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You can't sell your car. Your auto loan is secured by the car, and so if you sold it, you'd have to pay off the difference immediately. You don't have the cash for that, and shouldn't use a credit card to do it because your terms would certainly be worse than the rate on that car loan. Only paying minimums on your cards is going to accumulate a lot of interest. I agree that the car payment is severely impacting your ability to pay other stuff, but I really can't condone (effectively) shifting your gap from the car loan to a higher-interest credit card. Selling the car, then, becomes a possibility once you're right-side up on it, which you could get to more quickly by paying extra on top of your monthly payments... but, right now, I think the big problem is your high-interest debt, and (maybe) your monthly expenses. Your car loan is at 2% and you won't beat that with anything else, so you should set that aside for the moment. You need to pay off that 30% card as fast as humanly possible, and then that that 14% card with the $12k on it is the big hurdle. Selling stuff to put money on that card will help. I agree that you need a cash buffer. The $500 in a checking account is to absorb any emergencies (not all of which can easily be paid for with credit) and of course to help your cashflow problems. I think you should start by poring over your paycheck stub and look closely at all the deductions. Obviously most of them are non-voluntary but it'll be a good idea to check to see if you're paying for anything you don't need to. The costco idea isn't a terrible one (well, rather, the idea of buying in bulk to save) but my experience is that shopping at Costco doesn't save me a dime... because I wind up buying stuff I wouldn't have, otherwise. Like 5 pounds of pistachios, a flat of Hansen's soda, a desk chair, or whatever. Instead, focus on your discretionary expenditures and figure out where it's going. $250/month on groceries does not seem all that out of line... but, are you eating out a lot? Where is your entertainment/misc money going, and can you cut back? Etc. I think you're already doing that to some extent. "hopefully" your overdraft fees don't go away: you find out what you're paying for and stop doing that immediately. Don't rely on hope to find out when you'll stop paying for something; read the fine print, call them up, do whatever. Banking should be free, the bank should be paying you for your deposits, not you paying them for the privilege of them having your money. That colorful spreadsheet is kinda confusing and weird, I think it might be unnecessarily complicated. How much are you actually paying for that laptop? That is, what's the total you owe, how much interest are they charging you, etc? Selling some stuff is definitely a possibility but you seem to be making wild guesses about what your stuff might be worth. In some cases it might well be worth it (like that big TV you have in storage?) Leperflesh fucked around with this message at 02:47 on Jul 28, 2011 |
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Jul 28, 2011 02:42
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I think your plan is sound, but you need to see in a month if you've stuck with it and how well, and be ready to make tough choices if it's not working. I agree with not selling your camera (but if you do decide to sell it, let me know, because a Canon 40D is exactly what I want to buy... although I can't afford one.) And I agree with not selling your car (at least not till you're right-side up on it). People are being rough on you because probably 80% or 90% of the people who ask for BFC's advice go on to ignore it, and they think that being rough is the way to overcome that resistance. Especially since they think it worked with CornHolio. Also any sign of resistance is viewed as a challenge that must be responded to with escalating force. So you must adopt a meek attitude of acquiescence, regardless.
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Jul 28, 2011 23:46
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It seems to me that the biggest, most important "lifestyle change" that Tuyop needs to make - and which he seems willing to make - is no more vacations until he's out of debt. Despite the huge portion of his income the car boondoggle takes up, I just don't think there's anything he can do about that right now. If he sticks to a budget and stops going on vacations, given the upcoming promotions he's due (and if that's true that they're basically guaranteed), then he can claw himself out of debt in four years and that's not too bad. The idea about earning some more money with his camera is a good one but he should not put any of that income into his budget. Tuyop if you do manage to make some money from photography, put it straight into your debt without stopping. You must not regard that cash as "windfall profits" that you get to spend on fun stuff. Vowing right now to take no more vacations is easy. The difficult part will come when your girlfriend/wife wants to do something fun, and you want to as well, and you have room on your credit cards, and you know it'll only add another 6 months to your indebtedness, and you feel a lot of pressure to cave in and go for it. That is where you'll need to man up and tough it out, and we'll all find out if you've got the fortitude to do this or not. For now, I think you already know what to do and are doing it.
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Jul 29, 2011 19:07
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tuyop posted:and I'm good at poker This is the best possible idea, ever.
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Jul 30, 2011 03:37
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If you can get ahold of some screwdrivers you can probably replace that plastic panel yourself. It's not like there's going to be any welding involved or whatever, it's just screws or possibly some retaining clips or something. Get a Haynes/Chiltons for your car, and start doing minor easy repair work like this yourself. In the long run you'll save hundreds. Also, get ready for everyone to tell you xbox live service isn't a necessity...
