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earlyretirement
Participant[quote=livinincali] How can you possibly deny a kids dream.[/quote]
I’m sure for law students or medical students with good track record, good grades, etc. you will still see student loans even with any possible change in the law.
However, a kids dream of racking up a 6 figure + undergrad degree in Anthropology, Art, History, Philosophy, Drama, Religion, Archeology, etc that has mediocre grades, I think better plan on getting their dreams shattered if there is any change in the law where students can write off student loan debt in bankruptcy.
If so, you won’t see lenders doling out this kind of cash for semi-worthless degrees.
January 22, 2013 at 5:42 PM in reply to: Over 21% of homeowners in SD County have paid off houses #758274ParticipantBG,
I’d LOVE LOVE LOVE a pension like that. It sounds like you’re one of the lucky ones.
Participant[quote=squat300]it was not “just cycling”. Read Roland Barthes on the Tour D France. This was a lot more than just guys on bikes.
this was life itself.[/quote]
Man squat it sure looks like you love this guy. For Lance’s sake I hope there are more people out there like you that admire the guy or can justify what he did.
January 22, 2013 at 5:13 PM in reply to: Over 21% of homeowners in SD County have paid off houses #758271ParticipantBG,
The days of those with pensions are few and far between these days. Even for the Boomers either they have drastically been reduced (or probably will be).
If you give me the choice of a quality pension that is GUARANTEED to be around throughout my ENTIRE retirement, I’d probably gladly give up a million or two. But the thing is that I don’t think that ANYONE can truly guarantee any pension will make it throughout the duration I’d need it.
Edited – Oops. Flu was posting at the same time and I didn’t see his comments as I was typing mine. I agree with flu.
January 22, 2013 at 4:55 PM in reply to: Over 21% of homeowners in SD County have paid off houses #758266Participant[quote=flu]…And more importantly… don’t be so goddamn uptight about being a miser today and penny pinching today..Enjoy life a bit for christ sake today, because you really might not be able to 10/20/30 years from now…Work/save, get hit by a bus or random act of god, surprise you’re dead (or better off dead), and your nest egg you worked so hard to goes to your kid at best (and at worst goes back to the government and redistributed)…Personally, I think I’ll be happy making to 65 without an unduly financial expense. So that’s my target. Beyond which, I don’t give a crap.[/quote]
You make excellent points flu about unexpected medical/healthcare problems. I think it goes without saying that any major medical problem can totally throw your retirement plans into chaos.
I also strongly agree with your “enjoy life” comment. I do think it’s GREAT to save up and live within your means. But as I mentioned, I will have no guilt if my adult kids (by the time I die) get some big inheritance.
I’ve known several people that don’t do really anything at all. Some have never gone outside of their state their whole adult lives. They penny pinch their entire lives and then they die and you find out they had millions and millions of dollars. And sometimes they don’t even have kids.
My philosophy is to enjoy life. We travel quite a bit around the world, we take tons of vacations, we dine out quite often. Absolutely I think you need to live within your means but I also think you have to “live” and enjoy life as you mentioned.
Participant[quote=livinincali][quote=earlyretirement]
These banks and lenders are almost totally protected with the way the laws are set up. And they want to dole out as much as possible.
[/quote]Exactly. Quickest way to break the college debt bubble is to allow student debt to be discharged in bankruptcy. Nothing will change the behavior of lenders quicker than having having the prospect of default staring them in the face. Want $100K to go to school better have the grades and major lined up that produces a positive return on investment. The non-charge nature of student loan debt came from a couple of high profile cases of doctors and lawyers declaring bankruptcy right after school and then getting a high paying job shortly after.
If you’re really worried about doctors and lawyers strategically defaulting right after school and then getting a high paying job after the bankruptcy clears then put a special stipulation in for that. You can put some kind of probationary period on the debt being discharged. If you’re income goes up after the bankruptcy during a probationary period (3-5 years) you’ll still be on the hook for some or all of the debt. Nobody is going to wait 3-5 years to start their career just to be able to declare bankruptcy and avoid the college debt.[/quote]
Bingo. Bingo. We have a winner. Totally agree.
