|
Eyes Only posted:I've always been confused why people compare debt repayment with stocks. The return on debt repayment is guaranteed and you can't technically default on yourself. Treasuries are the comparable investment. With the 10yr currently trading at 2.1% it's really hard to justify investing instead of paying down debt unless your risk tolerance is so high that you would have no bonds in your portfolio anyway. You've also capped your upside; if you had $35k in student loan debt with a 5% rate, and $35k in a bank account in Jan 2013, you could: a) Pay off the student loans in January, not paying $1750 in interest. (+1750) b) Buy ~$35,000 of SPX, sell it all on Dec 31 2013, and end up with ~$45350, $30-ishk student loan debt, and having paid the interest. (+8600) Yeah, paying down the debt you definitely save that interest, but investing it in the stock market has an unknown upside which in the best cases will gain far more than avoiding the fixed APR on the debt. It's comparable in that there's multiple choices you can make with the money at your disposal. One of those choices has way more upside, but you need way more risk tolerance to get exposure to that upside.
|
#
?
Dec 15, 2014 20:32
|
|
|
|
| # ? May 14, 2024 12:39 |
|
|
Interest rate on student loans is a known quantity. Rate of return on an equity instrument is not. The guy saying "look how smart I am, this is a great idea" is making a lot of assumptions and leaving out some important points. Would it be any different if the guy was trading on margin with $35k of borrowed money at 3%? It sure doesn't feel that different, and that 's outside the risk tolerance level for a lot of people. Especially if the money he's borrowing on margin is impossible to discharge through bankruptcy.
|
|
#
?
Dec 15, 2014 21:19
|
|
|
One of our clients passed away last month, and a few weeks ago we got the assets transferred into beneficiary accounts for the heirs. The total was about $1.1 million split between 12 or so beneficiaries, and close to half of it has already been cashed out.
|
|
#
?
Dec 15, 2014 21:31
|
|
|
nickutz posted:One of our clients passed away last month, and a few weeks ago we got the assets transferred into beneficiary accounts for the heirs. To be fair I probably wouldn't keep money under management by someone just because a relative did. I...hope you don't literally mean cashed out in suitcase full of bills form  .
|
|
#
?
Dec 15, 2014 21:35
|
|
|
nickutz posted:One of our clients passed away last month, and a few weeks ago we got the assets transferred into beneficiary accounts for the heirs. This isn't necessarily bad with money because you have no idea what they've done with the money (if anything). Cashed out of a beneficiary account doesn't mean spent on a new car and hookers. I would probably remove the money from a custodial account myself unless the account was at Vanguard.
|
|
#
?
Dec 15, 2014 21:35
|
|
|
nickutz posted:One of our clients passed away last month, and a few weeks ago we got the assets transferred into beneficiary accounts for the heirs.
|
|
#
?
Dec 15, 2014 21:39
|
|
|
Yes I do, based on meetings and communications for the beneficiaries this will nearly all be used for new cars, vacations, and remodeling. None of the assets were transferred to a different custodian, just ACH transferred to their checking accounts. This is likely the most money any of them have had in their lives, and for a few of them it won't last much longer.SiGmA_X posted:Definitely good with money. I'm helping my buddy save roughly 15% a year from moving away from his grandpa's management company. They're basically fully ripoffs. Cool story, we made next to nothing on the accounts and charged no management fees to the initial client nor his beneficiaries. I do take exception to be called a ripoff. nickutz fucked around with this message at 21:44 on Dec 15, 2014 |
|
#
?
Dec 15, 2014 21:41
|
|
|
nickutz posted:Yes I do, based on meetings and communications for the beneficiaries this will nearly all be used for new cars, vacations, and remodeling. None of the assets were transferred to a different custodian, just ACH transferred to their checking accounts. This is likely the most money any of them have had in their lives, and for a few of them it won't last much longer. At least for those who are remodeling it might improve the value of their house. Vacations and new cars is just lovely though.
|
|
#
?
