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jspbtown
Samba Member
Joined: January 27, 2004
Posts: 5156
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 Posted: Tue May 17, 2016 10:41 am Post subject: Re: Is the economy really as bad as they say? |
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If you put the $25k that you were going to buy a car with (5 year note) and get invest it and get 6% then:
Year 1: $25000 x 6% = $26,500
Year 2: $26500 x 6% = $28,090
Year 3: $28,090 x 6% = $29,775
Year 4: $29,775 x 6% = $31,562
Year 5: $31, 562 x 6% = $33,456
If I take out a loan at 2.35% for 5 years it is $442 per month x 60m = $26,520
That scenario suggests "good" borrowing at 2.35% puts you in a better position after 5 years. |
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skills@eurocarsplus
Samba Peckerhead
Joined: January 01, 2007
Posts: 16859
Location: sticksville, ct.
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| Posted: Tue May 17, 2016 11:13 am Post subject: Re: Is the economy really as bad as they say? |
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I know how the forum gets, so don't take this as an attack, just my view....
| jspbtown wrote: |
I pay no tax on that unless I take a distribution.. |
this is the fucking part that drives me batshit crazy....
so, lets say I don't live to that magic age where the taxes/fees make it so I can have a disbursement without a huge penalty and I want my money now...you tend to lose quite a bit of it. everyone else gets paid, you eat it....
| jspbtown wrote: |
And things like auto loans do not have any tax deductions assigned to them. |
yet another thing that people keep telling us when we talk about paying off the house "you'll have no write off" well, the write off is a joke compared to the buckets of interest we will save.
I will start hoarding coffee cans to hide my loot in 
_________________
| gprudenciop wrote: |
my reason for switching to subaru is my german car was turning chinese so i said fuck it and went japanese....... |
| Jake Raby wrote: |
| Thanks for the correction. I used to be a nice guy, then I ruined it by exposing myself to the public. |
| Brian wrote: |
| Also the fact that people are agreeing with Skills, it's a turn of events for samba history |
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jspbtown
Samba Member
Joined: January 27, 2004
Posts: 5156
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| Posted: Tue May 17, 2016 11:26 am Post subject: Re: Is the economy really as bad as they say? |
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| Quote: |
| I know how the forum gets, so don't take this as an attack, just my view.... |
No worries  Investment discussions are like a lot of things...no single right answer.
Even on standard mutual funds you don't pay a tax until you make a withdrawal. And even then its based on your starting principal. So if I put $25k in there and then withdraw some of the balance not all is taxed because I already paid tax on the amount I initially (and subsequently) deposited.
And on the house...you are right...the amount you can deduct is often minimal when you compare it to what you pay in interest. |
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OB Bus
Samba Member
Joined: February 09, 2003
Posts: 2535
Location: Ocean Beach in Beautiful BLUE California
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| Posted: Tue May 17, 2016 12:00 pm Post subject: Re: Is the economy really as bad as they say? |
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| jspbtown wrote: |
Even on standard mutual funds you don't pay a tax until you make a withdrawal. |
Whoa there… taxable or tax deferred (i.e. 401(k), 403 (b), etc.)????
In a taxable account you pay tax on the earnings inside the account as they are earned. Whether you withdraw the money or not does not matter. In a tax deferred account the earnings stay in the account tax deferred and continue to compound until you start drawing the account..hopefully without penalty at 59.5 years or retirement time.
| jspbtown wrote: |
| And even then its based on your starting principal. So if I put $25k in there and then withdraw some of the balance not all is taxed because I already paid tax on the amount I initially (and subsequently) deposited. |
If you are talking a taxable account then yes, the profits are taxed as they are earned. Again, nothing to do with the timing of withdrawals.
| jspbtown wrote: |
| ….on the house...you are right...the amount you can deduct is often minimal when you compare it to what you pay in interest. |
Paying off our primary home was a big thing for us. We purchased our home when it was affordable for us. We added on 1100 square feet and financed that. Over the next 15 years we refinanced at least 6 times but never took out any equity. The refi's were always to get a lower interest rate. We always added more principle to every monthly payment. 25 years after purchase we were able to use a small windfall to pay off the minimal remaining balance.
I just looked at Zillow and the house is worth a lot -- more than I realized. Certain members of our extended family think we are crazy for "not selling and talking all that money." Why? Our goal is to live in this house until we no longer can. The kids can deal with the estate.
