The price is right!

[franklin]

^straight-forward words that relate to what I was saying. If you aren't comfortable leveraging debt in smart ways -- because it's debt -- then you are getting dominated by moral views of money.

Agreed, but...

Paying off a truck (a declining asset) with, what, a 3% rate these days VS investing that liquidity in appreciating assets. You decide.

You're discounting the value of cash flow and security. If you are out of debt and have cash in the bank then you can load up on your retirement account without worry of catastrophe bankrupting you fast.

 

[JAZZGASM]

Agreed, but...



You're discounting the value of cash flow and security. If you are out of debt and have cash in the bank then you can load up on your retirement account without worry of catastrophe bankrupting you fast.

In order to avoid a catastrophic incident bankrupting you, the FIRST thing you should do is max out your retirement accounts. Retirement assets are secure, and creditors can't touch them, even in bankruptcy.

I also recommend you:

1) Max out your Roth IRA--You can take out the original investment without penalty if you need to.
2) Invest as much in pre-tax retirement as you can afford. Know that you can take it out early, but will have a 10% penalty. If you get a decent rate of return, the gains attributable to the deferred tax can largely negate the penalty.
3) With any additional capital available, invest in non-retirement funds with a good mix of liquid and illiquid assets. I like to invest heavily in real estate, but I do a large chunk of it through a holding company where I can sell quickly if I need cash.

The other think to keep in mind, is that retirement assets are secure, and creditors can't touch them, even in bankruptcy.

 

[franklin]

In order to avoid a catastrophic incident bankrupting you, the FIRST thing you should do is max out your retirement accounts. Retirement assets are secure, and creditors can't touch them, even in bankruptcy.

The other think to keep in mind, is that retirement assets are secure, and creditors can't touch them, even in bankruptcy.

That's the obvious response, and I considered putting it in my response to get it out of the way. The problem is, on the flip side, your house is usually your major asset. Debt + lost job = no more house.

 

[JAZZGASM]

That's the obvious response, and I considered putting it in my response to get it out of the way. The problem is, on the flip side, your house is usually your major asset. Debt + lost job = no more house.

I guess the point is if you are investing instead of paying off debt, you are in at least the same position theoretically, and hopefully much better because you have had good gains on your investments. Even with large losses in 08-09, my rate of return has been many multiples of 3%. Of course if you invest poorly, or the market completely crashes, that is another story.

So a paid off $30k car (depreciating asset) with $0 investments is no better, and likely worse than a financed car with $30k invested gaining a return.

If you lose your job, you risk losing your house regardless. If your car is paid off, you can sell your depreciating asset for a loss under scenario 1 to pay for your house, or withdraw from your appreciating investments under scenario 2.

How about other scenarios? You get sued for $1M when a tree in your yard falls on someone. Your business with personal guarantees fails? Etc... Some states have homestead exceptions to allow you to keep your home. Many do not. Your retirement account would be protected. Retirement accounts are protected from everything except IRS taxes and Qualified Domestic Relations Orders.

I'd put my house in a retirement plan if ERISA allowed me to.

 

[fishonjazz]

So a paid off $30k car (depreciating asset) with $0 investments is no better, and likely worse than a financed car with $30k invested gaining a return.

I consider my lack of a car payment to be a return that I'm gaining on a monthly basis.

If you lose your job, you risk losing your house regardless. If your car is paid off, you can sell your depreciating asset for a loss under scenario 1 to pay for your house, or withdraw from your appreciating investments under scenario 2.

If my car is paid off then I don't need to sell it because I can get a worse, lower paying job and still be ok cause my monthly expenses are so low due to my lack of debt. My mortgage is only about 700 dollars per month and no car payments or debt means any old job (McDonald's) could get me by.

[/QUOTE]

 

[NAOS]

I consider my lack of a car payment to be a return that I'm gaining on a monthly basis.
If my car is paid off then I don't need to sell it because I can get a worse, lower paying job and still be ok cause my monthly expenses are so low due to my lack of debt. My mortgage is only about 700 dollars per month and no car payments or debt means any old job (McDonald's) could get me by.

[/QUOTE]

you're such a nice guy that you'll probably be taken care of in any scenario. But what you've laid out doesn't constitute thinking about the future, IMO. It sounds more like, "how do I make myself a flexible wage-laborer forever?" or "how do I make the future feel exactly like the present?" Your $30K in real-*** money is dwindling with every day and mile.

 

[franklin]

I guess the point is if you are investing instead of paying off debt, you are in at least the same position theoretically, and hopefully much better because you have had good gains on your investments. Even with large losses in 08-09, my rate of return has been many multiples of 3%. Of course if you invest poorly, or the market completely crashes, that is another story.

So a paid off $30k car (depreciating asset) with $0 investments is no better, and likely worse than a financed car with $30k invested gaining a return.

If you lose your job, you risk losing your house regardless. If your car is paid off, you can sell your depreciating asset for a loss under scenario 1 to pay for your house, or withdraw from your appreciating investments under scenario 2.

