Financial Independence: Methods, Mindsets and Cloth Diapers

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I LIKE COOKIE: Dec 12, 2010

More like Mr. Sellout-Liarman-shillmoney-greedyman-mustacheblog-man

# ? Feb 23, 2016 04:21

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# ? May 10, 2024 14:17

Rurutia: Jun 11, 2009

Cicero posted:

I'm surprised that people are surprised. His blog is extremely popular and it was already known that he monetizes it, he's talked about this before.

It'd be one thing if someone discovered that he secretly takes luxury trips to Paris every year or something, but simply making lots of money doesn't directly undermine his message, especially since he stopped working before he had the blog.

But he already was FIRE'd before that.

Whether the path he followed to initially become FI applies to "the everyman" depends on your definition of everyman. If you go by the median household income for everyone, becoming FI quickly is definitely very difficult. On the other hand, if you're talking median household income for college-educated white collar professionals (which seems to be the target demographic for the blog), then it's at least moderately realistic, especially if it's a DINK household.

I'm not surprised, it's about what I expected and why I kind of rolled my eyes at his posts and his shilling before.

# ? Feb 23, 2016 04:31

Mofabio: May 15, 2003; (y - mx)*(1/(inf))*(PV/RT)*(2.718)*(V/I)

GoGoGadgetChris posted:

He preaches low expense living, not low income living.

What's the problem of generating an extra $400,000 if he's still living on the $25,000/year lifestyle that his blog is all about?

I get that, it's good he's not spending it vs. living a dumb $$ lifestyle. Just saying that it's less costly to make a difference for charitable causes now - a dollar spent to prevent malaria now (or polio 20 years ago, or whatever cause), will prevent more deaths over the long haul than holding and waiting.

# ? Feb 23, 2016 05:10

NoDamage: Dec 2, 2000

Cicero posted:

But he already was FIRE'd before that.

That's debatable. The article says he "retired" at 30 with $600k and $24k/year in annual expenses. Without the extra income from the blog I would consider that pretty risky.

# ? Feb 23, 2016 08:51

Chadzok: Apr 25, 2002

400k dang thats alotta dough.

like woah. what a champ.

I'd like to see him host the Stoic Olympics, with cash prizes given to the Fastest Barefoot Sub-Zero 10 Mile Commute, Oldest Still-Functioning Cellphone Still In Daily Use and Longest Distance Travelled To Pick Up A loving Penny.

# ? Feb 23, 2016 09:05

EugeneJ: Feb 5, 2012; by FactsAreUseless

NoDamage posted:

That's debatable. The article says he "retired" at 30 with $600k and $24k/year in annual expenses. Without the extra income from the blog I would consider that pretty risky.

My ultimate goal is to have enough cash that I can just live off the interest from 2% CD's.

If he had 600k in 2% CD's, that's $12,000 in interest a year.

# ? Feb 23, 2016 11:49

Pompous Rhombus: Mar 11, 2007

EugeneJ posted:

My ultimate goal is to have enough cash that I can just live off the interest from 2% CD's.

If he had 600k in 2% CD's, that's $12,000 in interest a year.

Inflation's pretty close to that though, isn't it?

# ? Feb 23, 2016 13:31

Nail Rat: Dec 29, 2000; You maniacs! You blew it up! God damn you! God damn you all to hell!!

NoDamage posted:

That's debatable. The article says he "retired" at 30 with $600k and $24k/year in annual expenses. Without the extra income from the blog I would consider that pretty risky.

He also makes money doing carpentry stuff, he just doesn't have a set schedule or need to work regularly to pay the bills.

Also 600,000 is a bit misleading as he owned his home outright and I think they may have even owned a rental property at that point.

Nail Rat fucked around with this message at 13:42 on Feb 23, 2016

# ? Feb 23, 2016 13:37

pig slut lisa: Mar 5, 2012; irl is good

From his forum:

quote:

Hey Everyone!

I got word that this discussion was going on about the story and I thought it would be worth throwing in a thought or two.

First of all, while I think it is pretty good fortune to be featured in the New Yorker, I've learned that every story of this type comes with some pain. This one was no exception, and it may be a little worse for me personally than expected.

Overall it was still worth it because it should bring a lot more high-income eyeballs to the ideas I'm trying to share on the blog and hopefully change a few more minds about consumption and the purpose of life.

