Free Money Management Advice.

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squash junky
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Re: Free Money Management Advice.

Post by squash junky »

Similar to what I try to tell young people if they want to hear :)
-pay off yr house
-don't live beyond your means
-and....uhhmmm Don't get divorced ;)
-Don't ever get a car loan.
Helped me to be able to retire at 50, 5 yrs ago.

Interesting enough I cannot get a credit card since I don't have a credit rating :P The private banker says he will take care of it, but we just put it on my wife's name and I get a partner card.
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flyingjerry
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Re: Free Money Management Advice.

Post by flyingjerry »

rookiepilot wrote: Wed Jul 04, 2018 2:51 pm
flyingjerry wrote: Wed Jul 04, 2018 2:42 pm
This is key: The cost of money.

The ominous "debt" can actually be a great tool.

For example. If you have $20,000 saved up to buy a car and the current financing offer is 0% for 84 months. It's a great idea. Provided the $20,000 is invested elsewhere. Always say yes to free money!
Disagree. "Free is never free". Ever.

2 reasons: People do not have the discipline required to invest instead, and I'd rather hammer the car dealer for a much better deal, on a cash basis. Or buy used.

Then borrow some money, invest it if you're disciplined and know how, and the interest is then tax deductible.
Both of your reasons are legitimate. I'm just starting my career and here's my logic if I was faced with the decision. (totally open to any criticism)

I just started flying for money this year. I assume that over 5 years my salary should go up. Let's assume I make $2500/month which increases $250/month/year and currently have $20,000 in my bank account.

Scenario 1: Buy car with cash, negotiated dealer down to $18,000 cash deal
Monthly Income = $2500 - $4250 - no car payment
Car Value after 7 years = $4194 (20% dep/year)
Net 7 year position = ($18,000) + $4194 + $2000 (money in checking account)= ($11,806)

Scenario 2: Buy car at 0% financing loan
Monthly income = $2500 - $4250 - car payment of $238/month (total $20,000)
Car value after 7 years = $4194 ($0 owing)
$20,000 investment at 10%/year = $38,974
Net 7 year position = $38,974 (investment principle + interest) + 4194 (equity in car) - $20,000 (car payments) = $23,168

So by my logic, I would "save" $34,776 by buying the car on a long term financing plan and investing the cash. In the beginning the $238/month car payments would be a bit of a struggle but should be nothing unmanageable by cutting out a few starbucks and dinners. As the salary goes up the fixed car payment becomes a relatively smaller portion of my income and becomes easier to manage while the whole time that $20,000 has been appreciating.
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rookiepilot
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Re: Free Money Management Advice.

Post by rookiepilot »

Jerry,

I've offered an alternative which is a more defensive choice. Buy used for $9-10,000?

Apart from that, (you can borrow to invest) how do you know you will make 10% per year? Or any positive return?

Just asking.
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digits_
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Re: Free Money Management Advice.

Post by digits_ »

flyingjerry wrote: Wed Jul 04, 2018 8:14 pm
Both of your reasons are legitimate. I'm just starting my career and here's my logic if I was faced with the decision. (totally open to any criticism)

I just started flying for money this year. I assume that over 5 years my salary should go up. Let's assume I make $2500/month which increases $250/month/year and currently have $20,000 in my bank account.

Scenario 1: Buy car with cash, negotiated dealer down to $18,000 cash deal
Monthly Income = $2500 - $4250 - no car payment
Car Value after 7 years = $4194 (20% dep/year)
Net 7 year position = ($18,000) + $4194 + $2000 (money in checking account)= ($11,806)

Scenario 2: Buy car at 0% financing loan
Monthly income = $2500 - $4250 - car payment of $238/month (total $20,000)
Car value after 7 years = $4194 ($0 owing)
$20,000 investment at 10%/year = $38,974
Net 7 year position = $38,974 (investment principle + interest) + 4194 (equity in car) - $20,000 (car payments) = $23,168

So by my logic, I would "save" $34,776 by buying the car on a long term financing plan and investing the cash. In the beginning the $238/month car payments would be a bit of a struggle but should be nothing unmanageable by cutting out a few starbucks and dinners. As the salary goes up the fixed car payment becomes a relatively smaller portion of my income and becomes easier to manage while the whole time that $20,000 has been appreciating.
You don't have to subtract your 18 000 in the net 7 year position in scenario 1. You end that year with 6194 CAD, which makes the difference much smaller.

An investment with a 10%/year profit, consistently, is not easy to do.

The real solution? Buy a 4000k car cash and invest the 16k.
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digits_
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Re: Free Money Management Advice.

Post by digits_ »

ahramin wrote: Wed Jul 04, 2018 9:06 am Well already we don't agree :). Under many circumstances for many people I think a 35 year mortgage is fine, but there is no way I would ever borrow money for a car.
When would a 35 year mortgage ever be fine?

