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No body makes more than 1.9-3% ROI average over a thirty year period?
Lets hope we do or we would have very little savings. Most of my money has been from investments that did much better then 1.9 to 3% ROI. We are not investing in CD's.
That's because everyone thinks DEBT is good ! they think they are so smart paying 1.9% interest on a car.
And 3% interest on a house that cost them $8,000 a year .. they "say" they can invest it and make way more ... problem is nobody ever does ..
HOw can you build wealth when you are paying to buy money all day >?
There is no one size fits all when it comes to debt. For me, I have no problem with using other people's money at the right price.
House needed a new roof this spring. Choice one was to go ahead and pay for it from our investment account. Choice two was to borrow the $13k on a credit card at 0% interest for 15 months with a flat $200 fee. Took me all of 2 seconds to decide on option two. Made enough to cover the fee in the first week after borrowing the $.
And I am certainly happy with my 3 3/8% 15 year mortgage and it doesn't cost me $8000 a year
Everyone's circumstances are certainly different, but my opinion (for what it's worth) is that debt can be a useful tool in the right hands at times.
There is no one size fits all when it comes to debt. For me, I have no problem with using other people's money at the right price.
House needed a new roof this spring. Choice one was to go ahead and pay for it from our investment account. Choice two was to borrow the $13k on a credit card at 0% interest for 15 months with a flat $200 fee. Took me all of 2 seconds to decide on option two. Made enough to cover the fee in the first week after borrowing the $.
And I am certainly happy with my 3 3/8% 15 year mortgage and it doesn't cost me $8000 a year
Everyone's circumstances are certainly different, but my opinion (for what it's worth) is that debt can be a useful tool in the right hands at times.
And I thank you!
Yes, there is nothing wrong with the *smart* use of debt. Again businesses, companies, high net worth individuals and others do it all the time. That is what lines of credit and so forth are for in first place.
Why tie up cash that could be earning returns elsewhere when you can use someone else's money (credit) instead. What matters is keeping the cost of borrowing said funds (interest, etc...) lower than what one's money is earning elsewhere.
Debt only becomes a burden when people, a business or even government gets in over their heads. When costs of servicing said debt starts eating away at current and future revenue, it basically behaves as like a tax.
Furthermore to that:
Those zero/very low interest balance transfer offers are a hedge bet by credit card companies. Those with high to excellent credit scores get the best offers and usually manage to pay off all or most of the sums transferred before the promotional period expires.
OTOH those with low credit scores get far less generous offers (if they get any at all), and are certain to make the CC company money because chances are good they won't pay things off in time. So that new transferred balance will rack up interest.
The biggest value of owning a home is hopefully when you retire you a fully paid for home and not paying rent.
Being in fly over area the value does not go up as nearly as fast but hopefully real estate taxes are much lower.
For lots of folks the idea is to retire in lower cost situation with paid home. Not looking for our home as a big
money maker.
Oddly enough, and obviously purely anecdotal, but within the last few years several of our friends of our retired, sold their paid off homes in stable low appreciation areas, and moved into rentals. One was a mid-level banker who is single. She not only struggled trying to find competent professional help to maintain her home, but spent far too much time cleaning, and dealing with operating a big house that she didn't really need. She decided to take a hard look at how much it REALLY costs per month to own and operate a full paid off, sixty year old brick ranch in flyover country. She found that it was a couple of hundred bucks cheaper than a 2/2 apartment in a new rental community, with a ton of amenities. I guess the latest buzz word for places like it are "Luxury Apartment Living" complexes, After she deposited the $225K in sale proceeds, she is in a much more solid financial position, and very happy.
To each his own, and there is no right or wrong here. We retired, relocated, and bought a ranch that pretty much describes the home I mention above. It needs a ton of work, and maintenance.................. It's in an area that's dealing with inventory shortages, bidding wars, and appreciation. All of that is meaningless to me, since I still can't view it as an investment.
I don't think the issue is that they typical buyer in Iowa is expecting Silicon Valley level appreciation, I think the problem is that the mindset of the general public is that owning a home IS a wise choice BECAUSE it is obviously a solid investment, and it somehow has become a universal truth.
I know what you mean when it comes to trying to tread water on home value. Thirty years ago I was building new homes starting at $50-55 sq. ft. ( $104 in today's dollars) in an area where it's now possible to buy an very nice, existing detached SFH for $60 a foot. When it comes to opportunity cost, that $50, over 30 years, at 3% interest from a saving bond, would be worth $123. At the historical stock market return average of 8% it would leave you with $547. So much for "the smartest thing you can do is buy a house".
At some point, part of the appeal of owning a home is being mortgage free with a minimal monthly nut for property taxes and insurance.
...and my house in Connecticut (which currently is rented profitably to great tenants), has 20k annual property taxes plus 5k annual insurance costs plus 3k annual (minimal) maintenance. Its no-mortgage "carrying" costs, after utilities are factored in, is somewhere near 4k per month.
There are places in the US where people can comfortably retire, and then there are places people run from, screaming, when retirement costs become clear.
One of my retirement worries is that these high COL blue state property taxes and utility rates start spreading to the cheap COL red states, either by political means or simply via transplants who demand lots of services. Thankfully, Florida has a method under current law to lock-in property taxes, so they cannot increase beyond 3% per year.
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