But yeah, some of the stuff Nick wrote seemed to be out of pure misunderstanding. Take the Magic the Gathering Cards debacle for example. In the NY story, it sounds like I tried to prevent my boy from hanging out with his buddies over 4 bucks. Here's what really happened:

- a friend invited him over to introduce him to the game. There was a $20 buy-in for whatever reason, as announced in the email from his dad. "Awesome!", we all said. We'll pay for you (rather than having him pay out of his own sizeable 'stash), since this is kind of a special thing more like a joining a sports team than just buying yourself a video game. He went, and had a great time

- at the big game night, each kid was given 4 decks of 15 cards each. These little packs cost $5 apiece. "Hmm, sounds like a bit of a racket", I thought to myself, but obviously this was not a big deal and I was glad he had a new pastime.

- Magic the Gathering really captured his imagination, so he dove in. We researched the game together and it turns out you can buy packs of ONE THOUSAND (1000) cards for 20 bucks on Amazon. You get a curated mixture of like-new and new cards from game shops, because the nation is swimming in Magic cards after 20 years of popularity. So we bought him a thousand-pack for his birthday, and another for Christmas. He built a huge portfolio of custom decks and started playing the game with friends all over town.

- Then another email comes from that first friend's dad: "Friday Night Magic Night again! Every kid should bring another 20 bucks!"

"Wait a minute - why would kids want to spend $20 on another few dozen cards when we already shared the news about the thousand packs and several of the kids bought them?" I asked his dad, who is a friend of mine.

"Oh, that's just what Tom likes to do, because he heard about these Friday Night Magic nights that the company that manufactures cards likes to promote"

It was at THIS point that I felt the conflict of trying to be easygoing vs. speaking out against what I feel is bullshit consumerism. So I told my son that he could certainly continue to go, but I felt it was a pretty expensive hobby for 9-year-olds, and he'd have to start using up his own money if he wanted to do so.

Meanwhile, I privately suggested to his dad that he squelch the $20 part of his son's game night and just encourage the kids to play for free.

As it turned out, his dad agreed and the game nights have been free since then.

That was a long sidetrack story, but I feel it represents the difference between the deprivation of cheapness and Mustachianism, which means pursuing only win/win situations. For example a bike is better for you AND cheaper. Working harder instead of being lazy makes you happier AND earns you more money.

Similarly, there were about ten other parts of the NY story where the tone misunderstood the reasons I do things. Like the part about "would not stay in a cubicle just to be able to afford a Tesla or a Dryer". I CAN afford both Teslas and dryers, I just don't buy them because they would not make my family any happier!

Finally, the part about the blog making a shitload of money last year - it's true and it surprises me just as much as it surprises anyone else. The blog gets equivalent traffic to newspapers that have dozens or hundreds of staff, so even with pretty minimal advertising stuff, it adds up.

But I think this is an endorsement rather than a subtraction of what I'm promoting. Remember, this whole MMM thing is secretly an environmental activism blog. It's about getting my fellow rich people to consume less, because we are the ones destroying the planet.

Whether you spend $25,000 or $25 million per year, you can extract full happiness from life - the extra products and "experiences" you can buy with the surplus money don't help once your true needs are met. But in order for rich people to believe this, they have to see it being done. They need to see someone who has the option of spending more money, and yet still does not do it. They need to see their peers doing this. So although I didn't expect to make THIS much money after retirement, it's pretty handy that I can continue to not buy too much poo poo and continue to live the same life as before. And use this surplus money for something other than just pampering myself or passing on a big estate to my descendants.

Addendum: Oh, and as for the "Pothead" stuff, that was weird too. Here's how it really went down:
Nick was intrigued by the idea that marijuana is legal in Colorado. I do like the stuff, but I don't use it often and it is in plentiful supply around here so you don't really buy it. But Nick wanted the experience of going in to see what the legal weed buying experience is like.

So we walked down my street, and each of us bought a little sample. We didn't get around to partaking together since it was a busy week, but I still have the little oil refill thing I bought and it comes in handy occasionally.

Anyway, if you take the NY article with a good plate of salt, you can still get the general idea. It was lots of fun to work on it and Nick is a more fun guy in real life than he lets on as the author.

bolded a couple parts I found especially salient

# ? Feb 23, 2016 14:17

Rick Rickshaw: Feb 21, 2007; I am not disappointed I lost the PGA Championship. Nope, I am not.

