyday???

The problem with debt is that most people become addicted to it to support a lifestyle. They rationalize what the want vs what they really need and finance indulgences. That's why the average car loan is over 72 months and personal & commercial loan defaults are at an all time high. Folks take out equity loans against their house and pretty soon owe more than they own. Build up credit card balances that they can only afford to pay the interest.

Eliminating debt is hard and a discipline that many can't manage. Once you understand the Rule of 72, amazing what you can doing by moving $$ away from debt and into investments.

That 8th wonder of the world is a pretty cool place to be once you figure it out.

The math isn’t on your side. Credit cards, yes horrible idea not to pay those off every month. I think my truck loan was something like 45k at 2.9%. This math is not exact but I will end up paying around 52K for the truck. I put that same 45k in the market and instead of getting $52k back I get $173k back, and I will get another $20k when I sell the truck. The key is to invest the $45k and not blow it on hookers and blow. The math is made up but you get the idea. I never use my money when the bank lets me use theirs. My money can go to work so I can stop working at an early age. You are right that none of this works if your income doesn’t support your life style.

 

[yoderjac]

I


It depends on your tax bracket. For most people, a 401k is better than a Roth.

It more depends on age than tax bracket. You can't beat matching funds if your company does that. Many 401Ks now have both traditional and Roth options. I think young folks benefit more from a Roth as they have a much longer time horizon for the earnings to grow tax free. When you get old and your time horizon is shorter, transferring money from traditional to Roth does depend on your tax bracket. It is one way to reduce the higher bracket that RMD can cause, but when your transfer to Roth you've reduced what you have to invest by paying the tax. With a shorter time horizon, this may not make sense as there may not be enough time for the tax free earnings to compensate. I wish they had Roth when I was young.

Thanks,

Jack

 

[yoderjac]

The math isn’t on your side. Credit cards, yes horrible idea not to pay those off every month. I think my truck loan was something like 45k at 2.9%. This math is not exact but I will end up paying around 52K for the truck. I put that same 45k in the market and instead of getting $52k back I get $173k back, and I will get another $20k when I sell the truck. The key is to invest the $45k and not blow it on hookers and blow. The math is made up but you get the idea. I never use my money when the bank lets me use theirs. My money can go to work so I can stop working at an early age. You are right that none of this works if your income doesn’t support your life style.

Car loans make sense for young people just starting out who need a car to get to work. The problem is that most buy new expensive cars with big loans rather than buying a serviceable used vehicle and drive it until it dies. The industry drives kids to think in terms of what monthly payment they can afford. Using a short term with a high monthly payment forces you to live leaner. Then when the loan is paid your loan payment can go into savings for your next car. Hopefully the car you got lasts long enough to save enough that you don't need a loan for the next car.

 

[chummer]

Car loans make sense for young people just starting out who need a car to get to work. The problem is that most buy new expensive cars with big loans rather than buying a serviceable used vehicle and drive it until it dies. The industry drives kids to think in terms of what monthly payment they can afford. Using a short term with a high monthly payment forces you to live leaner. Then when the loan is paid your loan payment can go into savings for your next car. Hopefully the car you got lasts long enough to save enough that you don't need a loan for the next car.

I would still say finance the car and put the money you saved in the market. My play account has went from 36k to 95k in less than three years. Under your thinking I would have spent the 36k on the car. Today I would have a car worth 18k and no 95k still working everyday for me. Way ahead even after you subtract out 16k I would have made in car payments.

 

[yoderjac]

I would still say finance the car and put the money you saved in the market. My play account has went from 36k to 95k in less than three years. Under your thinking I would have spent the 36k on the car. Today I would have a car worth 18k and no 95k still working everyday for me. Way ahead even after you subtract out 16k I would have made in car payments.

Car loans are very expensive money. There are lots of less expensive ways to finance investment. Having said that, I was speaking to young folks starting out. In general, they should not be leverage investing.

For folks that are well established, like me, I'm considering taking out a home lone after we build our home. I don't need the loan (fingers crossed) as we hope to build using the equity when we sell our current home. However if mortgage rates continue to be this low, with decades of time horizon, that may be a reasonable use of leverage.

Thanks,

Jack

 

[SD51555]

So as to offend everyone equally, I will simply say this: Every single person that chimed in on this is wrong, especially Chummer with his comments about hookers and blow.

Pick up a few books and figure it out. If you do, you can double or triple your effective take by avoiding mistakes. You've really got to understand your situation better than anyone, and understand where you're going. I'm a good example of this. I may be the only one moving from a low tax state to a high tax state when I retire, and it may very well pay enormous dividends in the form of cheap property. That greatly lessens the amount of $$ needed for that retirement build.

When I lived in MN and made good money, I deferred all my taxes (401k). When I moved to SD and slowed down a bit, I converted all of it to Roth for nearly half what I took a deduction in MN.

