T Nation

Personal Finance Thread


#165

This is our “forever” home…

I should clarify, our goal is to max out our 401(k)s first. Then do this with the mortgage. We can’t really do this until our kids are out of daycare.


#166

I would much rather pay off debt than invest, personally.


#167

That’s my instinct as well, but it would seem as though Id be leaving money on the table eg. Paying cash for a new car as opposed to getting a 4% interest 72 month loan and investing that money for 5-6% return.

These decisions compound overtime too, so peace of mind now may mean losing out on tens of thousands of dollars a few years down the road.

I wish I enjoyed finance so I could make it my hobby and be really good at it haha


#168

Sure, if you can manage a 5%-6% return. Interest on debt will happen. ROI might happen.

The personal financial hierarchy (if you will) for me is:

  1. Small emergency fund
  2. 401(k) max
  3. Debt elimination (interest avoidance)
  4. IRA(s)
  5. Other (stocks, rental property, etc…)

It’s playing it safe. I’m just looking to retire comfortably with maybe a couple pieces of property and not much else.


#169

Just using the car thing as an example- really easy to get super low interest long term car loans that a safe CD or bond will easily beat. Just gotta have the upfront cash and a good credit score.

I hear about small things like this all the time but just don’t investigate further out of pure laziness. I could manage my CCs better for more rewards, put more money in an HSA, etc… But I’m too lazy to investigate it enough to the point I’d feel safe doing it I guess. The little things compound in life, both good and bad.


#170

The biggest influence on my financially (personal finance wise) was probably Die Broke, which I read as I was closing in on my 30s twenty-something years ago.

I think a lot of it has become semi-accepted wisdom in the years since. But at the time, it really came across as something different.


#171

Meh, I’m not sure that’s true. I just bought a new car in November and I can’t remember the rate off the top of my head, but it was sub 3%. New issue CDs on Fidelity don’t break 3% until 5 years. That’s a long time to have money tied up for. You can find bonds that are better if you’re willing to take the risk on BBB or lower. Most AAA or higher don’t hit 3% until 5 yrs

Not to mention, it becomes a cash flow issue. I have a lot more flexibility paying $500/month versus putting $30K in a 5 year CD. I can always pay the car loan off sooner, but I can’t pull the CD penalty free.

Financial flexibility is a pretty big factor for me personally.

Also, if we’re talking strictly about personal financial maximization then taking a load for a depreciable asset isn’t a smart move anyway. I have and will likely continue to take a car loan because it’s more convenient than driving a beater and saving for a nicer car, but it’s still a poor financial decision. At least with a home loan, the asset itself appreciated (generally).


#172

I’m happy driving a beater 4runner because it does everything I need, and I don’t feel bad beating the shit out of it in the mountains, plus no car payment. But my parents always paid cash for their new cars, and that mentality has trickled down to me and it just doesn’t make sense when you could take that cash and invest it and easily beat the loan interest rate… Assuming cashflow isn’t an issue. But then again, I wouldn’t be making any large purchases if cash flow was an issue.

And I’m sure there are a bunch of things like this out there where you can save yourself a few hundred a year here and there just by being smart with no real risk. Do that for 20 years, with compounding interest and damn that’s a lot of moola. I wish I was into finance so I knew all of this stuff and enjoyed putting it into practice.

My best friend is a finance manager at a large car dealership, and it’s amazing how people get screwed when talking loan and interest numbers with an expert out to make a profit. Glad he’s my best friend haha.


#173

It isn’t that easy, lol. I wish it was.

Sure. Again, if personal wealth is all you’re after, you could live off PBJ’s in a trailer watching paint dry for fun. Gym, saved $30-$100/month. Netflix, saved $15/month. Internet, $50-$100. So on and so forth.

It’s doable, but what’s the point.


#174

You’d have to get real unlucky to get a ROI less than the low 2-3% interest rate over a 6 year loan. Even if you match rates, you would save money on tax deductions I believe (don’t quote me on that).

And I was talking more about making smarter financial choices, not necessarily doing without or with less… Like choosing a CC with rewards more tailored to you, or getting company health insurance to pay for part of gym cost, etc. Lots of little things out there we could be doing to save on the things we already do. Quality of life is still the most important thing.


#175

deductions on what?


#176

If you use it for income (side business, drive a few times for Lyft/Uber, etc) you can deduct loan interest. Apparently you can also deduct sales tax on a new car purchase.


#177

You are forgetting one important thing, risk. Risk has a cost. If you have a debt obligation, you have a non zero risk of loss and that’s worth something in your math.

Everyone evaluates that risk differently (some not at all) so it’s up to you whether the interest rate spread on car debt vs investment return is worth the risk.


#178

Under the old rules, iirc, you could deduct a portion of interest based on usage/milage. I don’t remember the specific rules. I’m not sure if that’s true under the new rules. However, we were talking about passive income versus debt payoff, not a side hustle. That’s a different ball game.

Same as above.

This


#179

What mode do you use to pay? Online? Auto-pay? Mail a check?


#180

I pay online.