[quote=barnaby33]I take umbrage with, “student loans are necessary if you don’t come from a wealthy family.” That doesn’t even pass a basic sniff test, me. I’m po white trash from Valley Center (pronounced with a drawl.) 3 years in JC and 2.5 at Cal State Cap N Crunch and I got a CS degree. I did get some grants, I worked and oh yes, I joined the military.
You don’t have to go to an expensive school. You don’t have to choose a non-remunerative major (though most do) and you don’t have to borrow money. It does make life easier if you want the traditional college experience.
Josh[/quote]
Josh,
First of all, thanks for serving in the military for our country. You make a good point that there are other options but the vast majority of people don’t want to join the military. I too worked during college but I still had to get student loans.
Yes, there are options for Junior college, etc. But I guess the point I wanted to emphasize is the tremendous cost of University these days. And it’s not just special schools that are expensive. Many State Universities when you add up tuition and just cost of living, etc. are $25,000 or more if you’re in-state and out of state is more like $40,000 per year. And these are State Universities.
Yes, there are other options but the main point I wanted to make is the cost of a University education these days.
January 22, 2013 at 4:27 PM in reply to: Over 21% of homeowners in SD County have paid off houses #758259Participant[quote=flyer]Regarding various responses. . .
It’s true that a fairly large percentage of Baby Boomers have a lower net worth than they’d prefer–many times, not because of bad financial decisions–but because they are supporting themselves, their parents, their grown kids (who can’t find jobs, or buy homes) the government, etc., etc., but I believe that trend will continue to “infect” the majority of generations going forward. In fact, it could get even worse for them than it has been for the Baby Boomers.
Personally, like most of you, and as most financial professionals agree, we all may need multiple millions to sustain/enjoy retirement–and that’s what I was referring to with regard to “financial solvency.”
IMO, that’s when you can fully support yourself and/or your family for the balance of your life without being dependent on a job, and, as I mentioned, the stats are staggeringly low in that regard.
It’s easy to say we shouldn’t worry about things like that, and just blow it off, but, believe me, if things continue as they are with the ever-growing divide between the wealthy and the middle class (the poor will always be subsidized), there will inevitably be some price to pay (socially, politically, economically, etc.) In other words, you won’t be living in the same world you are enjoying today.
In one way or another, the “financial insolvency” in this country it will effect everyone’s quality of life.
edit: Case in point. Look for those 70% tax rates coming to a country near you. I jest now, but you never know![/quote]
What a great post flyer. And so true. You know something? NEVER would I ever have imagined growing up that being a “millionaire” would have meant so little. LOL.
The sad thing today is that isn’t really too much money these days, especially heading into retirement. I see all the facts and figures that show that many retirees have saved up less than $100,000 and I’m not sure how they manage in their twilight years.
And AN, your goal of $5 million by 55 sounds amazing! I hope you get there. I’d just say not to kill yourself trying to hit your # or become too obsessed with it. I’ve seen people sometimes that have their “#” and they will sometimes simply “try too hard” if you know what I mean.
Your parents sound like wonderful and amazing people that sacrificed quite a bit for their kids. But I wouldn’t stress too much on becoming old money for the AN generations to come.
January 22, 2013 at 3:23 PM in reply to: Over 21% of homeowners in SD County have paid off houses #758256Participant[quote=AN]
We have been putting money away for their college since the day they’re born. They will not have to worry about the cost of college, even if it’s private school. But they will be expected to put that money to good use or it can be easily taken away. That money is not part of the $5M goal.[/quote]
That’s the way to do it AN. We did the same thing. As soon as my kids were born starts the “birth” of their own spreadsheets to start the compound interest. You sound like a wonderful parent and I agree this is the best gift you can give your kids.
I’ve mentioned it many times but it’s amazing the power of compound interest. I know there are many many ways to set things up for kids. We set up custodial accounts which have their own benefits and negatives.
Also, I totally agree with what you mentioned NOT counting this money as part of the parents. I have a lot of friends that save up for their kids college but they count this in their total net worth. I always tell them they should NOT be even thinking about this money at all. And in some instances, I’ve seen people tap into those funds which is always sad to see.
January 22, 2013 at 3:11 PM in reply to: Over 21% of homeowners in SD County have paid off houses #758252Participant[quote=AN] I don’t see how ER can condemn debt and stating people who yo-yo by using debt. While, he himself, took major risk and cash out his 401k to start his business. I too have seen people did exactly what he did, but wasn’t as lucky and their business crash and burn. So, just because you pay things for cash doesn’t mean the risk is any different. Sometimes, it’s even greater, because you have nothing left to try again.