Refugees are fleeing to Florida, Texas, and Arizona for the weather and taxes. Many have to because they never had any kind of roth assets whatsoever. Well what good are those state tax savings if your retirement home costs 2-4x what it would cost in a normal or high tax state? I'm probably moving back into MN later in life, and will carry with me almost zero taxable assets. I'll be living like a fat man, and paying little to no tax. With everyone abandoning MN, it'll probably be very easy to buy up lots and lots of land in rec country for nothing.

A hundred hours of reading and self discovery beats the hell outta working an extra 10-15 years and finding out too late you're still broke.

 

[yoderjac]

So as to offend everyone equally, I will simply say this: Every single person that chimed in on this is wrong, especially Chummer with his comments about hookers and blow.

Pick up a few books and figure it out. If you do, you can double or triple your effective take by avoiding mistakes. You've really got to understand your situation better than anyone, and understand where you're going. I'm a good example of this. I may be the only one moving from a low tax state to a high tax state when I retire, and it may very well pay enormous dividends in the form of cheap property. That greatly lessens the amount of $$ needed for that retirement build.

When I lived in MN and made good money, I deferred all my taxes (401k). When I moved to SD and slowed down a bit, I converted all of it to Roth for nearly half what I took a deduction in MN.

Refugees are fleeing to Florida, Texas, and Arizona for the weather and taxes. Many have to because they never had any kind of roth assets whatsoever. Well what good are those state tax savings if your retirement home costs 2-4x what it would cost in a normal or high tax state? I'm probably moving back into MN later in life, and will carry with me almost zero taxable assets. I'll be living like a fat man, and paying little to no tax. With everyone abandoning MN, it'll probably be very easy to buy up lots and lots of land in rec country for nothing.

A hundred hours of reading and self discovery beats the hell outta working an extra 10-15 years and finding out too late you're still broke.

I don't think anyone will be offended since you chimed in on this as well.

 

[Telemark]

It doesn't have to be either/or. Fortunately, you can contribute to both. I don't want to sidetrack the thread, but this comment is absolutely dependent on your taxable income. I would also never describe "most people" as earning more than $139K (the max Roth IRA salary level), as it is factually not true.

There's a few fallacies in there. First, I never said most people aren't allowed to contribute to a Roth. I said for most people a 401k is better. I also said it depends on your tax bracket. The math is a bit complicated, but it's easy to understand, and it's available all over the internet.

Can you contribute to both? Sure. But you should max out your 401k first.

 

[roymunson]

So as to offend everyone equally, I will simply say this: Every single person that chimed in on this is wrong, especially Chummer with his comments about hookers and blow.

Probably my favorite opening line to a post on the entire forum... Well done.

Bottom line is, you still have to get up, go to work, and generate dollars to make all this happen. Not to mention we're mostly land owners and managers here. Most of us have a larger income than the general population. And there are multiple ways to maximize those dollars, depending on your goals.

I prefer to keep it simple, but I can see how the stock market over the last 4 years of so has become an intoxicating drug. Nearly as intoxicating as hookers and blow.Or so I've heard.

 

[Tree Spud]

The math isn’t on your side. Credit cards, yes horrible idea not to pay those off every month. I think my truck loan was something like 45k at 2.9%. This math is not exact but I will end up paying around 52K for the truck. I put that same 45k in the market and instead of getting $52k back I get $173k back, and I will get another $20k when I sell the truck. The key is to invest the $45k and not blow it on hookers and blow. The math is made up but you get the idea. I never use my money when the bank lets me use theirs. My money can go to work so I can stop working
at an early age. You are right that none of this works if your income doesn’t support your life style.

I would still say finance the car and put the money you saved in the market. My play account has went from 36k to 95k in less than three years. Under your thinking I would have spent the 36k on the car. Today I would have a car worth 18k and no 95k still working everyday for me. Way ahead even after you subtract out 16k I would have made in car payments.

I get it, as I said above, people rationalize debt. If you enjoy the truck that is great.

You didn't really save money though by financing you actually incurred a debt on the balance sheet. A debt on an asset that loses value of 20% the first year and then on average 15% every year after that plus the interest paid. So any investment you make has to make more than the loss on the vehicle just to break even.

 

[MN Slick]

I would really like to get into investing. I have the typical 401K, managed by someone through my employer but I would also like to start investing some of my savings. I'd really like to get into some real estate/rental properties but would also like to get into the stock market. I really don't know where to start, do you all use the online services or go through money managers?

Do not hire a money manager!! Read The Little Book of Common Sense Investing by John Bogle.

 

[chummer]

For the record I am not against hookers and blow.

Sent from my SM-G981U using Tapatalk

 

[Tree Spud]

So as to offend everyone equally, I will simply say this: Every single person that chimed in on this is wrong, especially Chummer with his comments about hookers and blow.

Pick up a few books and figure it out. If you do, you can double or triple your effective take by avoiding mistakes. You've really got to understand your situation better than anyone, and understand where you're going. I'm a good example of this. I may be the only one moving from a low tax state to a high tax state when I retire, and it may very well pay enormous dividends in the form of cheap property. That greatly lessens the amount of $$ needed for that retirement build.