I think that he "retired" knowing full well that he was going to continue making money with his construction / house-flipping business / rental income. And his wife continued to work a bit as well, as a bookkeeper / finance manager / realtor.

I'm an MMM sympathizer, but I do try to keep things in perspective when it comes to his "blog-related" spending/vacationing. If I reach my goal of retiring with 30K per year available to spend, I'll still do things to make more money for vacations and the like. I probably COULD be happy on 30k a year (without a paid off house, mind you), but I'll want to earn more to reduce my risk and have some fun.

He does promote making money after early retirement, though, so he's not really all that misleading. His message is to amass enough money so that you can quit your 9-5. If you never make another cent, you can be happy. But you can still make more money to spice things up a bit and add some extra layers of security.

edit: Also holy shitballs, $400,000 per year. I knew it was certainly six-figures, but I figured in the first 25% of six-figures. $400,000 is a lot of dough.

Rick Rickshaw fucked around with this message at 14:42 on Feb 23, 2016

# ? Feb 23, 2016 14:30

Rick Rickshaw: Feb 21, 2007; I am not disappointed I lost the PGA Championship. Nope, I am not.

Here's MMM's response to the article:

MMM Response posted:

Hey Everyone!

I got word that this discussion was going on about the story and I thought it would be worth throwing in a thought or two.

First of all, while I think it is pretty good fortune to be featured in the New Yorker, I've learned that every story of this type comes with some pain. This one was no exception, and it may be a little worse for me personally than expected.

Overall it was still worth it because it should bring a lot more high-income eyeballs to the ideas I'm trying to share on the blog and hopefully change a few more minds about consumption and the purpose of life.

But yeah, some of the stuff Nick wrote seemed to be out of pure misunderstanding. Take the Magic the Gathering Cards debacle for example. In the NY story, it sounds like I tried to prevent my boy from hanging out with his buddies over 4 bucks. Here's what really happened:

- a friend invited him over to introduce him to the game. There was a $20 buy-in for whatever reason, as announced in the email from his dad. "Awesome!", we all said. We'll pay for you (rather than having him pay out of his own sizeable 'stash), since this is kind of a special thing more like a joining a sports team than just buying yourself a video game. He went, and had a great time

- at the big game night, each kid was given 4 decks of 15 cards each. These little packs cost $5 apiece. "Hmm, sounds like a bit of a racket", I thought to myself, but obviously this was not a big deal and I was glad he had a new pastime.

- Magic the Gathering really captured his imagination, so he dove in. We researched the game together and it turns out you can buy packs of ONE THOUSAND (1000) cards for 20 bucks on Amazon. You get a curated mixture of like-new and new cards from game shops, because the nation is swimming in Magic cards after 20 years of popularity. So we bought him a thousand-pack for his birthday, and another for Christmas. He built a huge portfolio of custom decks and started playing the game with friends all over town.

- Then another email comes from that first friend's dad: "Friday Night Magic Night again! Every kid should bring another 20 bucks!"

"Wait a minute - why would kids want to spend $20 on another few dozen cards when we already shared the news about the thousand packs and several of the kids bought them?" I asked his dad, who is a friend of mine.

"Oh, that's just what Tom likes to do, because he heard about these Friday Night Magic nights that the company that manufactures cards likes to promote"

It was at THIS point that I felt the conflict of trying to be easygoing vs. speaking out against what I feel is bullshit consumerism. So I told my son that he could certainly continue to go, but I felt it was a pretty expensive hobby for 9-year-olds, and he'd have to start using up his own money if he wanted to do so.

Meanwhile, I privately suggested to his dad that he squelch the $20 part of his son's game night and just encourage the kids to play for free.

As it turned out, his dad agreed and the game nights have been free since then.

That was a long sidetrack story, but I feel it represents the difference between the deprivation of cheapness and Mustachianism, which means pursuing only win/win situations. For example a bike is better for you AND cheaper. Working harder instead of being lazy makes you happier AND earns you more money.

Similarly, there were about ten other parts of the NY story where the tone misunderstood the reasons I do things. Like the part about "would not stay in a cubicle just to be able to afford a Tesla or a Dryer". I CAN afford both Teslas and dryers, I just don't buy them because they would not make my family any happier!