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Aug 15, 2011 22:43
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Tuyop is obviously thinking that when his equity in the car (its salable value) rises to the point where it meets his falling debt on the car, at that breakeven point he is "debt free". Tuyop, that's wrong. You'll only be debt free at that point if you actually sell the car and pay off the loan. Otherwise, you'll be at zero net worth. Being at zero net worth is obviously better than being at negative net worth... but it's sure not cause for celebration.
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Aug 19, 2011 23:53
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Celebrations that cost lots of money are inappropriate things to do when spending lots of money is a bad idea financially. You can celebrate things without spending lots of money, though. In fact, inexpensive celebration is clearly a life skill you need to obtain. I think you should strive to celebrate and take satisfaction from any achievement, if doing so is psychologically important to you; everyone needs to congratulate themselves from time to time. Just... not with big expensive vacations. Of course, you do get to decide what the priorities are in your life. When you've paid off your card and your student loan, and have only a car loan left, and you're right-side-up on your car, you can decide which is a higher priority: keeping your car, or "trading down" (sell it and buy something much cheaper) and using the cash for something else. In other words, there is an opportunity cost to owning something expensive, and that's the opportunity to own or do something else with that money. Maybe you'd rather go on vacations than have a nice car. If you can't afford both, you have to decide what the priority is.
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Aug 20, 2011 01:48
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I should be clear of course that creating false-binary choices for yourself is also a problem. When all the debt save the car is paid, you have more than just the choice of "keep the car" or "sell it and go on vacation". For example, another choice is "sell the car and put some money into retirement", or "sell the car and put some money into savings", both of which would be financially responsible choices that might well serve you better in the long run. Also you were asking what emergency budgets are for earlier. They're for emergencies. Especially unforseen emergencies. The key thing about unforseen emergencies is that you can't forsee them. So listing forseeable emergencies kind of misses the point. Humans throughout history have found themselves caught up in all manner of tragedies, great and small, and a very large fraction of them can be alleviated or mitigated through the awesome power of cash money. But if you'd like an example that's not in the categories you mentioned: how about "a family member or dear friend of yours is in trouble and needs your help"? Those of us with good safety nets (medical insurance, family, government-run social services that are actually solvent, etc.) might (depending on your personal philosophy) feel that we have a responsibility to contribute to that network of safety-nets ourselves. Not merely through paying taxes or joining the military, but also through the informal networks that are often just as critical; family and friends and even neighbors and strangers sometimes need your help, and it's awesome to be in a position to provide it. Especially by not spending every spare dime (or toonie or whatever) you earn on self indulgence.
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Aug 20, 2011 01:55
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Good lord.tuyop posted:Very few people in my job don't smoke. You're an officer, right? Now here's another way you can set a good example. tuyop posted:They are a necessity for keeping mosquitoes away and staying awake. That is total, utter bullshit. You should be embarrassed to even have said such a thing, much less if you actually believe that. Deet is more effective, burn citronella if you must burn something, and if you can't say awake without drugs, I'm sure your commissary can issue you something appropriate. tuyop posted:And yeah, it's only like 5-10 cigarettes a day. I'm going to quit completely when I'm done training. When you're done training, will the bugs and the late nights and the people in your job who all smoke magically disappear? Because if not, then either you're lying (to yourself) or you've just invalidated all the (completely lame) excuses you just presented. People say that lottery tickets are a tax on people who don't understand math. Well, cigarettes are a tax on another kind of people. The kind that doesn't mind poisoning themselves, and is willing to pay to do it.
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Aug 23, 2011 00:52
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"Frozen vegetables aren't good enough for this temple that is my glorious body" <puffs a cigarette>. "I must eat nothing but the finest meats and freshest of fruits; I have standards" <puffs a cigarette> Do you get it? You just lashed back that everything is about moderation and compromise or something, and yet earlier you insisted that you would not compromise when it comes to the exquisite shape you keep yourself in. Put it another way: if you can run 5:30 miles on a half-a-pack-a-day habit, I bet you could do 5:15 or even 5 flat once your loving lungs are working properly.
