Author Topic: stellarly horrible financial advice  (Read 28159 times)

dmn

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Re: stellarly horrible financial advice
« Reply #50 on: December 07, 2014, 10:25:08 AM »
My fiancee was once told by her mother (half-jokingly) that she should spend more to enjoy life while she's still young, because money will be tight later in life.

The logic was that being poor late in life is a law of nature, so you better spend the money quick before it all mysteriously vanishes.

dandarc

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Re: stellarly horrible financial advice
« Reply #51 on: December 07, 2014, 11:29:08 AM »
My fiancee was once told by her mother (half-jokingly) that she should spend more to enjoy life while she's still young, because money will be tight later in life.

The logic was that being poor late in life is a law of nature, so you better spend the money quick before it all mysteriously vanishes.
Sort of a more cynical version of my now monther-in-law's "why worry about retirement now - there will be plenty of time to save later".

RosieTR

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Re: stellarly horrible financial advice
« Reply #52 on: December 07, 2014, 04:00:12 PM »
Absolute worst?  When we bought a house in Phoenix in July 2008.  By December we had barely any equity in the house (and that only because we put money down, counter to the advice of various people).  The mortgage broker, who was a complete idiot, sent us a letter explaining how we could get "$30,000-$40,000 more equity out of our house with a refinance!"  Face palm.  At that point, I had no doubt why the housing crisis was so bad.

One Noisy Cat

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Re: stellarly horrible financial advice
« Reply #53 on: December 07, 2014, 10:02:08 PM »
    Worst advice?  When I was hired by one company in 1987, the president told me not to invest in the stock market because it was too erratic and only slightly beat bank CDs.  Which may actually have been true the previously 15 years.  He repeated that advice in October when the Dow lost 22% in one day. I smiled, staggered a bit, but resolved I would stay on course of saving in the market.

thd7t

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Re: stellarly horrible financial advice
« Reply #54 on: December 08, 2014, 08:24:32 AM »
So say you have 325k mortgage. PMI is 1841 a year. If you invest 32.5k and get the market avg 10% return after 7 years the 32.5k is worth. 63k. The 1841 compounded over 7 years is worth 19k. So you come out over 10k ahead in this situation. And it doesn't take into account a refi after 1 year. If rates stay low. What am I missing here cheddar

Boarder, I think you're missing the interest (3-4%) that you're paying on the 32.5k for borrowing it.  That will cut into your return even if you get "typical" market results.

Cheddar Stacker

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Re: stellarly horrible financial advice
« Reply #55 on: December 08, 2014, 10:52:13 AM »
So say you have 325k mortgage. PMI is 1841 a year. If you invest 32.5k and get the market avg 10% return after 7 years the 32.5k is worth. 63k. The 1841 compounded over 7 years is worth 19k. So you come out over 10k ahead in this situation. And it doesn't take into account a refi after 1 year. If rates stay low. What am I missing here cheddar

Boarder, I think you're missing the interest (3-4%) that you're paying on the 32.5k for borrowing it.  That will cut into your return even if you get "typical" market results.

@ boarder42, I ran your example in a mortgage calculator spreadsheet I have on my desktop at work. I had to a assume a few things. 30 year mortgage, 4.25% interest rate, etc. At 10% ROI, which I think is high but that's another story, your $32,500 would earn $268 in month 1. But you would pay an additional $115 mortgage interest, plus the PMI of $153, for a total of $268. Very odd that with these assumptions it's 100% breakeven in month 1.

However, since your cash outflow is $300+ higher with the 10% down scenario, you theoretically have less $ to invest each month, so you have to "reduce" your $32,500 investment by that cash flow difference. This results in a slowly declining ROI on the initial $32,500 at a faster pace than the mortgage interest is reduced. By the end of the 7 years, you are $30 in the whole each month.

If I change the ROI to 7%, the ROI on the $32,500 is $188 in month 1 so you are starting out down $80/month. It's not an easy calculation, and I don't really see a clear winner with the numbers I've run. Just make sure you are factoring in everything you can when calculating it.

What I did, in 2007 so it might not work anymore, was an 80/10/10 loan. 80% mortgage, 10% HELOC, 10% down payment, no PMI. That's the best of both worlds IMO. Good luck figuring out what works best for you.
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JustTrying

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Re: stellarly horrible financial advice
« Reply #56 on: December 08, 2014, 09:52:33 PM »
IMHO, the common flaw was that the helpful person was advocating that we take on more (house, car, appliance, whatever) than we needed.  Seems like people look at what the monthly payment is and whether or not it could be paid instead of looking at the total amount owed and how much something actually cost over its lifespan.
Salespeople know and use this line of reasoning all the time, and sadly people fall for it. Yep, it's only 60 more a month...but it will also take more in running costs too.