In Europe there have been experiments with multi generation mortgages. To reeeeeeally screw over your kids!
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flyingjerry
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Re: Free Money Management Advice.

Post by flyingjerry »

digits_ wrote: Wed Jul 04, 2018 8:27 pm
flyingjerry wrote: Wed Jul 04, 2018 8:14 pm
Both of your reasons are legitimate. I'm just starting my career and here's my logic if I was faced with the decision. (totally open to any criticism)

I just started flying for money this year. I assume that over 5 years my salary should go up. Let's assume I make $2500/month which increases $250/month/year and currently have $20,000 in my bank account.

Scenario 1: Buy car with cash, negotiated dealer down to $18,000 cash deal
Monthly Income = $2500 - $4250 - no car payment
Car Value after 7 years = $4194 (20% dep/year)
Net 7 year position = ($18,000) + $4194 + $2000 (money in checking account)= ($11,806)

Scenario 2: Buy car at 0% financing loan
Monthly income = $2500 - $4250 - car payment of $238/month (total $20,000)
Car value after 7 years = $4194 ($0 owing)
$20,000 investment at 10%/year = $38,974
Net 7 year position = $38,974 (investment principle + interest) + 4194 (equity in car) - $20,000 (car payments) = $23,168

So by my logic, I would "save" $34,776 by buying the car on a long term financing plan and investing the cash. In the beginning the $238/month car payments would be a bit of a struggle but should be nothing unmanageable by cutting out a few starbucks and dinners. As the salary goes up the fixed car payment becomes a relatively smaller portion of my income and becomes easier to manage while the whole time that $20,000 has been appreciating.
You don't have to subtract your 18 000 in the net 7 year position in scenario 1. You end that year with 6194 CAD, which makes the difference much smaller.

An investment with a 10%/year profit, consistently, is not easy to do.

The real solution? Buy a 4000k car cash and invest the 16k.

That's a big woops! Thanks for the fix.
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Boreas
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Re: Free Money Management Advice.

Post by Boreas »

Some good financial advice here, but in my opinion, there are way too many pilots making decent money that drive around in beat-up Corollas...

Life is about balance. Too much of anything isn't good, and that includes frugality. So as an example, if you're a 'car guy', maybe get the M3 instead of the 911 4S and double up on your mortgage payments. Balance :mrgreen:

Off for a [financially irresponsible] drive!
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complexintentions
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Re: Free Money Management Advice.

Post by complexintentions »

I didn't mean to sound overly cynical about the value of financial advice. I do agree that education is vitally important. But all the knowledge in the world is irrelevant unless one is prepared to act according to some pretty easy to understand, but not as fun to practice, personal values.

In other words, if you know full well that living within your means will help you attain excess wealth, but aren't willing to do just that, what's the point of the knowledge? We aren't exactly living in an age where any value is placed on delaying gratification, quite the opposite - if we can't get something instantly, whether it's a slow internet connection or a late Amazon delivery, we whine like little children. No one wants to hear ugly words like "discipline" and "sacrifice", but no amount of education on finance or savings or index investing or buying used cars or whatever will help a bit if one isn't willing to be ruthlessly honest with themselves, and set aside their more trivial wants once in awhile. It just doesn't work. It's why I very, very rarely even give my opinion of money any more, unless someone demonstrates they're genuinely willing to live by the principles, not just listen to them and nod in agreement. Don't waste my time.

The example given of the wife who wasn't aware of how her mortgage works illustrates it nicely. In her case, it sounds like the only piece of the puzzle missing was the knowledge, and once provided with that, she was able to thrive. But it sounds like she was already someone trying to be responsible with her finances - try the same thing with a spendthrift who truly believes they "needed" and "deserved" the vacation they just put on their credit card, and it just won't matter what you teach them. Financial education is like sex ed: teaching the mechanics without any values doesn't work out too well.

Incidentally, I wasn't trying to be elitist when I mentioned credentialed financial advisors. There are certainly some extremely wealthy people who never obtained formal education. But I find that by and large they're the exception in the fee-for-advice world. My own advisor has several designations like CFA, etc, what those mainly allow her to do is read financial reports and conduct analysis to a depth that most self-taught investors (including myself) aren't capable of. Of course that's only a small part of what she does though, and it's more about having someone who shares your own philosophy on investing and crucially, has proven experience in the field.

She speaks money masterfully. I've just tried to learn enough to be able to understand the gist of what she says! :mrgreen:
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ahramin
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Re: Free Money Management Advice.

Post by ahramin »

Actually our biggest problem right now is the lack of tax knowledge. I'm realizing more and more a lot of the profits come from the decisions that worked out well for tax implications.
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Re: Free Money Management Advice.