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Aug 23, 2011 23:04
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tuyop posted:I prioritize some things over others. I don't really give a poo poo if I have some cigarettes, but I care a great deal if I eat well. My point is that you seem to put a high priority on one health thing and a low one on another, but don't see that there's a contradiction there. Specifically, on a scale of things bad for your health, a pack of cigarettes is obviously worse for you than a plate of spaghetti. tuyop posted:Would you have me eat pop and chips BECAUSE I smoke or something? In for a penny, in for a pound? The question which was raised early in the thread was, can you save money in your food budget. Suggestions included things like buying frozen vegetables. You rejected those ideas because you have such high, uncompromising standards for your diet... and you based that standard on your need to keep in physically peak condition for your job. But if you smoke, then you're not only compromising that goal in an obviously substantial way, you're paying extra to do it. Nobody is suggesting pop and chips. But deriving more of your protein from non-meat sources can save you money, and while fresh vegetables are obviously great for you and well worth the cost, you could reduce your food budget a bit by supplementing fresh salads and stuff with the occasional bag of (say) frozen peas or broccoli or whatever. But even that is not really the point; if you want to gently caress up your body or not is not really BFC's concern. Your budget is, and the contradictions that are plain in your budget which you rationalize away. Poor people cannot afford expensive addictions. Expensive addictions are probably directly responsible for increasing poverty. You have an expensive addiction and eliminating it from your budget would make you less poor. It'd also make you less of a hypocrite about your pro-body-is-my-temple stance w/r/t other parts of your budget. Here in BFC we are always going to recommend to anyone that quitting smoking is a great way to improve the bottom line, while having other obvious benefits and literally zero drawbacks (despite your lame attempt to invent some). So my reaction is one part "wasting money on cigs is dumb" and one part "man, I actually was on your side about the health nut thing but it turns out that's bullshit".
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Aug 24, 2011 01:08
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Is it impossible to buy that powder stuff locally somewhere, so you don't have to wait for it to be shipped to you?
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Aug 24, 2011 22:56
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Is that like a six month supply?
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Aug 25, 2011 02:07
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And if you don't have Excel, don't pay for it; instead, download OpenOffice (it's free) or use Google Docs (there's a spreadsheet program). Or, hell, did you go to high school? Surely they taught you how to draw a graph. Just draw one and scan it or take a picture.
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Aug 31, 2011 18:54
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Also smoking is stupid for everyone, but at least most smokers acknowledge that it's a deadly addiction that will destroy their health and eventually kill them. Although you definitely hear "I can quit whenever I want" a lot. Also it's a disgusting habit. But it's cool. Being a hot military dude with perfectly coiffed hair and a sweet ride and fancy underwear is all part of the Tuyop package, see. Tuyop, people who are financially sound put their finances ahead of their egos. The hostility you are getting from several posters essentially boils down to that inescapable fact; you are here asking for help to become solvent but the thing you seem to resist most is any suggestion that you need to change how you think about your spending. You're willing to cut some items but anything related to your self-image is apparently inviolable. It sounds like if you cut out your expensive vacationing, you'll eventually pay off your debt and get above water. That's true. But if you never change your attitude, it's very likely to be a temporary situation for you.
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Sep 5, 2011 19:02
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tuyop posted:Also, I did my time with $500 used cars and I think everyone should own at least two of those before having a nice new one. Unrelated to your point, but, this kind of statement is highly sympomatic of your illogical rationalizations of things. There is a vast middle ground between $500 shitpile cars, and brand new ones. That vast middle ground is where the smart money lies, and yet you seem to write it off as nonexistent, as you do with many other rationalizations. Previous examples: if you're not eating the finest of fresh foods and vegetables, then the obvious alternative is greasy fast food poo poo. If you're not wearing the finest undergarments, the alternatives are worthless. If you're not buying the best premium whey-based protein supplements, then the only other option is to betray your body's sublime needs with, I don't know, bucket chicken or whatever. There's never any middle ground with you tuyop.
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Sep 7, 2011 23:16
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Here is another opportunity to be thrifty: buy good-quality all-seasons and they'll last like three times longer than high-performance summer tires. Yes, the car won't be quite as excitingly sporty when taking corners at high speed, but you'll save hundreds of dollars.
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Sep 11, 2011 02:09
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tuyop posted:Yup, I've been driving the speed limit strictly for a couple of months now. It sucks, but the gas savings are awesome. The critical thing is more that "high performance" summer tires are designed with one feature - grippiness - being paramount over concerns for longevity. They are also poor performers in cold weather, becoming dangerously glass-hard, and they also tend not to have as much siping, so they are not as good in the wet. If you use summer tires you must switch to all-seasons or winters when it gets cold out. But quality all-seasons are more likely to be designed with longevity and fuel efficiency in mind. So, regardless of whether you stay with summer tires or go to all-seasons, the key thing would be to pick ones that aren't as expensive, and are designed for economy and longevity over raw performance. I recommend using the tools at TireRack.com to compare various tires and prices. They have well-regarded reviews both on performance and economy and even if you wind up not buying from them, it's a good way to narrow things down to a handful of choices and understand what the key differences are between them. Ultimately, whether you can save money on your tires depends a lot on exactly what size your wheels and tires are - there are some sizes where you have few inexpensive choices. Even then, though, at least you can pick a tire that will last a bit longer. And to more directly answer your questions: I think you should be able to find decent tires that last 40k to 60k miles under normal driving conditions.
