Red or Black?

lookout123 · 01-04-2005, 02:19 PM

also, having a free and clear home is not the wisest choice. Real Estate with either appreciate or depreciate in value irrespective of the amount owed on it. if you can pay 4-6% interest annually on a mortgage balance and have a greater portion of your net worth invested wisely you will have more for your retirement nest egg in the long run.

lookout123 · 01-04-2005, 02:21 PM

BTW, i have to change my previous answer as i will now finish january seriously in the red. i just purchased another piece of land last night and will have to wait 6-8 weeks to pull my money back out and return it to my investments.

Cyber Wolf · 01-07-2005, 10:38 PM

I'm about $12K in debt due to student loans. Minus that, I have about $400 that I owe on, made up of medical bills and credit card debt. I only got my first credit card two years ago. It came with a $500 limit and I've left it there because I know I'll spiral out of control if I get a limit much higher than that. Also, by using my debit card instead of cash for most of my purchases, I can easily see what my money's going into. And if there's something I really really want, I'm patient enough to wait until Christmas time or near my birthday and start dropping hints

Beestie · 01-07-2005, 11:33 PM

Quote:

Originally Posted by lookout123

BTW, i have to change my previous answer as i will now finish january seriously in the red. i just purchased another piece of land last night and will have to wait 6-8 weeks to pull my money back out and return it to my investments.

Please explain how buying property puts one in the red. Unless, of course, you paid considerably more than the property was worth.

Griff · 01-08-2005, 11:25 AM

Debt is a lifestyle choice. Its great for the mobile fully employed middle class suburbanite who can afford to play the government tax and education games that were written for him. Buying land on speculation may not be a great idea for working class country folks, with rural population wanning and the buying pressure from city folks inflating land prices (temporarily?). Agriculture is dead, we live in a difficult job market but won't have a banker on our butts if we lose our jobs. We live very different lives, let's not pretend that our economies are the same. My house is free and clear. I built (am building) it spending no more per month than I would have spent on a morgage so there was no initial lump sum that could have been invested differently. I did take a hit on salary but that was balanced by being the primary care-giver for my kids before they became school age and providing that crucial stability. You have to tune your debt to your personal situation. You can use debt but debt can just as easily use you. Griff

lookout123 · 01-08-2005, 11:42 AM

Beestie, i meant that i'll be in the red for the short term, as i chose to drain savings to pay for it. i will mortgage it next month and return the money to my investments (keep in mind i pay no sales charges). just playing numbers games for best possible terms, really.

Griff, i definitely wasn't encouraging excessive debt. i wouldn't take out a larger than necessary mortgage unless i had that same amount invested in relatively conservative vehicles. that way, if the need arises, one can always pay the mortgage down without fear. example, if your home is free and clear and you were to take a loan for 50% of the value and invest that into a nice blend of conservative investments returning an average of 8-10% annually and you were only paying out 5% on the mortgage balance(which is tax deductible, so in a 15% tax bracket you are really only losing 4.25%), your money would be working more effectively for you. if you run into hard times you can A) pull monthly expenses out of investments, B) liquidate investments to pay off debt completely eliminating payment altogether. that scenario is equally valid in any job and housing environment.

That doesn't mean you should do it, though. All financial plans have to fit your comfort level. If you have a fantastic financial plan in place with wonderful investment vehicles working for you, but you can't sleep at night because of concern over the mortgage, it wouldn't be the right plan for you. Like i tell my clients "I have many great investments available, that doesn't mean they are all great for you. the goal is to fit the investment to the person."

i should also add that i don't really invest in property for investment sake. i am going to build a new home over the next 24 months then sell the one i'm in now. i believe the big housing bubble is going to deflate over the next couple of years as people who got in over their heads start to drown, creating opportunity for others who were a little more restrained about the housing markets. IMO

Beestie · 01-08-2005, 03:10 PM

Quote:

Originally Posted by lookout123

Beestie, i meant that i'll be in the red for the short term, as i chose to drain savings to pay for it.

But your net worth doesn't change when you convert assets from one type (cash) to another (real estate). So, the transaction is neutral to your red/black status - it hasn't changed one penny. Not trying to split hairs just making the distinction clear.