When I lived in MN and made good money, I deferred all my taxes (401k). When I moved to SD and slowed down a bit, I converted all of it to Roth for nearly half what I took a deduction in MN.

Refugees are fleeing to Florida, Texas, and Arizona for the weather and taxes. Many have to because they never had any kind of roth assets whatsoever. Well what good are those state tax savings if your retirement home costs 2-4x what it would cost in a normal or high tax state? I'm probably moving back into MN later in life, and will carry with me almost zero taxable assets. I'll be living like a fat man, and paying little to no tax. With everyone abandoning MN, it'll probably be very easy to buy up lots and lots of land in rec country for nothing.

A hundred hours of reading and self discovery beats the hell outta working an extra 10-15 years and finding out too late you're still broke.

Thanks ... always good to have the smartness guy in the room agree with you.

You can only do what you describe above if you have learned how to avoid building a level of debt that consumes all of your income.

By the way, your assumption on folks moving to FL, TX, & AZ is limited in perspective. For some, even maxing out their roth, will have limited impact on reducing taxes given their income off their investments in retirement so moving to low tax states has significant value.

At the end of the day, it's not what you make, it's what you keep.

 

[PatinPA]

So as to offend everyone equally, I will simply say this: Every single person that chimed in on this is wrong, especially Chummer with his comments about hookers and blow.

Pick up a few books and figure it out. If you do, you can double or triple your effective take by avoiding mistakes. You've really got to understand your situation better than anyone, and understand where you're going. I'm a good example of this. I may be the only one moving from a low tax state to a high tax state when I retire, and it may very well pay enormous dividends in the form of cheap property. That greatly lessens the amount of $$ needed for that retirement build.

When I lived in MN and made good money, I deferred all my taxes (401k). When I moved to SD and slowed down a bit, I converted all of it to Roth for nearly half what I took a deduction in MN.

Refugees are fleeing to Florida, Texas, and Arizona for the weather and taxes. Many have to because they never had any kind of roth assets whatsoever. Well what good are those state tax savings if your retirement home costs 2-4x what it would cost in a normal or high tax state? I'm probably moving back into MN later in life, and will carry with me almost zero taxable assets. I'll be living like a fat man, and paying little to no tax. With everyone abandoning MN, it'll probably be very easy to buy up lots and lots of land in rec country for nothing.

A hundred hours of reading and self discovery beats the hell outta working an extra 10-15 years and finding out too late you're still broke.

What books would you suggest?

 

[roymunson]

Do not hire a money manager!! Read The Little Book of Common Sense Investing by John Bogle.

With all due respect, I have a guy who understands this stuff and knows what's available far more than I do.

I don't invest in something I don't understand (ie. bitcoin) but I've got a person I trust handling it and i go back to work finding a way to add more dollars to this equation.

 

[PatinPA]

Thanks for the replies. My 401K isn't quite maxed out but it's getting close. I have it as aggressive as possible although I haven't been too impressed with my returns. I've been inching it up every year trying to lower my taxable income. I'm well past my employer match. I'm finally to the point in life where I can actually save a few bucks and want to make it start working for me. I'm 42 so I have a ways to go yet but early retirement is most definitely a life goal of mine.

 

[roymunson]

generally speaking, slow and steady wins the race.

If I ever have a bunch of money, I'll credit my wife getting on board with getting rid of debt straight out of college. By the time our kids were born, all we had was the house. It allowed us to make good financial decisions rather than be behind the 8 ball so to speak and making bad decisions based on who I owe money to. The flexibility and ability to strike when opportunities arise have paid us back in spades. But I guess my discipline and early sacrifice is just my white privilege showing, right?

 

[SD51555]

What books would you suggest?

The de-programming books first.

Rich Dad Poor Dad
The Cashflow Quadrant

Then I'd find a basic income tax class, and take it. Beware the ones put on by HRB or any other refund chop shop. You just need to learn to speak the language. Develop some foundational principles and learn the words, then self discovery accelerates. Investment quacks love to use jargon and speak over people. It makes people think they're smart.

Once you've got the mechanics down, you can start reading ideas from people you meet, people on the internet, investing articles, books, and advertisements. I've read most of the books, and they're all good to some extent. At some point, you've got to pick a path that will be how you do it. And that is gonna be influenced by you and your style.

 

[roymunson]

generally speaking, slow and steady wins the race.

except when regarding hookers and blow. Then it's fast n furious

 

[FarmerDan]

The de-programming books first.

Rich Dad Poor Dad
The Cashflow Quadrant

Then I'd find a basic income tax class, and take it. Beware the ones put on by HRB or any other refund chop shop. You just need to learn to speak the language. Develop some foundational principles and learn the words, then self discovery accelerates. Investment quacks love to use jargon and speak over people. It makes people think they're smart.

Once you've got the mechanics down, you can start reading ideas from people you meet, people on the internet, investing articles, books, and advertisements. I've read most of the books, and they're all good to some extent. At some point, you've got to pick a path that will be how you do it. And that is gonna be influenced by you and your style.

Sage advice!