So true. I bought a car for the first time ever a couple years ago (previous car was bought for me by my parents when I graduated high school). I was all freaked out about getting ripped off because you hear so many horror stories, and I don't have a ton of car knowledge. But I knew generally what I wanted, I know how to use Google, and I know how to do math. For every car I seriously considered (which was like three), besides using the internet to make sure I was getting a good price, I added up what I'd pay in interest (I know, this was pre-MMM...) and counted that as part of the total price of the car. Car salesmen kept pointing me towards the monthly payment number and I just kept comparing the total cost of each car. It's weird, it was like... do people... not usually do that?

I just bought a car this year, and the dealer was CRAZY! I gave him a bottom-line amount (which was the amount I had in cash to buy a car), and he said he had to talk to his manager. He came back with two loan options, and he shared information with us about the monthly payments. My husband then asked him the APR on the loans, and he had absolutely no idea. I couldn't believe it. I mean, I could see him trying to trick a stupid consumer into buying just based on the monthly payments, but I was shocked that he didn't have the info available in case we were NOT the stupid consumers he hoped that we would be. (We ended up buying from a different dealer, and paying all cash).

Also, regarding the question of paying for a car with a credit card: I live in the US, and we were only allowed to put a small amount of the cost on the credit card - 1 or 2000 dollars. However, I would guess that the regulation is state-by-state????

johnny847

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Re: stellarly horrible financial advice
« Reply #57 on: December 08, 2014, 10:33:34 PM »
I just bought a car this year, and the dealer was CRAZY! I gave him a bottom-line amount (which was the amount I had in cash to buy a car), and he said he had to talk to his manager. He came back with two loan options, and he shared information with us about the monthly payments. My husband then asked him the APR on the loans, and he had absolutely no idea. I couldn't believe it. I mean, I could see him trying to trick a stupid consumer into buying just based on the monthly payments, but I was shocked that he didn't have the info available in case we were NOT the stupid consumers he hoped that we would be. (We ended up buying from a different dealer, and paying all cash).
This really boggles my mind. Has the salesman just never been asked this question before or something? I don't get it.
(My initial reaction was  actually to wonder why your husband even cared to ask the APR, when you wanted to buy with cash. But, at the same time, with a low enough APR loan, it can make sense to get the loan and invest the rest.)

Also, regarding the question of paying for a car with a credit card: I live in the US, and we were only allowed to put a small amount of the cost on the credit card - 1 or 2000 dollars. However, I would guess that the regulation is state-by-state????
I don't think it was this thread, but I'm pretty sure I saw somewhere on this forums that that is actually against the terms and conditions of merchants accepting credit cards as payments (as in, against the t&c from the payment networks Visa, Mastercard, etc.)  Apparently you're either supposed to accept all cards from the network for all transactions, or none of them - they can't put a maximum limit on the transaction. And neither can you have a minimum. Of course, merchants still do this anyway. But I'm not sure if these assertions are actually correct.
But, I know for a fact that in some states, it is legal to pass on the payment network fee to the customer.

Vitai Slade

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Re: stellarly horrible financial advice
« Reply #58 on: December 09, 2014, 05:01:21 AM »
Soooo, my PMI is ~$30/mo. - Meaning I'm losing approximately $360/year by having the capital invested in the market instead of my house. In order for me to get to 78% LTV I'd have to put in another $5200, which, at 7% returns, gets me $364. And this is when I'm six months from paying off enough to get PMI removed. When I got the loan, I'd have had to put down another ~$12,000. At 7%, that's $840 return for the market. Seems like paying PMI is winning to me.

Cheddar Stacker

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Re: stellarly horrible financial advice
« Reply #59 on: December 09, 2014, 05:36:56 AM »
Soooo, my PMI is ~$30/mo. - Meaning I'm losing approximately $360/year by having the capital invested in the market instead of my house. In order for me to get to 78% LTV I'd have to put in another $5200, which, at 7% returns, gets me $364. And this is when I'm six months from paying off enough to get PMI removed. When I got the loan, I'd have had to put down another ~$12,000. At 7%, that's $840 return for the market. Seems like paying PMI is winning to me.

Seems like you're winning because you've ignored the mortgage interest in your analysis. $12,000 * 4% = $480. $480 + $360 = $840. Seems like another "break-even" scenario to me. It won't always come out this way, but I'm seeing a trend here.
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JustTrying

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Re: stellarly horrible financial advice
« Reply #60 on: December 09, 2014, 09:24:01 PM »
I just bought a car this year, and the dealer was CRAZY! I gave him a bottom-line amount (which was the amount I had in cash to buy a car), and he said he had to talk to his manager. He came back with two loan options, and he shared information with us about the monthly payments. My husband then asked him the APR on the loans, and he had absolutely no idea. I couldn't believe it. I mean, I could see him trying to trick a stupid consumer into buying just based on the monthly payments, but I was shocked that he didn't have the info available in case we were NOT the stupid consumers he hoped that we would be. (We ended up buying from a different dealer, and paying all cash).
This really boggles my mind. Has the salesman just never been asked this question before or something? I don't get it.
(My initial reaction was  actually to wonder why your husband even cared to ask the APR, when you wanted to buy with cash. But, at the same time, with a low enough APR loan, it can make sense to get the loan and invest the rest.)

