Investing 102

[Vegas69]

Personally, I do want to be mortgage free within 5 years regardless of interest rates. Many have large mortgage debts with substantial monthly interest that far outweighs the size of their investment portfolio. (This is the typical American) Once that large debt is gone, you can really get serious about investing. I like to invest 15% of my gross income every month. Once my mortgage debt is gone, I can increase that number dramatically. It also provides more freedom for a career change or more time off with your family. Those are two major driving forces for me to get debt free.

We all have our unique set of values and circumstances. The key is to have the vision and plan that goes with it.

Merry Christmas fellas...

[LuxurySportCoupe]

Merry Christmas, and thanks for the quick responses guys. To answer some of your questions, the mortgage is my only debt, I have no credit card debt or car payment. (I paid 3k for my DD back in '08, and it gets me to work just as well as a new car, lol.) I plan on living in this house for life as well. I do have a Roth IRA already, but I've been slacking on putting money in it on a consistent basis. Vegas you make a good point about career flexibility. The way I look at that, is if the sh*t hits the fan at work, and I end up having to move out of town to find work, it's better to have my place paid off, rather than having to scramble to sell,and subsequently taking a loss.

Long story short, I'll start putting a good chunk into my Roth every month, and maybe shoot for 8 or 9 years to pay the house off rather than 6.

[GregWeld]

All "investments" and life style choices are individual - and there is no real right or wrong way. Better to say that there are MANY ways to do things and all can be right. Depends on the goals and where people are at in life etc.

At 25 - with a very low % mortgage.... I'd look at your house just like I'd look at any other investment..... in other words - don't put all your eggs in one basket. #1 - you have a short term mortgage. #2 - You're young. #3 - You have a great rate in a rising interest rate environment.

So - there are other considerations to be taken into account here. Your income tax rate. Your job stability. Your life situation stability.

Your mortgage interest is tax deductible --- therefore your real rate of interest is actually LESS than the face value.... because it's helping you avoid taxes. That's a good thing.

Your job stability at your age is a critical piece - because you don't want to end up with huge "equity" in your house - and be short of cash and investments should something change and you need to live for awhile without a steady income. So I would consider stashing some CASH savings first. Whatever that looks like for you. Maybe 6 or more MONTHS of living expenses, including our normal house payment and utility bills and that sort of thing. That way - come hell or high water - you'd have at least 6 months to find another job - or sell your home to relocate etc. I'd suggest that you're in a sweet spot right now - but 7 years from now - who knows what can change!


Once you have your emergency cash stash..... which gives you peace of mind and protects you from downside events out of your control.... THEN you should start to save for investments. Keep reading the thread so that you know what kind of investments you'd like to get into = how they work - and all the other things we write about here. Yes there's 500 pages --- keep plugging away at them while you're saving your emergency fund. I know that at 25 there is nothing "emergency" in your life.... but trust me -- just do it. You'll see why in a minute.

Let's say it takes you a little over a year to get the emergency cash built up to where you're happy with it. Now you start working on saving another 5 grand to buy some investments.... in the meantime you're now another 2 years into your 15 year mortgage.... You begin to buy in to some investments - and when you have 10 grand into your investments --- NOW you can invest your emergency funds -- because you'll no longer need them. You'd have plenty of reserves for an emergency... and you'll have fewer years left on your mortgage. Now you're earning dividends on your investments and you're still getting your tax deduction. All is good. Keep it up. You'll be retired early and loving life.

[ErikLS2]

Great point about the emergency fund of 6 months expenses, I totally spaced that one. My points were all assuming we don't lose the home mortgage interest deduction which some are talking about. I doubt we'll see it go away but if it does it will change things a bit.

[GregWeld]

Originally Posted by ErikLS2

Great point about the emergency fund of 6 months expenses, I totally spaced that one. My points were all assuming we don't lose the home mortgage interest deduction which some are talking about. I doubt we'll see it go away but if it does it will change things a bit.

