In reply to einy (Forum Supporter) :
I have a professional financial advisor and believe me, I didn't come here to be told how to build my financial future. Hence my initial disclaimer. (That said, it's not like the pros can't get it wrong either.)
We just live in strange times and sometimes a guy wonders when it's time to cash out his chips, pay the bar tab, and leave the casino. Push the reset button on the financials, as it were. Just wondering if I'm the only one.
pointofdeparture said:But I've never thought about it as seriously as I am right now.
Hi pointofdeparture,
I do statistical analysis for a living, have a passion for investing (I cheer for corporations like others cheer for sports teams), and have read dozens of books / hundreds of articles by economists, financial advisors, and most importantly to me, statisticians on the subject of investing.
Long ago (I'll be 56 at the end of this month) I concluded that trying to time the market is a fool's errand and I adopted the mantra of "never, never, never sell in fear".
Having said all of this, my confidence was seriously challenged in early May and I, like you, gave serious consideration to converting some or even most of my tax protected equities (401K & Roth IRA) into cash to weather out the storm. BTW, I had no problem sticking to my convictions during the 2008 meltdown but this situation seems different partly because I'm now 12 years closer to retirement but mostly because I don't feel like I can accurately characterize, in statistical terms, what "bad" or "really bad" or "oh, berk" looks like in this context.
Anyway, I'm working from home for the time being and while at the bottom of my confidence I was watching Liz Claman's "Closing Bell" as my 15 year old daughter walked past my room. I asked her to join me for the day's stock market close and I mentioned to her that I was thinking about taking a significant flight to safety. She immediately replied with "but dad, you taught me to never, never, never sell in fear".
That young lady will one day be in control of a sizable estate (specifics would be vulgar so I'll leave the numbers to the imagination) and there's no better single piece of guidance I could possibly leave her with than "never, never, never sell in fear".
Not only didn't I sell, my daughter was so effective in reminded me of what I've learned over decades of study and investing that it now feels much more like 2008 than 2020.
Look out world, a little bada$$ 15 year old is coming up!
Listening to Ramsey, watching youtube peoples, and taking advice from randoms on a car forum is all well and good. But more important is to learn to do the math.
I will only add that Gen2 Prius have been very good to me financially. Sure, the mpg is good but even better seems to be that the maint costs and needs are very low.
Yes, they may be dull but for me they have been the right tool for the job.
John Welsh (Moderate Supporter) said:I will only add that Gen2 Prius have been very good to me financially. Sure, the mpg is good but even better seems to be that the maint costs and needs are very low.
Yes, they may be dull but for me they have been the right tool for the job.
I've strongly come around to the Prius appliance idea in the past few months, to the point that my buddy who's the auction buyer for a local dealer is keeping his eyes peeled for the right Gen3 for me. I had already decided before making this post that the VW payment needs to go...
In reply to einy (Forum Supporter) :
Why would any of these people want to help other people unless they are making bank regardless of outcome? I am not half suspicious.
In reply to ProDarwin :
Right there with you. Only thing I couldn't pay off is the house cash but I do have over a year of living expenses quickly at hand. Cash flow management is a skill and why would I pay cash when I can borrow everything under 2.5% including my house now.
In reply to pointofdeparture :
Don't rule out a Gen2. The Gen3s will bring a much higher price, even at wholesale. The Gen2s are overlooked. Sure, the Gen3 is a bigger car with a bigger engine and delivers better economy but the Gen3 has more issues. Gen3s are known for burning oil and blowing HGs.
As a result of this, compare Gen2 and Gen 3 engine prices on www.car-part.com
For my area, real sample prices of Prius gas engines:
You just plain can't give away Gen2 engines. There is no demand for them so there is a huge supply of them making the prices cheap. However, for Gen3 engines the demand is high and the supply is low making the prices high.
Another sample is retails:
Nearly half the purchase price for Gen2. Just some food for thought and maybe search/compare similar in your market. Speaking of markets, I am generally in the Cleveland, Ohio market so I understand real rust and the Gen2 Prius is amazingly rust resistant. My theory was that these were expensive cars for their day and other than the technology their costs were driven by the desire to make them light which lead to a better alloy of metal with a higher alum content.
I have a 2004 w/190+ miles of all Cleveland driving and just barely has some rust bubbles at the rear rocker. Barely.
Put me down for zero debt or as little as possible.
Any of you every smash your hand or hit yourself with a big half inch drive ratchet or cheater bar?
That is what happens when leverage turns against you. Leverage is risky.
Do the math; beat the spread... is an overly simplistic viewpoint. Anyone playing that game is not calculating risk in their assessment of investments versus dept.
I would not ever pull money from retirement funds to pay debt. However, I would slow or stop contributions to clean up consumer dept if I was committed to a budget and had spending in control. In other words, live on a real budget for three or four months and see how much progress you can make on debt before making that choice. I would also consider your job stability and general life situation before draining any non retirement accounts to pay off debt. For what it is worth, that actually agrees Dave Ramsey and various other folks in the financial advice community.. I would generally keep more easily accessible funds available in the current environment.
tester (Forum Supporter) said:Any of you every smash your hand or hit yourself with a big half inch drive ratchet or cheater bar?
That is what happens when leverage turns against you. Leverage is risky.
The same thing can happen with paid off assets as well.
ProDarwin said:tester (Forum Supporter) said:Any of you every smash your hand or hit yourself with a big half inch drive ratchet or cheater bar?
That is what happens when leverage turns against you. Leverage is risky.
The same thing can happen with paid off assets as well.
That is true, but say the housing market craters and my house is suddenly worth half of what I paid for it.
That doesn't prevent me from living in it.