Ha ha, I guess that's a good point - I think that he asked because we were just kind of shocked and curious. We definitely weren't actually considering the loan. That being said, we also stupidly let him run a credit check prior to this conversation, because he told us that he couldn't lower the price of the car without first running a credit check (even though we were planning to pay cash). I don't know...car dealerships are just a strange world and I guess we were too nice about going along with things!

Snowballer

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Re: stellarly horrible financial advice
« Reply #61 on: December 09, 2014, 10:36:54 PM »

3-"ohhh you're buying  a house! My advice is to buy all new things to furnish your new home." (Face palm)
What about you? Any stellarly bad advice?

How about... "Oh you can buy a house for 0% down with a VA loan.  Just use the downpayment you saved up to furnish your new house!"

ncornilsen

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Re: stellarly horrible financial advice
« Reply #62 on: December 10, 2014, 09:47:13 AM »
"Invest with Edward Jones!"
"Invest with Thrivent!"

^doesn't get worse than that, except for:

"Don't invest. Wallstreet is run by the illuminati/CFR/free masons/jews/the obammer/the oprah to steal your money."

fantabulous

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Re: stellarly horrible financial advice
« Reply #63 on: December 10, 2014, 01:28:44 PM »
"Don't invest. Wallstreet is run by the illuminati/CFR/free masons/jews/the obammer/the oprah to steal your money."

Obamaluminati. Their goal is to trick the major world powers into forcing their citizens to pay for energy legs so that they'll run as fast as Kenyans.

mydogismyheart

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Re: stellarly horrible financial advice
« Reply #64 on: December 10, 2014, 03:08:31 PM »
My parent's years ago told me that I need to buy the biggest, nicest, fanciest home that I can possibly get approved for because it's the best investment I'll ever make.

Then the housing market crash and stock market crash happened.  Now my parent's are sitting in their big crazy fancy house that is costing them so much money to keep (and they're making less money now than they were) that they bitch about the fact that they can never go anywhere or do anything. Yet they refuse to sell because it's such an amazing home to show off to their friends!

I'm enjoying my cute little cottage house I bought for dirt cheap as a short sale with a mortgage almost 1/3 of what the bank approved me for.  I took a trip to Vegas this year and it was a blast! :)

Sid Hoffman

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Re: stellarly horrible financial advice
« Reply #65 on: December 11, 2014, 08:32:40 AM »
Did the dealership charge you a fee for paying with a credit card?

In the USA, it was illegal for a retailer to charge a fee to pay by credit card until late January, 2013.  It was legal to offer a discount to pay in cash, but illegal to charge a fee to pay by credit card.  As of February 2013 however, retailers can charge up to 4% for payment by credit card.

Rosewhipped

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Re: stellarly horrible financial advice
« Reply #66 on: December 11, 2014, 10:53:16 AM »
I've been car shopping for a year and a coworker and my boss both suggested I get a lease since they are "so cheap".  They were of course simply referencing the fact the low monthly payments. 

I mainly browse online for cars but i have picked up one of those free local Auto Trader advertisement booklets and nearly all the dealerships in there were listing cars by monthly payment amount.  So i had no idea of the total cost of the car.  I feel like even if I were to buy a car with a loan the total amount would still be super important to me.   It just seemed weird.

craiglepaige

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Re: stellarly horrible financial advice
« Reply #67 on: December 11, 2014, 12:51:01 PM »
I've been car shopping for a year and a coworker and my boss both suggested I get a lease since they are "so cheap".  They were of course simply referencing the fact the low monthly payments. 

I mainly browse online for cars but i have picked up one of those free local Auto Trader advertisement booklets and nearly all the dealerships in there were listing cars by monthly payment amount.  So i had no idea of the total cost of the car.  I feel like even if I were to buy a car with a loan the total amount would still be super important to me.   It just seemed weird.

Leasing is the new owning...
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attica

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Re: stellarly horrible financial advice
« Reply #68 on: December 11, 2014, 01:53:21 PM »
Did the dealership charge you a fee for paying with a credit card?

In the USA, it was illegal for a retailer to charge a fee to pay by credit card until late January, 2013.  It was legal to offer a discount to pay in cash, but illegal to charge a fee to pay by credit card.  As of February 2013 however, retailers can charge up to 4% for payment by credit card.

