Credit Cards (in the US)

[Vigo]

If it's that bad you may as well hide.  Anyone who has something everyone else needs is going to be outnumbered to the point where every shot you take is going to be returned ten times.  Hide with your supplies and wait for the first wave of people to knock off.  People on meds they can't live without, people who didn't save anything and kill each other over anything visible, and people without any practical skills will all be gone quickly.

My boss is well prepared for when it all goes to hell and he says I'm welcome to stay at his house if I'm able to survive the trip to it.  He says he has more ammo then he could possibly ever shoot in his lifetime, but has that much because he expects all his friends to fall back to his place and is making sure theres plenty of ammo for everyone.  I'm not expecting things to get that bad in my lifetime, but at least now I have a destination to run to in case it does 

Be sure to get a clear definition of what your boss means when you he says that he is saving ammo for any friends that fall back to his place after everything goes to hell. These things take on a different meaning when it comes to post apocalyptic survival. 

[Samstag]

Be sure to get a clear definition of what your boss means when you he says that he is saving ammo for any friends that fall back to his place after everything goes to hell. These things take on a different meaning when it comes to post apocalyptic survival. 

Post-apocalyptic etiquette says if you're going to visit a well-armed friend, call first.

[ChadTower]

Not many Mormons here.  I might be able to hitch a ride with the Jehovah's Witnesses, though.  They are all over the place.

[pinballwizard79]

"the only winning move is not to play"

I choose not to participate as money really only matters when you're in debt. Do that & you wont ever give a ---steaming pile of meadow muffin--- what any given index is doing.

There are a ton of people with low 30-year fixed rate mortgages which they are upside down on while holding 401k's & other assets worth squat @ an unstable job they previously thought would last forever (ie 30 year financing takes serious bolas in my book). These were the same "oh yeah I'm gonna borrow to invest" folks that parade BS tax write offs & unreliable optimistic ROI's on instruments they do not understand. IMO Leverage only if you are the savvy investor who dumps his money into developments of hotels in Dubai, not some sucker Fidelity account. If you have $500k in assets & $400k in debts you are not doing so hot there ballers   Never forget true wealth is determined by subtracting your liabilities from your assets....not what you hope the market does for you in the future (speaking of what will our fiat currency do in 20 years). PS America is THE place to live, I'm just thinking we should all make a few little changes to preserve it.

To think a corrupt & complex financial global market would just bend over & take it up the corn for the average worker man Joe on the day he finally decides to cash in his chips & get out is a self righteous ignorant typical American consumer borrowing assumption & entitlement thought process that burned many "its just gotta work I tell ya its just gotta". Might as well quit smoking the day before you get cancer too eh?

Read up on the Tulip crash of Holland, the stock market crash of 1929 & the EVERYTHING crash of today. Then all you gold & currency hounds should get all NWO & read up on 1913 (federal reserve & IRS creation the day before Christmas eve). Whoever said to stock up on ammo is right, learn to fly a plane too. Ammo guarantees you food/drink/plane & a plane will get you to whatever states are still functioning before they put up guard towers

Anyway credit cards can be a financial tool if done correctly FYI so be creative, not a Nordstrom & apple store shopping credit whore. Do whatever it takes to get in the clear & start saving acorns!!!!

In the end we all think we are experts but none of us have jets, yachts or a hot 19 year old toot princess from Russia so we should prob just delete this entire thread & never listen to each other ever again.

[danny_galaga]

If the fit hits the shan, just look up the mormon surnames in your phone book.  

Like SMITH?

[ChadTower]

My new definition of true wealth is having a 19 year old toot princess from Russia.

[Mikezilla]

My new definition of true wealth is having a 19 year old toot princess from Russia.

 

[hyiu]

.....

So you are saying that you are going to pay off your house, guaranteeing yourself a net 3% return, when instead you could easily invest that money in an index fun and earn 5-7%.  You really think this is good money advice?

Again, what you stated above is WRONG... at least wrong for probably 80+% of the general public...
you maybe able to make 5-7% easy.... but most general public does not...

as a simple example,
you mentioned index fund, so I picked the most obvious one... S&P500 ETF SPY...
if you buy S&P 500 ETF (SPY) on 2000 (10 yrs ago), you will be under water now, and no 5-7% return whatsoever...

so, just because you're good and/or lucky that you make 5-7% annually, it doesn't happen to everyone.  and majority people does not make that...

for most people, paying off mortgage first is a better choice...

