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Discussion Starter · #1 ·
Don't buy anything unless you have cash for it. Six years of interest on $200k put into the correct investments can become with compounding interest over 2 million in retirement.
Not kidding. This is why I got rid of my truck. Nothing including a house should ever be financed. It is a strange concept at first but if see the maths on paper it is insane how much 3.5% interest can actually become if you don't spend it.
By renting an apartment for x amount and placing what would be interest in a low risk investment fund one can own a house without loan in less than 15 years. Far faster than a loan can be paid off and far less money put out for the actual house.
It is outside the box thinking but 0 debt is the answer.
Of course homes is the hard part of living debt free. The rest is easy. We are fooled into thinking a high FICO score is good. It is calculated on numbers which represent how much lending organisations make off of you. My goal is to check my FICO and it not exist. This would mean everything I purchase was bought with money I had and I had paid banks zero.
It means living simple until the wealth builds but in ten-twenty years it is going to mean doing whatever I want debt free.
On the other hand nice houses are worth it to many people. I don't fault them for that.
 

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Two skinny J's
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Don't buy anything unless you have cash for it. Six years of interest on $200k put into the correct investments can become with compounding interest over 2 million in retirement.
Not kidding. This is why I got rid of my truck. Nothing including a house should ever be financed. It is a strange concept at first but if see the maths on paper it is insane how much 3.5% interest can actually become if you don't spend it.
By renting an apartment for x amount and placing what would be interest in a low risk investment fund one can own a house without loan in less than 15 years. Far faster than a loan can be paid off and far less money put out for the actual house.
It is outside the box thinking but 0 debt is the answer.
Of course homes is the hard part of living debt free. The rest is easy. We are fooled into thinking a high FICO score is good. It is calculated on numbers which represent how much lending organisations make off of you. My goal is to check my FICO and it not exist. This would mean everything I purchase was bought with money I had and I had paid banks zero.
It means living simple until the wealth builds but in ten-twenty years it is going to mean doing whatever I want debt free.
On the other hand nice houses are worth it to many people. I don't fault them for that.
And then reality sets in for 97% of the population :)
 

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^^^^^^^Rola, she's got part of it good! Get rid of the credit cards. Otherwise, yes! Reality bites ya in the wallet! (Perhaps they do it differently in the UK, though).
Either way, stay that course, CW! seriously, to the best ya can!
 

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Don't buy anything unless you have cash for it. Six years of interest on $200k put into the correct investments can become with compounding interest over 2 million in retirement.
Not kidding. This is why I got rid of my truck. Nothing including a house should ever be financed. It is a strange concept at first but if see the maths on paper it is insane how much 3.5% interest can actually become if you don't spend it.
By renting an apartment for x amount and placing what would be interest in a low risk investment fund one can own a house without loan in less than 15 years. Far faster than a loan can be paid off and far less money put out for the actual house.
It is outside the box thinking but 0 debt is the answer.
Of course homes is the hard part of living debt free. The rest is easy. We are fooled into thinking a high FICO score is good. It is calculated on numbers which represent how much lending organisations make off of you. My goal is to check my FICO and it not exist. This would mean everything I purchase was bought with money I had and I had paid banks zero.
It means living simple until the wealth builds but in ten-twenty years it is going to mean doing whatever I want debt free.
On the other hand nice houses are worth it to many people. I don't fault them for that.
You're mostly right, but not on the housing issue. Where I live, your mortgage payment is likely to be less than rent for a similar size home would be. And the tax benefit (for my income bracket, anyway) far outweighs what any investment would pay these days.

To save $200k in 15 years would require you to invest more than $1,000/month. That would be on top of rent. If you are planning this from your 18th birthday, you would be about 33 when you had the cash. By that age, many people are married, with children. How much will an apartment to fit your family cost you? While still socking away at least that $1,000? In Utah, we have a lot of tech companies, and tons of college students willing to work for $10-12/hour. Their entire paycheck would not cover what you are suggesting.

Again, you are mostly right though. Many kids today would rather have a brand new car (poor use of their funds), instead of saving. I was proud when my son mentioned his $1,000 car payment. He bought a used car for transportation to his first real job out of college, and paid it off in 7 months. Lol. But that's not normal.

As Rola mentioned, most of us can't (or won't) be able to get by on cash alone. On that note, here's what I took to the bank last Thursday. Took their machine a while to count out all 367 of them. In exchange, I got a cashier's check, and another CTR filed. :eek:
 

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Two skinny J's
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^^^^^^^Rola, she's got part of it good! Get rid of the credit cards. Otherwise, yes! Reality bites ya in the wallet! (Perhaps they do it differently in the UK, though).
Either way, stay that course, CW! seriously, to the best ya can!
While it's not totally impossible I know you and I have the same military background and I still have LESs showing 200. 00 bucks a pay period! It was all we could do to keep gas in the car and food on the table, literally! There were honestly times when peanut butter and crackers were a good meal and then there was the jam sandwich....

Today we pay cash for almost everything and by that I mean we put a lot on a CC 1. for points and 2. for security.

I know every financial advisor would most likely tell us that but in the blue collar working mans world it just isn't possible for most.
 

