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Um. That's not Dave Ramsey. You simply have managed to put the need for material goods behind you. I've never chased those.
How is that foolish? Mortgage rates are dirt cheap. You'd be a fool not to buy real estate if you had the ability/need.
Debt is a tool. You either know how to use it responsibly, or you don't. Dave Ramsey didn't.
I have a decent amount of money for my age. Don't need to borrow, yet I still do. Why? Because it enables me to make a lot more money, even with risk controlled.
I went through college racking up credit card debt in the winter and working it off in the summer. Guess how much interest/fees I paid... $0.00.
One year out of college guess how much school related debt I had... $0.00.
Debt is a fantastic tool for people who can use it.
It's easy to preach that message when you fell in that hole. However from my observations, those people tend to take things to the extreme and over simplify them, thus costing people more than had they done it rationally instead of emotionally.
If you want really good financial advice, find someone that never fell in that hole or doesn't have millions in the bank (before preaching). Unfortunately, nobody really comes to mind.
A car is never an investment, even a classic or rare vehicle. That is a speculation.
Because if you take a car loan at 1.99% interest instead of paying cash and invest it in the market, which I believe the S&P 500 returned 11% last year, you come out ahead of paying cash.
Yeah.
The other type is line of credit, or HELOC.
It's an investment in yourself, many people wouldn't make any money without a car. Public transportation is a myth where I grew up. At the same time, not everyone wants a $4,000 car. Mine was $25,000. 10 years old (paid off long ago, but financed). It's got years left on it having taken good care of it. Even though it's a color that really shows scratches, it certainly doesn't look it's age. Those friends that bought the $4,000 cars are on their 3rd or 4th ones and put a lot more money into them than I've had to put in mine. $15,000 would be the base for me.
Again, rates are cheap. 1.99% last I looked. That's less than inflation.
I'm refinancing my 15 year to a 30 year because debt isn't dumb. I put the minimum down on my house (4%) when I bought it. At 3.75% interest, I'll gladly pay it for 30 years.
Figuring in the average return of the market, the difference is a million+ for my retirement. By the time the 30 year is paid off, the payment would be equal to my electricity bill last month.
Those leveraged stock returns are not without their risk, though. You have much bigger fluctuations in your net worth when you are leveraged than otherwise. Consequently there is more uncertainty about the future.
Those leveraged stock returns are not without their risk, though. You have much bigger fluctuations in your net worth when you are leveraged than otherwise. Consequently there is more uncertainty about the future.
What uncertainty? The market always goes up, eventually. Not retiring any time soon. Fluctuations are just a part of the game.
What uncertainty? The market always goes up, eventually. Not retiring any time soon. Fluctuations are just a part of the game.
Yes but you can't suspend mortgage payments during a downturn. Even if you pay out of your income, the mortgage payments are robbing you of cash flow to buy shares when they are cheap.
The math doesn't add up on "using" debt to finance one's living. A car is not an investment (unless it's some classic or rare vehicle), so how would it ever make sense to "finance" a car, for example?
See?
You don't understand using free money to work for you.
If you can get someone to give you a free loan or very low interest loan, it is free money. So your money stays working and making even more money for you.
There are times taking a loan makes PERFECT sense.
Not much of one. I think it has more to do with the median homeowner having a net income that is higher and being more responsible with money. Income is the primary factor. 70% of renters are in the bottom 40% for income. There's just not a lot of high income renters. Certainly when considering the median renter, they're going to be low income roughly around the 30th percentile for income. The second biggest factor would be age. For households headed up by someone under 25, 78% are renters. By 40 that's dramatically flipped to 2/3rds owning. By 55 only 20% of households are still renters. None the less, median age of renters is still 40. Income is the biggest factor in my mind.
The stock market has historically been a much better investment than housing overall. Obviously, you can cherry pick your Amazons and your Park Slopes in either case. Housing has two advantages, leverage is much cheaper due to lower interest rates and interest being deductible, and there's the big advantage in capital gains treatment.
Source?
Median homeowner income is (almost exactly) 2x median renter income, so homeowners are able to spend and consume much more than renters, while enjoying principal reduction, capturing home appreciation, and building that net worth.
So the average renter lives more frugally than the average homeowner.
Yes but you can't suspend mortgage payments during a downturn. Even if you pay out of your income, the mortgage payments are robbing you of cash flow to buy shares when they are cheap.
That implies you put money in the market every month.
In my case, the difference between the 30 year and 15 year is a 45% reduction in amount being paid towards the mortgage monthly.
I view the ability to build up cash reserves when shares are not cheap in order to maximize what you can buy when they're cheap as greater than adding to the market monthly out of your income.
Every thing you're paying into the house is essentially dead money. It's not easy to access, and by and large the appreciation rate isn't that grand. Why rapidly lock up more money when rates are what they are today? At the same time inflation will make that payment smaller and smaller as the buying power of the dollar declines while the rate is locked in.
Actually it is not the reason. The median homeowner has more income than the median renter, not because of their housing, but the other way around - housing due to income. Don't confuse your causation.
Median mortgage payment is at most times lower than median rent payment. For that lower payment, homeowners also enjoy fixed P&I (try getting rent payments fixed for 30 years) and principal reduction, plus home appreciation.
The cost savings of never having to pay (ever-rising) rent, plus principal reduction, plus value appreciation, pretty much capture the net worth differential of homeowners.
See?
You don't understand using free money to work for you.
If you can get someone to give you a free loan or very low interest loan, it is free money. So your money stays working and making even more money for you.
There are times taking a loan makes PERFECT sense.
Median mortgage payment is at most times lower than median rent payment. For that lower payment, homeowners also enjoy fixed P&I (try getting rent payments fixed for 30 years) and principal reduction, plus home appreciation.
The cost savings of never having to pay (ever-rising) rent, plus principal reduction, plus value appreciation, pretty much capture the net worth differential of homeowners.
You've never owned a house if you think a lot of houses cost less then renting.
You've never owned a house if you think a lot of houses cost less then renting.
No joke.
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