I saw this article yesterday on MSN. Good read. I agree w/ that you have to take out the religious aspects of it (although I still tithe and give to charity - about 5% of my income total, which is less than the 10% Ramsey suggests; per the bible). Glad to see so many young people getting their sh*t together. I always kick myself for being a financial retard in my early/mid 20's.
I can honestly say, Dave Ramsey turned my life around financially (also w/ a little bit from Clarke Howard). I was working a 3rd job in the late 90's as a transport paramedic and was in the ambulance 12+ hours a day listening to AM radio (usually sports, financial, or political stuff). I got turned on to Ramsey and it financially turned my life around.
I haven't had a car payment since the year 2000. I bought my house in Arlington for over $400K and put 20% down (plus closing costs), I built a vacation/rental cabin and paid cash for it, and I have a healthy savings/investment/brokerage account. It's taken 20 years, but I look back on it and it all started w/ the part-time job and listening to Dave Ramsey on the radio.
Best Posts in Forum: Business, Investing & Finance
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- Thread: What if you made $500,000 year?
I would relax on the vacation budget. I would have not put myself in a 1.5M mortgage. I would have done something different with the vehicles. It's great they are saving $36,000 a year in a 401k... but I would make every attempt possible to put away WAY more than "just" that.
My 19-year old daughter, a college student who started her first job early this year making $80 gross/week,asked me "what percentage should I start saving for retirement, and how much toward an emergency fund?" just after her first paycheck. You couldn't have knocked the smile off of my face with a baseball bat.
- Thread: Inverted Yield
An inverted yield curve is based on the U.S Treasury rates. U.S Treasury rates go from anywhere from 1 day (the shortest) to 30 yr. bonds (the longest). Generally speaking when you loan your money to the U.S. Gov't (which is what you do if you buy a treasury) the longer the term usually gives you a higher rate, which makes sense b/c the longer you tie up your money the better rate you should get. This is basically how old school banks make money. You having a savings account and they pay you an overnight rate. They then take that money and lend it long term, say for a morgtage. But if they have to pay more to you than they can loan it out for, they can't make money. This won;t happen in reality, but it is one of the things that was happening in 2003-2008 and was part of the credit crisis that caused the modern day depression. So when the shortest rate is the lowest and progressively gets higher the longer in time, this is called a normal yield curve. An inverted yield curve is when any of the shorter duration rates is higher than any longer term rate. For example the 3 month T-Bill has had a much higher yield than the 2, 5, and 10 year T-notes for quite a while now, thus the yield curve has been inverted for a long time now. However today for a brief moment, the 10 year T-Note had a rate lower than the 2 year T-note, thus an inversion in the 2-10 spread. The reason it is all over the papers is that this particular inversion is closely followed by many and often seen as a good indicator of a recession to come. I personally think that the 3 month to 10 year is a better tell, but that is another topic. So in short an inverted yield curve is when a shorter term maturity instrument carries a higher interest rate than a longer term maturity instrument in that same family.
Oh and the simple answer as to why the panic is that it has been that recession indicator 6-24 months down the road.
- Thread: End goal / How much do you need?
I initially retired @ age 60 as a widow & received 71 1/2% of my late husband's social security, but I retired from full time work and only worked part-time. I fully retired @ age65 in 2003 w/full SS benefits on my account which was in excess of $2,000/mo. net. I had no debts as home/car, etc. paid off & had an employer-funded lucrative pension which I rolled over into Morgan-Stanley nor have I ever touched the principle.
From 2003 to date, I have enjoyed double-digit gains on my pension investments as my portfolio was initially somewhat aggressive with 70% stock/30% fixed. I reduced this to 60/40 four years ago and on my 80th birthday further reduced to 40/60%. "Money" magazine states you should not be invested in percentage of stock more than your age, less one hundred which means I should have no more than 20% in stock. I am not willing to go that low in this current economy. I think counting on an average of around 3.5 to 4% is a bit more realistic than 6%, but as long as the economy is doing so great, I would be more aggressive until there is a downturn. In essence, stockpile it while you can.
