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Old 11-17-2017, 12:44 PM   #41
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Need to replace your calculator.



$100,000 * 50 = $5,000,000.... that is $5 million, not $5 billion.


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Old 11-17-2017, 12:50 PM   #42
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Originally Posted by Texas Proud View Post
But you do not have to invest in the stock market... I have bought a number of pref shares that pay steady dividends and am making north of 7% with very little principal change either way.... so, I do not consider myself mismatched....


Edit to add since I just read pb4uski's reply.... I have very little 'cash'.... I would have to sell something to pay off my debt... my assets have about a 50% basis so that is a good amount of cap gains.... It would harm me financially to pay off my debt.... I do not want to spend my ROTH money to do it either... I am happy with my debt level and monthly payments....


+1
Another example that is not a mismatch is using a zero % card and keeping $ in the market. Both are short term. As long as one has the ability and desire to take the risk that assets will have to be pulled out at an uncertain future value to pay off the debt, I don't see a problem. Used this strategy before ER and have continued to use it post ER.
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Old 11-17-2017, 12:51 PM   #43
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But as a banker, you had a fiduciary duty to your depositors and shareholders, rules to follow and abide by and regulators monitoring what you did.

Having worked in finance in the life insurance industry I'm quite familiar with all of that and with asset-liability matching and disintermediatiion risk.

Since I'm managing this money for me rather than as a fiduciary, I can decide to take risks with my personal finances that would be foolhardy as a fiduciary. I recognize that I am taking some risk and it is a risk I am willing to take as the rewards have been good... but it could go sideways and reduce or wipe out my gains or even turn to losses.

I didn't borrow to invest in the stock market.... I took out the mortgage when we bought the property and refinanced to lower the interest rate in January 2012 rather than pay it off with taxable account funds which is a similar decision.... I kept the debt rather than paid it off. Also, since my AA is unchanged from before I took the mortgage, I didn't really invest the proceeds in the stock market but more in a 60/40 portfolio (and that is what the 6.6% is based on).

That said, our total debt is less than 10% of our net worth so it isn't a big bet in the whole scheme of things but the results hve been rewarding.


+1
This has worked for us
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Old 11-17-2017, 12:59 PM   #44
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100k/2%=$5billion dollars NW!
I wish!
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Old 11-17-2017, 01:07 PM   #45
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I'll have the mortgage paid off in year 5 of retirement.
I have a low interest auto loan as most of my savings are in 401k and tIRA and debt is a tax management opportunity for me. A new car at cash would either cost 10% tax on the bump from 15 to 25 percent, or deplete my 'emergency' account by more than I'm comfortable with.
Four year car loan will be gone next month. Now I'll have to mentally move that payment to the replacement vehicle account.
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Old 11-17-2017, 01:22 PM   #46
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To each his own. I really do not want any debt of any kind. DW and I are old school in about every area of finance. Is it optimal? Heck no but it works very well for us.
We've been lbyers for nearly 40 years. However we don't skimp on those things important to us. Despite a 5 figure income we managed to acquire a nice big house in town, 2 kids through college ,a lake house and vacations at top notch hotels. Other than a small $360 house payment 25 years ago, it was always cash.

The key was to research, plan and save for each purchase. No impulse buying. Buy quality, take care of it and the number of transactions is reduced greatly in the long run.

Certainly our approach is not sophisticated but it sure works for us. Being on the same page as DW for four decades didn't hurt either!
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Old 11-17-2017, 01:32 PM   #47
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I was debt averse until I went to business school, where I learnt that it’s a tool that makes the world go around. Used judiciously, it can be a great wealth builder. Used badly, it can destroy lives. (Just like the tools of my former trade). So I learnt how to use debt to my benefit and I am comfortable with that.
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Old 11-17-2017, 01:50 PM   #48
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I was debt averse until I went to business school, where I learnt that it’s a tool that makes the world go around. Used judiciously, it can be a great wealth builder. Used badly, it can destroy lives. (Just like the tools of my former trade). So I learnt how to use debt to my benefit and I am comfortable with that.
One thing that business school did not teach me, or I wasn't paying attention, was that some unforeseen things can happen. I had two neighbors in 2009 who owned long term successful family businesses, until their loans were called. That was something that I thought happened in the 1930's not now.
Now I have new neighbors and am hearing again about how credit is becoming much easier to obtain.
It's just an observation with far too small a group to draw any conclusions. I do agree that credit makes the world go round. I just feel fortunate I don't need to play the game, at least on the borrowers side of the transaction.
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Old 11-17-2017, 02:25 PM   #49
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We've increased our debt in ER to keep our MAGI low enough to get ACA tax credits. We haven't finalized our plan choice yet, but it is looking like next year's premiums will be $24 instead of $20,400 and that lets me sleep better at night.
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Old 11-17-2017, 02:45 PM   #50
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Nope. No plans to return to the "Debt Side". Before or during retirement.