Finally, the part about the blog making a shitload of money last year - it's true and it surprises me just as much as it surprises anyone else. The blog gets equivalent traffic to newspapers that have dozens or hundreds of staff, so even with pretty minimal advertising stuff, it adds up.

But I think this is an endorsement rather than a subtraction of what I'm promoting. Remember, this whole MMM thing is secretly an environmental activism blog. It's about getting my fellow rich people to consume less, because we are the ones destroying the planet.

Whether you spend $25,000 or $25 million per year, you can extract full happiness from life - the extra products and "experiences" you can buy with the surplus money don't help once your true needs are met. But in order for rich people to believe this, they have to see it being done. They need to see someone who has the option of spending more money, and yet still does not do it. They need to see their peers doing this. So although I didn't expect to make THIS much money after retirement, it's pretty handy that I can continue to not buy too much poo poo and continue to live the same life as before. And use this surplus money for something other than just pampering myself or passing on a big estate to my descendants.

Addendum: Oh, and as for the "Pothead" stuff, that was weird too. Here's how it really went down:
Nick was intrigued by the idea that marijuana is legal in Colorado. I do like the stuff, but I don't use it often and it is in plentiful supply around here so you don't really buy it. But Nick wanted the experience of going in to see what the legal weed buying experience is like.

So we walked down my street, and each of us bought a little sample. We didn't get around to partaking together since it was a busy week, but I still have the little oil refill thing I bought and it comes in handy occasionally.

Anyway, if you take the NY article with a good plate of salt, you can still get the general idea. It was lots of fun to work on it and Nick is a more fun guy in real life than he lets on as the author.

# ? Feb 23, 2016 14:41

pig slut lisa: Mar 5, 2012; irl is good

Rick Rickshaw posted:

Here's MMM's response to the article:

how dare you

# ? Feb 23, 2016 14:44

Vilgan: Dec 30, 2012

People getting in a wad over the fact that the blog brings in 400k is somewhat amusing. $400k is a tiny amount of money for a blog w/ that readership and if MMM focused on monetizing it, he would certainly make a lot more. Emergdoc mentioned in the bogleheads thread on the article that he brings in around that much on a blog with 1/10th the readership. He retired, lived for years according to plan, then started trying to spread the message and there was a lot of interest in what he had to say so now he gets a bunch of money he doesn't need - so what?

# ? Feb 23, 2016 16:41

Nail Rat: Dec 29, 2000; You maniacs! You blew it up! God damn you! God damn you all to hell!!

Yeah if anything it's just a stronger argument for what he advocates for. He has the time to pursue something like that because he was disciplined (and lucky in career choice/timing obviously) and now doesn't have to rent out his time for $40-$60 per hour to some dumb company that he relies on for food and shelter.

# ? Feb 23, 2016 17:06

WarMECH: Dec 23, 2004

The guy practices what he preaches, so he has my respect. He is also an inspiration to a bunch of people to live below their means. He may be a little extreme, but even his wife said he's a "weird dude" in that article.

# ? Feb 23, 2016 19:44

khysanth: Jun 10, 2009; Still love you, Homar

Lots of complainypants ITT

# ? Feb 23, 2016 19:48

Mofabio: May 15, 2003; (y - mx)*(1/(inf))*(PV/RT)*(2.718)*(V/I)

I'd like some of that money, if he's got more than enough.

# ? Feb 23, 2016 21:26

Rick Rickshaw: Feb 21, 2007; I am not disappointed I lost the PGA Championship. Nope, I am not.

My girlfriend just got her $6k tax return back. Her first words were:

"I'll have to send that to [brokerage] ASAP."

I'm so proud.

# ? Mar 4, 2016 15:01

BEHOLD: MY CAPE: Jan 11, 2004

Rick Rickshaw posted:

My girlfriend just got her $6k tax return back. Her first words were:

"I'll have to send that to [brokerage] ASAP."

I'm so proud.

Wouldn't you be more proud if she said, "how can I adjust my withholding to have a smaller return next year?"

# ? Mar 4, 2016 15:35

Rick Rickshaw: Feb 21, 2007; I am not disappointed I lost the PGA Championship. Nope, I am not.

BEHOLD: MY CAPE posted:

Wouldn't you be more proud if she said, "how can I adjust my withholding to have a smaller return next year?"