Obviously if I see the worm turning toward a (God forbid) Democratic president in 2020, I would greatly reduce stock investment percentage. Regardless, retirement is somewhat scarey and you hope not to outlive your money & to be able to handle the unexpected expenses.
I had no idea when I started this if you could actually make money. You hear about people having websites and ads and such but you just can't imagine making money that way. The first month I started putting up ads, I made something like $30, and was totally pumped! It's gotten better since then. Certainly not enough to quit my job, but making money doing something on the side that you love is truly the bees knees. None of this has ever been work for me.
I’ve never hired friends or family and never will. Loaned my best friend around $200 when we were 18 and had a huge rift because he swore he paid me back when he never did. I said screw it and considered it a $200 lesson in life. Fastest way to lose a friend other than banging their girl is to loan them money.
Family nearly split apart. In laws wanted all their kids (4)to go in on lake front property/A-frame house. I stated I would not consider unless rules/regs of use/payment drawn up by an attorney. Mother-in-law began drawing up her own rules - i.e.: no dogs, no this, that, etc.
I refused to participate & my husband and I were ostracized for over a year. Two sons participated and one son later sold out as he was getting a divorce. One son left holding the bag so-to-speak as retired parents could no longer afford maintenance/taxes. Our attorney told us that if we never listened to anything else, listen to this..."Never ever go into an arrangement like this with family or friends"!
Okay, here is my advice. It is a different than what others have already said. I guess you could say I'm looking at this through a different lens. I don't know the number of properties you own but we can go with made up #'s as it really doesn't matter in the grand scheme of this post. Let's assume you have 10 properties.
Effectively, you currently own 5 properties free & clear (50% debt to equity on the assumed number of 10 properties total) if you just rejigger your financing a little bit, which is what I would do. This is important IMO because let's say hypothetically you ran into cash flow problems (maybe the rental market craps the bed, a Lehman Brothers 2.0 event happens, etc.). You only have 5 properties at risk of being taken back by the lender if you can't swing the payments, rather than having all 10 properties at risk. It would really suck to have so much equity in a property wiped out because of unexpected, short term cash flow problems. So, the first things I would do is start to refinance the properties so that you only have mortgages on half of your properties and you own the other half free & clear. At the same time, I would consult with a lawyer that deals with asset protection and have him structure the ownership of the 5 you own free & clear in asset protected vehicles (maybe individual LLCs or something along those lines...how this is done may vary depending on where you live). If you can also put the other 5 that will have mortgages on them in a separate LLC for each one individually, by all means consider it. You will probably need to use your inheritance (or a chunk of it at least) to do this unless you have a lender that will give you 100% financing on the 5 properties you will keep mortgaged (remember, you have 50% equity in all the properties so if you own half free & clear the other half will be 100% LTV unless you use your windfall...you probably won't be able to get 100% LTV financing is my guess). I would do this because worst case scenario you have something happen financially (bankruptcy due to unforeseen events, you get sued and slapped with a big judgement, etc.), you are most likely protecting quite a few of your rental properties from creditors and you leave yourself with a nice nest egg even in the worst case scenario, while giving yourself the flexibility to walk away from those that are financed at 80/90%. I would consider putting the remaining properties that will still have mortgages on a 30 year fixed rate. This way you still benefit from the using OPM in this low rate environment we find ourselves in. The properties you now own free & clear effectively are your annuity as they spit out monthly income for you to live off of. You'll probably be cash flow positive on the properties that are still mortgaged as you've stretched the duration out to 30 years. Use some of your positive cash flow to invest in the market if you so choose realizing that you will be dollar cost averaging in over many years while giving yourself the ability to stop monthly contributions as needed if a need ever arises. Use the income from your job to fund your Roth or individual IRA (you won't need as much discretionary income from your job as your rental income will be available for you to spend). Then treat yourself to a nice steak dinner at the best restaurant in town and go have some fun!
- Thread: Emergency Fund
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