I work at a dealership and can tell you exactly what's going on. After a certain amount billed to your card ($3000 for us) the fee the CC company charges jumps up and the dealership doesn't want to eat that charge.

jinga nation

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Re: stellarly horrible financial advice
« Reply #69 on: December 11, 2014, 02:07:57 PM »
"Invest with Edward Jones!"
"Invest with Thrivent!"

^doesn't get worse than that, except for:

"Don't invest. Wallstreet is run by the illuminati/CFR/free masons/jews/the obammer/the oprah to steal your money."

Thanks for the chuckle. One of my ex-tenants is a financial advisor at Edward Jones. Twice he pitched that he could help me with my personal finances. I told him that I use Vanguard and Bogleheads' Lazy Portfolios, plus read books by Bogle, Bernstein, Swenson, etc. He said, "Ok, seems like you know what you're doing, I won't bother you again".

Thrivent... what can I say. Two of my neighbors told me to use Thrivent and they would refer me. I asked if I had to be a Lutheran, per the company tag line. I was told I should consider Jesus as my savior. WTF.

I see horrible financial decisions, some stellar, made by my co-workers daily, but I shut up and trudge on. I want to retire from the daily grind by 50-55.
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jinga nation

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Re: stellarly horrible financial advice
« Reply #70 on: December 11, 2014, 02:10:22 PM »
"Don't invest. Wallstreet is run by the illuminati/CFR/free masons/jews/the obammer/the oprah to steal your money."

Obamaluminati. Their goal is to trick the major world powers into forcing their citizens to pay for energy legs so that they'll run as fast as Kenyans.

Hey, hey, no need to drag me into this.

Seriously, my office has Fox News on all day. The crap I hear around here rivals the animal faeces.
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Jack

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Re: stellarly horrible financial advice
« Reply #71 on: December 11, 2014, 03:03:49 PM »
Soooo, my PMI is ~$30/mo. - Meaning I'm losing approximately $360/year by having the capital invested in the market instead of my house. In order for me to get to 78% LTV I'd have to put in another $5200, which, at 7% returns, gets me $364. And this is when I'm six months from paying off enough to get PMI removed. When I got the loan, I'd have had to put down another ~$12,000. At 7%, that's $840 return for the market. Seems like paying PMI is winning to me.

Seems like you're winning because you've ignored the mortgage interest in your analysis. $12,000 * 4% = $480. $480 + $360 = $840. Seems like another "break-even" scenario to me. It won't always come out this way, but I'm seeing a trend here.

In my case, we accepted PMI because it allowed us to buy a house in 2009, giving us an extra $8000 tax credit that would have expired if we had waited.

Cheddar Stacker

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Re: stellarly horrible financial advice
« Reply #72 on: December 11, 2014, 03:09:31 PM »
Soooo, my PMI is ~$30/mo. - Meaning I'm losing approximately $360/year by having the capital invested in the market instead of my house. In order for me to get to 78% LTV I'd have to put in another $5200, which, at 7% returns, gets me $364. And this is when I'm six months from paying off enough to get PMI removed. When I got the loan, I'd have had to put down another ~$12,000. At 7%, that's $840 return for the market. Seems like paying PMI is winning to me.

Seems like you're winning because you've ignored the mortgage interest in your analysis. $12,000 * 4% = $480. $480 + $360 = $840. Seems like another "break-even" scenario to me. It won't always come out this way, but I'm seeing a trend here.

In my case, we accepted PMI because it allowed us to buy a house in 2009, giving us an extra $8000 tax credit that would have expired if we had waited.

That's a huge win, nice work. Be glad you didn't buy in 2008 when the credit had to be re-paid.
Indecision may or may not be my problem.

eyePod

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Re: stellarly horrible financial advice
« Reply #73 on: December 12, 2014, 07:55:02 AM »
Soooo, my PMI is ~$30/mo. - Meaning I'm losing approximately $360/year by having the capital invested in the market instead of my house. In order for me to get to 78% LTV I'd have to put in another $5200, which, at 7% returns, gets me $364. And this is when I'm six months from paying off enough to get PMI removed. When I got the loan, I'd have had to put down another ~$12,000. At 7%, that's $840 return for the market. Seems like paying PMI is winning to me.

Seems like you're winning because you've ignored the mortgage interest in your analysis. $12,000 * 4% = $480. $480 + $360 = $840. Seems like another "break-even" scenario to me. It won't always come out this way, but I'm seeing a trend here.

In my case, we accepted PMI because it allowed us to buy a house in 2009, giving us an extra $8000 tax credit that would have expired if we had waited.

That's a huge win, nice work. Be glad you didn't buy in 2008 when the credit had to be re-paid.

Or in 2014 when we didn't get any credit. :(
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ncornilsen

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Re: stellarly horrible financial advice
« Reply #74 on: December 12, 2014, 08:02:40 AM »
"Invest with Edward Jones!"
"Invest with Thrivent!"