In reply to Duke :
Well said. You will always need shelter. ( food, clothing, shelter ) a paid off or simply affordable payments will keep you out of the rental market
. The rental market can and will increase at the landlords whim. Forcing you to either keep paying higher rents or move again to someplace cheaper.
Mortgage on the other hand can last up to 30 years at one cost.
Yes property taxes adjust as the value of the property goes up. However since most property tax reflects 1-1&1/2% of the value of the property that will be a rather trivial increase in your monthly cost.
Especially when property appreciates at about the rate of inflation. ( unless it's particularly prime real estate such as lakeshore, ocean frontage, or great school district) in which case it appreciates at 2-3 times inflation. More during times of high inflation.
Do people even remembered the concept of indentured servitude? As horrible as it seems, for what we call the middle class, it is our current economic reality in the land of the Free. The boss be "Massa Debt". "He treat us right long as we don't sass-back or step out of line."
Imagine what that indentured slave felt like the day he finally canceled out his debt to the owner. THAT is what no debt feels like. Can investments replace that feeling if we keep the yoke on? Or maybe for some, the dream of taking the yoke off is better than the reality, and investments keep the dream alive. That has value.
In reply to NOHOME :
Agreed. Writing that last check to pay off my mortgage back in 2013 felt amazing.
I'll still get car loans if the rate is low enough, but it is so much easier to live below your means and build up savings without a mortgage payment. And my mortgage was a lot lower than most.
So place me firmly in the "no debt" camp.
As far as investments go, I'll be 50 next month and while I'm hopefully another 10 years away from retirement, my plan is to start shifting my portfolio into less volatile investments within the next few years.
In reply to ProDarwin :
Foreclosures typically happen when you have a mortgage. As long as you hold a mortgage, you are carrying risk.
To be clear, leverage is debt. So no, paid off assets do not present that risk. The value of assets can and will fluctuate, but that alone does not bloody your knuckles like having a note called by the bank. Buying in a bad neighborhood or a bad property or bad stock or bad investment ... is a risk, but typically avoidable or correctable in the long run.
Personally, I had my "moment of awakening" regarding living beyond my means late last year. My consumer debt balances have been steadily decreasing, but with everything going on in the world today...y'know. It's easy to be a little anxious.
The ultimate goal is to be debt-free other than the mortgage as soon as practically possible. Not very worried about the mortgage, I bought a modest house at the right time and even if the market goes tits up I'm paying less to own than all of my friends are to rent.
I do feel the "slave to the debt machine" analogy though. That's definitely part of what took my thoughts down this path.
Luckily I'm having this realization now (at 30) while I still have plenty of time to correct, at least.
NOHOME said:Do people even remembered the concept of indentured servitude? As horrible as it seems, for what we call the middle class, it is our current economic reality in the land of the Free. The boss be "Massa Debt". "He treat us right long as we don't sass-back or step out of line."
Imagine what that indentured slave felt like the day he finally canceled out his debt to the owner. THAT is what no debt feels like. Can investments replace that feeling if we keep the yoke on? Or maybe for some, the dream of taking the yoke off is better than the reality, and investments keep the dream alive. That has value.
You only have to work as much as your spending dictates.
In reply to Robbie (Forum Supporter) :
see my signature line.
The greatest thing that being debt free has brought is the freedom to make wild career changes. There is literally no downside to taking a chance with doing something that is outside of your existing skillset if money is not a factor.
I’m on a mini vacation visiting my parents, and typing from my phone. This will be shorter than I would normally post on this subject. Full disclosure, I’m overinvested in healthcare companies - specifically ABBV - for reasons unrelated to Covid originally, and in the company I work for because I believe in us, and I have an excellent ESPP.
First, we have seen market volatility like this before. You can cherry pick to say it would be better to dump it than hold it, but that is not correct for most investment managers/investors. Buy and hold will win most of the time. This should not be considered different right now.
Second, the stock market is not the economy. They’re related. But not one and the same.
Third, debt is a powerful tool. Like any tool, it can help you build an empire, or it can make an empire tumble to the ground.
I have more debt than I’m comfortable with right now. I had the opportunity to sell stock to pay it all off, except for the mortgage. I decided to restructure it into a 0% credit card. Had to pay 3% fee. Was it worth it? Maybe, maybe not. But that’s where my head is - I’ll see a better return with the stock market than 3% on debt.
mtn (Forum Supporter) said:I’m on a mini vacation visiting my parents, and typing from my phone. This will be shorter than I would normally post on this subject. Full disclosure, I’m overinvested in healthcare companies - specifically ABBV - for reasons unrelated to Covid originally, and in the company I work for because I believe in us, and I have an excellent ESPP.
First, we have seen market volatility like this before. You can cherry pick to say it would be better to dump it than hold it, but that is not correct for most investment managers/investors. Buy and hold will win most of the time. This should not be considered different right now.
Second, the stock market is not the economy. They’re related. But not one and the same.
Third, debt is a powerful tool. Like any tool, it can help you build an empire, or it can make an empire tumble to the ground.
I have more debt than I’m comfortable with right now. I had the opportunity to sell stock to pay it all off, except for the mortgage. I decided to restructure it into a 0% credit card. Had to pay 3% fee. Was it worth it? Maybe, maybe not. But that’s where my head is - I’ll see a better return with the stock market than 3% on debt.
More on the bolded part: it takes many tools to build an empire, but only one used incorrectly to tear it down. Keep that in mind.
On my last part, I’m in a position that is relatively unique in terms of life happening, but financially probably pretty common. There may be a difference in the sense of I have had this, almost to a T, as a possible outcome. So this is not a surprise.
Being Debt free is always a great idea. However, It's best to have Income Producing Investment and a little Debt than being debt free but no money coming in.
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