Author Topic: This guy did most things right EXCEPT  (Read 16641 times)

arebelspy

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Re: This guy did most things right EXCEPT
« Reply #50 on: March 20, 2014, 09:32:07 AM »
I think this guy has a good groundwork to be a mustachian, and with a few adjustments could be FI/FIRE in less than 10 years. Good for him.

By his numbers, he'll have a net worth somewhere around $600k, no debt, and rental income that covers all his household expenses by the time he's 31.  By the definition around here he's on pace to be FI even before MMM pulled it off.  And he accomplished this with a primary job that pays less than $50k a year.  He should be facepunching us, not the other way around.  ;)

MMM was 30, IIRC.  But yes, this guy is badass as well.
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
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dragoncar

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Re: This guy did most things right EXCEPT
« Reply #51 on: March 20, 2014, 10:19:17 AM »
If you pay off your house with all your money. Get laid off now you don't have any liquid assets that can be tapped. Using a paid off house to " hedge " against declining real estate isn't a hedge you now just own a depreciating asset. I mean this is an ultra simple math equation.

Avg price increase in houses over time is typically right around inflation. Avg market gains over time are 5-6% better than inflation. 

Sooo not accounting for mortgage tax breaks etc. 5% -3% = 2% more ROI. assuming a 3% interest rate. speculating in the market or housing is possible and you can win but just using historical avgs you end up behind

Though neither option is bad. If you feel like a mortgage is the weight of the world. And you lose sleep at night have high blood pressure and stress about it pay it off. Also invest your money in bonds BC the market will drop like it did in 2008 again.
There is no mortgage tax breaks in Canada. 5%=5%. You can't apply American math outside America.

Also, every 5 years his rate changes, again Canadian not American rules.  So he might have a 3% rate today, at the end of his 5 year term he'll likely have higher (depends when interest rates climb). It's a scary thought, what if I pay the minimum and in 3 years my payments jump $200/month? For normal people that's a legitimate concern.

I know this is an predominantly American site, sometimes though the location of the problem does matter. Most tips are universal, which is why I think this is a great forum.

Lol @ "American math" (I agree with your point though)

libertarian4321

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Re: This guy did most things right EXCEPT
« Reply #52 on: March 21, 2014, 07:58:54 AM »
Really? Some people here want to beat this guy up for paying off his house? Wow...

I can see the point of investing rather than paying off a mortgage. I think that is better. Lets agree that for most people in his shoes the financially superior plan would be to invest the money instead.

BUT, the best plan on paper isn't always best for every person. What he did is not foolish or wrong or poor for his financial health, it simply might not be the absolute BEST he could have done.

It's like berating someone because they sold their big SUV and purchased a gar getting 33mpg instead of 38mpg. Yes, we can agree that higher mpg is better, but maybe we should celebrate the good along with pointing out the better... especially when the average so damn bad...

Agreed, and well said.  IMO, nereo put it best.

He made a conservative, but still good choice.

Yup, this isn't a financial "mistake" like running up credit card debt, going into day trading, spending money on hookers and drugs, living above your means, etc.

Paying off a home loan early (or simply paying cash for a home) is something a lot of financially successful people choose to do- and it's a decision that involves more than just statistical tables.   It's one of those often debated topics for which there is no "right" answer.

My advice too people is do the math, factor in other considerations (e.g. risk tolerance and personal attitudes about money) and make the decision that best fits you. 

I would never tell a person that one way or the other is best on this.

BTW, the guy in the article sounds like he's well on his way to becoming a multi-millionaire, he clearly knows what he is doing, so who am I to tell him he's right or wrong on this?
« Last Edit: March 21, 2014, 08:02:14 AM by libertarian4321 »

sly

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Re: This guy did most things right EXCEPT
« Reply #53 on: March 23, 2014, 01:53:08 PM »
the idea that just because the carry is positive you should max out leverage is dangerous.  I speak from experience.