^doesn't get worse than that, except for:

"Don't invest. Wallstreet is run by the illuminati/CFR/free masons/jews/the obammer/the oprah to steal your money."

Thanks for the chuckle. One of my ex-tenants is a financial advisor at Edward Jones. Twice he pitched that he could help me with my personal finances. I told him that I use Vanguard and Bogleheads' Lazy Portfolios, plus read books by Bogle, Bernstein, Swenson, etc. He said, "Ok, seems like you know what you're doing, I won't bother you again".

Thrivent... what can I say. Two of my neighbors told me to use Thrivent and they would refer me. I asked if I had to be a Lutheran, per the company tag line. I was told I should consider Jesus as my savior. WTF.

I see horrible financial decisions, some stellar, made by my co-workers daily, but I shut up and trudge on. I want to retire from the daily grind by 50-55.

My dad, a Lutheran, has been with thrivent since right after they changed their name from the Lutheran Brotherhood...(12ish years) was going to show him that with his portfolio and   investment fund returns versus a 30%/70% Vangaurd Bond/VFIAX portfolio have lost him nearly $90,000... but it only took comparing the prospectuses for him to extrapolate that the expenses alone were killing his portfolio. When I get home for Xmas we're going to transfer it all to Vanguard.

mydogismyheart

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Re: stellarly horrible financial advice
« Reply #75 on: December 12, 2014, 01:00:31 PM »
"Invest with Edward Jones!"
"Invest with Thrivent!"

^doesn't get worse than that, except for:

"Don't invest. Wallstreet is run by the illuminati/CFR/free masons/jews/the obammer/the oprah to steal your money."

My parent's use Edward Jones and have for years.  It's been pretty much awful, they lost most of what they invested over the years.  I mean, my mom once received an inheritance for $500,000 alone, invested all of it. They also invested money monthly their entire lives.  Here they are now, retired after how many years working AND investing? Yet they have less than $500K in investments.  My mom recently came to me and said that they have a "really cute guy that works there that can help me with my portfolio." Um.... no thanks...

Self-employed-swami

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Re: stellarly horrible financial advice
« Reply #76 on: December 15, 2014, 04:10:21 PM »
Not every investment advisor at Edward Jones is terrible at their jobs.
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ncornilsen

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Re: stellarly horrible financial advice
« Reply #77 on: December 15, 2014, 07:00:06 PM »
If you ever meet an actual advisor at EJ, let me know. Given their compensation scheme, they're commissioned salesmen, nothing more.

I'm sure some look past their own gain and advise their marks to purchase investments that don't generate the highest commission possible, but I don't think they stay at EJ very long.

Megma

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Re: stellarly horrible financial advice
« Reply #78 on: December 15, 2014, 07:20:49 PM »
When buying a house i've been told:

1. Put my student loans in deferment until you're approved to get more then just take them back out. She said I could get approved for 175k as single person making like 35k/year. Yay!

2. Oh you want 150? I did 175 so you have room to shop. (This time I at least had a huge down payment from past sale)
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eyePod

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Re: stellarly horrible financial advice
« Reply #79 on: December 16, 2014, 06:17:44 AM »
When buying a house i've been told:

1. Put my student loans in deferment until you're approved to get more then just take them back out. She said I could get approved for 175k as single person making like 35k/year. Yay!

2. Oh you want 150? I did 175 so you have room to shop. (This time I at least had a huge down payment from past sale)

That was one of the best parts about using a realtor. They had a pay for service which was more up to date than zillow/trulia called listingbook. We were able to set criteria on there and only looked outside of our range (by 3k) if we felt comfortable.
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Fuzzy Buttons

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Re: stellarly horrible financial advice
« Reply #80 on: December 16, 2014, 07:10:24 AM »
My parent's use Edward Jones and have for years.  It's been pretty much awful, they lost most of what they invested over the years.  I mean, my mom once received an inheritance for $500,000 alone, invested all of it. They also invested money monthly their entire lives.  Here they are now, retired after how many years working AND investing? Yet they have less than $500K in investments.  My mom recently came to me and said that they have a "really cute guy that works there that can help me with my portfolio." Um.... no thanks...
My girlfriend was using Edward Jones for investing monthly for several years, and they had her in some Franklin Templeton funds with a 5.75% front end load and 1.25% ER.  She still managed to save up the money she was looking for, but mostly because that's how much she had put in.  Goes to show that building wealth is much more about saving than investing.  Still, she's looking forward to starting a Vanguard account for the future.

The Ed Jones advisor?  He left that job to open a bar.  It failed.

mtn

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Re: stellarly horrible financial advice
« Reply #81 on: December 16, 2014, 08:27:45 AM »
My pre-wife isn't good with math. She's good with money in the sense of "don't go into debt, buy a used Corolla, and keep the shopping to a minimum", but her family in general is just not good with money.