Post by rob-air »

I am wondering if paying off a mortgage is a good idea with interet rates still being quite low, especially if you have other debts and if you dont just remortgage and invest. I have witness someone making a significant profit selling a house, mostly due to the market price increasing, and put all that money down on a bigger house with one goal in mind, paying off the mortgage sooner. Meanwhile, they were paying interest on two cars, motorcycle, personal credit, credit card......A house should be the last thing you pay off.
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rookiepilot
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Re: Free Money Management Advice.

Post by rookiepilot »

rob-air wrote: Thu Jul 05, 2018 8:27 am Meanwhile, they were paying interest on two cars, motorcycle, personal credit, credit card......A house should be the last thing you pay off.
I'd generally agree with that.
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Re: Free Money Management Advice.

Post by rookiepilot »

complexintentions wrote: Thu Jul 05, 2018 8:01 am Incidentally, I wasn't trying to be elitist when I mentioned credentialed financial advisors. There are certainly some extremely wealthy people who never obtained formal education. But I find that by and large they're the exception in the fee-for-advice world. My own advisor has several designations like CFA, etc, what those mainly allow her to do is read financial reports and conduct analysis to a depth that most self-taught investors (including myself) aren't capable of. Of course that's only a small part of what she does though, and it's more about having someone who shares your own philosophy on investing and crucially, has proven experience in the field.

She speaks money masterfully. I've just tried to learn enough to be able to understand the gist of what she says! :mrgreen:
Excellent words. I have one question and I am not dissing your advisor.

Is she independently wealthy, not from the advisory, but from her own investing?

That is a question I'd ask of any advisor. Most get offended with that kind of question like it's irrelevant.
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up on one
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Re: Free Money Management Advice.

Post by up on one »

The best financial advice I have ever been given was to pick up a copy of The Wealthy Barber Returns by David Chilton.


You either spend like a millionaire or you are a millionaire. You can't be both
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rookiepilot
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Re: Free Money Management Advice.

Post by rookiepilot »

up on one wrote: Thu Jul 05, 2018 9:28 am The best financial advice I have ever been given was to pick up a copy of The Wealthy Barber Returns by David Chilton.


You either spend like a millionaire or you are a millionaire. You can't be both
I see a lot of future GoFundme for those 80,000 truck payments
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Re: Free Money Management Advice.

Post by Zaibatsu »

Its usually just the basic things that give you financial security. Everyone has their tricks. They like to parade their expertise. And their successes. But rarely do they talk about their losses. Their setbacks.

My father worked an average job with an average salary and pension. My mother didn’t work. We lived in an average house in Calgary. We bought a new vehicle on average of once every four years. All of their other investments were in bonds, GICs, and mutual funds. We took a family vacation every year, with a big one down south about every couple to three years.

They paid off their house and sold it for almost half a million dollars and bought a retirement property in BC for cash. They bought another property in Arizona. They take their new RV down every winter. They have so much money from pension and income investments that they struggle with what to do with it.

It’s been said that Donald Trump would be a richer man today had he simply invested his inheritance in the S&P 500 component companies. Some people like gambling, and some people gain big, but lots lose big as well. Ultimately, as long as your living within your means and saving consistently, there’s little reason why anyone else can not only achieve financial freedom, but still enjoy things along the way.

I lived a lot of lean years in aviation. But I always made sure I left at least $200 a month to put away. Most of the time I target 10-15% to put away. I’m no investing shark. I use an advisor and pay fees. But I’ve seen double digit growth in the last few years with very little effort or risk.

When it came time to buy a vehicle to replace a very old Jetta I’d had since starting flying, I decided to buy new. Interest rates were lower on a new vehicle vs an old one, so cost of borrowing is only a couple thousand dollars if I let it go to full term (it’s a small car, so I won’t) and I plan on keeping it forever so the depreciation doesn’t really matter. Didn’t have to worry about a lemon or spending months trying to find the right car. It made far more sense to keep the cash I had in investment making much more in growth than I’d be paying in interest, plus being able to be easily accessible in an emergency rather than tied up in something that’s losing value daily and that I’ll still need in the end.

I haven’t bought a house because it doesn’t make sense while my career is still moving, so I’m paying less in rent as well as upkeep (nobody ever mentions the property taxes or roof replacement or furnace repairs or mortgage interest or realtor and legal fees when they say how much money they made in real estate, all of which are included in what is often a lower equivalent monthly rental rate) and I can pack up at short notice. I am planning on buying property in the next few years that will include a substantial down payment.

I know quite a few people who are big on “passive income”. To me, it’s the wrong focus at this stage in life, unless I can easily achieve a passive income that can be used for reinvestment or to be a full time business owner or retire. Most passive incomes generate low returns relative to investment, but are consistent and low risk. Many also aren’t passive at all, requiring considerable amounts of time and effort to maintain. For me, a passive income will be for when I’m closer to retirement and want to work less, and when my net worth will support a larger venture capable of generating significant income.