View Poll Results: How much debt do you hold?
$20k+	2	6.45%
$10k-20k	1	3.23%
$6k-10k	5	16.13%
$2k-5k	3	9.68%
$0-1k	3	9.68%
I break even each month	4	12.90%
I'm in the black each month	13	41.94%
Voters: 31. You may not vote on this poll

01-04-2005, 02:19 PM	#1
lookout123 changed his status to single Join Date: Apr 2004 Location: Right behind you. No, the other side. Posts: 10,308	also, having a free and clear home is not the wisest choice. Real Estate with either appreciate or depreciate in value irrespective of the amount owed on it. if you can pay 4-6% interest annually on a mortgage balance and have a greater portion of your net worth invested wisely you will have more for your retirement nest egg in the long run. __________________ Getting knocked down is no sin, it's not getting back up that's the sin

01-04-2005, 02:21 PM	#2
lookout123 changed his status to single Join Date: Apr 2004 Location: Right behind you. No, the other side. Posts: 10,308	BTW, i have to change my previous answer as i will now finish january seriously in the red. i just purchased another piece of land last night and will have to wait 6-8 weeks to pull my money back out and return it to my investments. __________________ Getting knocked down is no sin, it's not getting back up that's the sin

01-07-2005, 10:38 PM	#3
Cyber Wolf As stable as a ring of PU-239 Join Date: Jun 2004 Location: On a huge rock covered in water, highly advanced moss and 7 billion parasites Posts: 1,264	I'm about $12K in debt due to student loans. Minus that, I have about $400 that I owe on, made up of medical bills and credit card debt. I only got my first credit card two years ago. It came with a $500 limit and I've left it there because I know I'll spiral out of control if I get a limit much higher than that. Also, by using my debit card instead of cash for most of my purchases, I can easily see what my money's going into. And if there's something I really really want, I'm patient enough to wait until Christmas time or near my birthday and start dropping hints __________________ "I don't see what's so triffic about creating people as people and then getting' upset 'cos they act like people." ~Adam Young, Good Omens "I don't see why it matters what is written. Not when it's about people. It can always be crossed out." ~Adam Young, Good Omens

01-08-2005, 11:25 AM	#5
Griff still says videotape Join Date: Feb 2001 Posts: 26,813	property counts when the sheriff nails the tax sale notice up Debt is a lifestyle choice. Its great for the mobile fully employed middle class suburbanite who can afford to play the government tax and education games that were written for him. Buying land on speculation may not be a great idea for working class country folks, with rural population wanning and the buying pressure from city folks inflating land prices (temporarily?). Agriculture is dead, we live in a difficult job market but won't have a banker on our butts if we lose our jobs. We live very different lives, let's not pretend that our economies are the same. My house is free and clear. I built (am building) it spending no more per month than I would have spent on a morgage so there was no initial lump sum that could have been invested differently. I did take a hit on salary but that was balanced by being the primary care-giver for my kids before they became school age and providing that crucial stability. You have to tune your debt to your personal situation. You can use debt but debt can just as easily use you. Griff __________________ If you would only recognize that life is hard, things would be so much easier for you. - Louis D. Brandeis

01-08-2005, 11:42 AM	#6
lookout123 changed his status to single Join Date: Apr 2004 Location: Right behind you. No, the other side. Posts: 10,308	Beestie, i meant that i'll be in the red for the short term, as i chose to drain savings to pay for it. i will mortgage it next month and return the money to my investments (keep in mind i pay no sales charges). just playing numbers games for best possible terms, really. Griff, i definitely wasn't encouraging excessive debt. i wouldn't take out a larger than necessary mortgage unless i had that same amount invested in relatively conservative vehicles. that way, if the need arises, one can always pay the mortgage down without fear. example, if your home is free and clear and you were to take a loan for 50% of the value and invest that into a nice blend of conservative investments returning an average of 8-10% annually and you were only paying out 5% on the mortgage balance(which is tax deductible, so in a 15% tax bracket you are really only losing 4.25%), your money would be working more effectively for you. if you run into hard times you can A) pull monthly expenses out of investments, B) liquidate investments to pay off debt completely eliminating payment altogether. that scenario is equally valid in any job and housing environment. That doesn't mean you should do it, though. All financial plans have to fit your comfort level. If you have a fantastic financial plan in place with wonderful investment vehicles working for you, but you can't sleep at night because of concern over the mortgage, it wouldn't be the right plan for you. Like i tell my clients "I have many great investments available, that doesn't mean they are all great for you. the goal is to fit the investment to the person." i should also add that i don't really invest in property for investment sake. i am going to build a new home over the next 24 months then sell the one i'm in now. i believe the big housing bubble is going to deflate over the next couple of years as people who got in over their heads start to drown, creating opportunity for others who were a little more restrained about the housing markets. IMO __________________ Getting knocked down is no sin, it's not getting back up that's the sin Last edited by lookout123; 01-08-2005 at 11:46 AM.

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