[pinballwizard79]

If the fit hits the shan, just look up the mormon surnames in your phone book.  They're required to have months of supplies on hand and will be more than happy to sell you a few blond wives to repopulate the earth.

Yeah but they wont have any soda

[ChadTower]

With 5 blonde wives you don't need soda.  You've either got a lot of repopulating to do or you have no place to sleep because you were dumb enough to get married 5 times.

[Nephasth]

If you have $500k in assets & $400k in debts you are not doing so hot there ballers  

I always thought the further you are in debt when you die, the further ahead you got in life. 

[Samstag]

as a simple example,
you mentioned index fund, so I picked the most obvious one... S&P500 ETF SPY...
if you buy S&P 500 ETF (SPY) on 2000 (10 yrs ago), you will be under water now, and no 5-7% return whatsoever...

If you cherry-pick the numbers you can make them say anything you want.  Using the value at open on 4/1/2001 ($116.3) it's up 10%, which is still a poor investment for such a long term, but a lot different from being under water.

I'd rather pick a time like November/December 2008 (around $85-$95) when I jumped on a weak market and dumped nearly all my "safe" investments for various mutual funds.  If I'd been paying down my mortgage instead of building up reserves I would have missed out on greater than 20% returns across the board.

[Donkbaca]

You guys are forgetting about dividends...

[Samstag]

You guys are forgetting about dividends...

Are they a factor?  I don't have any investments that pay dividends in any significant amount. 

[HaRuMaN]

You guys are forgetting about dividends...

Are they a factor?  I don't have any investments that pay dividends in any significant amount. 

They can be...  I have some stock that pay dividends that I just reinvest right back into the stock.

[Donkbaca]

the average dividend yield for S&P stocks is about 2%, so you would benefit from the dividend, plus any appreciation in the stock when you sell.  Lets say I bought 100 bucks of S&P stocks ten years ago, I would get 2 bucks in dividends per year.  That's 20 bucks.  Even if the stock is down 15%, I have made 5% on my investment, that is without re-investing the stock.  ... it makes a difference, especially when you consider that an investment in say, something like gold or another commodity pays no dividends and is subject to pure speculation, plus transaction costs; you can frequently find index etfs that trade commission free.  Savings accounts now go for what, 1%?  If inflation is running at about 2.5% so you are losing money keeping it in the bank

[ChadTower]

Then you pay a chunky capital gains tax that you would not be paying when selling the primary residence you could have paid off instead.

Money can be made either way and it's all up to an individual's comfort levels with any given approach.  You could also pass on securities, not pay off your mortgage early, and buy investment real estate instead.  Or use it as capital to start your own business or provide capital to someone else to start a business.  There are tons of ways to invest and trying to compare them with hypotheticals could last forever without actually proving anything.

[Donkbaca]

capital gains is 15% off of profit. You are assuming that you are selling your house for more than what you bought it for, hard to believe, especially considering the enourmous cost and time to sell.

I agree with you on the hypotheticals, I am just saying, paying off your mortgage is probably just about the worst investment you could make.  There is not much upside, the downside is that you have now spent a boatload of money on an asset that is not appreciating, and in many cases, is depreciating in value.

[javeryh]

So putting it all on black at the casino isn't a sound investment strategy?

I honestly don't know what I'm doing when it comes to this stuff but you people talking about not carrying a mortgage are either nuts or wealthy.  It's just not realistic - especially where I currently live.  I guess if I wanted to move to Middle of Nowhere, USA I could swing a very cheap house but there's just no way the average person can afford less than a 30 year mortgage.  I mean, the average person can't even keep themselves out of credit card debt never mind being fiscally responsible enough to quickly pay off a house. 

I've been in my house for 7 years and I just refinanced a second time so I'm back up to 30 years but the monthly payments are almost $1,000 less than where I started.  Sure I'll be paying more in interest long term but the extra $1,000 a month helps me and my family live a little more comfortably NOW.  I might refinance again if it made sense.  Once the kids are out of college I'll probably be able to pay down the mortgage much quicker but for now I think I'm doing OK.