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Sep 11, 2011 21:41
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I want to say it's a mazda 3 or 5, but I don't remember for sure. I have priced out tires for my own mazda (a 2003 Protege5) and there are decent quality all-season tires available from several different makers for around $110 to $140 a tire. The OEM tires cost close to $200 each. I live in california so I don't need winter tires, but I expect my all-seasons to last at least 40k miles.
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Sep 13, 2011 21:56
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OK I looked in the OP. It's a 2010 Mazda 3 Sport GS. Those are the ones with the huge ridiculous grin on them.
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Sep 14, 2011 19:55
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On video, prepare and eat a delicious and healthy meal consisting entirely of frozen and/or canned ingredients, and costing less than $8.
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Sep 14, 2011 21:12
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I bet Tuyop can get condoms for free on-base. Actually he lives in Canada, land of free health care, so surely condoms are just free for everyone?
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Sep 15, 2011 19:33
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He said earlier that he goes commando while wearing the same pair of jeans for several days in a row, but wears underwear for when he's working out/running/doing military stuff. I still think that's gross (imagine the nasty rear end-streaks that build up inside his jeans, ugh) but whatever, if he doesn't mind and neither does his girlfriend, who cares.
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Sep 16, 2011 19:07
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$600 is a lot better than nothing, but it's still a paltry sum. You could be wiped out by a simple transmission failure, nevermind something really disastrous like your apartment burning to the ground with all your clothes and stuff inside. Hell, would $600 even cover the deductible on your auto insurance? You could get smashed-in-to by another driver and, through no fault of your own whatsoever, be totally drained of cash. Saving 100-300 a month for your emergency fund is a good idea and I'm glad you're doing it, except, I thought you earmarked that money for future expenses you're already expecting. The critical thing with your emergency rainy-day fund is that it's got no future debts or obligations or plans or anything like that attached to it.
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Sep 20, 2011 23:29
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the talent deficit posted:The emergency fund advice is well meant, but silly when you're talking about someone with no assets worth protecting and no dependents. I imagine Tuyop could always move in with family/friends if it comes down to it. He should absolutely ignore the emergency fund advice and just pay down debt as fast as possible. Did you totally miss the part about the deductible on his car insurance, the possibility of car repairs out-of-pocket, and how either of those could totally wipe him out tomorrow? Since he is underwater on the car, it absolutely is an asset worth protecting. Aside from that, at least two or three of us have mentioned that one's emergency reserve is also useful for when friends or family have emergencies. I know from personal experience how rewarding it is when your sister has a nasty combo personal/medical/financial crisis and you can keep her from homelessness for a few weeks. Tuyop probably doesn't need six months of expenses since he lives in a country with free medical care and (I assume) also some kind of right-to-shelter law, unlike our barbaric American practices, but the advice to save up two or three thousand as he can is still good advice. As an aside, even if you honestly believe someone is a worthless human being, telling them so is not conducive to getting them to accept your advice. From a purely practical perspective, then, I'd suggest not bothering with the advice if you're going to sling that level of insult out there. You're just wasting your time. And since this is an advice thread in a subform specifically about giving advice, maybe you should just vote 1 and then gently caress off. Leperflesh fucked around with this message at 08:52 on Sep 26, 2011 |
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Sep 26, 2011 08:50
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The danger here is that you'll randomly do well in your online stock picking game and then believe that you can pick stocks and start gambling with real money. In the late 1990s... I wanna say maybe 98 or so... I took second place in an online stock game. (The winner got a vacation - I got a t-shirt.) Both of us had just happened to randomly invest our entire starting money in a biotech penny stock that got a positive result one day and increased in value twentyfold - the winner happened to have slightly more money in that stock and so I came second. But as a result I started thinking I could pick stocks and in the next two years I flushed away about $500. Thankfully not a huge amount of money but it was an object lesson in the difference between investing and the lottery. e. I want to say, I wasn't even being particularly stupid with my investing. I did research, picked good companies, and played a long game rather than trying to day-trade. Successful stock trading depends on both skill and luck, and if you have bad skill or bad luck you can lose. Leperflesh fucked around with this message at 19:08 on Oct 10, 2011 |
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Oct 10, 2011 19:03
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T0MSERV0 posted:but so is EVERYONE who finances a new car EVER at some point. I agree completely with most of your post but this is simply not true. You can avoid being upside down on a car loan simply by making a sufficiently large down payment. For an extreme example: if the car you buy will lose 30% of its value the day you drive it off the lot, make a 30% down payment and you will never be upside down on the car (unless I guess if you go for like a seven-year loan or something). Most people put far less down on a new car than they would need to to stay right-side up, but that's why insurance companies offer "gap coverage". Given how low the interest is on car loans these days, it can make a lot of sense to finance more than you really need to, but staying right-side up so you don't have to pay extra for gap coverage is not a terrible idea.