Yes, I thought about that, because it will be a similar story for the next two years until she uses up her unused contribution room from previous years in her tax-advantaged accounts.

Particularly because of the market's downturn lately, it is tempting to get the money now rather than wait a year.

Rick Rickshaw fucked around with this message at 15:40 on Mar 4, 2016

# ? Mar 4, 2016 15:38

WarMECH: Dec 23, 2004

I have a coworker who keeps his withholding high and uses his return to fund his Roth IRA every year. Kind of a forced savings, but uses it wisely.

# ? Mar 4, 2016 16:29

froglet: Nov 12, 2009; You see, the best way to Stop the Boats is a massive swarm of autonomous armed dogs. Strafing a few boats will stop the rest and save many lives in the long term.

You can't make an Omelet without breaking a few eggs. Vote Greens.

My work is withholding too much. The payroll lady denies there is an issue and refuses to change it. Last year I got $2k back, this year it will be even more because I salary sacrifice into my super (reduces tax) and I will have been off the probationary rate for over a year.

I don't think it's a smart move on my part to pick a fight with payroll, so eh, I guess I'll just get a huge tax return this year, too.

# ? Mar 5, 2016 04:10

balancedbias: May 2, 2009; $$$$$$$$$

froglet posted:

My work is withholding too much. The payroll lady denies there is an issue and refuses to change it. Last year I got $2k back, this year it will be even more because I salary sacrifice into my super (reduces tax) and I will have been off the probationary rate for over a year.

I don't think it's a smart move on my part to pick a fight with payroll, so eh, I guess I'll just get a huge tax return this year, too.

I thought witholding was based on a form you fill out. So wouldn't it be your responsibility to adjust your witholding yourself by giving the updated form to payroll?

# ? Mar 5, 2016 17:05

froglet: Nov 12, 2009; You see, the best way to Stop the Boats is a massive swarm of autonomous armed dogs. Strafing a few boats will stop the rest and save many lives in the long term.

You can't make an Omelet without breaking a few eggs. Vote Greens.

balancedbias posted:

I thought witholding was based on a form you fill out. So wouldn't it be your responsibility to adjust your witholding yourself by giving the updated form to payroll?

Not in Australia!

# ? Mar 5, 2016 17:19

TLG James: Jun 5, 2000; Questing ain't easy

I'd be really curious to see how much MMM donates, like he says he does.

I have no problem with him making that much and living on much less. His blog isn't really interesting anymore. After you read the core "blog posts" it isn't much else outside of, save most of your income & minimize expenses, and you don't need most of the crap you have.

I wonder if he's saving money for when/if whoever the next president is, if they tear apart some of the healthcare stuff. At least I would.

# ? Mar 5, 2016 19:33

Devian666: Aug 20, 2008; Take some advice Chris.; Fun Shoe

Low interest rates have created a bit of a construction and development boom so I've gotten a lot of work done the last few months. My income is up significantly so much so that I probably won't have to borrow money to finish construction work on my property. This is good as I'll now be able to start putting a large portion of my income towards investments and increasing my mortgage payments. Still a long way from FI but it's getting closer at a faster rate now.

# ? Mar 5, 2016 20:33

Cast_No_Shadow: Jun 8, 2010; The Republic of Luna Equestria is a huge, socially progressive nation, notable for its punitive income tax rates. Its compassionate, cynical population of 714m are ruled with an iron fist by the dictatorship government, which ensures that no-one outside the party gets too rich.

Anyone have thoughts beyond the math behind saving and paying down mortgage. In the current low interest environment (and my specific uk situation where we can only lock rates for 3-5 years at a time) im really torn.

The math says currently its better to save like a bandit and let the mortgage pay down at the minimum the lender allows to take advantage of the fact the market should be beat c.2%. But I could get rid of it in around 5 years by either saving very little or saving and using those against it when they cross each other in value.

Overall the difference is c. 1% to overall pot value when I project I want to start withdrawing but the idea of being mortgage free is quite temping and the certainty is quite aluring.

Edit - note we are well past emergency funds etc here saving refers to specifically fi moneies.

# ? Mar 6, 2016 11:10

Desuwa: Jun 2, 2011; I'm telling my mommy. That pubbie doesn't do video games right!

