206 replies to this topic

[Andrea V]

I'm perfectly calm.

"Budget every month" told me everything I wanted to know.

Actually death can be quite inexpensive - cremation and life insurance payout, sure, it'll change the budget, but it wouldn't screw it up altogether.

yeah it would, there would be a lack of income. That changes a LOT!

[Orangetj]

OK...now that we've debated the definition of "afford" to death, what would some of you smart folks suggest that a person do, given the following qualifiers:

1. Salary is sufficient to pay all monthly indebtedness obligations (mortgage only) as well as all bills and other "necessary" expenses (i.e. food, diapers, utilities, etc.), but with very little extra remaining each month despite not spending frivolously.

2. Has $20K-$30K of cash on hand, sitting in a savings account. Another $20K - $30K in 401k with moderately aggressive fund selections.

3. Relatively low investment risk tolerance

What would you do with with that cash on hand? Keep some or all as cash for an emergency? Invest it in mutual funds? CD's? Some combination of things? Throw your ideas in here!

[Andrea V]

OK...now that we've debated the definition of "afford" to death, what would some of you smart folks suggest that a person do, given the following qualifiers:

1. Earns enough money to pay all monthly indebtedness obligations as well as all bills and other necessary expenses (i.e. food, diapers, utilities, etc.). Indebtedness consists only of a mortgage.

2. Has $20K-$30K of cash on hand, sitting in a savings account. Another $20K - $30K in 401k with moderately aggressive fund selections.

3. Relatively low investment risk tolerance

What would you do with with that cash on hand?

leave it there.

Is there something SPECIAL that person wants?

[Orangetj]

Let's say that there aren't any particular material items wanted at this time, but that the person wants to make the most of what they have without taking on too much risk of losing the limited cash on hand.

[ChipShot]

Wow...this thread is now up to 12 pages. Why?? Is 'saving money' some kind of mysterious rocket-science?? It shouldn't be. Unless.....oh, never mind. I better be nice.

[Orangetj]

How about rather than talking about "saving money", we talk about what to do with that money that is being saved?

[CostcoLover]

yeah it would, there would be a lack of income. That changes a LOT!

That would be offset with lower expenses and insurance. Now if you're saying that your lifestyle requires two incomes then maybe you shouldn't have had a kid....

OK...now that we've debated the definition of "afford" to death, what would some of you smart folks suggest that a person do, given the following qualifiers:

1. Earns enough money to pay all monthly indebtedness obligations as well as all bills and other necessary expenses (i.e. food, diapers, utilities, etc.). Indebtedness consists only of a mortgage.

2. Has $20K-$30K of cash on hand, sitting in a savings account. Another $20K - $30K in 401k with moderately aggressive fund selections.

3. Relatively low investment risk tolerance

What would you do with with that cash on hand?

Well, blow it on the track if that makes you happy.


My answer isn't one that would be welcome by most, and often gets a lot of negative push back, but so be it.

Pay down your debt.

You're still living on debt (mortgage). And nothing personal Orange, you're doing great, but I really dislike when people say, I have X and no debt other than a mortgage.

My sister is a spendthrift and can make the same statement. It's just financial manipulation.

If one person owes $100k on a mortgage and $50k on something else they're somehow way worse off than a person who only has $150k mortgage.

Then they turn around, refinance their ARM into a fixed for the whole $150k and now they're in the "only a mortgage" gang.

Now, to your question.

Well, you could invest it. The dollar depreciated 9% this year vs. the Euro so far, so I hope that everyone's investments and savings are doing better than 9%.

I, like everyone else, enjoy the illusion of having money. We can easily have $500k in cash (aside from all investments) if we wanted to, but that would just be an illusion as we'd owe $500k to the bank.

I'm a big believer in liberty - and to me that also means not being fiscally enslaved (to the extent possible - there's always taxes which we can't avoid) - in other words, no debts whatsoever.

That being said, I would make an exception for investment property that yields a positive cash flow, and to a lesser extent, an index fund, stocks and bonds, etc.

What do you want to do with the money?

[ChipShot]

How about rather than talking about "saving money", we talk about what to do with that money that is being saved?

You SAVE it for a rainy day. Everyone has the occasional rainy day. It gives you some peace of mind knowing you're covered for the unexpected. And if you're lucky, it'll just become additional retirement cash. Hope this isn't too technical...

[Andrea V]

That would be offset with lower expenses and insurance. Now if you're saying that your lifestyle requires two incomes then maybe you shouldn't have had a kid....
Well, blow it on the track if that makes you happy.
My answer isn't one that would be welcome by most, and often gets a lot of negative push back, but so be it.

that was dumb... I thought you were smarter then that.... guess I was wrong. Our current conversation is over.

[CostcoLover]

that was dumb... I thought you were smarter then that.... guess I was wrong. Our current conversation is over.

Just a little poke for the jab at multiple kids you took earlier (we have 3)

[CostcoLover]

Orange,

If very conservative how about laddered bonds as long as they yield more than the mortgage interest (after tax ded.)