[/quote]
No, I’m not “condemning” anyone at all. I’m just throwing out the other side of the argument that it’s foolish to pay off one’s home or avoid debt.
Yes, I took a risky move cashing out part of my 401K to finance my business and buy some investment properties (also without leverage). I’m certainly NOT advocating that for anyone. It worked out for me.
I wouldn’t have done it if I was older or married or had kids. We all have different levels of risk and comfort with leverage.
What works for one person won’t for another. And I think that is what this thread shows. We can agree to disagree. There isn’t any need for anyone to justify the merits of using leverage.
[quote=UCGal]
AN – will you adopt me? $5M is a lot to leave your kids.
My kids will get a paid for college education… and our paid for house. We are *NOT* budgeting in an inheritance. But we also aren’t going to be a burden to them. They will need careers, same as we did.
We’re planning on using our nest egg to live. If the economy tanks for longer/deeper than historically has happened, then they might not get our house – since that’s our plan B. (Sell the house and live off the proceeds.) If we die younger than age 100 – they may get some inheritance…
Hopefully a 3% withdrawal rate should last me 40-50 years. Compounding and all that.
I’m also not of the mindset that you go 100% cash/CDs… not with longevity the way it is. You need to come up with an asset allocation that includes equities/bonds/cash/real estate/precious metals/whatever… pick your percentages based on your risk tolerance. but putting 100% in one asset allocation (cash) is a sure way to see a serious decline in your nest egg.[/quote]
You sound like us UCGal. We don’t feel a need to leave millions to our kids. First of all, who knows how long you will live to. These days it’s not uncommon to live until 80’s 90’s or even 100. So I don’t think it makes sense to really worry about leaving adult kids a huge sum of money.
If my estate happens to have millions of dollars left in it after we are gone I’ll be happy. But I wouldn’t feel guilty if I spent every last dollar in my retirement by the time my wife and I pass. Hopefully by then our kids will also be senior citizens with their own families. And I won’t feel obligated to leave millions to grandkids.
More likely, my kids will inherit our real estate portfolio (rental properties) and primary house that we have at the time we die. I’d like to think they wouldn’t sell and just keep them as they spin off dependable cash flow each and every month.
I think the biggest gift I can give my kids is to fully cover any University, and post grad education they have. MBA, law school, medical school, etc. I hated the feeling of graduating with a huge college tuition bill so I think that’s the best gift you can give your kid to start off life debt free after college.
I also agree with UCGal that 100% in any investment class isn’t the way to go in retirement. While I agree that no way I’d want too much in the stock market at all, I’d probably want to have some exposure (not much). But I think my favorite will still be non-leveraged real estate that is paid off and generating cash flow.
January 21, 2013 at 6:57 PM in reply to: Over 21% of homeowners in SD County have paid off houses #758193Participant[quote=flyer]
All so true ER! CA has become the land of “smoke and mirrors,” and I’m saying that as a native.
That wasn’t really the case when my wife and I grew up here in LJ, but as it’s become more expensive, and competitive, and people have become more and more desperate to “keep up appearances,” it has devolved into that.
What’s sad is that many people will spend everything they make during their best earning years just to exist here, then be left high and dry later in life, when they need financial security. Not a good plan.
People are always astounded when I bring up the topic of “net worth,” it’s like an elephant entered the room.[/quote]
Absolutely true flyer. I’ve seen quite a bit of that in Southern California. San Diego seems to be much more laid back vs. other places like Orange County.
So true about people spending everything just to “exist” here. I’ve seen quite a bit of that as well. They talk about the great weather, the beautiful scenery, the wonderful beaches but they don’t really talk about their relatively low paying jobs with the sunshine tax and their relatively high rental/mortgage payments and high taxes.
I always wondered about how things will end for some. And funny about you mentioning the topic of net worth. I just finished reading, “The Number” by Lee Eisenberg. It was a great and interesting read. (They have it at the San Diego County Library so you don’t even need to pay to read it).