Pre-wife got a masters (had to, otherwise she was flushing her BS down the toilet) and had $35k in debt due to that (2 year program). Her dad told her to pay the smallest amount they allowed per month on the loan. We're paying the largest amount they allow to be transferred on a schedule, and we pay in between those payments when we can. I've talked to her brother a few times on investing. He thinks he is some big-shot trader in his spare time. I highly suspect he isn't beating the market.

The worst thing about all of it though is that money makes her dad nervous because he doesn't understand it, and she was never taught it, so now it makes her nervous as well. I really enjoy dealing with it (if I didn't have a heart, I'd probably be a Financial Advisor), but it makes conversations difficult when we need to have them regarding our funds.

iris lily

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Re: stellarly horrible financial advice
« Reply #82 on: December 16, 2014, 08:44:18 AM »

Leasing is the new owning...
Americans have everything but own nothing :(

On one of the wedding sites they are discussing the practicalities of leasing engagement rings. Because you want to trade up in a few years, you know. It's a thing, trading up your e-ring.

So here's a business ready and waiting for someone to swoop in and start.

slugline

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Re: stellarly horrible financial advice
« Reply #83 on: December 16, 2014, 09:08:37 AM »
On one of the wedding sites they are discussing the practicalities of leasing engagement rings. Because you want to trade up in a few years, you know. It's a thing, trading up your e-ring.

Actually, if all you're really after is a gaudy prop to show off during the engagement period, that doesn't sound like such a bad idea.....

johnny847

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Re: stellarly horrible financial advice
« Reply #84 on: December 16, 2014, 09:41:58 AM »
Not every investment advisor at Edward Jones is terrible at their jobs.
I'm sure that's true. But it's their job to make money for Edward Jones. It's not their job (unless they've signed a fudiciary pledge, which is incredibly unlikely) to look out for the best interests for the clients.

And as ncornilsen said, it is incredibly likely that Edward Jones pays and/or promotes the employees that make a lot of sales for funds that have high expense ratios and/or front/back end load fees. Edward Jones is a subsidiary of a limited partnership owned by its employees and retire employees. EJ has an incentive to make money for itself, which comes at the cost of its clients.

DeepEllumStache

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Re: stellarly horrible financial advice
« Reply #85 on: December 16, 2014, 09:45:42 AM »
On one of the wedding sites they are discussing the practicalities of leasing engagement rings. Because you want to trade up in a few years, you know. It's a thing, trading up your e-ring.

Actually, if all you're really after is a gaudy prop to show off during the engagement period, that doesn't sound like such a bad idea.....

For the business you can then have an add on option of an unlimited nail salon membership so you can keep your manicure looking lovely while you show off the sparkly stuff.
And a journal because I #REF occasionally

rocksinmyhead

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Re: stellarly horrible financial advice
« Reply #86 on: December 16, 2014, 09:49:56 AM »

Leasing is the new owning...
Americans have everything but own nothing :(

On one of the wedding sites they are discussing the practicalities of leasing engagement rings. Because you want to trade up in a few years, you know. It's a thing, trading up your e-ring.

So here's a business ready and waiting for someone to swoop in and start.

that is one of the most depressing things I've ever heard.

neo von retorch

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Re: stellarly horrible financial advice
« Reply #87 on: December 18, 2014, 02:13:26 PM »
Now my brother (one of two, both older) is pretty smart overall and he's certainly better with money now than he was in college... anyway I was at the mall with him and he bought some expensive jeans - with a credit card. For me, even $40 was expensive but they might have even been like $60. He said "with the jobs we'll get out of college, we'll make plenty, so who cares if we pay a little extra interest on stuff we want now?"

eyePod

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Re: stellarly horrible financial advice
« Reply #88 on: December 19, 2014, 09:02:00 AM »
Now my brother (one of two, both older) is pretty smart overall and he's certainly better with money now than he was in college... anyway I was at the mall with him and he bought some expensive jeans - with a credit card. For me, even $40 was expensive but they might have even been like $60. He said "with the jobs we'll get out of college, we'll make plenty, so who cares if we pay a little extra interest on stuff we want now?"

That there is a slippery slope.
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RWD

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Re: stellarly horrible financial advice
« Reply #89 on: December 19, 2014, 10:05:42 AM »
Soooo, my PMI is ~$30/mo. - Meaning I'm losing approximately $360/year by having the capital invested in the market instead of my house. In order for me to get to 78% LTV I'd have to put in another $5200, which, at 7% returns, gets me $364. And this is when I'm six months from paying off enough to get PMI removed. When I got the loan, I'd have had to put down another ~$12,000. At 7%, that's $840 return for the market. Seems like paying PMI is winning to me.

Seems like you're winning because you've ignored the mortgage interest in your analysis. $12,000 * 4% = $480. $480 + $360 = $840. Seems like another "break-even" scenario to me. It won't always come out this way, but I'm seeing a trend here.