[Maitreya]

OK...now that we've debated the definition of "afford" to death, what would some of you smart folks suggest that a person do, given the following qualifiers:

1. Salary is sufficient to pay all monthly indebtedness obligations (mortgage only) as well as all bills and other "necessary" expenses (i.e. food, diapers, utilities, etc.), but with very little extra remaining each month despite not spending frivolously.

2. Has $20K-$30K of cash on hand, sitting in a savings account. Another $20K - $30K in 401k with moderately aggressive fund selections.

3. Relatively low investment risk tolerance

What would you do with with that cash on hand? Keep some or all as cash for an emergency? Invest it in mutual funds? CD's? Some combination of things? Throw your ideas in here!

Hi Orange,
Seems like you have positioned yourself well.
Be sure to check on your 401k often to ensure your rate of return is high esp in agressive growth funds. (and dont pay those fund loads fees)
Be willing to advance your risk tolerace horizon to other vehicles, in trade for moderate growth in different investment vehicles not being used, like triple net lease, or REIT mortgages.

People are talking good "DEFENSE" in saving more. Though consider also shoring up the "OFFENSE" in generating more income (investing). Example: $20K invested in real estate with a 3 year turn over 12 years could yield 1M (million). Working and saving will NEVER allow you to save 1M in 12 years.

Your JOB pays your daily living expense, your INVESTMENTS give you the American dream, college tuition for your kids, a confortable retirement. If both your parents worked like mine did, how much did they save in their life time, and how are we doing anything different?

Best investment strategy: Teach your kids how to make investments (you'll have to teach yourself in the process)

Best asset: Time, spend it on the people and things that make life meaningful for you.

Peace,
M

[Orangetj]

You're still living on debt (mortgage). And nothing personal Orange, you're doing great, but I really dislike when people say, I have X and no debt other than a mortgage.

No offense taken. I fully recognize that mortgage debt is real debt. The purpose of writing it out was to clarify that there aren't a bunch of other outstanding accounts (cars, credit cards, etc.). Our mortgage doesn't cover anything other than our home - i.e. we haven't "consolidated" other debts into our mortgage. We do actually push additional money toward principal each month, but it's slow going. I guess I'm thinking that there has got to be a better way to utilize the cash in savings than letting it sit there collecting 2.8% interest and we might be able to realize a better return on that cash than the 6.25% rate we're paying on our mortgage.

Some of these other recent posts have been great! Thanks for the insights.

[CostcoLover]

I guess I'm thinking that there has got to be a better way to utilize the cash in savings than letting it sit there collecting 2.8% interest and we might be able to realize a better return on that cash than the 6.25% rate we're paying on our mortgage.

And this my friend is why banks own the world.

Banks own the homes, cars, boats, businesses, furniture, even the food most Americans shove down their throats.

Banks are king, and Central Banks reign supreme!

But seriously, you can certainly do better than 2.8%

http://home.ingdirect.com/

And if you can't do better than that for a "no risk" investment, there's always investing in paying down the mortgage, a "no risk" investment.

With a 6-percent mortgage and a 25-percent marginal federal tax rate, the effective rate on the mortgage is 4.5 percent (0.06 x (1-0.25)) or 4.3 percent if you're in the 28 percent bracket.

or you can BE the bank - http://www.prosper.com

[CostcoLover]

But you could take all that leftover cash in your checking, and buy gold immediately! Your net worth would skyrocket, along with your savings ratio.

Gold isn't a very good investment, it's more of a store of value, and not a very good one as you can see.

That being said, the dollar has been in a free fall for almost 7yrs now, so your savings/investments need to outpace the devaluation of the American peso ~50%? So we should expect higher prices for oil as it's traded mostly in dollars.

As dollars lose value, the price of a barrel goes up to recoup that loss (there's plenty of demand, so fear not the macroeconomic supply/demand equation)


Gold surges past $800

Associated Press

October 31, 2007 at 3:20 PM EDT

Gold barreled above $800 (U.S.) an ounce Wednesday for the first time since 1980 as investors cheered the Federal Reserve's decision to lower its benchmark interest rate by a quarter point.

The Fed lowered its federal funds rate to 4.5 per cent, as the markets had widely expected. Lower interest rates tend to undermine the U.S. dollar and raise the allure of precious metals as an investment alternative. The dollar stumbled to another low against the euro and other currencies following the Fed's decision on Wednesday, helping drive gold higher.

Although the regular trading sessions of most commodities markets were closed before the Fed released its decision, gold prices continued to climb in aftermarket trading. An ounce of gold settled at $795.30 an ounce on the New York Mercantile Exchange, then rose to a high of $800.80 ounce in later electronic activity.

Gold last topped $800 an ounce in 1980, when prices reached as high as $875 an ounce in January. Adjusted for inflation, an $800 ounce of gold in 1980 would be worth more than $2,000 today.

The euro, which hit a high for the fourth straight trading day, bought a record over $1.45 in afternoon trading.

In the energy market, light, sweet crude for December delivery gained $4.13 to $94.51 in electronic trading on the Nymex.