[Donkbaca]

number one rule in finance: its always better to use other people's money.  There is nothing wrong with using leverage.

[ChadTower]

I've been in my house for 7 years and I just refinanced a second time so I'm back up to 30 years but the monthly payments are almost $1,000 less than where I started.  Sure I'll be paying more in interest long term but the extra $1,000 a month helps me and my family live a little more comfortably NOW.  I might refinance again if it made sense.  Once the kids are out of college I'll probably be able to pay down the mortgage much quicker but for now I think I'm doing OK.

Do a little reading on amortization periods so you understand why you're setting yourself back with each refi.  It's an important concept to grasp if you are refinancing every 3-4 years.

[Donkbaca]

he's not setting himself back if he's using that capital to bring back a greater return then the present value of the future interest payments.  The future interest payments might not even matter because he could 1) sell before then; or 2) walk away and not pay them.

[ChadTower]

If he's talking about the inability to escape credit card debt he's not going to be bringing back a greater return.  He's going to be folding in consumer debt to lessen the interest going out.

[Samstag]

I honestly don't know what I'm doing when it comes to this stuff but you people talking about not carrying a mortgage are either nuts or wealthy.  It's just not realistic - especially where I currently live.  I guess if I wanted to move to Middle of Nowhere, USA I could swing a very cheap house but there's just no way the average person can afford less than a 30 year mortgage.  I mean, the average person can't even keep themselves out of credit card debt never mind being fiscally responsible enough to quickly pay off a house. 

Sure, but the average person buys a lot of stuff they don't really need, and probably a much nicer/bigger house than they need.  When I was house hunting they approved me for 3 times the mortgage I ended up with and tried to steer me toward homes I didn't need.  Most of my friends ended up in much more expensive homes and live paycheck to paycheck.

The American Dream can be pretty expensive, but a big tv in every room of an oversized house isn't mandatory.

I realize there are some parts of the country where housing is just ridiculous.  Sometimes your best financial move is to move to a better location.

[Donkbaca]

I think the best financial move is to leverage to the max and blow it all on cristal and hookers in Barbados.  They can repossess your house, they can't reposses your vacations.

[hyiu]

if that is your finance rule...

then you should go margin, and bet on the triple leverage ETF..... lol....
or better yet... for biggest leverage, just trade futures...
you pretty much go rich instantly....
(or go broke....)

yeah... picking a particular time isn't exactly the theory I talked about...
for the normal investor... its more like you invest constantly...
so, every month, you save up like $100 and buy a certain shares of index fund...

if you did that for the past 10 yrs... you're not really moving ahead 5-7% annually...

for most people, paying off mortgage give them a constant and certain 3% gain...
while if they decide to invest... MOST PEOPLE (me included) can and will do much worse...

I'm not saying don't invest, or definitely pay off your mortgage...
(its different for each person... their risk tolerance, preference, and knowledge on the subjects...

but for most people, they don't know head of tails on the market...
its really better off for them to pay off mortgage first...
and its not like Donkbaca said, leverage up and invest in index fund and you get 5-7% annual return...

[Donkbaca]

Yeah, that is what you should do, borrow to the hilt, invest in things that are more risky then the rate you are borrowing money at.  But you shouldn't borrow it all and bet on black   Just because you are borrowing does not mean you are being reckless. 

The average return on large cap stocks, accounting for appreciation and dividends from 1926 through 2008 is 11.7%

Paying off your mortgage is NOT a 3% gain though, unless you plan on living there for 30 years.  I sure as heck wouldn't want to pay off my house NOW, why sink extra money into an asset that is depreciating at worst and stagnating at best?

Credit card debt, on the other hand is horrible, UNLESS you do some serious gymnastics whereby you take advantage of balance transfers to get your rate down crazy low and have points/cash back.

[Vigo]

  WTH? What's this thread doing on topic again? 

[danny_galaga]

You guys are forgetting about dividends...

Are they a factor?  I don't have any investments that pay dividends in any significant amount. 

They can be...  I have some stock that pay dividends that I just reinvest right back into the stock.