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Discussion Starter · #7 · (Edited)
I just want to say. Best investment I ever made was a bike. Doesn't matter the cost best purchase ever.
Sprocket told me that financing is not my strong suite and I should now out of grown up topics. ;) She is surely right.
 

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Discussion Starter · #9 ·
My better sense tells me not to post this. Banks spend millions to get people to line up to beg to make them rich. My silly Welsh arse rambling won't make an impact but here it is anyways.
maybe did not explain it right but let's say you pay 2k in interest a year.*
If you invest 2k the interest on a home loan for 8 years. It is about 30,857 on year 9. 10 years later without investing a single dime more than the 16k you will have 85,570. After twenty years because of compound interest you have $825,435. That is simply 8 years of investing the interest on your home loan. If you think a home will increase by $800,000 by the time you pay it off then it is a good investment. If not even if rent is slightly more you are better off paying rent and investing the interest for the next 8 years then just waiting 20 years.*
It seems nuts because banks have invested millions to make us think a home loan is good for us. But the interest they make could make us a millionaire.
 

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I just want to say. Best investment I ever made was a bike. Doesn't matter the cost best purchase ever.
Sprocket told me that financing is not my strong suite and I should now out of grown up topics. ;) She is surely right.
No, you have some very valid points. In America, people use credit as an extension of their income. That's a horrible habit. For most things, you shouldn't buy it if you can't pay cash. Now you can get 6 and 7 year car loans, so the payment is small. And you end up upside down a lot sooner.

But buying a home is different. The security and stability of a home is important to many people. Not long ago, people and banks lost track of the basics - saving up a large down payment, and only using a small portion of your income for monthly payments. Banks got greedy, people got stupid, and zero down loans at 40+% of their monthly pay were suddenly okay. No biggie, the entire economy of the nation went into the toilet. Bankers got rich, then got a slap on the hand for packaging those bad loans as investments, which screwed EVERYONE else.

The smart move is to save for a big down payment (not the whole sale price), and aim for a 15 or 20 year loan, at under 30% of your monthly income. That shorter term loan also comes with a lower interest rate, saving you more. Paying cash for a home while you're young and single is unrealistic.

Also, any bike you ride is a good investment. :thumbsup:
 

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Seriously I am not smart enough to give advice. Certainly not financial.
I just want to say. Best investment I ever made was a bike. Doesn't matter the cost best purchase ever.
Sprocket told me that financing is not my strong suite and I should now out of grown up topics. ;) She is surely right.
CW, Don't think that way, at all. Being financially responsible is the direction you are going. You are doing it correct.... to the degree that Industry mentioned, as well as others. I even partially agree with Rola, for the credit and security. I did not mention that I have one card. Guess what... that one card got me two modes of transportation and, like you, the best mode was my Cannondale. The other was not by my choice, but by need! That card supplemented the car I had to buy to replace the car totaled out by a deer.
Otherwise, this card is the first card I've had in YEARS. Prior to no cards.... Oh, man!!!! I was not in serious debt, but the wife took all the cards to the MAX!!!!!!!!! Do the math on minimum monthly payments for a $5000.00 CC debt, at, say... at about 12-13% interest rate. Just one card alone.
Debt management, also known as a budget, is the key. Oh, man!!! It is so much easier to get a card to buy things NOW, but the consequences are tough... I don't advocate the over use of credit cards at all. I do see them as an "evil necessity". Simply because today's society, today's business runs on credit.... scores...but the other side of the coin is this.... if one cannot manage money, do not get a card! Buy things with cash. I will tell you that a mortgage is TOTALLY different than credit debt, though the interest is far less, over the years on a mtg, than a cc, the mtg IS a benefit at tax time... fortunately!
Do it right, girl.. you are on the right track of financial discipline, I'll grant you that! That is very admirable of one in you age group, and I was even taken by (some) of that wisdom you imparted....
My bottom line is Try not to get caught up in credit cards. Try to buy high dollar items, as you said, by saving the $$ for them.... you will appreciate those things way more, as well. When it comes time to look for a house..... you may find a man with those same values as you, and together you will be financially stable... and even maybe put a sizable down payment for the house..... but, the loan may be tougher to get without some proof of financial credit accountability.... and that is where one or two very well managed credit cards, and/or car loans comes in at, because lending institutes look at the debt management you have, to determine the interest % of a loan.... and again... do the math over a 15-30 year loan of a house with a simple 6% to a 6.75% loan.
You're AWESOME, in my book CW... stay that way.
 

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Discussion Starter · #13 ·
I am still trying to get how a loan is good for me. Of course I understand how we get trapped and have to get them because things are so crazy expensive. Just not sure it is good even when a must.

The chart above shows a $180,000 loan at a low 3.5% fixed interest rate. In the first twelve months the interest the bank would receive is $6,244.93.

Those charts show the interest paid instead as an investment that annually returns just 3% which is really easy to get. In 20 years you have enough to almost buy the house for cash. In 30 years of investing the interest one has an incredible $294,000.