We can all agree to disagree on the smarts of paying off one’s mortgage early. However, I will say that those of you that have done it know how wonderful of a feeling and accomplishment it is. Once you live a totally debt free life including your primary mortgage or even investment property mortgages…. you’ll never again want to get into debt. (Or at least most of the people I know that are in that position tell me they agree with that sensation).
Also, I’ll mention that it’s funny how you get penalized on your FICO if you have no debt. Ironic that if you pay off your house after many years your FICO goes down. Or if you pay cash for your cars your FICO will go down if it’s been many years with no car payment.
My FICO has been over 800 for most of my adult life. I had mortgages before (over 7 years ago), I had car payments before (many years ago). I had LOTS of student loans previously (long since paid off). But after many years they drop off and your FICO score actually goes down if you have no debt. I always thought that was ironic. Oh well… Only in America!
January 21, 2013 at 6:30 PM in reply to: Over 21% of homeowners in SD County have paid off houses #758188Participant[quote=CA renter]
What ER said is true about the yo-yo types who make incredible amounts of money on a lucky streak, but then double down and lose everything (and then some). Sometimes, they actually manage to come back again, but they usually crash again, too. Some might view this is “successful” because when these people are at the top, they can really fly high, but they can crash just as dramatically; and seeing this — more often than not — is what makes me want to do the exact opposite of what these people do, and what they invariably do is use leverage…lots of it (and get into really convoluted deals that don’t make any sense).[/quote]
Exactly. I’ve seen a lot of these types over the years. My feeling is this… it’s really difficult to really ‘know’ someone’s TRUE net worth. Many times it’s all smoke and mirrors and leverage and credit card debt fueling their lifestyle.
In other countries where I’ve lived it’s easier to ascertain one’s true net worth. Because no one is buying an expensive sports car unless they bought it outright. Or for the most part if someone “own’s” an expensive pad it means they bought it. If they take fancy trips around the world it’s because they have the cash for it.
The USA can be a land of smoke and mirrors where you THINK someone has a high net worth but it’s all a facade. They can live in a really amazing house in the best neighborhood, their kids can go to private schools, they take fancy trips and drive luxury cars…. but you know what? They could not only have NO net worth but worse they have NEGATIVE net worth.
I’ve met people over the years that kept trying to tell me that it doesn’t make sense to own outright and they could do better things with their money or earn more, etc. But the rub is that the vast majority of humans always over estimate their investment abilities. They think they can do better than anyone else. They think they are smarter than most people.
For those of you who haven’t watched “Queen of Versailles” – http://iurl.no/v1C Watch it! It’s amazing to see a guy building a $100 million dollar house yet not have any college savings set aside for his 8 (EIGHT) kids. All kinds of sharks like this out there.
Heck, I’m as guilty of this as anyone else and will be the first to admit it. Even people that are somewhat “conservative” in nature will make stupid investments that they didn’t think were stupid at the time.
So the trick is that those that say they will take $X money they have in the bank during the hard times to really have the money in the bank because in my experience there is always some “great investment” or “can’t lose investment” or “once in a lifetime investment property” etc. where you can take the funds you have and lose it.
Very, very, very few people have the discipline to hold large sums of money and ride out extremely difficult periods of time. I’m sure you will hear everyone and their brother tell you how much bloody money they’ve made in the last few years in the run up in the stock market. Funny how I always hear friends talk about their “genius stock picks” but their losers are never mentioned or come up until years later. (Human nature).
But what most people don’t tell you is how scared they were at the peak of the crises when their 401k’s were getting decimated. And anyone that tells you they knew things would rebound so quickly is probably lying.
Like I said….most people think they are better investors then they actually are. I’ve met VERY few people that are truly gifted and make insane returns year after year or more importantly decade after decade. One is Warren Buffet and another is Steven Cohen. Although it looks like now there is a reason guys like Cohen could justify making 30% annual returns for decades.
People will go on and on telling you about their best and greatest returns on investment. While I’ve made some GREAT investments I try not to think about those. What I try to always remember is my WORSE investments.
An example of one of my worst investments. I was short selling stocks like Bank of America (BAC) for 2 years along with many of the financial companies back at the peak. I saw the crash coming and knew they were going to get killed so I started short selling them and made lots of money doing that.