In my case, we accepted PMI because it allowed us to buy a house in 2009, giving us an extra $8000 tax credit that would have expired if we had waited.

That's a huge win, nice work. Be glad you didn't buy in 2008 when the credit had to be re-paid.

That's my life... Bought in the middle of 2008. House value is still down 25% from what we paid (according to Zillow). Still paying PMI until next year. About a decade left until the tax credit thing is finally paid back. If we had just waited a year or two we could have had a 10-20% down payment saved up, houses would have been way cheaper, interest rates would have been lower, and we would have got to keep the tax credit... The back of the envelope calculations I'm doing in my head right now on how much that decision cost us is making me depressed.

neo von retorch

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Re: stellarly horrible financial advice
« Reply #90 on: December 19, 2014, 10:17:32 AM »
Zillow is very strange to me. For some reason, it has my house going off on tangents compared to the township and zip code I live in, despite all the "comparable" homes also being in that township and zip code. If it tracked even a little more in line with them, it'd currently be worth at least $15k more. Of course, in 2012, it was apparently worth $45k more than the township average, but has now devalued to basically match that average (which is ridiculous.) I live in a relatively stable area with no big events triggering great swings in home values, and my little corner of the neighborhood is not an exception to that. If anything, some sales quite a few years ago (the one house was foreclosed on in 2007 and has since been totally revamped, another house wasn't selling for the excessive listing price and ended up going to auction for much less in 2010) would've dragged it down, but both of those are up $25,000 and $105,000 in value since those events on Zillow, so there's not much logic behind them dragging my home value down 4-7 years after the fact.

DoubleDown

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Re: stellarly horrible financial advice
« Reply #91 on: December 19, 2014, 11:26:56 AM »
That would buy at least 4BR 3BA in the nicest gated community in town. It's just me, my wife, and a corgi. Why would I even want to buy a house like that?

Because that Escalade of yours isn't going to garage itself! Duh!
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frugalnacho

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Re: stellarly horrible financial advice
« Reply #92 on: December 19, 2014, 11:38:35 AM »
That would buy at least 4BR 3BA in the nicest gated community in town. It's just me, my wife, and a corgi. Why would I even want to buy a house like that?

Because that Escalade of yours isn't going to garage itself! Duh!

pfff, maybe yours doesn't.

GrayGhost

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Re: stellarly horrible financial advice
« Reply #93 on: December 20, 2014, 02:24:31 PM »
"Build equity by buying a home!"

"Become a landlord, buy a house such that your mortgage payment (ARM currently at 1.something%) is $800 - and rent it out for $900!"

"Become a landlord, buy a house whose mortgage payment is $850, pay $100 a month to a property manager, and rent it out for $1,100!"

I say, keep your bloody "equity" and the prestige of owning real estate, and I'll keep my diversified stocks. Maybe there will be the rare year or so where they plummet in value, but I will never have to pay money to repair my stocks or field 2am calls for my stocks, and after a few decades, I'll be better off than you anyway.

This is not to say that I am against RE investing, far from it, but there's a way to do it, and a lot of my colleagues are not doing it that way. Gah!
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rob in cal

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Re: stellarly horrible financial advice
« Reply #94 on: December 20, 2014, 07:57:40 PM »
All this talk about buying furniture got me to thinking.  I didn't know people actually buy furniture from stores.  I thought you just bought it from neighbors having a moving sale.

eyePod

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Re: stellarly horrible financial advice
« Reply #95 on: December 21, 2014, 05:29:38 AM »
"Build equity by buying a home!"

"Become a landlord, buy a house such that your mortgage payment (ARM currently at 1.something%) is $800 - and rent it out for $900!"

"Become a landlord, buy a house whose mortgage payment is $850, pay $100 a month to a property manager, and rent it out for $1,100!"

I say, keep your bloody "equity" and the prestige of owning real estate, and I'll keep my diversified stocks. Maybe there will be the rare year or so where they plummet in value, but I will never have to pay money to repair my stocks or field 2am calls for my stocks, and after a few decades, I'll be better off than you anyway.

This is not to say that I am against RE investing, far from it, but there's a way to do it, and a lot of my colleagues are not doing it that way. Gah!