Investing in the market isn't necessarily better even if the expected returns are better. Paying down a mortgage is an investment with essentially zero risk, so even if the expected returns are lower right now it's never going to be wrong to do it ("wrong" being taking on more risk when less risky assets have the same expected returns). Not having to deal with a mortgage anymore would be another positive of paying it down even during low interest rates.

# ? Mar 6, 2016 11:35

BEHOLD: MY CAPE: Jan 11, 2004

Desuwa posted:

Investing in the market isn't necessarily better even if the expected returns are better. Paying down a mortgage is an investment with essentially zero risk, so even if the expected returns are lower right now it's never going to be wrong to do it ("wrong" being taking on more risk when less risky assets have the same expected returns). Not having to deal with a mortgage anymore would be another positive of paying it down even during low interest rates.

The chance of a market portfolio not beating a mortgage over 30 years is basically zero, particularly at extremely low mortgage rates, and particularly if any of the portfolio is tax advantaged. "Not dealing with a mortgage anymore" means you don't make a principal and interest payment every month (and lose the tax deduction in the US) but doesn't really spare you from recurring taxes/bills/expenses with home ownership. I guess you could also choose not to have insurance anymore too if you were crazy.

# ? Mar 6, 2016 17:38

moana: Jun 18, 2005; one of the more intellectual satire communities on the web

Desuwa posted:

Paying down a mortgage is an investment with essentially zero risk, so even if the expected returns are lower right now it's never going to be wrong to do it ("wrong" being taking on more risk when less risky assets have the same expected returns).

Completely disagree with your premise here. First of all, market returns will almost always beat out a 4% mortgage rate over 30 years. Secondly, assuming you are saving the extra into a 401k or other retirement vehicle, that money is protected in case of bankruptcy, which the equity in your house isn't. Thirdly, a mortgage is the easiest way to hedge against long term inflation. If you don't have that hedge, you should be taking it via TIPS in your portfolio, which will lower your overall return. Lastly, if things go south for both real estate and the stock market (as they often coincide) and you have to withdraw money, you will at least have tax savings on your capital losses in the market. With a HELOC, you'll be paying interest to take out your money, with no tax advantage.

I recently bought my house cash and then did a cash-out mortgage, so this isn't just theoretical posturing from me. I fully believe that in this lending environment, you should be maxing out your market investments, not paying down a low interest loan.

# ? Mar 6, 2016 19:12

BEHOLD: MY CAPE: Jan 11, 2004

moana posted:

Completely disagree with your premise here. First of all, market returns will almost always beat out a 4% mortgage rate over 30 years. Secondly, assuming you are saving the extra into a 401k or other retirement vehicle, that money is protected in case of bankruptcy, which the equity in your house isn't. Thirdly, a mortgage is the easiest way to hedge against long term inflation. If you don't have that hedge, you should be taking it via TIPS in your portfolio, which will lower your overall return. Lastly, if things go south for both real estate and the stock market (as they often coincide) and you have to withdraw money, you will at least have tax savings on your capital losses in the market. With a HELOC, you'll be paying interest to take out your money, with no tax advantage.

I recently bought my house cash and then did a cash-out mortgage, so this isn't just theoretical posturing from me. I fully believe that in this lending environment, you should be maxing out your market investments, not paying down a low interest loan.

I didn't mention the legal protections of 401k/IRA assets but that's an excellent point too

# ? Mar 6, 2016 19:40

Devian666: Aug 20, 2008; Take some advice Chris.; Fun Shoe

When deciding how to pay down a mortgage you need to look at the inflation rate. Low inflation the mortgage is just a debt. When inflation is high interest rates tend to get rather high but that's the time to pay a mortgage at the slowest rate as you get to pay the principle with devalued dollars/pounds.

Your investments will have better returns in the long run and the faster you pay your mortgage the more you deleverage any property price gains. All of these things to consider make it complex. I think there's a 50:50 chance of a recession in the next 2 years which means potential diminished investment returns (or cheap stocks which could be very profitable in the future).

What I've done is increase my saving rate so I put more into paying off the mortgage but that's only about 10% of my total investment money. Diversify.

# ? Mar 6, 2016 20:02

n8r: Jul 3, 2003; I helped Lowtax become a cyborg and all I got was this lousy avatar

I have been contemplating paying off my mortgage because the rate of 5.15% is a bit borderline. The total loan isn't that big, and with the speed that I am paying it down, doing a refinance seemed like a bit of a crap shoot.

