I'd be more impressed by his advice -- in order to be able to afford anything you need, be frugal about what you don't -- if he hadn't happened to mention the time that his wife bought a house for $2.8M (and returned it, whatever exactly he means by that). If you can afford houses that expensive, your ability to afford nice stuff is probably not entirely the result of frugality.
How to Afford Anything
31–40 of 121 posts
Re: How to Afford Anything
#32I was more-or-less with him up until the "Don't Rent" advice. By his own admission, purchasing a condo and riding it up to the very top of the largest real estate bubble in history netted him only a 1% return. Any other market at any other time would likely have netted him a loss on that purchase. In a non-bubble market, I wonder how much more he would have gained by renting that very same condo and investing the dif…
Even if he suffered a loss (i.e. if the appreciation in the home value was not enough to offset his accumulated outflow of principal and interest) it probably would not be as much as he would have lost by renting. Your scenario assumes that (1) he could rent the same or an equivalent property for much less of cash outflow than buying and (2) he could have invested the difference in some other asset that had a much hi…
> Your scenario assumes that (1) he could rent the same or an equivalent property for much less of cash outflow than buying
Of course he could. If your rent is paying your landlord's mortgage, you're overpaying.
> and (2) he could have invested the difference in some other asset that had a much higher return than appreciation of the condo.
Finding an asset with a better than 1% return is not difficult.
> If the amount the rental amount is about the same amount as the mortage payments then you are almost certainly going to be worse off renting than buying under average market conditions.
If you're wasting your money by paying your landlord's mortgage, you're going to be worse off than if you refuse to waste money and pay a reasonable rent. Renting is cheaper than home ownership; if it's not, you're doing it wrong.
Re: How to Afford Anything
#33I was more-or-less with him up until the "Don't Rent" advice. By his own admission, purchasing a condo and riding it up to the very top of the largest real estate bubble in history netted him only a 1% return. Any other market at any other time would likely have netted him a loss on that purchase. In a non-bubble market, I wonder how much more he would have gained by renting that very same condo and investing the dif…
Even if he suffered a loss (i.e. if the appreciation in the home value was not enough to offset his accumulated outflow of principal and interest) it probably would not be as much as he would have lost by renting. Your scenario assumes that (1) he could rent the same or an equivalent property for much less of cash outflow than buying and (2) he could have invested the difference in some other asset that had a much hi…
This is probably generally true, provided that you reside in the property long enough to recoup the rather high transaction costs. I did the math on purchasing recently and given how long I expect to be in my current area, the math doesn't add up, even assuming relatively low upkeep costs.
I'm not sure how long you have to stay somewhere to hit the break even point.
Re: How to Afford Anything
#34Earlier quoted context omitted.
Even if he suffered a loss (i.e. if the appreciation in the home value was not enough to offset his accumulated outflow of principal and interest) it probably would not be as much as he would have lost by renting. Your scenario assumes that (1) he could rent the same or an equivalent property for much less of cash outflow than buying and (2) he could have invested the difference in some other asset that had a much hi…
> Your scenario assumes that (1) he could rent the same or an equivalent property for much less of cash outflow than buying Of course he could. If your rent is paying your landlord's mortgage, you're overpaying. > and (2) he could have invested the difference in some other asset that had a much higher return than appreciation of the condo. Finding an asset with a better than 1% return is not difficult. > If the amoun…
The only caveat is if you are somewhere long enough, rents will continue to increase while your fixed rate mortgage will remain constant (taxes and upkeep, of course, may not). I've looked at the costs of short term renting vs. buying in my market, and for the kind of properties I look at, it's significantly more expensive to buy in, say, the 2 year time frame.
Re: How to Afford Anything
#35I was more-or-less with him up until the "Don't Rent" advice. By his own admission, purchasing a condo and riding it up to the very top of the largest real estate bubble in history netted him only a 1% return. Any other market at any other time would likely have netted him a loss on that purchase. In a non-bubble market, I wonder how much more he would have gained by renting that very same condo and investing the dif…
From a new-buyers perspective (i.e. my own) this is actually good advice. Right now an average sized house is about as much to rent as it is to buy with a mortgage (at least here in the UK anyway). There is no sane way anyone should be renting a whole house.
If, on top of your mortgage interest, you add in property taxes, property maintenance (2-5% annually?), brokerage fees and the gains foregone in purchasing property rather than bonds, is it still good advice?
Re: How to Afford Anything
#36So apparently Coke still has cocaine, and most companies are big conspiracies... If you ignore the the tin-foil hat stuff though, there are some good tips in the article.
Re: How to Afford Anything
#37So apparently Coke still has cocaine, and most companies are big conspiracies... If you ignore the the tin-foil hat stuff though, there are some good tips in the article.
He didn't say it still had cocaine. He said the first half of the name "Coca-Cola" comes from cocaine.
Re: How to Afford Anything
#38Earlier quoted context omitted.
From a new-buyers perspective (i.e. my own) this is actually good advice. Right now an average sized house is about as much to rent as it is to buy with a mortgage (at least here in the UK anyway). There is no sane way anyone should be renting a whole house.
If, on top of your mortgage interest, you add in property taxes, property maintenance (2-5% annually?), brokerage fees and the gains foregone in purchasing property rather than bonds, is it still good advice?
> You add in property taxes, property maintenance (2-5% annually?), brokerage fees and the gains foregone in purchasing property rather than bonds, is it still good advice?
I should have mentioned; my calculations included most of those extras. To be honest, though, the only important thing is what you are paying out in total each month.
Re: How to Afford Anything
#39...the real deal now is get your 4 year degree then take a job on a big yacht as a mate. You will start at $60K/year (tax-free take-home) with room, board and uniforms included. I love reading Ken's articles. He talks about the weirdest things.
Can anyone confirm that this is even remotely true? $60K tax-free!?
It's tax-free if you stay outside the U.S. long enough. I believe the limit is 10 months/year, but it might be higher.
Of course, that means you're not subject to U.S. income tax, but you might be subject to some other country's income tax depending on where you spent your time.
I've met people who work on offshore oil rigs who have (claimed to have) avoided taxes this way, but apparently it is a recipe for an almost guaranteed audit. YMMV.
Re: How to Afford Anything
#40...women don't give a crap what kind of car you have... How strange. OP advises being able to afford anything by being "frugal" and then claims to know what women care about. He must not be married. I agree with much of OP's advice. Just be aware that the quickest way to stop following it isn't loss of discipline but falling in love with someone who doesn't want to live that way.
Ken is, in fact, married, as you'll find out if you just read further down the article.
Married with 2 kids. Hypocrisy.