Well, once banks started folding or getting sold and bailed out, I thought I was smarter than everyone else. I told myself, “you can’t lose!”. Long story short….I ended up investing in Washington Mutual (WAMU) 2 days before it went under.
I told myself that there was no way the government would let them fail. I saw other banks like Wachovia being bailed out and quickly sold so I figured that the same would happen to WAMU. I’m not sure if there are any WAMU investors on the board but if so you know how things turned out.
The FDIC handed over WAMU to Chase and the investors lost out. It was the quickest $250,000 I ever lost (literally in a few days).
So again, I saw think about your worst investments rather than your best investments. I’m as guilty as anyone else as making stupid investments or trying to “catch a falling knife”.
I mention this story because I say again that most people simply don’t have the discipline to hold cash during great investment opportunities. Things in principle sound great but it’s another thing in real life.
Of course I’m not saying there aren’t any totally disciplined people out there that can do it when they say they would rather not pay off their primary house and leverage it and they can always make guaranteed money. In reality, we all have hiccups.
I consider myself a VERY disciplined investor and I’d like to think I’ve made some very wise investments. But my point in my diatribe above is to point out that we ALL make horrible investments or decisions to use our money. Whether it’s that can’t lose investment, that great rental/investment property or making a loan to a dead beat family member.
January 21, 2013 at 5:49 PM in reply to: Over 21% of homeowners in SD County have paid off houses #758184Participant[quote=UCGal]I’ve been reading this thread with interest. I think part of the differences expressed are because of different ages and stages of life.
.[/quote]
I think you make an excellent point UCGal. I do think you’re going to get a lot of different chains of thought on this depending on your stage in life, age, if you have kids vs. no kids, etc. I don’t even think there IS a right or wrong answer on this. What might be right for one person might not be right for another. Also, people have different tolerances of risk and also financial comfort.
I’m really loving the different answers on this thread. Several of the responses are quite interesting.
[quote=sym]The thread topic about 21% of homes w/ paid off mortgages caught my attention this morning. Curious to learn about the profile of owners in this scenario I read the entire thread with great interest.
20% of mortgage free homes is a healthy start, but the article did not expand on the type of owners. My guess is the 20% would be a combination of long term owners paying off their loans, parents buying properties for their kids, prudent Piggs, and possibly the cash purchases from investors we hear about.
[/quote]
I was also curious at the breakdown of the profile of the 21.5% that have their homes paid off. I posted the same thread on another forum and it was interesting to read from some long-time posters that explained how most of their neighbors have their homes paid off as their neighbors are mostly older.
One guy in La Mesa said in his neighborhood 16 out of 20 homes are all paid off with all the owners in their 70’s or older. One of my friends in Lemon Grove said his neighborhood is in a similar type situation. So it seems like there are a huge number in this category.
I know here recently there are a lot of cash sales but I guess that number is dwarfed by the amount of older people that have paid off their mortgages and are free and clear.
[quote=carlsbadworker]I am agreeing with AN/flu now since they are not really talking about leveraging at all costs and never pay off the house ever.
[/quote]I also think that I misunderstood some of what was being discussed about perpetually refinancing and leveraging over and over. I guess that doesn’t seem to be the case but I also don’t think CA Renter should take too much flack for her comment. When she said “avoid debt at all cost” I think that is more of an expression not that someone would never take on any debt but that those that do have debt want to quickly pay it off and get rid of it as soon as possible. This sounds like it has served her and her husband well and it’s also served me very well and served other clients and friends that I have in this same category.
Also, I think It’s important to note the difference in thinking as well. Some terms were thrown around that make it sound like some people consider a paid off house as a potential liability or mention the possibility or need to possibly just “send in the keys” or walk away from the property. The thing is that guys like me would NEVER even consider or even think about this sort of thing. It doesn’t even compute in my mind.
I do realize that it might be wise for some people to probably do that with their lender. (Although quite honesty I truly believe in the majority of the cases it was one’s stupidity or greed or ignorance in buying something that they couldn’t or shouldn’t have bought in the first place). People have different opinions on moral hazard but that chain of thought doesn’t even enter my mind or probably others that strive to avoid all debt.
I guess I’m a Generation X (I missed Generation Y by a few short years as most definition I see online mention Generation Y starts in the late 1970’s). But I probably have the mentality of someone much older. Growing up I kept getting hammered into my head to take advantage of compound interest, stay out of debt, pay off your house as soon as you can.