Dec 15, 2014 21:54
|
|
|
Jeffrey of YOSPOS posted:Doesn't that logic lead to treating debt repayment as the bond portion of your portfolio that he allocates by paying the minimum? If he regularly did double/triple payments that now go to stocks, isn't it something more like a 50/50 stock/bond or a 66/33 stock/bond portfolio? I'm not saying I believe any of this, but it certainly seems like you're agreeing with him on the surface. Good point, the minimum payment does count toward the bond allocation, and I guess it can easily be sufficient to cover all bonds. I guess I should restate my claim then: If your loan rate is less than the comparable treasury rate then the correct choice is to pay only the minimum and invest the rest. Let's be realistic: this doesn't happen unless you got ripped off by a car dealer. If it's over the expected return of the market (about 8.5% these days) then everything should go to paying it down and nothing should be invested at all. If it's in the middle, then the allocations are a rather complicated statistical problem that depends on the exact rate, your risk profile, and how much extra cashflow you have compared to the loan minimum. But it is going to be hard to come up with an optimal portfolio that has bonds in it under a sane set of assumptions. Dwight Eisenhower posted:Yeah, paying down the debt you definitely save that interest, but investing it in the stock market has an unknown upside which in the best cases will gain far more than avoiding the fixed APR on the debt. It's comparable in that there's multiple choices you can make with the money at your disposal. One of those choices has way more upside, but you need way more risk tolerance to get exposure to that upside. Upside doesnt have any inherent value though. If you have a choice between an investment that guarantees your $100 will turn to $110 and one that has a 50/50 shot of staying at 100 or going to 120, the former is superior in an absolute sense since I can choose at the end to go to Vegas for my upside. Expected return and risk measure are what everything comes down to in the end. Bad with money story: one of my coworkers has all of his 401k allocated to company stock. He's been maxing contributions for years here and rolled over his old 401k when he joined, so I'm thinking 150k balance at a bare minimum. We get instant vesting on our ESPP and such, so there's no reason to do this.
|
|
#
?
Dec 15, 2014 21:56
|
|
|
xie posted:please don't loving start "everyone should just be in college for a STEM/engineering degree" poo poo please. it takes a baby to realize that if everyone switched to engineering there would be no jobs. It's not that we need more STEM graduates, so much as we need fewer liberal arts graduates going into debt to then make fries upon graduation.
|
|
#
?
Dec 15, 2014 22:02
|
|
|
canyoneer posted:Interest rate on student loans is a known quantity. Rate of return on an equity instrument is not. The guy saying "look how smart I am, this is a great idea" is making a lot of assumptions and leaving out some important points. Absolutely agreed. The 2013 SPX example is cherry picking one of the better cases of indexing you'll find, and there's no appreciable difference between debts apart from interest rates and how they are secured and discharged. Embracing a debt to keep money on hand for investing is very comparable to trading on margin. However, it is a good example showing that it's not always strictly better to discharge debts instead of investing the money you have in other vehicles. There's other factors to consider, like reasonable confidence in continuing income and an ability to make the payments necessary to service that debt, the margin rate you'd have to accept vs. whatever your loan you're not paying off is, etc.
|
|
#
?
Dec 15, 2014 22:02
|
|
|
nickutz posted:Cool story, we made next to nothing on the accounts and charged no management fees to the initial client nor his beneficiaries. I do take exception to be called a ripoff.
|
|
#
?
Dec 15, 2014 22:03
|
|
|
SiGmA_X posted:You shouldn't be offended, it wasn't a dig at you at all, sorry if it came across that way. Most management companies are ripoffs through and through. Paying more than ~25bp for complete expenses is bad with money IMO. The one exception could be when you require tax loss harvesting for large taxable accounts, and then I would vote a cap of ~50bp. I shouldn't have gotten so defensive because I recognize there are many firms out there that are in it to extract as many fees and commissions from their clients as they can.
|
|
#
?
Dec 15, 2014 22:17
|
|
|
To be fair the people bad with money are the wealthy people that don't establish structured trusts for their beneficiaries. The people spending their inheritances are just following human nature. This is something that old money learned a long time ago - just because you're smart doesn't mean your kids aren't morons that will squander your wealth upon your passing. So you structure it to pay out dividends, or lock people out on clauses, or have delayed and periodic maturities. That way at least if your kid is a retard, your grand-kids will have something left to pay for their education.
|
|
#
?
Dec 15, 2014 23:18
|
|
|
cowofwar posted:To be fair the people bad with money are the wealthy people that don't establish structured trusts for their beneficiaries. The people spending their inheritances are just following human nature. This is something that old money learned a long time ago - just because you're smart doesn't mean your kids aren't morons that will squander your wealth upon your passing. So you structure it to pay out dividends, or lock people out on clauses, or have delayed and periodic maturities. That way at least if your kid is a retard, your grand-kids will have something left to pay for their education. Or they teach them how to control themselves and how not to blow it all on cocaine. Trusts work great for descendants that you know won't possibly be financially responsible enough to stop themselves, but people who don't think in truck equity don't need it, and can use it as a down payment for a house.
|
|
#
?
Dec 15, 2014 23:52
|
|
|
Volmarias posted:Or they teach them how to control themselves and how not to blow it all on cocaine. Trusts work great for descendants that you know won't possibly be financially responsible enough to stop themselves, but people who don't think in truck equity don't need it, and can use it as a down payment for a house. cowofwar fucked around with this message at 00:01 on Dec 16, 2014 |
|
#
?