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Oct 12, 2011 22:47
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T0MSERV0 posted:No, you'd still be upside down on the car for that period. You might not be upside down on the LOAN, but you'd be upside down on the car. To use your example for a $10,000 car, you'd go in and pay 3k down and finance 7k on what ends up being a 7k vehicle. Just because that 3k isn't part of the loan doesn't mean you didn't just pay 10k for a vehicle that is now worth 7k - you're still out 3k, you just elected to pay your way above water up front. Since most people don't turn around and sell cars that they just bought, no one would really care, but the financial value of the transaction (excluding cost of interest) is identical whether you finance 100% of the vehicle or 0%: There will be a point in time where the vehicle's depreciation will outstrip what you've paid for the car, but over time the two values will come back together. The common meaning of the words "upside down on" refer to debt, not to the difference between resale value and what a business would track as depreciation. Unless you're running a business and track depreciation, what being "upside down" means is that if you sold the collateral for a loan, you'd still owe money on that loan. Hence the most common use in the media, referring to homeowners who are upside-down on their loans - it only refers to those whose loans are larger than the present resale value, and explicitly not to everyone who has experienced a drop in value from what they paid. I think someone would have to be a pretty huge idiot not to understand the basic fact that a brand new car will lose resale value after purchase.
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Oct 13, 2011 23:41
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<$300 for routine maintenance for a car is totally normal, of course. Honestly that's a fairly cheap trip to the mechanic. Brakes, oil, balancing, all wear items; the only bit that's weird is the wheel replacement (which honestly sounds totally bogus to me, unless you hit a pothole or curb really hard at some point) but that's a pretty cheap wheel so whatever.
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Nov 18, 2011 21:15
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If all you're doing is replacing the pads, $400 - even in canadian moon dollars - is outrageous. Also, don't have it done at one of those terrible chain brakes & oil only places (go to a local mechanic instead). The chains are sleazy, overpriced, and notorious for lying and ripping people off. In particular, if they tell you you need your rotors resurfaced, it's probably a lie, and even if the rotors are badly gouged, it's quite possibly cheaper to just replace them than to have them machined. If they tell you the rotors are "warped" they're almost certainly not an actual problem (and possibly not actually warped at all); the vast majority of the time, this is just uneven deposition of brakepad material (sometimes caused by cementite inclusions forming in the cast iron due to overheating) which can be rectified often with just a scotch brite pad and brake cleaner followed by proper bedding-in of your brakes. In any case, rotors which are mildly warped do not cause the "pulsing" sensation that you sometimes get from brakes, because the brake caliper is designed so that it can track the rotor regardless of its shape. Pulsing can be caused by variations in thickness of the rotor, which again, is caused by uneven depositions and not warping. And when you machine a rotor you remove material making it thinner, and therefore more prone to actual warping as well as lowering its capacity to absorb heat during braking. Replacing brake rotors is pretty straightforward and easy to do on most cars, too, should it actually be necessary (which it probably isn't). Leperflesh fucked around with this message at 02:22 on Jan 7, 2012 |
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Jan 7, 2012 02:09
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Yeah, sounds like you're on the right track. It's an easy DIY job and there's good odds you don't need new rotors at all.