Guy like me don’t think about tomorrow or next year or even 5 years from now. Guys like me project and think about far from now. And in almost every scenario I would always want to have a house paid off. Again, not saying it’s right or wrong. It works for me as I already have enough in the stock market and already own several investment properties.
I’m the type that pre-pays off my Mello Roos taxes ahead of time even though I just purchased the house in 2011. I like to think out longer term and I’d rather be too conservative.
I really appreciate all the great posts. They have been really interesting to read.
January 21, 2013 at 10:07 AM in reply to: Over 21% of homeowners in SD County have paid off houses #758141Participant[quote=AN]. I was just debating the point that CAR tried to make, which is: [quote=CA renter]The one difference I’ve noticed between successful people and unsuccessful people (my definitions, not necessarily mainstream) is that the successful people have tended to avoid debt at almost all costs.[/quote]My point is, you need to take calculated risk and a lot of time, leverage to get you to the point of financial independence.[/quote]
Actually I’ve noticed the same thing as CA Renter. (Not to say that I haven’t met lots of successful people that leveraged as well). But I mostly work with high net worth and ultra high net worth individuals and families and ironically almost none of the clients I work with came from wealthy families or got inheritances.
Most of them are self made type people that started a business, work super hard and lots of hours and also avoid debt. This is not to say that these people didn’t utilize some debt to get ahead. Because most of us at some point in our lives (especially when we are starting out) have had to take on debt.
I can’t begin to speak for CA Renter but maybe the point she was making is these people that she knows really want to get debt free as soon as humanely possible. And once they get out of debt to stay out of debt.
I’ve also seen many yo yo types as she mentioned that start from nothing, get wealthy but then lose it all again. You will see several types like this even people like Donald Trump. Of course he is back on top but many people don’t come back on top again.
As Americans we are very spoiled because it’s so darn easy here to take on debt and get credit. I was amazed after graduating college that banks were lining up to give kids that didn’t even have a job yet tens of thousands of dollars or even over $100,000 in available credit. Heck, on my campus the University was even partnering with credit card companies to offer the students cards.
Student loans, credit cards, car loans, etc. All very easy here. Try going to some countries and you’ll see the credit just isn’t there. There are many cash based societies where it’s almost impossible to get a credit card. You want a car, you have to pay cash or VERY high interest rates. Or even people that want to buy an apartment or house must pay cash. As Americans we’re very spoiled.
Living abroad many years also opened my eyes to just how spoiled Americans are with credit. Many of my friends in other countries have to save up and buy a place once they have the cash. Of course they might have to live at home with mom and dad until they are in their 30’s but they do what it takes to buy things. No one is buying things unless they have the cash in many countries around the world.
In the USA, we mostly live in an “I want it now” society where we have to have the latest gadgets, ipads, iphones, computers, new car every few years, etc. I have had many employees in both the USA and abroad and in most cases my employees abroad made much less than my employees in the USA yet the net worths of those abroad that made much less money are much higher.
January 21, 2013 at 9:39 AM in reply to: Over 21% of homeowners in SD County have paid off houses #758137ParticipantI do agree with you guys when you say that it’s hard to truly get ahead without taking some risks. That is totally true.
Back when I was starting one of my companies, I had the option to take on debt (loans) or other investor funds (I would have had to give up equity). I didn’t want to do those things as I hated debt but I also didn’t want to give up equity as I was confident of my business plan. I did have to do some VERY risky things.
(1) I cashed in a big chunk of my 401k to start my company and fund operations and also to buy a few investment properties with it.
(2) I quit my corporate job where I worked for a decade and already made Partner and gave up the stability of a guaranteed paycheck to go start up a new company.
For most people doing these types of things above is MUCH more risky vs. taking on leverage/loans. So I do feel it’s important to point out that I too took risks to get ahead.
This was back in my early 30’s before I was married or had kids. No way I would take those kinds of risks now. I also agree with many of you that pointed out the time to take those kinds of risks are when you’re young.
People are posting excellent posts from both sides. I can understand both sides and I don’t think you have to give too big of extremes on either side as examples.
I guess the points are over leveraging can cause significant problems and not leveraging at all will never cause you to get ahead.
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