How about other scenarios? You get sued for $1M when a tree in your yard falls on someone. Your business with personal guarantees fails? Etc... Some states have homestead exceptions to allow you to keep your home. Many do not. Your retirement account would be protected. Retirement accounts are protected from everything except IRS taxes and Qualified Domestic Relations Orders.

I'd put my house in a retirement plan if ERISA allowed me to.

Having no debt allows you to leverage substantially more in a house or real estate and land. Why pay or put your leverage into a depreciating asset when you can lever up way more in real estate?

But yeah, if the market tanks like it's 2008 then I'll be first in line at the HELOC line, then giving my vehicle titles back to the bank for as much as they'll give me and invest in stocks.

 

[b_line]

I guess the point is if you are investing instead of paying off debt, you are in at least the same position theoretically, and hopefully much better because you have had good gains on your investments. Even with large losses in 08-09, my rate of return has been many multiples of 3%. Of course if you invest poorly, or the market completely crashes, that is another story.

So a paid off $30k car (depreciating asset) with $0 investments is no better, and likely worse than a financed car with $30k invested gaining a return.

If you lose your job, you risk losing your house regardless. If your car is paid off, you can sell your depreciating asset for a loss under scenario 1 to pay for your house, or withdraw from your appreciating investments under scenario 2.

How about other scenarios? You get sued for $1M when a tree in your yard falls on someone. Your business with personal guarantees fails? Etc... Some states have homestead exceptions to allow you to keep your home. Many do not. Your retirement account would be protected. Retirement accounts are protected from everything except IRS taxes and Qualified Domestic Relations Orders.

I'd put my house in a retirement plan if ERISA allowed me to.

If you have enough money in a Roth you on buy real estate.

 

[JAZZGASM]

Having no debt allows you to leverage substantially more in a house or real estate and land. Why pay or put your leverage into a depreciating asset when you can lever up way more in real estate?

But yeah, if the market tanks like it's 2008 then I'll be first in line at the HELOC line, then giving my vehicle titles back to the bank for as much as they'll give me and invest in stocks.

I agree with what you are saying, my point was having financed debt allows me to take current cash and invest more in real estate or other investments that I wouldn't have cash to currently invest in if I paid off a car for example. I don't think of a car as an investment, but a necessity. Don't buy a new car if leaves you in a position where you can't invest at least 10 to 20% of your net income. The other takeaway is to invest as much as you can through the investment of an ERISA based retirement plan.

 

[JAZZGASM]

If you have enough money in a Roth you on buy real estate.

Not sure what you are saying. That if you have enough money in an IRA you can buy real estate?

That is true, but you can't use the real estate for your personal use, so your own house could not be invested in a retirement plan, at least without breaching the prohibited transaction rules under ERISA.

I do have real property in my retirement accounts, including IRA investments in a private real estate company (which also has a lot of technical rules you should know before investing this way).

 

[fishonjazz]

I avoid interest at all costs. Maybe it's to a fault and the wrong way to go about things though.
I really hate paying interest to the bank (I even hate paying interest to blackjack dealers lol). I even choose to borrow from my 401k and pay the interest back to myself on occasion.

I have a pension for retirement which is nice (i have been with my company for 14 years so it's a decent monthly pension at this point). Plus my company matches 3.5 percent of my 6 percent contribution (total of 9.5 percent by my math). I figure there will be less SS for me but I will still get some. I hope to have no mortgage and no car payments or any other debt.

I figure that between my retirement stuff, social security, and my low monthly expenses I will be ok at retirement. Ok isn't great but I'm pretty easily satisfied and I think I will be ok with being ok.

 

[JAZZGASM]

I consider my lack of a car payment to be a return that I'm gaining on a monthly basis.
If my car is paid off then I don't need to sell it because I can get a worse, lower paying job and still be ok cause my monthly expenses are so low due to my lack of debt. My mortgage is only about 700 dollars per month and no car payments or debt means any old job (McDonald's) could get me by.

[/QUOTE]

The point is, if you invest $30,000 now, it will compound and grow faster than getting say $500 back a month to invest, even if you are paying 3%. The avg. rate of return on the stock market is 7%.

More importantly, everyone should invest as much as they can. Regardless of whether they finance debt or not.

 

[fishonjazz]

My wife and I do want to invest a small amount ($500) in a Marijuana production company but we have no idea how to choose which one and no idea how to actually invest the money.

 

[fishonjazz]

The point is, if you invest $30,000 now, it will compound and grow faster than getting say $500 back a month to invest, even if you are paying 3%. The avg. rate of return on the stock market is 7%.

More importantly, everyone should invest as much as they can. Regardless of whether they finance debt or not.[/QUOTE]
You say the average rate of return. Which means it could be less sometimes right? Isn't investing a form of gambling, albeit less risky?

 

[JAZZGASM]

I avoid interest at all costs. Maybe it's to a fault and the wrong way to go about things though.
I really hate paying interest to the bank (I even hate paying interest to blackjack dealers lol). I even choose to borrow from my 401k and pay the interest back to myself on occasion.

I have a pension for retirement which is nice (i have been with my company for 14 years so it's a decent monthly pension at this point). Plus my company matches 3.5 percent of my 6 percent contribution (total of 9.5 percent by my math). I figure there will be less SS for me but I will still get some. I hope to have no mortgage and no car payments or any other debt.

