Editor: Crass Cash

Here's another episode of what I like to call, "Where did they make the mistake?".  

This episode comes from CNN Money about an engineer who thinks it's better to pay the minimums on his student loans and invest the rest.  

http://money.cnn.com/2014/12/11/investing/dont-pay-off-your-student-loans/index.html?iid=Lead

Read the article and let me know where he's making the mistakes.  

1. Thinking the stock market will return 11% just because it has in the past.  Logic Alert!  You've never died so I guess that means you'll live forever?  The market is very overpriced at this point and to think that it's going to return 11% going forward is fucking retarded.  
2.  Your mom declared bankruptcy because of your student debt.  Hello!  Time to start paying her back fucker!  
3. Student loan interest is tax deductible, but it would have been completely phased out for the amount of money that he's probably making now.  If his AGI is over $75,000 he receives absolutely no tax benefit from it.  
4. All of his calculations are going to flip flop when the stock market drops 50%.  

Student loan debt is awful.  It can't be bankrupted and it's nearly impossible to get rid of except to pay it off.  The only time I advocate you saving money over paying it off is to build an emergency fund (3-9 months worth of expenses) and to just match the company retirement plan (3-6% of your income).  Other than that, get that shit paid off ASAP!    

Editor: Crass Cash

This article has been circulating around the financial news sites for days.  According to the comments section people are shocked that this should happen, but I know the readers of this site aren't shocked because I've preached about this numerous times.  Believe it or not this happens all of the time.  

So go through and read the article and tell me where they made the financial mistake: http://money.cnn.com/2014/07/28/pf/parents-student-loans/index.html

If you said not having life insurance on their daughter, you're the big winner!!! 

If you co-sign for a student loan you always need to have life insurance up to the amount of the outstanding loan.  And since she also had 3 young kids, she should have had an ass load of insurance for them as well!  
"The insurance must have been expensive though?" wrong!  She or her parents could have gotten $1,000,000 worth of term life insurance for 20 years for only $1 a day.  That's a third LESS THAN a basic TV cable package. 

That's right all of this could have been averted for $1/day.  The loan would have been paid off and her kids would have had $900,000 to be put into a trust for their well being until they graduated from high school or college. Assuming anything was left after their grandparents had to take care of them.  

If she just wanted to make sure that her parents weren't stuck with the student loan bill then it would have cost her $9/month to have this paid off with a 20 year term loan. 

Such a simple solution for so little money.  And now everybody is going to get their panties in a wad and petition congress to have this changed.  As a result people won't be able to get the student loans and/or the rates for these loans will skyrocket, much like credit card rates have.  You have an unsecured debt that last for 20 years.  WTF do you think is going to happen??

Here's another result.  These loans go away or the interest rates increase.  People look to Congress once again.  Now they start to subsidize these loans with tax payers money and we end up footing the bill because they didn't do proper financial planning.  Did I mention this could have been averted for $9 per month??

Editor: Crass Cash

I recently ran across a few dozen Starting Lineup figurines that I bought when I was probably around 11.  Now you would think that 23 years later they'd be worth something, but I would be totally wrong!  I initially bought them that long ago as an investment.  So here's a lesson in supply and demand, just because it's old doesn't mean it's in short supply.  Nor does it mean that somebody will want it.  

I originally  bought them for $5.99 in 1991 dollars and they have by no means kept up with inflation.  How much could I have made if I had put that in the stock market instead?  That's the definition of opportunity cost.  

So let's say I have 20 of them at $5.99 and I'd be lucky if I could sell them at cost, if at all.  So with tax I probably paid around $128 for all of them.  Some have actually gone up in value according to the prices on amazon.com and other I probably won't be able to get anything except some shipping profits.  

The S&P500 index was trading for $395 in the summer 23 years ago.  Now it is trading for $1958.12.  Which means that it's gone up almost 4x!  That would make my original investment of $128 worth $506!  Note this isn't counting the dividends that I would have received the whole time also.  You also would have received a compounded amount of $504 for dividends, after taxes!  

This post was designed to draw attention to how much useless stuff you buy that has no meaning and no use.  Hell it can even be through the guise of an investment, but in the end it costs you a lot more than what you paid for it.  Look at every financial transaction that doesn't pertain to the basic necessities of life and see how much it'll cost you in 30 years.  You'll be shocked to see how much that new set of golf clubs, new couch, or $2,000 a year smoking habit.  That last one will really make you cry!