Dec 15, 2014 23:58
|
|
|
I got an unexpected bonus at work and I'm going to blow it on a vitamix for my gf's Christmas gift. Its me, I'm the bad with money
|
|
#
?
Dec 16, 2014 00:05
|
|
|
http://www.reddit.com/r/personalfinance/comments/2pcnvn/have_been_climbing_out_of_debt_for_years_mother/ posted:26m, my grandmother on my fathers side left me and my brother $60k/each in savings accounts for college only and she passed away when I was 6, father passed away when I was 16 and my mother became the soul owner/person in charge of the accounts and when I was 18 I signed (what at the time I believed to be my administrative or signup papers) for college when they were in fact loan documents. I know I was stupid not to read what I was signing but I believed I could trust my own mother, graduated with a bachelors degree in an IT field and got a rude slap in the face @ 22 years old with collections warning from the loan company of $32k. Holy poo poo........WHAT!?!? Came to find out my mom had lost both accounts for me and my brother in mostly gambling that she's admitted to. Not really bad with money on the poster's part but woof, no matter how badly my parents may have screwed me up they never committed borderline fraud against me to feed a gambling addiction. Just straight up bad with money: http://www.reddit.com/r/personalfinance/comments/2pdqqy/would_it_be_an_awful_idea_to_purchase_say_100/ posted:Would it be an awful idea to purchase say $100 worth of silver after every paycheck? Just for the sake of diversifying some of my assets. "Diversify my portfolio" has turned into some cargo cult poo poo at this point right? And finally... http://www.reddit.com/r/personalfinance/comments/2pdrgj/utilizing_college_loans_for_another_purpose/ posted:Before everyone tells me (29M) I'm nuts, let me provide a little background. I am a veteran student, utilizing the Post 9/11 GI Bill to finish my undergrad (this spring) and complete my masters (next fall). I have a very small amount of college loan debt from being in college before the military (less than 10K, which I am actively paying off). I applied for financial aid this year, in the hope of receiving Pell Grants (for all intents - free money). I did, and used them to pay down my current college loan debt ($4700 towards it!).
|
|
#
?
Dec 16, 2014 00:24
|
|
|
That guy with the gambling mom needs to file charges against his mother, stat, if I'm reading that part about the newly discovered 60k. Sounds like fraud to me? I wonder if he can get that discharged or at least his responsibility diminished or something. Insane.
|
|
#
?
Dec 16, 2014 00:40
|
|
|
rrrrrrrrrrrt posted:"Diversify my portfolio" has turned into some cargo cult poo poo at this point right?  says that the rest of his "portfolio" is in gold.
|
|
#
?
Dec 16, 2014 01:00
|
|
|
Rudager posted:
or bitcoin
|
|
#
?
Dec 16, 2014 01:31
|
|
|
C... posted:Work provided polo and jeans seems a little weird to me. Where do you work? AT&T. I didn't mean to infer they provide jeans, although they actually do provide slacks (uniform is either jeans or slacks). Basically, they give a budget of $130 a year for uniforms, and you start getting extra shirts really quick.
|
|
#
?
Dec 16, 2014 02:42
|
|
|
MAKE NO BABBYS posted:That guy with the gambling mom needs to file charges against his mother, stat, if I'm reading that part about the newly discovered 60k. Sounds like fraud to me? I wonder if he can get that discharged or at least his responsibility diminished or something. Insane. Or take out a life insurance policy on her and have her take up a dangerous hobby. Following the link, the guy updated and informed the world that the extra $60k of loans are Parent Plus loans, so mom's on the hook for the whole amount. So mom blew the entire $60k college fund for her son and took out $60k of loans to cover it up, that she is wholly responsible for. Sounds like her problem now!
|
|
#
?
Dec 16, 2014 02:44
|
|
|
Duckman2008 posted:AT&T. I didn't mean to infer they provide jeans, although they actually do provide slacks (uniform is either jeans or slacks). Basically, they give a budget of $130 a year for uniforms, and you start getting extra shirts really quick. canyoneer posted:Or take out a life insurance policy on her and have her take up a dangerous hobby.
|
|
#
?
Dec 16, 2014 03:16
|
|
|
SiGmA_X posted:I wish my company would give us a stipend for clothing... Slacks, jackets, shirts, and shoes add up... What if those loan docs he unwittingly signed were actually master promissory note forms? If these surprise loans originated off of an MPN he signed then he might be screwed. I dunno though.
|
|
#
?
Dec 16, 2014 08:35
|
|
|
Wickerman posted:What if those loan docs he unwittingly signed were actually master promissory note forms? If these surprise loans originated off of an MPN he signed then he might be screwed. I dunno though.
|
|
#
?
