Anyone else super stupid with money?

[Lorgar Aurelian]

I feel I do pretty well with my money I save about 400-500 a month and only spend about 200 on entertainment. My only real weak spot is that i’m to giving when it comes to family and between all of my close family members I’ve given about 15k or more which has been incredibly slow trickling back to me and 3k which I don’t ever expect to get back.

[lordsphinx]

I mean it depends on the interest rate. If the interest rate is relatively low, you can just invest the money you would have spent otherwise, if you can secure a higher rate of return then it would be worth it.

On paper you are obviously correct, but reality doesn’t usually work that way for the average person. It’s much better to just pay for something up front because with debt, you add risk. Sure, your investment would be a better bet if you make it to the end of the loan with no emergencies happening, but if you have zero debt and an emergency happens, you’re not going to suddenly default on a bunch of shit while your money is tied up in some investment somewhere.

I listen to Dave Ramsay on the radio during my lunch break every day, and whenever this comes up, he answers the same way…

Caller: “I just came into some money from an inheritance, and I’m wondering if I should invest it or pay off my home. I owe $90k on a $400k mortgage, and I inherited $100k.
Dave: “Do you have any other debts?”
Caller: “No, just the house”
Dave: “Then you should pay off the house”
Caller: ”But the mortgage is only 3.99%, and I can invest at 12%. Wouldn’t I make more money with the investment than I would save by paying off the house?”
Dave: (goes into risk, strategies, etc to explain)
Caller: “That doesn’t make sense on paper”
Dave: “I’ll tell you what… if you believe that it’s smarter to invest this money, then it would also be smarter to take a home equity loan at 4.99% on the $310k you have in equity, and invest that money. You’re literally doing the same thing, but taking out a HELOC sounds a lot scarier, right? Tell me, why haven’t you taken out a HELOC to invest the money?”

[Themius]

On paper you are obviously correct, but reality doesn’t usually work that way for the average person. It’s much better to just pay for something up front because with debt, you add risk. Sure, your investment would be a better bet if you make it to the end of the loan with no emergencies happening, but if you have zero debt and an emergency happens, you’re not going to suddenly default on a bunch of shit while your money is tied up in some investment somewhere.

I listen to Dave Ramsay on the radio during my lunch break every day, and whenever this comes up, he answers the same way…

Caller: “I just came into some money from an inheritance, and I’m wondering if I should invest it or pay off my home. I owe $90k on a $400k mortgage, and I inherited $100k.
Dave: “Do you have any other debts?”
Caller: “No, just the house”
Dave: “Then you should pay off the house”
Caller: ”But the mortgage is only 3.99%, and I can invest at 12%. Wouldn’t I make more money with the investment than I would save by paying off the house?”
Dave: (goes into risk, strategies, etc to explain)
Caller: “That doesn’t make sense on paper”
Dave: “I’ll tell you what… if you believe that it’s smarter to invest this money, then it would also be smarter to take a home equity loan at 4.99% on the $310k you have in equity, and invest that money. You’re literally doing the same thing, but taking out a HELOC sounds a lot scarier, right? Tell me, why haven’t you taken out a HELOC to invest the money?”

When I say low rates I mean sub 5%. Which is typically easy to attain.

There are some down and up years so just invest in the market. That’ll control your volatility a bit.

For instance if you can refinance your student loan down to 1-2% it is more beneficial to pay the bare minimum and invest any extra since you very likely can gain at least 3-4%.

[lordsphinx]

When I say low rates I mean sub 5%. Which is typically easy to attain.

There are some down and up years so just invest in the market. That’ll control your volatility a bit.

For instance if you can refinance your student loan down to 1-2% it is more beneficial to pay the bare minimum and invest any extra since you very likely can gain at least 3-4%.

The principal is the same though. If someone were to invest their money instead of paying off the student loan, then that person loses their job / gets sick / has to quit to take care of a loved one etc etc etc, their student loan will go into default. The money invested in market funds is not easily accessed without steep penalties, so that person ends up in default with plenty of money sitting in non-liquid assets. If you’re confident that nothing bad could ever happen to you, or you have enough liquidity to pay the thing off regardless of income, then you’re right. Otherwise, it’s a smarter idea to get out of debt first, then worry about investing later.

[Themius]

The principal is the same though. If someone were to invest their money instead of paying off the student loan, then that person loses their job / gets sick / has to quit to take care of a loved one etc etc etc, their student loan will go into default. The money invested in market funds is not easily accessed without steep penalties, so that person ends up in default with plenty of money sitting in non-liquid assets. If you’re confident that nothing bad could ever happen to you, or you have enough liquidity to pay the thing off regardless of income, then you’re right. Otherwise, it’s a smarter idea to get out of debt first, then worry about investing later.

How does that happen when you’re saving all the money??????????? And investing in relatively low volatile market funds with proven returns? The money doesn’t evaporate.

That’s bad advise.

Saying to pay off a 1% debt instead of investing in the market where in relatively slow and bad years you can expect 3-4%

[Pony Soldier]

I can be sometimes if there's like a limited time deal on something but I'm usually very cautious before I spend money. Sometimes though impulse gets the best of me.

[denn69]

Me too, but life doesn't always go as planned. I've been thinking about FIRE a lot lately. I'm a little late to the game though, and I fear that one enormous financial mistake in my past will keep me from actually retiring early. I have already found short term TheGuaranteedLoans service that gives money everyone, even unemployed. I guess I'll use their help to pay off my bills.