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It Is Not About the Money, Silly, It Is All About the Time

jacquesmattheij.com

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Re: It Is Not About the Money, Silly, It Is All About the Time

#31

Post by conjecTech »

zzleeper wrote: post #12
jacquesm wrote: post #4

Earlier quoted context omitted.

Index funds do not have a guaranteed rate of return but mortgages do have a guaranteed rate of expense.

Was just thinking the same thing. Keeping the mortgage and investing on index funds is the same thing as "leveraging up" your investments. AKA, it's the same as saying "let's borrow 1k from the bank at 3.5% and put it into the SP500".

Taking the mortgage was the thing that leveraged you to begin with. Investing in the market rather than paying it off at an advanced rate merely serves to not further reduce your leverage.

Re: It Is Not About the Money, Silly, It Is All About the Time

#32

Post by onion2k »

"Annual income twenty pounds, annual expenditure nineteen pounds nineteen shillings and six pence, result happiness. Annual income twenty pounds, annual expenditure twenty pounds and six pence, result misery." Charles Dickens, in "David Copperfield", published in 1850.

The notion of living within your means is not a new one. It's something that ought to be taught all the way through school. It's that important.

Re: It Is Not About the Money, Silly, It Is All About the Time

#34

Post by throwaway283719 »

brightsize wrote: post #19
throwaway283719 wrote: post #3

There can be totally valid reasons for not getting rid of your mortgage even if you have the opportunity - if you have something better to do with the money. If you are paying 3.5% on your mortgage but you can invest somewhere with a return greater than 3.5% after tax, why would you pay down your mortgage?

Dave Ramsey, who, for lack of a better term, one might describe as a "personal finance turn-around guru and radio personality", poses the question you ask in a different way. I paraphrase: "If you owned your house outright, would you go out and get a mortgage on it so that you could invest in the stock market?". Financial management is about much more than maximizing returns. It's also about managing risk. For most p…

I didn't mention anything about the stock market. I said if you can invest somewhere with a return greater than 3.5% after tax.

Implicit in that was that the investment is risk-free i.e. it's a government bond or something. But it could be a risky investment, if the risk-return trade-off is high enough.

If I had the opportunity to invest at a 10% rate of return with a stdev of 5% then absolutely, I'd remortgage my house at 4% to do that!

Re: It Is Not About the Money, Silly, It Is All About the Time

#35

Post by gnopgnip »

davidw wrote: post #2

> someone explained to me in a very serious tone of voice that getting rid of your mortgage is stupid because it is a deductible, better to wait with paying it off when you sell the house in 25 years All else being equal, if you can deduct that from your taxes and spend the money on something else - like, say, index funds - you're going to be better off financially, no?

Well you also have to pay taxes on your gains, and there is risk involved. You could lose all of the money you put into index funds, you will not lose any money you spend on paying off your mortgage early.

Re: It Is Not About the Money, Silly, It Is All About the Time

#36

Post by jacquesm »

DontBeADick wrote: post #28
jacquesm wrote: post #21

Earlier quoted context omitted.

I personally am much more likely to follow anonymous investment advice. Do you have any tips on how I could re-mortgage my house or get some cheap loans to buy gadgets or invest? Hint: don't be a dick.

Actually, depending on where you live, now could be a great time to refinance your mortgage or take out a second one. Look into the concept of leverage sometime.

I think I've worked out the concept of leverage, but thank you for the attempt at eduction. On a similar note I could make similar comments about risk versus reward and the fact that very few greater-than-inflation strategies will come with any guarantees. Sure, you can use leveraging to buy 5 rental properties instead of only one or two cash. But that's not what the article talks about.

It's not about how to allot your surplus millions, but about dealing responsibly with the income and the debt that most ordinary, middle class people have.

Re: It Is Not About the Money, Silly, It Is All About the Time

#37

Post by ryandrake »

jasonkester wrote: post #22

A lot of talk about mortgages here. I think as long as you do the math and let that guide your decisions, you'll come out ahead. Take this year, for example. I happen to have a mortgage that I could pay off completely later this year without penalties. I've been saving to do just that, and parking the balance in the market until the day comes to pull the trigger. But what's this? I'm up 11.6% on the year thus far. It…

Paying down a mortgage is probably the safest, guaranteed bet. Not everyone can get lucky on stocks or bear the risk of being unlucky. If there was an available investment opportunity with a higher risk-adjusted rate of return than my mortgage interest rate, I wouldn't want to pay down my mortgage either.

If I got all the money back I lost gambling on index funds and other "low risk" investments, I'd probably be able to pay mine off today.

EDIT: guaranteed -> risk-adjusted

Re: It Is Not About the Money, Silly, It Is All About the Time

#38

Post by JoeAltmaier »

charlieflowers wrote: post #26
DontBeADick wrote: post #14

I'm getting tired of all this "live debt free!" nonsense. There's good debt and bad debt, and people like this should learn the difference before giving financial advice.

OK, well look around. Do you know a lot of people (is it possibly even most of the people you know) who have 2 or more car loans, and at least one home loan? That's the "norm". That's what "everyone" does (everyone who is in a first world country and has a decent job). Is that somehow "smart debt"? Really? What's so smart about it? It is smart for whomever loaned that money out ... they get back free money paid consi…

Really there's only car and house debt. The rest are small fry. And both of those can be problematic.

Re: It Is Not About the Money, Silly, It Is All About the Time

#39

Post by gtCameron »

jasonkester wrote: post #22

A lot of talk about mortgages here. I think as long as you do the math and let that guide your decisions, you'll come out ahead. Take this year, for example. I happen to have a mortgage that I could pay off completely later this year without penalties. I've been saving to do just that, and parking the balance in the market until the day comes to pull the trigger. But what's this? I'm up 11.6% on the year thus far. It…

Take a look at the historical returns of the stock market. Using the S&P 500 as an index, if you did the same in 2007 riding through 2008 you would have lost 37% of your money.

You could very well continue to ride the wave up, but there is a non-zero risk that it all comes crashing back down again, and that needs to be considered in your equation.

Re: It Is Not About the Money, Silly, It Is All About the Time

#40

Post by pjungwir »

One thing I heard once that has stuck with me: When you earn a dollar, you pay 30-40% tax on it, but when you save a dollar, you keep the whole thing. It pays to push on both the revenue side and the expense side, but one pro of putting effort into expenses is you keep 100% of the reward.
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