# ? Mar 7, 2016 18:31

BEHOLD: MY CAPE: Jan 11, 2004

n8r posted:

I have been contemplating paying off my mortgage because the rate of 5.15% is a bit borderline. The total loan isn't that big, and with the speed that I am paying it down, doing a refinance seemed like a bit of a crap shoot.

I think it is a mistake to pay off your mortgage faster than necessary if you are like the vast majority of US homeowners and either or both 1) you itemize your mortgage deduction and do not hit an AMT or 2) you have room to contribute more to any type of tax advantaged account.

# ? Mar 8, 2016 14:56

silvergoose: Mar 18, 2006; IT IS SAID THE TEARS OF THE BWEENIX CAN HEAL ALL WOUNDS

BEHOLD: MY CAPE posted:

I think it is a mistake to pay off your mortgage faster than necessary if you are like the vast majority of US homeowners and either or both 1) you itemize your mortgage deduction and do not hit an AMT or 2) you have room to contribute more to any type of tax advantaged account.

The implication being, if you do hit the AMT and you're maxing 401k and Roth IRA...it's not a mistake?

# ? Mar 8, 2016 15:04

BEHOLD: MY CAPE: Jan 11, 2004

silvergoose posted:

The implication being, if you do hit the AMT and you're maxing 401k and Roth IRA...it's not a mistake?

The US tax implications for most people of deducting mortgage interest and saving in tax advantaged accounts are so big that they override the actual interest and return numbers. If you are one of the relative few that can't benefit from more tax deduction or advantaged retirement saving, it then depends much more on your long term expected portfolio return and mortgage rate if the (very significant) tax implications do not apply. For instance, if your cash portfolio is conservative and mostly bonds and your mortgage rate is 6% it makes sense to pay down. If your mortgage is at 3% and your cash portfolio is mostly stock indices then it's crazy to pay down. Most of the time the math is closer to the latter than the former even still.

# ? Mar 8, 2016 16:56

Crazy Mike: Sep 16, 2005; Now with 25% more kimchee.

Can we look at the mortgage payoff question from the lender's perspective? Would the bank rather get more money now to put in more lucrative uses or would the bank rather have those thousands of dollars in interest payments from me paying the minimum? Which is the gently caress YOU WELLS FARGO choice?

# ? Mar 8, 2016 18:35

asur: Dec 28, 2012

Crazy Mike posted:

Can we look at the mortgage payoff question from the lender's perspective? Would the bank rather get more money now to put in more lucrative uses or would the bank rather have those thousands of dollars in interest payments from me paying the minimum? Which is the gently caress YOU WELLS FARGO choice?

If the interest rate on your loan is close to the rate they offer for new loans or refinance then the bank presumably doesn't have more lucrative options.

# ? Mar 8, 2016 20:02

Devian666: Aug 20, 2008; Take some advice Chris.; Fun Shoe

Crazy Mike posted:

Can we look at the mortgage payoff question from the lender's perspective? Would the bank rather get more money now to put in more lucrative uses or would the bank rather have those thousands of dollars in interest payments from me paying the minimum? Which is the gently caress YOU WELLS FARGO choice?

From the lender's perspective they are allowed the highest leverage and loan size on housing under the Basel III regulations. What this means is they make more money on low interest mortgages than they do on any other type of loan. The most gently caress you option to decrease bank profitability is to repay as much of your mortgage as possible as quickly as possible.

# ? Mar 8, 2016 22:38

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# ? May 10, 2024 14:17

Pryor on Fire: May 14, 2013; they don't know all alien abduction experiences can be explained by people thinking saving private ryan was a documentary

If you really want to get into it from the bank's perspective your loan interest rate and pre payment amounts are largely irrelevant, they make their money via the loan origination fees and of course from the fact that they just created all the money they are loaning you out of thin air thanks to fractional reserve banking. The money you're paying them back didn't exist before you took out the loan, so even at a negative interest rate they will theoretically make money. Don't spend too much time worrying about how the loan holder is making out, they will be just fine either way.

It's a bit of a negative to prepay and readjust what was a predictable amortization schedule downward for the bank, but usually this risk is built into all their models anyway.

# ? Mar 9, 2016 16:11

The Something Awful Forums > Discussion > Ask/Tell > Business, Finance, and Careers > Financial Independence: Methods, Mindsets and Cloth Diapers

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