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Jan 7, 2012 19:57
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tuyop posted:I think I'm learning that freedom isn't really worth any amount of money, and I definitely don't feel free. Yeah. The day you joined the military is the day you signed away your rights. I knew that was the case when I was 18, and that's one of the many reasons I didn't go join the army at that point. Were you confused about this somehow? I know you're acutely aware of this, but your options would be far more open if you hadn't also run up $50k in debt. You wrote a lot of checks and now you have to pay up. You have a dream, you want to be a teacher, fantastic. Of the seven billion human beings on this planet, probably six point five billion of them dream about stuff they want to do, and then go back to working their asses off doing something mundane and kinda crappy to ensure they'll have a meal tomorrow. Most of them have absolutely no opportunity to improve their lot in life, much less pursue their dreams. If you have to put off your dreams for five to ten years... well, that's still a better offering than most of humanity today. Count yourself lucky. Honestly you sound like a spoiled child. Suck it up. Do one of the options that earns you a living so you can pay back what you borrowed. When you are totally debt free - including the debt you owe to your country and its taxpayers - your options will be wide open. And if you're pushing 30 when that happens? So what? You think you'd be the oldest guy ever to face starting a career change at that point? I spent several years taking night classes at community college while working full time - and then taking night classes at state university while working 30 hours a week - to earn a degree and graduate without any significant debt. And all those night classes were packed with adults - not young people like me, but 30, 40, even 50 year old people, who were all working their assess off for the opportunity to try and change their careers. You think you had an "offensive, degrading" experience? No you didn't. You had a goddamn wake up call! Nobody ever guaranteed you that you'd get to have things work out how you planned, and you put the chances of that happening at risk through your own irresponsibility. Now face the fact that there is no difference in the quality of human being between a commissioned officer and a loving barnacle scraper. In fact I have more respect for the barnacle scraper, because at least he's doing something with a direct, tangible, measurable impact on the world, something that needs to be done, and there's a drat good chance that scraping barnacles for five grand a month is two or three times better than what his daddy did, and his poppa would be loving proud of him for doing it. I don't want to belittle the effort and time and drive that it takes to become an officer. But it sure seems to me, based on what I've read in this thread, that you've spent a hell of a lot of time living the lifestyle of a spoiled, overprivleged jackass, one you absolutely couldn't afford, treating yourself to every luxury you think you deserve - and yes, mail-order protein supplements are a luxury! - while all around you people you think you're better-than have somehow managed to conduct themselves like an honest-to-god responsible adult. So basically what I'm getting at is, suck it up, Tuyop. Take the option that pays back your debts, pays for the rewards you gave yourself in advance, regardless of what your dreams are. Maybe in ten years you'll be a better person and if you have to start from scratch at that point, that's not such a bad thing. A lot of people do that, and there's nothing special about you that makes you deserve what you want more than those people. Leperflesh fucked around with this message at 06:05 on Feb 3, 2012 |
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Feb 3, 2012 06:03
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I feel like this thread isn't really BFC so much as it is E/N. I stay out of that subforum because I can't resist yelling at people and I don't like myself when I do that, regardless of whether it's deserved or not. So I'm just gonna say that Option 1 is blindingly obviously the best choice from a purely financial perspective, because it offers you the ability to pay off your debts faster, not owe money to the army for your (really surprisingly expensive) college they paid for, and of course not be unemployed and broke. Beyond that I'm gonna stop commenting. Maybe unbookmark the thread. Because I get too involved in other people's attitudes and how I think they need adjustment.
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Feb 3, 2012 19:33
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tuyop posted:a cop in Quebec who tailgated me through a suburb until I was speeding Does not compute. Were you oblivious to the tailgating cop? Was he in an unmarked car? Why did you exceed the speed limit with a cop on your rear end?
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Feb 17, 2012 21:22
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How an investing neophyte thinks: "Wow! Look at this fund's performance! The last few years its been up up up! I should buy some today!" How a smart investor thinks: "Wow! Look at how expensive this fund has gotten! It's clearly overdue for a big downward correction! I should sell all my shares while the price is high and go look for a bargain elsewhere" This is of course a massive oversimplification. But the fundamental premise, "buy low sell high," should always be in one's mind when investing. If I could afford it I'd be massively short on precious metals with like a 5 year timeframe. edit: ugh posting from my phone sucks Leperflesh fucked around with this message at 01:10 on Feb 24, 2012 |
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Feb 24, 2012 01:04