Dec 16, 2014 15:36
|
|
|
canyoneer posted:Would it be any different if the guy was trading on margin with $35k of borrowed money at 3%? It sure doesn't feel that different, and that 's outside the risk tolerance level for a lot of people. Especially if the money he's borrowing on margin is impossible to discharge through bankruptcy. Yes it would. Margin debt is secured by your investments and the brokerage can liquidate them if they fall too much, while student debt is unsecured.
|
|
#
?
Dec 16, 2014 15:41
|
|
|
Series DD Funding posted:Yes it would. Margin debt is secured by your investments and the brokerage can liquidate them if they fall too much, while student debt is unsecured. That's what I'm saying...? 
|
|
#
?
Dec 16, 2014 16:06
|
|
|
The quote about the guy wanting to but $100 in silver every paycheque reminds me that I at one point wanted to buy a kilo of silver. Not as an investment (though I recognize that it is still a precious metal) but just because I think it would be really neat to just have a bar of silver hanging out around the house. I have a similar opinion about a tonne of zinc. I bet I could build a really awesome garden shed with a tonne of zinc.
|
|
#
?
Dec 16, 2014 16:27
|
|
|
Tell me how I can talk my dad out of buying silver, he's been adamant that it's near the bottom and that it'll blow up during the next financial crisis.
|
|
#
?
Dec 16, 2014 17:07
|
|
|
Silver bugs are worse and dumber than gold bugs.
|
|
#
?
Dec 16, 2014 17:24
|
|
|
Tell him that although it is at or about a five year low, it has been less than ten bucks an ounce within the past 10 years. Much less that that even, under $7/oz in 2005. So it may not be all that near bottom. He is right though that people will buy more precious metals in real bad times, but that could be 30 years away. But if he has solar panels to build or werewolves to shoot, he should probably buy silver right away.
|
|
#
?
Dec 16, 2014 17:38
|
|
|
Sigh. I've posted about my best friend before, my first post in this thread talks about how he was freed from bankruptcy repayments early, was debt free, and only lasted 3 months before relapsing deep into debt. Well, the housing market here has rebounded big time (bubble #2 anyone?) so the house he's been in for 2 years has grown $25k in value! Holy poo poo I'm sitting on equity! This isn't right, how can I gently caress that up? I know, everyone is always saying REFINANCE! Get a new home loan for 100% value, take the equity out in cash and spend it. To be fair he's spending it on the house so hopefully he sees more equity growth but good god drat it's like watching him punch himself in the nuts over and over and over.
|
|
#
?
Dec 16, 2014 18:02
|
|
|
Antifreeze Head posted:... or werewolves to shoot, he should probably buy silver right away. I think this has come up in this thread before, but if that's his problem this should be right up his alley: http://silverbulletbullion.com/
|
|
#
?
Dec 16, 2014 18:16
|
|
|
cowofwar posted:Silver bugs are worse and dumber than gold bugs. Kinda related, but one of my favorite little subgroups of Bad With Money are preppers.
|
|
#
?
Dec 16, 2014 18:27
|
|
|
That is totally amazing and the next time I feel like buying something stupid (probably when I'm drunk) I am sure I'll get a .50 BMG in solid silver. It would go well with the deactivated one my great grandpa brought back from the great war. SilverBulletBullion posted:Just one of these rounds can score a bull's eye for your economic independence. Fantastic. EDIT: They offer engraving too! 
Antifreeze Head fucked around with this message at 18:48 on Dec 16, 2014 |
|
#
?
Dec 16, 2014 18:43
|
|
|
I'm surprised no one has started buying large tubs of gasoline yet.
|
|
#
?
Dec 16, 2014 18:59
|
|
|
"Investing in silver bullets will be the most unique way to preserve your wealth — and yet it’s priced as bullion"* *plus a low low 35-100% premium!
|
|
#
?
Dec 16, 2014 19:00
|
|
|
BEHOLD: MY CAPE posted:"Investing in silver bullets will be the most unique way to preserve your wealth — and yet it’s priced as bullion"* For retail silver, they are competitive. Well over spot, but other sites are charging $205 for a 10oz bar, you can get it as a 10oz bullet for $210. Don't delay, order today!
|
|
#
?
Dec 16, 2014 19:20
|
|
|
|
| # ? May 14, 2024 12:39 |
|
|
TLG James posted:I'm surprised no one has started buying large tubs of gasoline yet. A guy that I work with has been doing this. He claims to have like 6-8 or so of those blue plastic 55 gallon drums full of gasoline, rigged up on a big rack in the garage with hoses and a pump. The funny part is he filled most of them months ago and is stuck using some pretty expensive gas now.
|
|
#
?
Dec 16, 2014 19:29
|
|