_________________
Larry in OB
Stop dead photo links! Post your photos to The Samba Gallery!
69 Westfalia and 2002 Eurovan Camper. |
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skills@eurocarsplus
Samba Peckerhead
Joined: January 01, 2007
Posts: 16859
Location: sticksville, ct.
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| Posted: Tue May 17, 2016 12:28 pm Post subject: Re: Is the economy really as bad as they say? |
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| jspbtown wrote: |
No worries Investment discussions are like a lot of things...no single right answer.
And on the house...you are right...the amount you can deduct is often minimal when you compare it to what you pay in interest. |
and that is the right answer
I don't know....I just like to have access to my money. I would like to invest but quite honestly I just don't have the balls to hand over money I killed myself to get. I suppose I could buy gold, and bury that in my coffee cans. I just like it to be "real"....numbers on a computer screen don't make me feel all warm and fuzzy
_________________
| gprudenciop wrote: |
my reason for switching to subaru is my german car was turning chinese so i said fuck it and went japanese....... |
| Jake Raby wrote: |
| Thanks for the correction. I used to be a nice guy, then I ruined it by exposing myself to the public. |
| Brian wrote: |
| Also the fact that people are agreeing with Skills, it's a turn of events for samba history |
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TDCTDI
Samba Advocatus Diaboli
Joined: August 31, 2013
Posts: 12846
Location: North Carolina
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| Posted: Tue May 17, 2016 12:41 pm Post subject: Re: Is the economy really as bad as they say? |
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X2. Instead of tying up my money for long periods of time in something that only makes 6%, I can buy cars & other items that I know the value of & double or triple my investment in a few days to weeks.
_________________
Everybody born before 1975 has a story, good, bad, or indifferent, about a VW.
GOFUNDYOURSELF, quit asking everyone to do it for you!
An air cooled VW will make you a hoarder.
Do something, anything, to your project every day, and you will eventually complete it. |
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Manfred58sc
Samba Member
Joined: October 05, 2009
Posts: 3382
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| Posted: Wed May 18, 2016 8:57 am Post subject: Re: Is the economy really as bad as they say? |
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Property and transportation are safe bets for the working person, as long as you have a "long view" for property and good understanding of the car market (constant research and monitoring). A healthy lifestyle to avoid medical ruin is a must. The systems discourages savings, it wants to see money moving through financial sectors as much as possible (40% of the economy is financial services). I have experienced many of the annoyances listed over the years, but compared to working in most of the world....I count my blessings every day.
_________________
Fat chick owner/operator |
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EverettB 
Administrator
Joined: April 11, 2000
Posts: 69802
Location: Phoenix Metro
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| Posted: Wed May 18, 2016 6:54 pm Post subject: Re: Is the economy really as bad as they say? |
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| TDCTDI wrote: |
| X2. Instead of tying up my money for long periods of time in something that only makes 6%, I can buy cars & other items that I know the value of & double or triple my investment in a few days to weeks. |
This can work if you can stay on top of it and constantly be flipping stuff and making money.
You basically have to treat it like it's your job.
Otherwise it's really hard to beat the power of compound interest.
_________________
How to Post Photos
Everett Barnes - [email protected] | My wanted ads
"Water is the only drink for a wise man" | "Communication prevents complaints"
Stop dead photo links! Post your photos to The Samba Gallery! |
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TDCTDI
Samba Advocatus Diaboli
Joined: August 31, 2013
Posts: 12846
Location: North Carolina
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| Posted: Wed May 18, 2016 7:23 pm Post subject: Re: Is the economy really as bad as they say? |
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Yes, one day I hope to have enough that compound interest at 6% outperforms my maneuvering, it'll be easier now that the house is paid for. Obviously all that are talking about investing are not the ones affected by this economy.
_________________
Everybody born before 1975 has a story, good, bad, or indifferent, about a VW.
GOFUNDYOURSELF, quit asking everyone to do it for you!
An air cooled VW will make you a hoarder.