I figure that between my retirement stuff, social security, and my low monthly expenses I will be ok at retirement. Ok isn't great but I'm pretty easily satisfied and I think I will be ok with being ok.

At least you are saving for retirement. Many do not.


When it comes to paying interest, you have to ask if borrowing will cost you less overall than not. So if you are going to buy a new car, is the power of investing $30k better than financing debt at 1.9%. At most of our ages, we should still be investing heavy with a decent amount of risk, so it is probably worth it.

Even borrowing from your 401(k) can be a bad idea. What has been your average rate of return? What interest are you paying?

 

[Boris]

My wife and I do want to invest a small amount ($500) in a Marijuana production company but we have no idea how to choose which one and no idea how to actually invest the money.

Shoot give that money to Boris. I know where to get the plants an grow lights. Hell, I might even be able to convince the neighbor to let us grow em in his corn field. All I ask is you harvest the buds an get the hell outa there quickly as possible. These stoners always tryin to squat on my property an I'd be to tempted to get into the weed dealing business.

Last week I woke up to two of them damn hippie packs sleeping outside my trailer. 2 guys, 1 girl in a tent than 3 guys 1 girl next damn day. Don't know where they keep coming from but I gotta fire a shotgun off to wake em up, than feed em breakfast so they can pay attention.

 

[JAZZGASM]

The point is, if you invest $30,000 now, it will compound and grow faster than getting say $500 back a month to invest, even if you are paying 3%. The avg. rate of return on the stock market is 7%.

More importantly, everyone should invest as much as they can. Regardless of whether they finance debt or not.

You say the average rate of return. Which means it could be less sometimes right? Isn't investing a form of gambling, albeit less risky?[/QUOTE]


7% is the average return you should expect over the long-term with the stock market. Unless you are old, and getting ready to retire, if you bet against the market long-term, you will likely lose. This is for broad based investments. My individual stocks have gained 40.32% over the last 12 months. I'd be kicking myself if I invested less and did not have a car payment (one car was at 1.9% that I just paid off after 5 yrs) and my current car is at 2.49%.

I have made 40% on my stock investments over the last 12 months. Over the last 3 years they have grown 215.48%. I just wish I had even more to invest. I also invest in commercial real estate, and even in the downturn, was still an ok investment. Over the last 15 years, my rate of return on real estate has never been below 4%, and has been as high as 29%. Utah commercial real estate is pretty safe, unless you own the Gateway.

 

[JazzGal]

I'm 56 years old and have a rare incurable illness that will most likely keep me from reaching retirement age. My dilemma is whether I should keep paying any more than my company matches into my 401k. I need a crystal ball.

FYI - not looking for sympathy here but some genuine ideas/opinions.

Sent from my HTC6535LVW using JazzFanz mobile app

 

[b_line]

You say the average rate of return. Which means it could be less sometimes right? Isn't investing a form of gambling, albeit less risky?

7% is the average return you should expect over the long-term with the stock market. Unless you are old, and getting ready to retire, if you bet against the market long-term, you will likely lose. This is for broad based investments. My individual stocks have gained 40.32% over the last 12 months. I'd be kicking myself if I invested less and did not have a car payment (one car was at 1.9% that I just paid off after 5 yrs) and my current car is at 2.49%.

I have made 40% on my stock investments over the last 12 months. Over the last 3 years they have grown 215.48%. I just wish I had even more to invest. I also invest in commercial real estate, and even in the downturn, was still an ok investment. Over the last 15 years, my rate of return on real estate has never been below 4%, and has been as high as 29%. Utah commercial real estate is pretty safe, unless you own the Gateway. [/QUOTE]

That is awesome. I have been focusing on investing in real estate the past 4 years, and thus have not put any money in the market. I wish I would have put all the real estate gains into retirement accounts. My real estate investments have had returns that were pretty great for what I invested, well over 100% on initial investment.

I need to figure out what I want to do though, as I don't have a 401k provided by my employer, and I just started a Roth. I am maxing out my Roth for 2016 and 2017. I have looked into simple IRA's but don't know a ton about them, and don't really know how to go about doing pre-tax investing. I am planning on transitioning my Roth to a broker that has a more lenient investment approach, to use the options on real estate and such. My current broker is Fidelity, and they are pretty traditional on the investments the allow.

 

[Gameface]

I'm 56 years old and have a rare incurable illness that will most likely keep me from reaching retirement age. My dilemma is whether I should keep paying any more than my company matches into my 401k. I need a crystal ball.

FYI - not looking for sympathy here but some genuine ideas/opinions.

Sent from my HTC6535LVW using JazzFanz mobile app

Man, I'd say that if you know that you won't reach retirement then stop putting money towards retirement. If it's like 80% I personally would take my chances and live now and let SSI or SSD take care of me, albeit at a pretty low income, essentially poverty.

If it's more likely than not you'll reach retirement then I'd invest, but I wouldn't invest too much.

I mean, unless you really want to give someone a windfall after you die and they collect your nest egg and promptly blow it on hookers and coke.