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Yeah that's fine, I didn't really intend to be giving advice about going short metals. It's more that if it were as simple as picking through all the funds and finding the ones with the best recent performance, that's what everyone would do and we'd all get rich and die happy. The reality is that since there are thousands of funds, even if every one of them were managed in a totally random fashion, there'd still be a whole bunch that randomly got lucky and performed well over a given time horizon. This record of great performance would of course be meaningless for the future of those funds (because in this thought experiment, they're all managed by a random number generator). Given that, one should never look at performance on its own as the factor for picking investments. It's impossible to perfectly separate "lucky" from "good". There are "technical investors" who look at collections of data to try and find trends and take advantage of them (say, what's the EPS, what are the recent floors and resistance levels, volume, how do the charts compare to reference charts for similar industries in the past, etc.), and there are "fundamentals investors" who look at the underlying facts about a company (or fund) and try to predict the future based on research (say, "given the global economic situation, a bunch of information about gold mining prospects in africa, some research on the correlation between metals prices and inflation, and a prediction of Ron Paul's chances in the upcoming election, is gold a good investment right now?). In both cases though, there's massive amounts of research, millions of people spending millions of dollars on computer models and math geniuses and hundreds of thousands of highly-experienced fund managers, all doing their utmost to figure out the market and make good picks. And after all that, the majority of actively-managed funds underperform the market. Yes. More often than not, the experts are worse at picking investments for the future than a room full of monkeys throwing darts at a newspaper. And if that's true, why would anyone invest in an actively managed fund? How can you tell the good ones from the bad? This is why in the long term investment thread, the prevaling wisdom is to invest your retirement in passive, low-cost funds like index funds. Spread across asset classes, yes, find the low risk, yes, but low cost is a better way to preserve and grow your wealth than trying to pick out a handful of funds being managed by accurate-future-predictor geniuses. References: Motley Fool: "80% of mutual funds underperform..." "If in doubt, buy an index fund." About.com" "According to Vanguard, for the 10 years leading up to 2007, the majority of actively-managed U.S. stock funds underperformed the index they were seeking to outperform." "For the period of December 31, 1992 to December 31, 2007, only 41.6% of actively-managed U.S. large company funds that beat the S&P 500 in a particular year were able to beat the S&P 500 in the next year. After three years, only 9.7% of the original group was still beating the index. The numbers are similar for actively-managed small cap funds and emerging market funds." Bullshit: Investor Daily: "Most mutual funds are unfairly maligned because the S&P 500 is a managed fund itself. If you look at it carefully, they only add outstanding stocks with great fundamentals. In most years, it's a hard index to keep up with. The stocks (like Microsoft, etc.) that go up the most get the highest weighting. They're dealing with the best stocks. You also have millions of dollars going into index funds pushing the funds up." This is crap because there's no reason why an active fund manager can't pick the great stocks that the S&P500 managers pick. Additionally, most mutual funds are measured not only against the S&P500, but also against their own, industry-specific or asset-class-specific indexes, and they underperform those as well. But most importantly, it's really just an argument that investors should stick to S&P500 index funds, to avoid management fees and keep up with the "unfairly advantaged" S&P500. William Sharpe, Nobel Laureate in Economics Sciences, The Arithmetic of Active Management: "If "active" and "passive" management styles are defined in sensible ways, it must be the case that (1) before costs, the return on the average actively managed dollar will equal the return on the average passively managed dollar and (2) after costs, the return on the average actively managed dollar will be less than the return on the average passively managed dollar" From Porfolio solutions, discussing the above article: "Sharpe’s argument is intuitive. Mutual funds are a $5 trillion dollar business, and that is more than one-third of the value of the entire U.S. stock market. As such, mutual funds in aggregate can only return what the entire stock market returns, less costs." (emphasis mine) So, if you invest in actively-managed funds, you are selecting a segment of all funds which on average must do worse than all passively-managed funds will do (on average). Why would you do that? Yes, you might pick a winner, but you're more likely to pick a loser, no matter what: on average the entire class of funds are losers, so you're starting out from the getgo at a significant disadvantage. \/\/\/\/That is very good advice and I'm sorry for intellectualizing. My whole rant basically boils down to "Tuyop, you clearly don't know what you're doing and you have hardly any money to invest anyway. Focus on your debt and your emergency fund, and when you can actually afford to start saving for retirement, get to the long-term investing thread and really learn some stuff." Leperflesh fucked around with this message at 02:06 on Feb 24, 2012 |
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Feb 24, 2012 01:48
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blah_blah, I'm just going to go ahead and quote this bit - which you even quoted yourself:Leperflesh posted:This is of course a massive oversimplification. Please do not read into my fairly flip response to Tuyop's fairly naive investment strategy as some kind of bold, sweeping statement about my philosophy of how markets work and/or how to make money from investing. To do so is to attribute beliefs to me that I do not hold. I will say, though, that bam thwok has an interesting take on things too. I'd be interested in seeing this discussion continue in the long-term thread as well.