Do something, anything, to your project every day, and you will eventually complete it. |
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mark tucker
Samba Member
Joined: April 08, 2009
Posts: 23937
Location: SHALIMAR ,FLORIDA
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| Posted: Thu May 19, 2016 11:50 am Post subject: Re: Is the economy really as bad as they say? |
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| some people are apparently doing very well. |
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crukab
Samba Chef
Joined: December 13, 2002
Posts: 6116
Location: Vermont
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| Posted: Fri May 20, 2016 5:27 am Post subject: Re: Is the economy really as bad as they say? |
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Living within your means is not something most people do, or have been taught to do. We have really good credit, buying used cars that I could keep running, I buy log length fire wood, cut & split it myself, heat our Vt. home for $300-$400 a year, during the last few years we doubled our home loan payments, got it paid off last year @ the 19 year mark. I do lots of food prep and make almost all our meals from scratch, lots of home made stuff in the freezer, all this takes time, and saves us a bunch of cash.
I worked 2 jobs on & off until I was in my 40s, never had "the wolf at the door" feeling, no debt collecters calling, just try doing w/out, live within your means.
_________________
Tom
My Pops:
http://www.thesamba.com/vw/forum/viewtopic.php?t=604100&highlight=
I know you will always be with me, rest in peace with no more pain. 8/13/14.....
In the yard right now:
'51 Dodge 5 window truck
'65 Bug
'66 Singlecab
'82 Rabbit Truck Diesel from CALI 
'86 Doublecab W/T
'91 Vanagon carat/wolfsbrg.Tiico
'88 Dodge Ram pickup
'11 Jetta Wagon |
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vwinnovator
Samba Member
Joined: July 11, 2005
Posts: 1555
Location: Still doing it in the back of your VW
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| Posted: Fri May 20, 2016 6:02 am Post subject: Re: Is the economy really as bad as they say? |
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| jspbtown wrote: |
Here is how I look at it in a VERY simplistic way....and as it gets bigger the results are bigger.
Say I want to finance $25k for a new car. At 2.35% interest (one of my current loan rates) I would pay just over $1500 in interest over 5 years.
Now if I invest that money in a reasonable fund and I earn a very reasonable 6% return on my money I will have about $33,500.00 in my account after 5 years. That's $8,500 in interest or $7000 more than I pay on my loan.
I pay no tax on that unless I take a distribution.
And lets say this "gamble" doesn't pay off and I earn 0% off of my $25000...then it costs me $300 bucks per year. And yes...I understand I could lose money....but I have run out of coffee cans to bury the money and prevent that from happening.
I will take that chance. |
you think your doing Ok in this scenario, but your not....
You borrowed $25K and pd back $26,500 for a car
you invested another 25K and earned $8500 pre-taxed, let's say $6K after tax.
paying back the borrowed car money + interest($26,500) would have to come from your after taxed funds on hand or money not earned / taxed yet, let's say about $34,000 of earned $$$ in a 22% tax brkt.
(the $25K you had on hand to invest @ 6% started out as earned and taxed $$ as well)
Now the new car you purchased is a depreciating asset, which I consider a liability that is losing $$ as well as costing $$ in maintenance, Ins., registration, etc....
say after 5yrs, it's value is 1/2..minus the cost to have...say $8K....
Now , that $34,000 you earned to pay back the $26,500, is only worth $8K....
but you've got to enjoy that new car smell, new car perks/comforts-the cost of those pleasures.
Back to the $25K you had on hand, your after tax $34K you worked hard for. For 5yrs, you tied it up, and it gained $8500 ($6K after tax).
That $25K is now worth $31K in your hand..But is it??
Over those 5 years, food costs went up, gas went up, everything went up-INFLATION!!! has sucked away the value of that $$$$
here's a thought though... In order for the ppl using your $25K for 5yrs to give you 6% interest, how much do you think they were making off your $25K???
The only way your money is working for you, is by somebody smarter than you working your money!!
The only way to get ahead with $$ is to know how to "flip $$" yourself. Smart $$ keeps moving, it never sits idle earning interest... |
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vwinnovator
Samba Member
Joined: July 11, 2005
Posts: 1555
Location: Still doing it in the back of your VW
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| Posted: Fri May 20, 2016 6:20 am Post subject: Re: Is the economy really as bad as they say? |
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| jspbtown wrote: |
If you put the $25k that you were going to buy a car with (5 year note) and get invest it and get 6% then:
Year 1: $25000 x 6% = $26,500
Year 2: $26500 x 6% = $28,090
Year 3: $28,090 x 6% = $29,775
Year 4: $29,775 x 6% = $31,562
Year 5: $31, 562 x 6% = $33,456
If I take out a loan at 2.35% for 5 years it is $442 per month x 60m = $26,520
That scenario suggests "good" borrowing at 2.35% puts you in a better position after 5 years. |
borrowing for a new car is NEVER "good" borrowing.