Same.

[Fordman]

For those that want to keep paying someone else to carry your debt, go right ahead and do it. When my home is paid off (im not wealthy-$60,000 a year job) and the money I bring home goes into my savings account, I then become a winner with my money.

I havent used credit cards in 5 years. I do have a debit card with Mastercard logo on it, but the money comes right out of my bank account.

When you have a debt to someone else, in a sense, you have become "a slave to the lender". Im tired of working for someone else, Im working for me and my family!

Fordman

[Hoopz]

For those that want to keep paying someone else to carry your debt, go right ahead and do it. When my home is paid off (im not wealthy-$60,000 a year job) and the money I bring home goes into my savings account, I then become a winner with my money.

I havent used credit cards in 5 years. I do have a debit card with Mastercard logo on it, but the money comes right out of my bank account.

When you have a debt to someone else, in a sense, you have become "a slave to the lender". Im tired of working for someone else, Im working for me and my family!

Fordman

You're missing the point.  Regardless of what you think or what you heard on a radio show, you incur a cost when you pay off debt.  The economic term is "opportunity cost".  Whenever you do anything with your cash, whether its buy something that's necessary (food, clothes, shelter) or something that you want (hookers, video games, internet access) you lose the chance or opportunity to use those funds somewhere else.  With a limited number of resources, you can only buy so much stuff with your cash.

In your situation, you're losing a return on the cash that you're paying towards your mortgage means your'e not investing that cash.  Yes, you are definitely lowering how much you're paying in interest but you are also limiting how much you may earn on that cash via interest, investment appreciation, dividends etc.  Missing out on that is the cost of paying off your mortgage sooner.

That's not to say you are wrong to do it.  It's a personal decision as others like Chad have said.  For your situation, it meets your comfort level and your goals.  It doesn't mean it is right for everyone.

I'll just suggest that you should meet with a financial advisor and have him/her put your financial information into a model to show you the "real" cost of your decision.  You are, potentially, missing out on not just a 2-3% return this year, but the effect of having that return compounded year over year.  Yes, it's a variable as far as the return, but historically almost all situations show that it's better to have your money in the market working for you and having your mortgage at the same time.  

It's not always an easy concept to grasp the first time whether it's an article on-line, some schmuck telling you on a message board, or listening to someone on the TV or radio.  I've found in dealing with clients or in my own finances, that I need to see the numbers side by side to see what's best for me.  Any reputable financial advisor will have the ability to changes multiple variables to show you what your financial situation would be like in 5-10-20-30 years based on various return rates.

Regardless of anything else, I strongly suggest you meet with someone who can work with you on this.  Financial advisors aren't just for the wealthy.  They can help people become wealthy or more carefully manage their funds.  

And no, I'm not a CFA or in the financial sector any longer.  I left about 7 years ago and run a non-profit foundation.  I have no dog in this fight anymore.

[javeryh]

Do a little reading on amortization periods so you understand why you're setting yourself back with each refi.  It's an important concept to grasp if you are refinancing every 3-4 years.

I know I pay more in the long run but in 30 years my mortgage payment shouldn't seem like too much due to inflation.  When my parents bought their house back in 1981 they really stretched themselves but the last 5 years of the mortgage were a joke because the payments seemed so low relative to the cost of things at that time.

he's not setting himself back if he's using that capital to bring back a greater return then the present value of the future interest payments.  The future interest payments might not even matter because he could 1) sell before then; or 2) walk away and not pay them.

yeah - I mean I invest and stuff but really the extra money I'm saving each month just ensures I can survive if I were to lose my job or it helps me buy crap that the kids need, etc.  I also max out my 401K and we have 529 plans for the kids.

If he's talking about the inability to escape credit card debt he's not going to be bringing back a greater return.  He's going to be folding in consumer debt to lessen the interest going out.

I have ZERO debt (other than my mortgage).  No credit cards (I pay the balance monthly), no car loans (both cars are paid for) and no student loans (paid those back already).

I think I'm doing the right thing but I honestly don't know (and my CPA wife is in charge of the finances for the most part).  There is a part of me that wants to just say screw it and spend it all but I don't think I'd be able to sleep at night.   

