Learning about investing money...?
09-15-2008, 03:43 PM
#11
Originally Posted by mxt_77,Sep 15 2008, 05:25 PM
I'm not quite following that formula. Can you explain it to me?
According to this, if you have a 10% credit card and your marginal tax rate is 20%, then you're getting 12.5% gains on your balance just by paying it off => [[ 0.10/(1 - 0.20) ]]. Is that what you're saying?
I get the 10% bit obviously because you're not paying that money to the lender, but where is the other 2.5% coming from?
f20milo, I think you should just pay off your credit card debt the old-fashioned way, by spending less than you make and chipping away at it as quickly as you can that way. Taking out a loan to pay off other debt all too often creates more problems than it solves.
According to this, if you have a 10% credit card and your marginal tax rate is 20%, then you're getting 12.5% gains on your balance just by paying it off => [[ 0.10/(1 - 0.20) ]]. Is that what you're saying?
I get the 10% bit obviously because you're not paying that money to the lender, but where is the other 2.5% coming from?
f20milo, I think you should just pay off your credit card debt the old-fashioned way, by spending less than you make and chipping away at it as quickly as you can that way. Taking out a loan to pay off other debt all too often creates more problems than it solves.
If you could invest in risk-free T-bills @ 12.5% yield, you'd earn 10% after tax assuming your 20% marginal tax rate.
Therefore, you should be indifferent between investing in t-bills vs. paying off your 10% interest rate debt.
The reason for the tax adjustment is that non-mortgage debt isn't tax deductible, but you'll owe tax on interest earned.
09-15-2008, 03:51 PM
#12
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Originally Posted by f20milo,Sep 15 2008, 03:25 PM
Ok, too educated for me...lol And I owe about $11,000 in credit cards.. And credit cards have higher interest than loans(my credit card has an 11% interest. Is not good but its certainly not bad.) I'd pay off the credit cards and invest some money.. What sha think?
Your also not working how are you able to take out a loan while your not working?
. The rich people you're talking to isn't revealing the real truth about making your money work for you. Your only hearing the good side of the story. Did they ever tell you that you should never borrow money to invest?
09-15-2008, 04:05 PM
#13
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Originally Posted by PearlwhiteS2k,Sep 15 2008, 03:51 PM
If the loan ur getting is lower interest than you credit card, than I'll say yes take the loan pay off the credit card. It's not a wise idea to borrow 30k to pay off 10k in credit card debt and use the rest of the money to invest.
Your also not working how are you able to take out a loan while your not working?
.
The rich people you're talking to isn't revealing the real truth about making your money work for you. Your only hearing the good side of the story. Did they ever tell you that you should never borrow money to invest?
Your also not working how are you able to take out a loan while your not working?
. The rich people you're talking to isn't revealing the real truth about making your money work for you. Your only hearing the good side of the story. Did they ever tell you that you should never borrow money to invest?
So what your telling me is that I shouldnt borrow 30k? Yea, maybe its not too wise to do that. Maybe ill take out 10k. And Like I said, My credit is really good (I have a 735 beacon score) And I just lie to the bank 
Thats how I got my s2000... 
09-15-2008, 04:25 PM
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Originally Posted by f20milo,Sep 15 2008, 04:05 PM
Naa man, Im just learning as im going. So what your telling me is that I shouldnt borrow 30k? Yea, maybe its not too wise to do that. Maybe ill take out 10k. And Like I said, My credit is really good (I have a 735 beacon score) And I just lie to the bank Thats how I got my s2000...
So what your telling me is that I shouldnt borrow 30k? Yea, maybe its not too wise to do that. Maybe ill take out 10k. And Like I said, My credit is really good (I have a 735 beacon score) And I just lie to the bank Thats how I got my s2000... 
Your digging yourself a hole that your not going to be able to get out of just like my friend. I'll say this once again, within a few month or a year your crediting rating is going to haunt you and you'll be crying for help just like my buddy did.
BTW don't bite off more than you can chew or you'll choake on it.
09-15-2008, 04:27 PM
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Originally Posted by f20milo,Sep 15 2008, 04:05 PM
And I just lie to the bank Thats how I got my s2000...
Thats how I got my s2000...
09-15-2008, 08:30 PM
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Originally Posted by andreiscv,Sep 15 2008, 04:27 PM
Replace "s2000" with "house" and isn't that part of the reason the economy is in the mess it is right now?
I've also had my credit since I was 16 and Im 23 and have never missed a payment.. 
09-15-2008, 08:35 PM
#19
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Originally Posted by PearlwhiteS2k,Sep 15 2008, 04:25 PM
You sound like 1 of my friend that is a IDIOT! Lying to a bank that your still working to buy a S2000 and while you still owed 11k on a credit card debt is a no no
Your digging yourself a hole that your not going to be able to get out of just like my friend. I'll say this once again, within a few month or a year your crediting rating is going to haunt you and you'll be crying for help just like my buddy did.
BTW don't bite off more than you can chew or you'll choake on it.
Your digging yourself a hole that your not going to be able to get out of just like my friend. I'll say this once again, within a few month or a year your crediting rating is going to haunt you and you'll be crying for help just like my buddy did.
BTW don't bite off more than you can chew or you'll choake on it.
I might have gotten in debt for the wrong reasons but hey, you live and learn..
Plus, I wouldnt have bought the car knowing I couldnt have paid for it.
I am not going to risk screwing up my credit for any car. Here in USA your nothing without credit.
And im certainly not going to screw that up for a stupid car.
If I knew there'd be a chance that I couldnt pay for it, I wouldnt have bought it.
09-15-2008, 09:52 PM
#20
I'm not really recommending this but if you are going to invest barrowed money , Invest it precious metals. Regardless of where the stock market goes, gold and silver bullion will always have value. There is always the possibility that this market could continue to decline but on the other hand it really is impossible to lose everything. I think this is a safer bet right now considering what has just happened over the last 24 hours.