your only borrowing to lose value of your $$$ |
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jspbtown
Samba Member
Joined: January 27, 2004
Posts: 5156
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| Posted: Fri May 20, 2016 10:44 am Post subject: Re: Is the economy really as bad as they say? |
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| Quote: |
| paying back the borrowed car money + interest($26,500) would have to come from your after taxed funds on hand or money not earned / taxed yet, let's say about $34,000 of earned $$$ in a 22% tax brkt. |
But this comment applies to both paying for a car outright and borrowing. A purchase (whether done at once or delayed over time) comes from after tax dollars. Whether its financed or not is irrelevant.
| Quote: |
Now the new car you purchased is a depreciating asset, which I consider a liability that is losing $$ as well as costing $$ in maintenance, Ins., registration, etc....
say after 5yrs, it's value is 1/2..minus the cost to have...say $8K.... |
Agreed. But buying outright or financing does not change that a car is a depreciating asset (unless collectable which is a different ball of wax)
| Quote: |
| Back to the $25K you had on hand, your after tax $34K you worked hard for. For 5yrs, you tied it up, and it gained $8500 ($6K after tax). |
Again...if you paid $25k outright not only have you "tied it up" but you have lost all access to it. Especially with a depreciating asset.
| Quote: |
That $25K is now worth $31K in your hand..But is it??
Over those 5 years, food costs went up, gas went up, everything went up-INFLATION!!! has sucked away the value of that $$$$ |
Maybe during times of high inflation but with low inflation it is not as applicable. And if your investment outpaces inflation you are not losing money despite how much things have gone up. AND you have liquidity to opt into other investment strategies as they present themselves.
| Quote: |
| here's a thought though... In order for the ppl using your $25K for 5yrs to give you 6% interest, how much do you think they were making off your $25K??? |
They are clearly making more money. That's capitalism. But let me ask you...when you give someone $25k right up front will they make more off your money than someone who you give monthly payments to? Why do people take lump sums from the lottery? Everyone wants the money up front so it can be invested. |
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jspbtown
Samba Member
Joined: January 27, 2004
Posts: 5156
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| Posted: Fri May 20, 2016 10:45 am Post subject: Re: Is the economy really as bad as they say? |
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| Quote: |
borrowing for a new car is NEVER "good" borrowing.
your only borrowing to lose value of your $$$ |
if you get 0% interest (and all parts of the deal were the same) that would not be "good" borrowing? |
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coad
Samba Scapegoat
Joined: September 12, 2002
Posts: 7552
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| Posted: Fri May 20, 2016 11:16 am Post subject: Re: Is the economy really as bad as they say? |
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I can't make the car loan work, because almost everything I would make investing the money would go right back out again in sales taxes, higher insurance, and annual licensing fees.
I'm driving an 11 year old Prius that I should have traded years ago, but my license plates are down to about $60/year and my insurance is a joke. I spent some money this year buying new leather interior seats and interior panels from a car that hit a deer and was totaled, and I've replaced a lot of the mechanical parts. The total on everything isn't even close to what the sales tax on a new one would be, and when I get in it's like driving a brand new car anyway. Why trade?
Besides, when I bought it I got a subscription to Sirius good for as long as I own the car, and I'm going to make them pay for that mistake. I'm gonna be like that guy in the old Midas commercials driving his Model A in for it's 10th free muffler. They used to shut me off about once a year just to see if I was still out there and would call to get turned back on, but they even stopped doing that. I think they've given up on me. |
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mark tucker
Samba Member
Joined: April 08, 2009
Posts: 23937
Location: SHALIMAR ,FLORIDA
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| Posted: Fri May 20, 2016 1:33 pm Post subject: Re: Is the economy really as bad as they say? |
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| I like cash, I pay in cash.if I dont have the cash I dont own it. the only payments/bills we have is, electrick,water/sewer/garbage. and gass for the car , insurance and eats for us. pertty much everything we own is paid for...well everything is. but......I have been wanting a new lathe lately so....I may do payments on it.....for a short time. as for credit rating.....probably dont have one since I dont do credit cards& pay cash for everything. |
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OB Bus
Samba Member
Joined: February 09, 2003
Posts: 2535
Location: Ocean Beach in Beautiful BLUE California
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| Posted: Fri May 20, 2016 1:38 pm Post subject: Re: Is the economy really as bad as they say? |
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| jspbtown wrote: |
| Quote: |
borrowing for a new car is NEVER "good" borrowing.