[ChadTower]

historically almost all situations show that it's better to have your money in the market working for you and having your mortgage at the same time.

You can't say that without knowing his age.  The closer you are to retirement age the riskier the market becomes.  How many people were about to retire 3-4 years ago and now cannot because their entire retirement portfolio was in various forms of the stock market?  Those people don't have time to wait for the correction to average back out to a 10% anuual return.  They needed their money now and the recession wiped it all out.  If those people had paid off their mortgage they'd be in much better shape when retirement came around.  Historical averages are great for people who have the luxury of time.  They mean a lot less to a 65 year old who may never be able to retire as it stands now.

[Hoopz]

historically almost all situations show that it's better to have your money in the market working for you and having your mortgage at the same time.

You can't say that without knowing his age.  The closer you are to retirement age the riskier the market becomes.  How many people were about to retire 3-4 years ago and now cannot because their entire retirement portfolio was in various forms of the stock market?  Those people don't have time to wait for the correction to average back out to a 10% anuual return.  They needed their money now and the recession wiped it all out.  If those people had paid off their mortgage they'd be in much better shape when retirement came around.  Historical averages are great for people who have the luxury of time.  They mean a lot less to a 65 year old who may never be able to retire as it stands now.

Based on his past posts, he's about 40.  I factored that in. 

And you're taking it out of context.  I said repeatedly that he should work with someone to see the numbers.  If his time horizon was 5 years or 25 years, it gets factored into the model. 

[javeryh]

Me or Fordman?  I'm 36.  Plenty of time before retirement. 

[Hoopz]

Me or Fordman?  I'm 36.  Plenty of time before retirement. 

I was talking about Fordman.

[Vigo]

Go a friend who is a senior financial advisor. I've heard enough horror stories about rookie advisors dunking large sums of peoples savings because they recommended heavily investing in junk shares from obscure Russian companies or whatnot to their clients.  I think anytime you invest a substantial amount of your savings you need to pay attention and be careful of any advice you get, because even a financial advisor can screw up your portfolio.

Not saying it's dumb to invest, and I am definitely not saying there is a guarantee you will ever get your home investment back either (though your home is insured, at least). But market investing takes a bit of time and care, making that additional payment on your mortgage is all of 30 seconds and can often yield the same ROI.

Either way works, YMMV

[HaRuMaN]

As far as debt goes, we have a mortgage, my wife's undergrad student loan (which is like $20K @ 1.x % APR), and under $1K on our credit cards.  No car loans, no store credit cards, etc.  My wife is getting her Masters now, and we've been paying that ourselves (no loans).

We use credit cards to our advantage, using only ones that give us cash back, etc.  Generally we pay them off each month, unless we have a promo 0% APR, in which case we leave the money in an interest bearing savings until just before the 0% APR runs out on the credit card, then we pay off in full.

[Hoopz]

As far as debt goes, we have a mortgage, my wife's undergrad student loan (which is like $20K @ 1.x % APR), and under $1K on our credit cards.  No car loans, no store credit cards, etc.  My wife is getting her Masters now, and we've been paying that ourselves (no loans).

We use credit cards to our advantage, using only ones that give us cash back, etc.  Generally we pay them off each month, unless we have a promo 0% APR, in which case we leave the money in an interest bearing savings until just before the 0% APR runs out on the credit card, then we pay off in full.

All sound cash management techniques. 

[ChadTower]

FWIW, I'm closer to Fordman's strategy than the credit card folks.  I haven't had a credit card in years.  My only debt is my truck and my house.  Wife's car has no lien.  I pay cash for everything and if I can't it doesn't get bought.  I have a Mastercard ATM card for online transactions.  Sometimes I consider opening up a $750 limit credit card to make it easier to rent cars and make online reservations.  I own a token amount of stock from a former employer and contribute the % of salary to 401k that gets me the maximum employer match (immediate 100% return).

I'm not accelerating my mortgage, though.  I'm in a 15 year with a very low rate so that's quick enough for me.  Any excess cash I get goes into a capital fund that will eventually be the down payment on investment real estate.  My goal is enough passive rental income each month to make two sets of student loan payments - my two elementary school age kids.