It's amazing how much risk and work they're willing to take on for $100 a month, but then talk about cutting back the cable bill and they'll look at you like you have two heads.
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Re: stellarly horrible financial advice
« Reply #96 on: December 22, 2014, 08:55:35 AM »
This made me think of a question, is it truly better to invest say 25k on a down payment to avoid PMI when you could instead invest it in the market and accept PMI? 25kx.07=1750 earnings/year 1750/12= nearly 146/month, I have no clue but if PMI was less then 100$/month then it seems like it would be a good trade off?
I would caution against generalizing here - you need to analyze the specific options available to you. Think of the down payment as just another investment and evaluate it in the context of all your other options. We just closed on our place in Oct and I spent substantial time comparing various scenarios, ranging from the FHA minimum 3.5% down with outrageous PMI, up to 20% down on various conventional loans. Purchase price was $125k, for reference.
I started with the smallest down payment and then calculated the annual ROI (over 5 years) of each incremental addition to the down payment, based on the loans available at that LTV. I found a very NON-linear correlation between increasing the down payment and saving money on interest/PMI/etc.
The jump from 3.5% to 10% gave us a huge bang for our buck. We knocked off a substantial amount of PMI and also opened up better loan program options with lower APRs, including the 5/1 ARM we decided to take. We saved ~$2k/year by only adding ~$8k to the DP. 25% annual ROI? No-brainer.
I calculated a much smaller savings in going from 10% to 20%, and we decided to leave our cash invested elsewhere. My projection was around 6% ROI, between the 3.125% APR on that portion of the principal, and retiring the $33/mo PMI. We decided this was still worth doing (and will achieve it within a few months) but not worth divesting elsewhere to pay for it.
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zephyr911

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Re: stellarly horrible financial advice
« Reply #97 on: December 22, 2014, 09:08:06 AM »
Also as a heads up, PMI is permanent  on some home loans of as the summer of 2013. I am not sure the specifics on which loan but this is what a mortgage lender I work always makes sure clients are aware of.

FHA loans. Only way to get rid of it is to pay off the loan, or refinance.
Yup... was told by a mortgage broker that they felt the program was being over-used and this was to make it less attractive and push people back toward conventional.
I don't know why they can't just increase the down payment requirement... this is more like a hidden tax on less cautious buyers. Paying $100+ PMI, even after 25 years with a balance of only a few grand, is fucking retarded. It should be illegal, if you ask me.
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zephyr911

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Re: stellarly horrible financial advice
« Reply #98 on: December 22, 2014, 09:26:51 AM »
Ok, so after saving for a while DH and I are finally in a position to buy a home. We calculated out how much to save based on estimates for down payments and our ability to pay off the mortgage over time. (I could detail more but an entire other conversation). In the course of home buying we have been given some doozies of advice.

1- what! You actually have x amount(x amt being a little over 20%) that's crazy! You need a new realtor if your realtor told you that's how much you need. (PMI explained, my idea, not a realtor) response:it's not that big s deal! Just Y more a month ( y adding up to be significant in my book)
2-the monthly payments for x mortgage would only be about $60 less a month than y. You should go with y unless you really need the $60 a month( ahhh that adds up way fast!)
And last, but definitely not least,
3-"ohhh you're buying  a house! My advice is to buy all new things to furnish your new home." (Face palm)
What about you? Any stellarly bad advice?
When I started looking to rent out my first house and buy/occupy a second, I found a badass townhome for $175K. It was way more house than I needed, but a fundamentally good investment in a great area, with a manageable payment of $1000 or less, and I figured I could live cheaply by having a roommate. I was looking well within my means, pretty sure that 1900SF, 3BR/2.5Ba, and two stories with two separate living areas was more than enough for me, a single guy, and two dogs, even with a roomie to help pay for everything - really, I needed much less, and was only buying up for the investment aspect (as planned, it's now a rental). Meanwhile, the builder's agent was convinced I should pay $250K for a free-standing 4BR down the block, just because I was making $90K/yr and could afford it. (Very few people rent such homes here). I would have had 50% more space to clean, more things to repair, and 10x the lawn to mow. I'd rather punch myself in the face, even if it had been free - let alone 50% more money.
Thank ye gads I held that line, because I took a major pay cut a few months later. At that point, though not exactly strapped, I decided to add a second housemate - and said Realtor ended up as my tenant. >.<
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ketchup

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Re: stellarly horrible financial advice
« Reply #99 on: December 22, 2014, 09:46:25 AM »
"Build equity by buying a home!"

"Become a landlord, buy a house such that your mortgage payment (ARM currently at 1.something%) is $800 - and rent it out for $900!"

"Become a landlord, buy a house whose mortgage payment is $850, pay $100 a month to a property manager, and rent it out for $1,100!"

I say, keep your bloody "equity" and the prestige of owning real estate, and I'll keep my diversified stocks. Maybe there will be the rare year or so where they plummet in value, but I will never have to pay money to repair my stocks or field 2am calls for my stocks, and after a few decades, I'll be better off than you anyway.

This is not to say that I am against RE investing, far from it, but there's a way to do it, and a lot of my colleagues are not doing it that way. Gah!

It's amazing how much risk and work they're willing to take on for $100 a month, but then talk about cutting back the cable bill and they'll look at you like you have two heads.
They're not even clearing $100/month at that point though.  Maintenance, repairs, vacancy, etc will definitely put both of those theoretical properties at cash-flow negative.  Losing money, in other words.