In short. Live within your means, enjoy your life, and don’t worry or obsess about money.
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complexintentions
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Re: Free Money Management Advice.

Post by complexintentions »

rookiepilot wrote: Thu Jul 05, 2018 8:46 am
Excellent words. I have one question and I am not dissing your advisor.

Is she independently wealthy, not from the advisory, but from her own investing?

That is a question I'd ask of any advisor. Most get offended with that kind of question like it's irrelevant.
I understand completely. And yes, she and her husband are independently wealthy. They're both American financial industry veterans who left the rat-race and run a boutique firm out of Bangkok that specializes in complicated expat situations, which is why I was attracted to them initially, among other reasons. Their minimum portfolio requirement size isn't insane, but it does put them out of reach of the beginning investor.

Anyone looking for an advisor should have a list of questions that should they not be happy with ANY of the answers, should cause them to run, not walk away. The one you mentioned "How does your own portfolio perform, and may I see a history of returns?" is on it, as is "How are you PAID?"
ahramin wrote: Thu Jul 05, 2018 8:21 am Actually our biggest problem right now is the lack of tax knowledge. I'm realizing more and more a lot of the profits come from the decisions that worked out well for tax implications.
Could not agree more. Making it is only half - or less - of the equation. The other part is how much do you get to KEEP! Taxes and fees will kill even the best returns. Which is why I left Canada and only come back to visit. Not an option for most I know, but I beg for this not to turn into a screed about the virtues of socialist policy, I'm not interested. The point is, tax planning and close watch of costs is very much important for anyone's finances.

I love Zaibatsu's post, I won't quote it in its entirety but he nails it. Most "investors" are really just gamblers who brag about their wins and are strangely silent about their losses. True investing is boring, slow, with a managed amount of risk and not that apparently lucrative in the short-term. And most truly wealthy people - not the ones who APPEAR wealthy - you'll never even know about. Check out the latest edition of "The Millionaire Next Door" if you want to know how most rich - not the outliers you see on tv - got rich.
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rookiepilot
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Re: Free Money Management Advice.

Post by rookiepilot »

complexintentions wrote: Sat Jul 07, 2018 11:32 am

Most "investors" are really just gamblers who brag about their wins and are strangely silent about their losses. True investing is boring, slow, with a managed amount of risk and not that apparently lucrative in the short-term. And most truly wealthy people - not the ones who APPEAR wealthy - you'll never even know about. Check out the latest edition of "The Millionaire Next Door" if you want to know how most rich - not the outliers you see on tv - got rich.
TRUE TRUE TRUE. X 1000.

The ones who brag on their wins, lifestyle, pictures of toys, whatever, and they are on every social media site, are never the ones you should listen too. 99% are bald faced liars, too.


+++ this tidbit:
The very smartest investors are rarely if ever in the media. They have nothing to sell.
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Re: Free Money Management Advice.

Post by seniorpumpkin »

This is a conversation that needs to happen more often. As boring a topic as this is to learn, it's importance is so often underestimated.
The basic concepts of financial planning are so straight forward, it's amazing that so few people even know the difference between a TFSA and an RRSP and how to use these tools.
When I finally got to a point in aviation that I had more money than I knew what to do with, the conclusion I eventually came to was that I HAD to educate myself. Nobody will be as motivated to grow your money as you, and as has been mentioned, very few financial "professionals" can be trusted to dispense good advice.
I read a book on how to pick the best stock (Peter Lynch) and I read a book on how picking the best stock is dumb (the Boggleheads). I often read www.greaterfool.ca and I read the news. Between those sources I have come up with my own plan and it's been paying off very well!
I also learned that there's no point in accelerated payments on a mortgage given most interest rates are below 3% when you can invest in a super stable utility company that pays 5% in dividends alone!
I have friends who buy houses as investment properties. Maybe in some markets that makes sense, but I personally don't enjoy replacing toilets, painting walls, or going after delinquent renters for money. I'd rather click buttons on my computer and watch my diversified, balanced portfolio grow by itself.
Don't listen to me though, find out for yourself what kind of financial plan makes sense for you.
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Re: Free Money Management Advice.

Post by co-joe »

I like the idea of ETFs over Mutual funds (or other funds with huge MERs). It blows me away that an asset management company gets paid regardless of a fund's performance. The MERs they are changing are insane.

Something I've been doing the past year is read all the articles on, and emails from Investopedia. It's a great way top learn terms, and what the advantages of different strategies are. They dumb things down well.
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digits_
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Re: Free Money Management Advice.

Post by digits_ »

You can't blame the government for everything.

It's our cultural acceptance of debt and credit rating that's the main culprit. Education is just a part of it.
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