I don't want to make payments. Even at 0%.

At some point you no longer have to squeeze every drop out of a dollar. I can turn down a 0% car loan quite easily. Same for a 0% furniture loan and paying for my cell phone for 3 years. Or making payments on my new refrigerator. Thanks, but no thanks.
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Old 11-17-2017, 03:21 PM   #51
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Originally Posted by Texas Proud View Post
But you do not have to invest in the stock market... I have bought a number of pref shares that pay steady dividends and am making north of 7% with very little principal change either way.... so, I do not consider myself mismatched....


Edit to add since I just read pb4uski's reply.... I have very little 'cash'.... I would have to sell something to pay off my debt... my assets have about a 50% basis so that is a good amount of cap gains.... It would harm me financially to pay off my debt.... I do not want to spend my ROTH money to do it either... I am happy with my debt level and monthly payments....
I wouldn’t say pref shares have the same risk profile as debt. As long as you understand the risks,carry on.
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Old 11-17-2017, 03:23 PM   #52
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Originally Posted by pb4uski View Post
But as a banker, you had a fiduciary duty to your depositors and shareholders, rules to follow and abide by and regulators monitoring what you did.

Having worked in finance in the life insurance industry I'm quite familiar with all of that and with asset-liability matching and disintermediatiion risk.

Since I'm managing this money for me rather than as a fiduciary, I can decide to take risks with my personal finances that would be foolhardy as a fiduciary. I recognize that I am taking some risk and it is a risk I am willing to take as the rewards have been good... but it could go sideways and reduce or wipe out my gains or even turn to losses.

I didn't borrow to invest in the stock market.... I took out the mortgage when we bought the property and refinanced to lower the interest rate in January 2012 rather than pay it off with taxable account funds which is a similar decision.... I kept the debt rather than paid it off. Also, since my AA is unchanged from before I took the mortgage, I didn't really invest the proceeds in the stock market but more in a 60/40 portfolio (and that is what the 6.6% is based on).

That said, our total debt is less than 10% of our net worth so it isn't a big bet in the whole scheme of things but the results hve been rewarding.
You obviously understand the risks. Carry on. Not everybody does.
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Old 11-17-2017, 03:24 PM   #53
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+1
This has worked for us
Given the markets, of course it has worked.
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Old 11-17-2017, 03:44 PM   #54
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+1
Another example that is not a mismatch is using a zero % card and keeping $ in the market. Both are short term. As long as one has the ability and desire to take the risk that assets will have to be pulled out at an uncertain future value to pay off the debt, I don't see a problem. Used this strategy before ER and have continued to use it post ER.
So you took (or didnt repay) money on your CC and invested in the market, and this is not a mismatch? I guess we need a better definition of what mismatch means. It’s not the rate on the debt that causes the mismatch, it’s the characteristics of debt vs equity.
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Old 11-17-2017, 04:32 PM   #55
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What's up with people taking the zero percent financing on new cars? Have things changed?

The last two new vehicles I purchases in 2000 and 2011 I would have had to give up a several thousand dollar incentive if I took the special low rate financing offer.
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Old 11-17-2017, 04:50 PM   #56
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In my case I had come to terms on the car purchase based on an out-the-door cash price with three competing dealers and had intended to pay cash and then I noticed that the mfg was offering 1.9% financing and asked if I qualified and they said yes. But in my case the offer to customers was not a choice between a rebate or the 1.9% financing.
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Old 11-17-2017, 04:52 PM   #57
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What's up with people taking the zero percent financing on new cars? Have things changed?

The last two new vehicles I purchases in 2000 and 2011 I would have had to give up a several thousand dollar incentive if I took the special low rate financing offer.

Some of the offers do not have a cash incentive... it is only low or zero interest....
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Old 11-17-2017, 05:06 PM   #58
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As long as my Vanguard dividends are paying roughly 2.5% I have no problem financing a vehicle at 1.9%. In fact I've currently got two of them like that.

Paid cash for a travel trailer and just a couple months ago a boat; can't get money that cheap for those sorts of things.
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Old 11-17-2017, 05:29 PM   #59
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Some of the offers do not have a cash incentive... it is only low or zero interest....
So even if you pay cash and don't take the special financing you pay the same price?

Seems to me then, they must have the financing interest cost built into the price of cars nowadays, regardless of how you pay for it? I wonder if this will become the standard business model for car companies in the future?


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Old 11-17-2017, 05:41 PM   #60
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We turned down low rate financing on our new car and just paid cash for it even though there was a $500 rebate if we financed it. I love having no debt.
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