Having "downside cash" is the most overlooked savings - and probably the absolute most important one. **** happens these days. Plants get bought and closed - economic risks abound with our government(s) - Markets can, and do, implode suddenly! Take the '08 market drubbing.... it came when we were all on a housing high.... suddenly almost overnight there were financial businesses closing - GM went broke - the dang government almost went broke. None of this was the fault of our own conservative investments!!! Many of us were doing everything right! But here you are - caught up in it. So having a few months of reserves so that you aren't forced to sell stuff at a loss.... or if you manage to survive intact... you might be able to take advantage of some real bargains with that cash! Mostly - it allows freedom of choice and peace of mind and costs very little compared to what it can 'save'.

[ErikLS2]

So I went to see The Big Short last night, highly recommend it, whether you really understand the financial crisis or not. And if you don't you will after seeing it. Also Google "bespoke tranche opportunity". The big bank a-holes are at it again it appears!

[Vince@Meanstreets]

Originally Posted by ErikLS2

So I went to see The Big Short last night, highly recommend it, whether you really understand the financial crisis or not. And if you don't you will after seeing it. Also Google "bespoke tranche opportunity". The big bank a-holes are at it again it appears!

come on bubble pop!!!

[GregWeld]

I never short anything.... that's for big money boys with big money to loose and inside info or in depth info.

As soon as you think you are 100% certain of the direction of a company - you get swatted like a fly. Better to invest in companies you feel are growing and doing fine. It's not as exciting... but we're investing not gambling. Gambling is best done in Las Vegas.

[slow4dr]

Always a good read in this thread.

It's been a while since I've checked in so I figured I'd post an update. My Real Esate (rental) plans changed this year. The house we bought for our primary residence a few years back had appreciated enough to sell, cash out and pay off our rental plus have some extra to invest. It wasn't a decision made overnight but our long term, very good renter put in their notice so the timing was perfect.

The sell of the house took a little longer than expected and we had many sleepless nights. We ended up getting asking price(minus $5K in closing) even though we had lots of competition in our price range. The 45 day escrow ending up being about 65 with delay after delay. Finally, we closed and got funded.

We moved back into the rental house which is now paid off. We had lived in this house for 10 years previously. We always considered it to be our "Forever Home" so it was an easy transition. I am pretty excited to have my shop back too. It's got a 800 sq ft shop with 11' ceilings and A/C.

Old pic



On paper, this financial move is only about a $400 swing in our favor. Which will dwindle considering no longer having the mortgage & rental writeoffs. Although, I think my stress level will be much less without the rental.

I know there is still a chance of going through this whole process again in the future. When the time comes we'll be confident in our ability to make it happen after learning so much this first time around. If the housing bubble pops again we'll be ready to pounce.

[Vince@Meanstreets]

Originally Posted by slow4dr

Always a good read in this thread.

It's been a while since I've checked in so I figured I'd post an update. My Real Esate (rental) plans changed this year. The house we bought for our primary residence a few years back had appreciated enough to sell, cash out and pay off our rental plus have some extra to invest. It wasn't a decision made overnight but our long term, very good renter put in their notice so the timing was perfect.

The sell of the house took a little longer than expected and we had many sleepless nights. We ended up getting asking price(minus $5K in closing) even though we had lots of competition in our price range. The 45 day escrow ending up being about 65 with delay after delay. Finally, we closed and got funded.

We moved back into the rental house which is now paid off. We had lived in this house for 10 years previously. We always considered it to be our "Forever Home" so it was an easy transition. I am pretty excited to have my shop back too. It's got a 800 sq ft shop with 11' ceilings and A/C.

Old pic



On paper, this financial move is only about a $400 swing in our favor. Which will dwindle considering no longer having the mortgage & rental writeoffs. Although, I think my stress level will be much less without the rental.

I know there is still a chance of going through this whole process again in the future. When the time comes we'll be confident in our ability to make it happen after learning so much this first time around. If the housing bubble pops again we'll be ready to pounce.

congrats