Let's show off our bank accounts

[hawkingvsreeve]

Yeah, guys.

[captncrzy]

I'm trying to figure out what kind of argument I can start where I pretend to not be an expert and then when someone chimes in I can get all experty on their ass.

[TomAz]

Hey look, someone else who caught half of a Suzie Orman conversation.

Just because it’s ‘guaranteed’ doesn’t mean it’s worth it. And it may not be taxable, but it removes a tax deduction that is equal to the tax liability you’d realize on an equivalent gain on another taxable investment. Also, when you pay down your extra principal, you don’t have access to that anymore. What happens when interest rates rise or the market rallies or you really need that cash for a personal emergency? It’s not available.

Bottom line is that if you can afford to put in $200 extra payment each month, you can probably afford to make a lot of other smarter investment decisions.

- If you have 80% equity and you haven’t refinanced in the last 18 months, you probably should and you will reduce your monthly payment by hundreds of dollars
- If you have been in your home a few years, you could refinance into a 15 year mortgage to get an even lower rate

In both of these scenarios, you end up saving interest on THE ENTIRE PAYMENT, not just the extra principal you’d be paying down.

- Those who are saying the Stock Market ‘isn’t doing all that well’ (compared to a ‘guaranteed 4.5% return) are full of it. Putting $200 per month into a very conservative index fund has reaped greater returns than the 4.5% annuity you’re getting by locking principal down in your mortgage.

I was with you up to your last point. The Vanguard 500 Index fund, as an example of a "very conservative index fund", returned -0.9% per annum over the last 10 years. (source). In other words, stuffing your cash in a mattress has offered a better rate of return over the past 10 years than the stock market.

Now you could argue, I suppose, that the 10 year window is abritrary, that it includes two extraordinary events (9/11 and the Great Recession) and that we have no where to go but up. and that an actively managed fund might well have helped you avoid losses in those extreme down markets. And you might be right. I'm just sharing data, not speculating.



edit: also don't you mean 20% equity?

[lickety_spit]

I only make about $100 more than I pay in bills each month, but I only drink about $100 worth of alcohol each month, so it works out. It's FINE.

[PlayaDelWes]

One more reason is that your mortgage is one of the only tools you will ever have to guard against inflation. You are losing about 3% per year on every dollar you pre-pay on your mortgage.

I was with you up to your last point. The Vanguard 500 Index fund, as an example of a "very conservative index fund", returned -0.9% per annum over the last 10 years. (source). In other words, stuffing your cash in a mattress has offered a better rate of return over the past 10 years than the stock market.

Now you could argue, I suppose, that the 10 year window is abritrary, that it includes two extraordinary events (9/11 and the Great Recession) and that we have no where to go but up. and that an actively managed fund might well have helped you avoid losses in those extreme down markets. And you might be right. I'm just sharing data, not speculating.

edit: also don't you mean 20% equity?

Not sure I understand your 20% equity question?

Also, there is a difference between investing one amount 10 years ago and investing the same amount every month spread out over the same period (dollar cost averaging).

[MissingPerson]

In my current account, I am about forty quid overdrawn, and I've got about fifty quid in my pocket that I owe somebody. But I've just discovered that I actually have a significant chunk of change in an account I'd more or less forgotten about.

Holy shit, I think I might get a car.

[TomAz]

Not sure I understand your 20% equity question?

You said "If you have 80% equity and you haven’t refinanced in the last 18 months, you probably should and you will reduce your monthly payment by hundreds of dollars". 80% equity would mean you only need a loan on 20% of the value of your house.

[PlayaDelWes]

You said "If you have 80% equity and you haven’t refinanced in the last 18 months, you probably should and you will reduce your monthly payment by hundreds of dollars". 80% equity would mean you only need a loan on 20% of the value of your house.

Oh, yea. I was thinking LTV (loan to value) which is the inverse of equity....

[faxman75]

In my current account, I am about forty quid overdrawn, and I've got about fifty quid in my pocket that I owe somebody. But I've just discovered that I actually have a significant chunk of change in an account I'd more or less forgotten about.

Holy shit, I think I might get a car.

How in the hell can you forget about enough money to buy a car with?

[PotVsKtl]

It's Ireland, their cars are made of corrugated despair.

[JustSteve]

about to close escrow on 2 houses in Newport Beach...hello commissions!

Crazy/scary amount of money to get all at once.

[marooko]

Not quite enough to buy a car, but I found $400 a couple weeks ago. I had forgotten about it.

[MissingPerson]

How in the hell can you forget about enough money to buy a car with?

It's not enough to buy a car by itself, like, but it's enough to make a car feasible.

My godmother set up an account for me when I was born, I never kept an eye on it in case I spent it, but it turns out it's double what I thought it was.

Also, it won't be a good car.

[faxman75]

Well that's a hell of a nice find, Gemma! Don't you think it would be more practical to use that money to come to Coachella next year though?