Mortgage extra Payment Calculator

Thats a great story Lukem, impressive. I think you have accomplished something very few people have (BTW, how did you work at 12 years old? In most states 15 or 16 is the minimum legal age?). I wish I could have accomplished a lot of that but I got a somewhat later start (early 20s) and my wife got a very late start (didnt start saving or thinking about giving up CCs till she met me in her late 20s) so we are still catching up. And we have the fact that we are in a very high cost of living area working against us.

The only thing I would argue is that from a purely financial perspective, some debt can be useful as leverage, same as its used in business. Here is where I would group whats been called good debt - "good" being defined as debt taken on to aquire assets that will appreciate at a greater rate than the interest paid on the debt. This is why mortgages are considered good debt used within reason - as traiditionally your home would be expected to appreciate more than what the interest cost you and you end up ahead in the end. Of course that went upside down with the housing bubble and people buying no down and interest only and massively overpaying for property.

The other thing I would put in the good debt category for an individual is student loan debt (assuming you went into a field with good career prospects) as in theory its leverage to secure a greater income stream than would be attainable without a degree.

It doesn't hurt that the federal govt subsidizes both of these with tax breaks. After tax my effective interest cost on the mortgage is about 2.5%. If my house appreciates at he pre-bubble rate of 3-4% per year Im making a positive spread on the investment, not bad. And Im taking excess cash that I would otherwise be using to pay of the mortgge and sticking it into index mutual funds in my 401k making more returns And even if not, for many people a mortgage is the only option to acquire a residence.

EVERY other form of personal debt I consider bad - car loans, credit cards, and so forth. They are all used to buy depreciating assets. bad bad bad. I use them when I have to but try to avoid as much as possible.

I know lots of folks seem to revere Dave Ramsey, and he has a lot of good things to say about getting out of bad debt and living within your means.... but a good investment strategy is the key to really get ahead long term, and for that Ive always followed the bogleheads -keep it simple, keep costs low, dont try to outsmart the market, and stay in it for the long haul.

https://www.bogleheads.org/wiki/Bogleheads®_investment_philosophy
https://www.bogleheads.org/wiki/Bogleheads®_personal_finance_planning_start-up_kit

 

Who said it was legal?

 

[QUOTE="jharkin, post: 271930, member: 20"

I know lots of folks seem to revere Dave Ramsey, and he has a lot of good things to say about getting out of bad debt and living within your means.... but a good investment strategy is the key to really get ahead long term, and for that Ive always followed the bogleheads -keep it simple, keep costs low, dont try to outsmart the market, and stay in it for the long haul.

https://www.bogleheads.org/wiki/Bogleheads®_investment_philosophy[/QUOTE]


I've listened to Ramsey. I hate to say it but it seems like the only people who would benefit from his advice are those with zero financial literacy or common sense. His stuff is very basic. Plus he infuses his advice with religion which I find offputting as I'm not religious at all.

You've had good fortune heeding the advice of the bogelheads?

 

This should be a "STICKY" here somewhere!!!

 

For me...it's not worth it to take on the debt. See bullet points 1-4 on my post above. Not saying it is the same for everyone.

 

yep. actually around May 2009 I set out on this journey.
Like I said there are setbacks. The house would have been paid off now had I not paid cash for all the other major renovations along the way. But I never incurred any debt in the course of making my house what I want it to be

 

I want to have mine paid off as soon as possible. If I'm able to accomplish that in roughly 15 I think I'll be happy. As I stated earlier my wife and I put the majority of an inheritance we recently received toward the principal of our mortgage and using our actual numbers in the calculator I linked to we saw that we saved slightly over 70K in interest if we see the loan to term without ever making another payment toward principal but just doing the monthly minimum.

 

I don't follow his principles, but do listen on occasion. Wearing one's religion on their sleeve can be off-putting....but it is a free country.
With Ramsey, it's more about getting into the mindset like Lukem described - Live like no one else so some day you can live like no one else.
My biggest dig with DR (aside from not getting out of high interest debt first) is people calling in "debt free" and then stating they have a mortgage

 

Exactly!!!

 

Ive never used Ramsey's advice myself, but I know for a lot of people who where in trouble following his advice to get debt free got htem back on track... so its gotta be worth something. If it breaks peoples dependency on the conspicuous consumption culture i think thats a good thing, even if I dont subscribe to all his theories. And it sure has made Dave rich

I'm a big fan of Bogle. Sticking to a simple allocation and using all low cost index funds works for me. Right now I'm using age-10 in bonds and splitting my equities into 60% large cap, 20% small cap and 20% international. Its all index funds... all of my big cap is in Vanguard 500, international is in Vanguard total international index and so forth. For my bonds I have most of it in stable funds like Pimco total return (401 plan doesn't have bond index options) and a little in a TIPS fund as a hedge.

Most of the vanguard index funds have tiny expense ratios of well under 0.1%, so you dont have fees eating up your returns.

As far as how its worked for me... Its hard to sort out contribuitions to figure the absolute returns but I can tell you that my total retirement portfolio lost 26% from April '08 to April'09 (what did the Dow loose then, almost 50%?), and then grew 250% from April '09 to today . If I could back out all the contributions effects I think Im still doing at least as good or better than the dow as a whole (which is up 100% in that period), not bad for a set and forget hands off approach.

I could cash out my portfolio and pay off the house to be debt free tomorrow - but then Id be starting from zero again for retirement.

Again its all personal preference - this is what works for me. Lukems strategy works for him and I admire him as it takes a lot of guts and hard work to go against the "buy buy buy" mentality so many are a slave to to achieve what he has.

 

"Live like no one else so so some day you can live like no one else" still implies that happiness is tied to money and material possessions. He's basically saying that you have to be miserable for a few years because you can't buy the stuff you want but then you will be able to buy the stuff you want later in life.

I think true freedom and happiness comes when, regardless of your financial situation you have the ability to turn down every monetary or material thing that comes your way and be content doing this. That means even if you had all the money in the world you're not out buying fancy things because you've found happiness through relationships and experiences. However ,materialism is so deeply ingrained into our society that the vast majority of us, myself included, will probably never get there.

 

I've listened to him as well. Anyone actually helping people get their finances in order is doing good in my book.
As far as very basic, math is, well simply basic. Unless you can't do math but that's another subject.

 

Isn't that living like no one else?

 

Not if I live that way too.

 

I didn't mean to imply that his advice had no value at all. I simply meant to say that his advice, at least to me, seems to be the most basic type of financial advice that can be offered. To someone whose finances a re a mess and has no clue his advice might be very helpful but to someone who already has their stuff together and is looking to grow their wealth, his advice is not as helpful.

 

yes but not in the way that Ramsey means it.

 

Wow. What a thread!!!!!!! Have had a ball reading all of this!

 

Don't take my advice. I'm a dairyfarmer.

 

They be crazy.

 

[/QUOTE="Dana B, post: 271960, member: 1376"]"Live like no one else so so some day you can live like no one else" still implies that happiness is tied to money and material possessions. He's basically saying that you have to be miserable for a few years because you can't buy the stuff you want but then you will be able to buy the stuff you want later in life.

I think true freedom and happiness comes when, regardless of your financial situation you have the ability to turn down every monetary or material thing that comes your way and be content doing this. That means even if you had all the money in the world you're not out buying fancy things because you've found happiness through relationships and experiences. However ,materialism is so deeply ingrained into our society that the vast majority of us, myself included, will probably never get there.[/QUOTE]

Happiness isn't tied to money - the principle of freedom from debt is.

See what I stated above about it being a bit daunting? Starting with a mindset of "I'll never get there" - well, that will never get you there.