your only borrowing to lose value of your $$$ |
if you get 0% interest (and all parts of the deal were the same) that would not be "good" borrowing? |
Some years back we were buying a new car and planning to pay all cash. Toyota was offering 0% financing. At that time we were getting 4% from our money market. Getting 4%, even after taxes, was better than paying 0% on the loan.
_________________
Larry in OB
Stop dead photo links! Post your photos to The Samba Gallery!
69 Westfalia and 2002 Eurovan Camper. |
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vwinnovator
Samba Member
Joined: July 11, 2005
Posts: 1555
Location: Still doing it in the back of your VW
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| Posted: Fri May 20, 2016 7:56 pm Post subject: Re: Is the economy really as bad as they say? |
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| jspbtown wrote: |
| Quote: |
borrowing for a new car is NEVER "good" borrowing.
your only borrowing to lose value of your $$$ |
if you get 0% interest (and all parts of the deal were the same) that would not be "good" borrowing? |
Well, I have a vw super beetle I'll sell you for $25,000 @ 0% interest...
borrowing at 0% interest does not mean you got a good deal 
It means they needed to unload something no one wise was willing to buy...
your still going to be paying for it, and it's still going to be losing value faster than your "investment" will be gaining...
try to sell that 0% NEW car purchase the next day for the same amount you paid for it and let me know how that work out.... |
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vwinnovator
Samba Member
Joined: July 11, 2005
Posts: 1555
Location: Still doing it in the back of your VW
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| Posted: Fri May 20, 2016 8:11 pm Post subject: Re: Is the economy really as bad as they say? |
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| jspbtown wrote: |
| Quote: |
| paying back the borrowed car money + interest($26,500) would have to come from your after taxed funds on hand or money not earned / taxed yet, let's say about $34,000 of earned $$$ in a 22% tax brkt. |
But this comment applies to both paying for a car outright and borrowing. A purchase (whether done at once or delayed over time) comes from after tax dollars. Whether its financed or not is irrelevant.
| Quote: |
Now the new car you purchased is a depreciating asset, which I consider a liability that is losing $$ as well as costing $$ in maintenance, Ins., registration, etc....
say after 5yrs, it's value is 1/2..minus the cost to have...say $8K.... |
Agreed. But buying outright or financing does not change that a car is a depreciating asset (unless collectable which is a different ball of wax)
| Quote: |
| Back to the $25K you had on hand, your after tax $34K you worked hard for. For 5yrs, you tied it up, and it gained $8500 ($6K after tax). |
Again...if you paid $25k outright not only have you "tied it up" but you have lost all access to it. Especially with a depreciating asset.
| Quote: |
That $25K is now worth $31K in your hand..But is it??
Over those 5 years, food costs went up, gas went up, everything went up-INFLATION!!! has sucked away the value of that $$$$ |
Maybe during times of high inflation but with low inflation it is not as applicable. And if your investment outpaces inflation you are not losing money despite how much things have gone up. AND you have liquidity to opt into other investment strategies as they present themselves.
| Quote: |
| here's a thought though... In order for the ppl using your $25K for 5yrs to give you 6% interest, how much do you think they were making off your $25K??? |
They are clearly making more money. That's capitalism. But let me ask you...when you give someone $25k right up front will they make more off your money than someone who you give monthly payments to? Why do people take lump sums from the lottery? Everyone wants the money up front so it can be invested. |
Because most ppl who win don't trust in their life expectancy to see the annuity through.
They also have everyone around them "advising" them to get the money up front and they can "invest" it to make more than the annuity will. (doubt any have)
And, of course, they just want to spend it.
Sound like your set and comfortable with your style. If you've run out of "coffee cans" and your methods work, to each his own....
Of course when I run out of "coffee cans", I step up to the 5 gal buckets....
(pays to be one of the ppl paying that 6% on the use of other ppls money) 
your economy is only what you strive to make of it. |
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