I agree with what Iron and Industry and Rola stated in the other thread which was off topic. What I don't get is if young why is it not better to live in a really cheap dump and invest the money. It seems if these maths are correct that by my 40th birthday I will have enough cash to pay for a house without a loan. It seems a bad idea to pay a bank when just by living in a crappy place I can have a bank pay me. Maybe I am missing something.
 

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Appreciation, depreciation, maintenance costs, repair, taxes and quality of life all figure into getting a loan for a house and or property.

Most of the wealthy people I know got that way from investing in real estate. They typically buy the lowest cost house (that they can afford) in a nice neighborhood. Pay it off early, sell it, use money from the sale to do it again.

If you learn to do your own maintenance and repairs you can save thousands.

On paper it looks like over the long run renting and investing/saving will get you to the same place as buying, but in my experience it has never worked out that way for the young people that went down that path.
 

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I agree with what Iron and Industry and Rola stated in the other thread which was off topic. What I don't get is if young why is it not better to live in a really cheap dump and invest the money. It seems if these maths are correct that by my 40th birthday I will have enough cash to pay for a house without a loan. It seems a bad idea to pay a bank when just by living in a crappy place I can have a bank pay me. Maybe I am missing something.
Do you want to live in a cheap dump? Most people don't. I have no idea how much rent you would expect to pay, but let's do a little simple math. We're not adjusting for inflation or anything like that, but of course, rent would go up.

Rent @ $800/month for 12 months is $9,600. If you started paying that on your 18th birthday, by the time you turn 40, you will have spent $211,200. And what will you have for that money? Nothing. Your landlord, on the other hand, will have probably paid off the loan on his or her property long before then, and is just making profit now. Sure, you may have also saved and invested, so now you have $166,596.32 in the bank. And nothing.

But what if you had bought a modest $200k home 22 years ago? Sure, you would have paid quite a bit of interest. And your $200k home would probably be worth twice what you initially paid. You had a roof over your head, it wasn't a dump, and should you decide to sell it, you're going to put a big chunk of change back in your pocket. Smart home purchases are investments. And unlike bank accounts, you can live in them. :)

Crunch some numbers for yourself. How much is a 3 bedroom where you live, or want to live? If you're willing to live in a cheap apartment, would you be willing to rent rooms to friends? My son splits his mortgage three ways, as he rents two of his rooms to friends. He pays less for his house than he did to rent a crappy room while he was in college. That situation won't last forever, but he's only 25. After he pays off his student loans, he may pay more towards his home. His girlfriend might move in, and they kick out his friends, so they can have some privacy. But now they have two incomes as well. And still, just a reasonable loan, on a modest house, in a nice neighborhood. For about what he would have paid in rent. It makes sense, financially. Unlike cars, bikes, computers, and all our other toys and hobbies, nearly everyone is going to need a roof over their head. We don't "need" that other stuff. That's why you pay cash for it. But your home, that's different.
 

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Most of the wealthy people I know got that way from investing in real estate. They typically buy the lowest cost house (that they can afford) in a nice neighborhood. Pay it off early, sell it, use money from the sale to do it again.
When I was 25, I bought a townhouse for $120k. That was such a huge sum! But on my way home from work, the 2nd day I lived there, I passed a Bentley Turbo R convertible (this was in SoCal). Here I am thinking my home was sooo expensive, and the guy next to me is driving a $330k car. Seven years later, I got $267k for my townhouse. Pretty sure his Bentley was worth a lot less than that. :D
 

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Discussion Starter · #17 ·
See I knew I was missing something. Industry and Frisky are both obviously right. Of course I would live in a crappy place now for a better future. But I forgot about all the cash I would spend on rent for nothing in return of long term value. It makes sense now. I get it. Yes, the interest stinks to pay but paying someone elses mortgage via rent is foolish.

Seriously thank you, Frisky, Iron, Industry, Rola and all others who helped me understand better.
 

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See I knew I was missing something. Industry and Frisky are both obviously right. Of course I would live in a crappy place now for a better future. But I forgot about all the cash I would spend on rent for nothing in return of long term value. It makes sense now. I get it. Yes, the interest stinks to pay but paying someone elses mortgage via rent is foolish.

Seriously thank you, Frisky, Iron, Industry, Rola and all others who helped me understand better.
You were spot on about everything else. And I'm sorry you had to learn the hard way with your auto loan. Better to have an older car, newer bike, and a bit of money left over for epic vacations.
 

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Life never seems to go as planned. always twists and turns, at least for our family. First son born with profounf disability - tremendous medical expenses, wife unable to work needing to stay home with him, me working 3 jobs to keep food on the table and not answering the credit card late payment calls. 2nd son broke neck - once again tremendous expenses, raised thousands and thousands for a special van and addition to the house, had to quit job and career to support his efforts at rehab and to get back into the world. Now facing expenses associated with medical side of aging for wife and myself.

It just is not as simple as an amortization chart.
 

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All of that is great.........right up until you have kids, or have to pay for college or so many other things that your frugal planning attempts simply can't handle. There is nothing simple about either path. Most things you'll attempt will be easier said than done. But here's to it working out for everyone. If I had an effin penny for every time you put money away only to have happenstance take it and then some, I'd have that million your talking about to go buy only with cash. Good luck..................
 
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