Financial tip of the day.com - FREEDOM THROUGH FINANCE
Social Sites
  • Financial Tip Of The Day
  • Books
  • Websites
  • Contact Us
  • Disclosure

Investing Misjudgment

31/5/2014

0 Comments

 

See Charlie Munger's YouTube video:

http://youtu.be/pqzcCfUglws

0 Comments

NEVER HAVE A LARGER MORTGAGE THAN RIGHT NOW!

30/5/2014

5 Comments

 
Editor: Crass Cash
Picture
"Mortgage burning parties" used to be a big a deal, but people seem to rarely pay them off now, so they've become extinct.

If you're like me, than you're creeping up on being 30 years out from a traditional retirement age of 65.  I think a retirement age of 65 is bullshit, but I fully recognize that that's what will happen for the vast majority of people.  So here's a little piece of advice.  Never have a larger mortgage than you have now.  

Whether you live in the same house or sell and then buy another, make sure that you never take on more mortgage debt than you have right now.  This will help ensure that you will have your mortgage paid off by the time you retire in 30 years.  Assuming of course that you have a 30 year mortgage.   

I've heard some people advocate that it's ok or even a good idea to go into retirement with a mortgage.  Bullshit!!!  This is always a bad idea!  Don't do it!  The last thing that you need in your life is the thought that the bank could come and take your home.  

This goes for all debt as a matter of fact.  No auto loans, no mortgage, no credit card loans, no HELOC, no debt, no way, NEVER!      

5 Comments

Reverse Compounding

29/5/2014

0 Comments

 

Editor: Crass Cash

Picture
For you Dave Ramseyites you probably know this as a "debt snowball".  Don't forget that there are 2 components to a person's net worth: assets and liabilities.  When you use income to pay down your liabilities you are also increasing your net worth.  However, if you use assets or cash to do it, the impact on your net worth is nil.  It will however, increase the ability to increase your net worth going forward, hence reverse compounding. 

So with that said, here's why it's better to pay off debt (especially high interest) vs saving it.  The key is in the interest rate of the debt vs the interest rate of the investment.  I've personally seen people who have enough money in a checking account to completely pay off their credit card debt.  This is a horrible idea because you're probably making 0.1% interest on the checking account money and paying well over 15% on the credit card.  

"But I like the thought of having cash in case of an emergency."  That's fine and all, but then just use your credit card if the emergency happens!  The one nice thing about paying off debt with a high interest rate is that paying it off is one of the best investments that you can make.  Why?  Because when you pay off a card with a 15% interest rate vs not paying it off at all, it's like making 15% on your investment (which is a great return if you didn't know)!  Then after this is paid off, rebuild this emergency fund that you had.  

This is an area where Dave Ramsey and I disagree.  However, I'll be the first to admit that from an emotional standpoint his baby steps of saving $1,000 first and then paying off credit cards is probably a more effective approach.  I've never had a problem with credit cards, so it's hard for me to relate to the addictive nature of them.  
0 Comments
<<Previous

    Author

    This website was created due to the atrociously misguided financial advice that I've heard over the decades.  Financial freedom is not intellectually strenuous, but it takes discipline. 

    RSS Feed

    Categories

    All
    BHAG UPDATE
    College Savings
    College Savings
    Credit
    Economics
    Estate Planning
    Estate Planning
    Financial Planning
    Financial Planning
    Insurance
    Investing
    INVESTMENT JOURNAL
    Mistakes
    Net Worth Update
    Retirement
    Tax
    Thrift

    Archives

    October 2017
    August 2017
    May 2017
    April 2017
    February 2017
    October 2016
    September 2016
    August 2016
    July 2016
    June 2016
    May 2016
    October 2015
    September 2015
    August 2015
    July 2015
    June 2015
    May 2015
    April 2015
    March 2015
    February 2015
    January 2015
    December 2014
    November 2014
    October 2014
    September 2014
    August 2014
    July 2014
    June 2014
    May 2014
    April 2014
    March 2014
    February 2014
    January 2014
    December 2013
    November 2013
    October 2013
    September 2013
    August 2013
    July 2013
    January 2011

Powered by Create your own unique website with customizable templates.