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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

#71

Post by grecy »

xrange wrote: post #61

One things I don't see mentioned is the use of a mortgage as kind of a forced savings plan. For a bunch of reasons, it is really hard for people to plan/save for the future. That's why there is thousands of years of parables and social convention exhorting people to save and not be in debt (i.e. if it was easy to do, everyone would do it). Buying a larger-than-strictly-necessary house with a mortgage is a way to star…

By the time you pay off the mortgage you will have paid 3-4 times the value of the property because of the interest. So on a $400k house you will have put $1.2mil - $1.6mil into the savings account, but you'll only have a ~$500k property to show for it (IF the house appreciates, which it hopefully does, fingers crossed). That's a seriously inefficient way to save.

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

#72

Post by dionidium »

Saving is so much easier than earning, and it’s a habit that once built will pay you back for the rest of your life.

There's a weird cultural meme that's convinced the middle class that the road to wealth is saving. The road to wealth is earning. This is just kind of an obvious thing, but I guess there are benefits to convincing people who will never earn enough to be wealthy that there are attainable ways to go about it. I'll tell you this much, if buying an iPad makes you broke, then not buying that iPad sure ain't gonna' make you rich.

This meme is just kind of annoying as it relates to the middle class, but it's downright dangerous when applied to the poor. It's useless to apply ideals of thrift to people making minimum wage, a level of earning at which no amount of saving can cover even predictable periodic expenses.

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

#73

Post by david927 »

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.

If you honestly think that leverage hasn't become an overused tool in our society, you're simply not paying attention.

On a side note, based on your tone, I'm guessing that your username is based on how people refer to you. Cool it.

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

#74

Post by grecy »

chrisBob wrote: post #65
noonespecial wrote: post #48

Earlier quoted context omitted.

Health insurance for starters. Poor people will likely have a (mostly less than sufficient) government option that they pay little for, hoping that they don't get sick. Then comes the mandatory insurances of "ownerships". Mortgage insurance to cover loan default, required property insurance for that home, auto insurance (full coverage also required by your lender on a new car) etc. Fearful insurances like disability…

I agree except for life insurance. Most life insurance (at least a whole life policy) is a way to pass on wealth tax free, rather than a real insurance policy.

And why would you want to do that?

You're assuming that passing on wealth is a good thing, implying that it will make your kids happier.

In all honestly, when my parents pass, I genuinely hope they've spent every cent of what they earned in their lives and my brother, sister and I wind up with nothing more than photo albums. They worked their entire lives for that money and I want them to spend and enjoy that money.

I can earn my own.

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

#75

Post by ryandrake »

NickPollard wrote: post #41
jacquesm wrote: post #24

Earlier quoted context omitted.

I'm all for debt if used responsibly. Getting a mortgage can - depending on your personal financial situation and the market conditions - be a good decision. But paying it off versus buying a bunch of gadgets or a new car should be a no-brainer. Unless you have a guaranteed ROI on some investment plan.

It doesn't need to be guaranteed, it just needs to be better expected value, with a volatility you're willing to accept. Risk, like debt, is not always a bad thing, as long as you're informed and understanding of it. As Daniel Kahneman said in 'Thinking, Fast and Slow', people ought to take more opportunities with risky outcomes with positive expected values - some you will lose, but over your life, taking a large nu…

In any kind of gambling, including investing, variance is the killer. Unless you're making extremely small bets compared to your total bankroll, the inevitable down-swing will end you. The "take risky opportunities" advice is only valid if you can afford the worst possible outcome and still keep going.

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

#76

Post by bradshaw1965 »

dionidium wrote: post #72

Saving is so much easier than earning, and it’s a habit that once built will pay you back for the rest of your life. There's a weird cultural meme that's convinced the middle class that the road to wealth is saving. The road to wealth is earning. This is just kind of an obvious thing, but I guess there are benefits to convincing people who will never earn enough to be wealthy that there are attainable ways to go abou…

There are pressures from both the earn and the spend side, but the surest path to misery is living above your means. Dickens had it pretty much nailed with, "Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery."

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

#77

Post by dimva »

dionidium wrote: post #72

Saving is so much easier than earning, and it’s a habit that once built will pay you back for the rest of your life. There's a weird cultural meme that's convinced the middle class that the road to wealth is saving. The road to wealth is earning. This is just kind of an obvious thing, but I guess there are benefits to convincing people who will never earn enough to be wealthy that there are attainable ways to go abou…

Investing $4000/month (which is what I do on a salary barely over $100k while living by myself in a 1 bedroom in the East Village, NYC and going out for every meal) at 3% will get you $1 million in 17 years. That means you'll be a millionaire by the time you're 40 if you start doing this right after graduating college.

3% happens to be the rate that stocks have historically appreciated above inflation, so by doing this you'll be a millionaire in today's money.

Don't believe me? Try it: http://www.bankrate.com/calculators/savings/simple-savings-c...

EDIT: For the poor, there are many structural problems that lead to a cycle of poverty, but it is possible to escape even that with very good money management. I dated a girl whose parents came to America on a raft, with a fifth-grade education. They slept outside the 7/11 where they worked at first (didn't have to spend any money on rent), and ended up owning a large portion of their town by the time they were in their 50s.

In short, don't knock thrift. Yes, earning more is always great, but savings combined with compound interest is magical.

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

#78

Post by throwaway283719 »

timwaagh wrote: post #60
throwaway283719 wrote: post #34

Earlier quoted context omitted.

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 h…

3.5% is not risk free. with interest rates this low, that kind of investment cannot be offered risk free. government bonds that have such roi are not going to be safe either.

Yes, that is why the sentence begins with the word "if".

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

#79

Post by ap22213 »

I run into this all the time as I bootstrap my company. I have a deep temptation to try to do everything myself. And, a lot of times, I will do so. But, I have to keep reminding myself that there's way more value in outsourcing things. I have enough extra capital to do so, so there's no reason not to. But, it's a mental challenge to allow myself to drain the bank account, as I instead feel comfortable spending enormous time tinkering with things on the side. Trying to do all the code myself only takes more time. And time is more than money in this business.

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

#80

Post by dionidium »

dimva wrote: post #77
dionidium wrote: post #72

Saving is so much easier than earning, and it’s a habit that once built will pay you back for the rest of your life. There's a weird cultural meme that's convinced the middle class that the road to wealth is saving. The road to wealth is earning. This is just kind of an obvious thing, but I guess there are benefits to convincing people who will never earn enough to be wealthy that there are attainable ways to go abou…

Investing $4000/month (which is what I do on a salary barely over $100k while living by myself in a 1 bedroom in the East Village, NYC and going out for every meal) at 3% will get you $1 million in 17 years. That means you'll be a millionaire by the time you're 40 if you start doing this right after graduating college. 3% happens to be the rate that stocks have historically appreciated above inflation, so by doing th…

That's great, but I hope you'll appreciate that earning $100k+ on a single income in your early twenties without kids isn't exactly the median household I'm talking about. As you point out, you've still got plenty of money remaining to live in one of the most desirable neighborhoods in the country while eating out for every meal.

You're doing fine.

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