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LOL, whats the other point of going to college for besides getting the paper, getting a job and getting paid.
I know, that post is kind of negative. I was just on here to celebrate my accomplishments.
I'm a very bookish person, I love learning, and most of my reading/self-teaching happens outside the classroom. I'm constantly reading books, watching lectures, and educating myself. I think it's weird that people are stuck to the idea that college is the best place to learn. Sure, it has plenty of outlets, but I simply wasn't challenged enough in my classrooms. I took it into my own hands with jobs, internships, and reading. I now have a very challenging job that keeps me on my toes and encourages continuous learning.
I'm more of a self-starter anyways. I did best in classes that were completely online and I got to learn by trial and error at times. Very rarely did I actually need to consult a professor. I'm the kind of person that needs to be teaching it actively (if even to myself) or working with a group to learn it best.
I am 26 years old still have three outstanding undergrad loans, and they are between 2.95% and 3.2%, so it would be pretty stupid for me to pay more than the minimums. I get just north of 5% in my portfolio right now, so until my rate of return on my investments drops below the interest rate on my loans, I will never pay more than the minimum payment.
Being debt free isn't necessarily a goal of mine. Growing my net worth as quickly as possible is.
While I agree with growing your net worth as quickly as possible and utilizing the concept of leveraging, the extra premium payments and the additional 2% (before taxes) growth on the quantity of money that would be going toward those premium payments is generally not very large in the grand scheme of things. For me, my student loans were 3.75%. I paid off my student loans in 5 years instead of 10 by paying extra. The extra $400 a month I paid for 5 years to pay off my loans wouldn't have amounted to too much when looking at a compared personal growth of 5% vs 3.75% and figuring in taxes over those 5 years (Probably $500 after any taxes).
Yes, the 5% investment plan would come out ahead by $500 or whatever it is (did it in my head), but for some people, eliminating a loan is personally "worth" more than a negligible long term gain like that. As soon as I cleared my student loan, both my previous minimum and the extra principal started getting invested anyway and now.
I personally wanted my wife and I to be debt free (other than our mortgage) by last year (before I turned 27) and it worked out. I figure I still have 30 years now to start playing numbers games, but I liked having nothing but a mortgage over heads before I started getting heavier into taxable investments.
Last edited by Sunbather; 02-14-2013 at 06:47 AM..
While I agree with growing your net worth as quickly as possible and utilizing the concept of leveraging, the extra premium payments and the additional 2% (before taxes) growth on the quantity of money that would be going toward those premium payments is generally not very large in the grand scheme of things. For me, my student loans were 3.75%. I paid off my student loans in 5 years instead of 10 by paying extra. The extra $400 a month I paid for 5 years to pay off my loans wouldn't have amounted to too much when looking at a compared personal growth of 5% vs 3.75% and figuring in taxes over those 5 years (Probably $500 after any taxes).
Yes, the 5% investment plan would come out ahead by $500 or whatever it is (did it in my head), but for some people, eliminating a loan is personally "worth" more than a negligible long term gain like that. As soon as I cleared my student loan, both my previous minimum and the extra principal started getting invested anyway and now.
I personally wanted my wife and I to be debt free (other than our mortgage) by last year (before I turned 27) and it worked out. I figure I still have 30 years now to start playing numbers games, but I liked having nothing but a mortgage over heads before I started getting heavier into taxable investments.
I understand what you are saying, but for me, my net total debt (student loans and mortgage) are roughly $160,000 paying an average of 3.75%. I can put aside $2000/mo between debt repayment as well as adding to savings, which average about 5% growth. Over a 20 year time span, adjusting for inflation and taxes paid, my net worth will be $113,000 higher by paying minimums on debt and paying more aggressively into savings.
So while I understand what you are saying, being able to claim I am debt free isn't worth $113,000 to me.
Well if you are lumping the mortgage in, that is an entirely different scenario. We were talking about student loan debt here. I am paying a little extra on the mortgage (just to reduce the term at least SOME), but I am investing much more into mutual funds. But that is an easier call because that is a 15-30 year investment or leveraging scenario for most people.
As long as you don't take out a large, unnecessary student loan, a student loan can be paid off rather quickly with just a little extra principal. It can be a much different situation than a mortgage. I paid my student loans off in 5 years and the amount of unrealized gains from investing into the market with potential higher yields was pretty small over that period of time.
As far as the house goes, I see is as a steady 4.5% APR. So, paying a little extra towards the house is just a PART of my investing strategy. It just makes up a % of my overall portfolio, the rest of which is made up mainly of indexing mutual funds.