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Mar 2, 2012 19:29
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Yeah canadian insurance is quite different from the US in that they have much, much higher liability minimums. Which is kind of odd considering they also have free national healthcare, so you're not going to get stuck with someone's massive medical bills (I imagine, maybe I'm wrong?). Whereas here in the US, in most places the minimum liability limits are laughably small, and for a huge percentage of americans an at-fault injury accident is a quick ticket to bankruptcy. Tuyop, the reason a savings account's interest is different from the earnings on an investment are threefold: 1. the savings account's interest is guaranteed (earnings on investments are not); 2. the money in the account is insured and guaranteed by your government (most investments are not guaranteed in this way); and 3. you can withdraw money from a savings account in minutes (most investments take longer to cash out, and some can take days). With an investment you might earn nothing or might lose a bunch in an investment account, or you might lose money. But this is the thing that really concerns me: quote:I don't know why I put like 40% of it in a mutual fund and I don't know why I have a TFSA either. That's just what I did. I don't think the global financial system is about to collapse (Eurozone? Whatever) so it's not really that big of a risk. I feel like the ideal solution would be to stuff it all under a mattress to keep it safe from the volatility of the market or something. These statements are self-conflicting. First, if you don't know why you put 40% in a mutual fund, the only conclusion I can draw is that you made a selection at random. Or perhaps you have amnesia. Randomly flailing about with your money is exactly how you got into your massive debt situation in the first place. People who are successful with their money at least have some idea of why they spend it or invest it or save it where and how they do. They may get things wrong from time to time, they may misunderstand things or be less than fully informed, but at least they had some inkling of a plan and tried to execute that plan. Second is that you seem to be optimistic about the prospects for the economy, although you are either exaggerating or are wildly over-estimating the extent to which the economy would have to decline in order to take a significant chunk out of your savings. Investments are not all perfectly correlated to the global economy; while mutual funds help to decrease volatility by spreading across multiple investments, even a trivial amount of time spent looking at the performance of various mutual funds will show you that a 50% move in one year is not impossible. And does not require global financial meltdown, either. Especially actively-managed funds. But then the third thing you stated reflects wild pessimism. People who stuff money in mattresses are so paranoid about how the world is going to hell that they don't even trust government-insured bank savings accounts to protect their money. They are also, of course, morons (because money itself is backed by government and only worth something while there is still faith in that government... and also because mattresses are flammable). But even if you were just using a metaphor, this is wildly at odds with your casually optimistic assessment of the prospects for your mutual funds. So let me try and break this down into simple terms that give you actual advice. And for blah_blah's benefit, let me again say that I'm just trying to kind of use layman's terms and maybe am oversimplifying a few things here, and please let's not have a big derail about my personal philosophy of efficient market operation or something. First: "emergency savings" are not for investing with. The idea of emergency savings is that it is a specific amount of cash which you will always be able to access, on very short notice (hours). Given your current situation, you should decide on a minimum amount that you should have in emergency savings, and not put any more into it than that (because you have massive debt and you need to pay it down). Given that ideally you'd have that exact minimum amount in cash savings, you cannot afford to have it decline in value. If it goes down in value than you no longer have your minimum emergency fund! You should be very conservative with this money because you are broke, and it's your emergency stash. It belongs in an interest-bearing savings account that you can access directly and cash out at a bank or ATM. Second: "Investing" is when you try to take money you have and get it to earn more money for you by risking it. Investing has inherent risk for reasons we don't need to elaborate on. The thing is, given a reasonable level of risk, the expected returns (meaning, the average amount of returns that are likely) are probably the same or significantly lower than the cost, to you, right now, of not paying down your debt. In other words, since the interest charged on your debt is a fixed, guaranteed amount, by paying down debt you are "earning" a guaranteed return on that cash. A guaranteed non-zero return is almost always better than a non-guaranteed but merely hoped-for investment return. Now, there is one exception to this rule: if a particular investment opportunity is both A) very good (low risk/high reward) AND B) time-sensitive (if you pass it up it's gone forever), then it is worth at least considering. Here in the USA, employer matching of a 401(k) is one such opportunity. Tax-advantaged retirement accounts (ROTH/IRA) is another (because there is a fixed amount you are allowed to put in every year, and if you miss that in a year, you can't go back and put it in later). Assuming that one day I will be putting in as much into my Roth IRA as I'm allowed-to, it might be worth me paying down debt more slowly in order to make sure I make my maximum allowed contribution this year as well. But. Not always. If your debt is too big, if the opportunity is not that great, or especially if you're still really young, paying down the debt is probably best. You will have many, many years in the future, before you retire, to maximize your contributions to whatever advantaged retirement accounts you have access to. So, OK, if you already have money in a tax-advantaged account and you would pay penalties to withdraw it, then go ahead and put it into a reasonably safe investment (such as an index-tracking mutual fund). But don't put any more than that into such a fund, and don't treat such a fund as your emergency money. It's probably not liquid enough, and you don't want to pay a big penalty to get to it in order to cover a fine, auto repairs, or something stupid like that. When you have gotten rid of $50k of debt, you'll be in a good position to start saving for retirement. You're still young and can put this off for five years without crippling yourself. You can bother to learn about investing and how to do it well when you actually have something worth spending that time on.
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Mar 6, 2012 22:45
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Right, yes. The only reason to pay a penalty to take that money out of where it is right now, is if you absolutely need the cash right now. Otherwise, treat it as not part of your emergency fund, e.g., build up your emergency fund in a savings account and forget about the invested money. It's at risk, so it's not your emergency fund, it's your retirement fund, in which case, leaving it invested is fine.
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Mar 7, 2012 19:51
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In my old neighborhood, a runaway truck rolled down a street about a block and into the parking lot of the grocery store, where it killed a small child and crippled his mother. Tuyop can count himself lucky that he did not ruin someone's life. It's a story with a happy ending!
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Apr 6, 2012 18:45
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