Posted on 04/17/2009 6:21:04 PM PDT by FromLori
Read the book “The Millionaire Next Door”. The book has a whole chapter about why people making tons of money end up broke. Paycheck to paycheck is the main reason, and the author pointed out that these types of families exist in all types of neighborhoods, including upper middle class and working wealthy ones. Made my son read the book when he was in junior high school. At the time he hated it, but today he is a sophmore in high school and he thinks the book was awesome because it outlined the main causes how well to do people go bankrupt and how these stories are appearing in the news as the recession hits the country. He actually reread the book.
Why do we blithely accept the premise that the recession began at the end of 2007? That's a pure lib fabrication in order to place the blame on Bush.
my husband has lost one pension due to bankruptcy, and now in his present job, he has been cut down to 3 days a week...
neither of us has ever made a big salary.....
but you know what....we get up on his days off, when I’m not working, have a nice breakfast together, and then play cards...he’ll then go do some home repairs and such and I go about my business....
its quite nice actually......we don’t have a huge wad but we don’t have tremendous expenses either...
I'm sure you're right and I'll never have as much money as you. But I would prefer to live without debt than with debt and a big bank account somewhere.
Let me think for a minute. Judging by the rule of 72, your proposed 12-year-to-double investment is making about 6%? And I'm paying 5% for the $100,000 that I didn't pay off? So over 12 years, I pay ($500 * 12 mos/yr * 12 years) $72,000 out of pocket to have a $200,000 investment but I still have $76,000 in debt. That looks a lot like paying $72k to end up with $124k, a net gain of $52k.
What if, instead, I put that $500/month into the same 6% investment without the debt? I end up with $105k (a $33k gain) and still have zero debt hanging over my head. Or if I put it into something more risky but with a long-term track record that makes 10% per year and end up with $138k (a $66k gain) and zero debt.
Naaaa ... I'll be stupid and stay debt free. We can compare net worth in 2021 and see which way was actually the wiser path.
I agree; I’ve decided that the key to financial security is simply NOT buying “upgraded” houses and cars.
Buy one affordable house (there are 6 of us and 2000 sq ft is more than enough space), pay it off in 15 yrs and stay in it, maybe forever. Buy one good used car and keep it for much more than a decade, until it literally falls apart, maybe 200K miles later. Then buy another good used one.
And try to stay employed. And healthy. That’s it!
“That means even with a six figure salary he was living pay check to pay check.”
Yeah, but I bet he was “living large.”
Equity had a return when their were margin accounts and HELOC’s...but that was funny money anyway!
I feel for the guy, but as usual, this is CBS/Democratic Party (Communism) being the slender, cute, flirty woman in the office who knows you’re married but bends over a little much, show a little too much cleavage, wears a lot of perfume and always touches your arm when she speaks to you...
The lure is Government being your feeder, employer, doctor, protector and God... nothing short of that will make Obama or Soros rest, nothing.
The Cold War never ended, people on the American Left were always cheering for the Russians.
Are you looking for a job?
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You're not including the tax savings. You don't pay the full amount of interest because the interest is deductible. If you're in a 1/3 brqacket state and federal a 6% loan actually costs you 4% and you may save a little by lowering the marginal rate on the rest of your income.
Also in the policy you have a death benefit.
If you take your money out and put it into an investment, that’s the only way to get a rate of return. HELOCS charge higher interest and lessens the gain from your investment. Less arbitrage.
You're right ... I left those out. So please allow me to rejiggle the math.
A $100,000 30-year mortgage at 6% costs $600 per month. After 12 years, your client has paid out $86k and reduced the mortgage to $79k. This means he has paid $65k in interest of which $22k is deductable.
Subtract the deducted interest from the amount paid and over 12 years, your client has paid $64k out of pocket for a $200k asset and retains $79k in debt. His net worth is increased by $121k.
On the other hand, if he is my age (45) he can get $250k in 20-year term life insurance for $60 per month. Take that away from the $600 monthly payment and that leaves $540 per month to invest. $540 @ 6% for 144 months = $113k. With zero outstanding debt. And no worries over that debt for 12 years.
But what if I put it into one of the many, many S&P 500 index funds out there? Vanguard says theirs (VFINX) has averaged 9.76% over the past 35 years, even taking the current decline into consideration. Your client's $540 per month for 12 years becomes $146k. And he has no outstanding debt.
And if they invest it into a ROTH 401k or ROTH IRA, they pay no taxes on the money as they pull it out.
In a lot of urban areas, if you have a mortgage and a couple of kids, $100k is NOT a lot of money. It doesn't take much financial mismanagement or bad luck to put you in a tough situation. I would point out that the untold story of the expense of living in those areas is the taxes - property taxes, sales taxes, income taxes, to the point where the Commies who dominate our political culture pretty well achieve what they want "economic equality". Someone with a six figure income isn't much better off than the next guy, even though he may have invested several years and lots of his money into an education.
I am always wary of decrying “consumerism” because so many use it as the beginning argument against capitalism, but there is a lot of wisdom in what you say. If I could be satisfied with what I have and just save the money I waste on more stuff, I'd be a rich man by now.
IOW a bullshit merchant who has no known skills but has been feeding off the foam of the economic bubble. Tough shitsky. Go to work for once in your degenerate snivelling life and find out what it's like to raise a sweat, a-hole.
Bullshit merchant = Psychologist.
Nope. You don't know much about the average American. Go home and educate yourself on life outside your own little fishbowl. Most Americans are in good shape.
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