Last edited by Sunbather; 02-14-2013 at 12:31 PM..
Well if you are lumping the mortgage in, that is an entirely different scenario. We were talking about student loan debt here. I am paying a little extra on the mortgage (just to reduce the term at least SOME), but I am investing much more into mutual funds. But that is an easier call because that is a 15-30 year investment or leveraging scenario for most people.
As long as you don't take out a large, unnecessary student loan, a student loan can be paid off rather quickly with just a little extra principal. It can be a much different situation than a mortgage. I paid my student loans off in 5 years and the amount of unrealized gains from investing into the market with potential higher yields was pretty small over that period of time.
As far as the house goes, I see is as a steady 4.5% APR. So, paying a little extra towards the house is just a PART of my investing strategy. It just makes up a % of my overall portfolio, the rest of which is made up mainly of indexing mutual funds.
I assume that debt is debt...but when I look at the breakdown I still come out tens of thousands of dollars better paying off student loan debt slowly while growing investments quicker. A $1,000/mo savings at an investment that pays a 1.5% spread over a loan interest rate (5% market return vs 3.5% loan rate) turns into over $62,000 in five years. According to student loans alone (assuming they are consolidated to a lower rate as mine are) paying minimums and investing my extra money generates a LOT of extra cash.
I know a lot of people enjoy the emotional relief of having one less loan on the books, but I have never been worried about that. I tend to always approach situations like this as a math problem where I try to come up with a number in a spreadsheet that is the maximum NPV of my future cash flows.
You are younger, correct? Why are you almost all in mutual funds if you are in your 20's? If you assume you have 30 or so years left to work, wouldn't you want to be heavily in pure equity?
I guess I'm the odd man out, I'm 31, I still have about $3k left in undergrad debt, I paid back the other almost $37k, but I'm in no rush to pay this loan because the rate is now at 1.825%, I can make more significantly more money than that buying bonds and dividend stocks. I have ended up prepaying that loan by about 3 years, so the next payment is due in 2016, and I don't plan to pay more than interest until then.
I assume that debt is debt...but when I look at the breakdown I still come out tens of thousands of dollars better paying off student loan debt slowly while growing investments quicker. A $1,000/mo savings at an investment that pays a 1.5% spread over a loan interest rate (5% market return vs 3.5% loan rate) turns into over $62,000 in five years. According to student loans alone (assuming they are consolidated to a lower rate as mine are) paying minimums and investing my extra money generates a LOT of extra cash.
I know a lot of people enjoy the emotional relief of having one less loan on the books, but I have never been worried about that. I tend to always approach situations like this as a math problem where I try to come up with a number in a spreadsheet that is the maximum NPV of my future cash flows.
You are younger, correct? Why are you almost all in mutual funds if you are in your 20's? If you assume you have 30 or so years left to work, wouldn't you want to be heavily in pure equity?
Correct. I turned 28 not that long ago. As far as the mutual funds, I'm invested heavily in mutual funds like: Vanguard Total Stock Market Index Fund and Total International etc. So it is still equity heavy. Buying individual stocks frankly takes a lot of time if you want to stay properly diversified in my opinion and it really stresses me out personally. I have a mix of funds that are mainly equity-based mutual funds with one bond fund that I invest in and re-balance them annually to the ratio I keep. I'm sure to the purist it is not the best approach but it doesn't provide me much stress this way, it keeps me fairly diversified, and I regularly invest in them each month.
Correct. I turned 28 not that long ago. As far as the mutual funds, I'm invested heavily in mutual funds like: Vanguard Total Stock Market Index Fund and Total International etc. So it is still equity heavy. Buying individual stocks frankly takes a lot of time if you want to stay properly diversified in my opinion and it really stresses me out personally. I have a mix of funds that are mainly equity-based mutual funds with one bond fund that I invest in and re-balance them annually to the ratio I keep. I'm sure to the purist it is not the best approach but it doesn't provide me much stress this way, it keeps me fairly diversified, and I regularly invest in them each month.
That makes sense. I definitely wasn't asking about pure stock picking...that almost never works out well. I was more referring to indexes that follow US or foreign equities.
I agree completely that picking individual stocks is fairly risky and usually doesn't end up well for the person doing it.
That makes sense. I definitely wasn't asking about pure stock picking...that almost never works out well. I was more referring to indexes that follow US or foreign equities.
I agree completely that picking individual stocks is fairly risky and usually doesn't end up well for the person doing it.
Good deal.
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