Financial Freedom

[humblegenius]

Originally Posted by blacksuperman

Debt is merely a synonym for leverage. Leverage is a double-edge sword.

You stated that you borrowed money last year to buy shares that have appreciated by 51%... This is great news. The flip side to this is that your gains were not guaranteed and that you could have been down 51%. If you had $10k, then borrowed another $10k and were down 51% you would have lost ALL of YOUR capital. In addition, most borrowed money charges interest.

humblegenius, you are not stupid or silly for what you have done. You have been profitable. Who can speak badly about that? I will not. The point is that this is a Financial Freedom thread and the method to reaching financial freedom chosen by the OP has been through debt reduction/elimination and then wealth building (much like the Ramsey philosophy).

This path may not be the fastest way to build wealth since it fore goes potential gains/profits through leverage by paying debt off first; but what it does do is guarantee that fixed amounts of interest charged on debts is eliminated and the overall obligation to pay for what you have is removed. Peace of mind is often priceless. This works for him, you have found what works for you.

Basically, if both Ruben AND your financial philosophies work out you would likely stand to be richer that he would. But if you have 10 million, and Ruben has 4 million, does it really matter? You are both successful and living well. Rubens' method is just risk adverse.

Just sayin'

All Im merely saying is debt can work for you if you know how to manage it. Ive prolly come off as sounding like Im massively in debt but Im making all this coin from it, but in reality my total debt is less than one years salary, and thats before I put my wifes in it.

All I was referring to is sometimes you need debt in order to obtain opportunities.

Oh, and when I was talking about leasing the car and taking on that debt, in Oz when you are a salary and wage earner the only way to make the car deductible is to novate lease it. By doing this the car I bought becomes tax deductible, and the savings are 40%. Basically my car only cost me 60% of its purchase price, but without the debt it would have cost me a lot more and I would have had to use my existing capital in order to buy it. The minimal interest I pay is far outweighed by the taxation benefits and the other investments I have made with my capital.

[blacksuperman]

Originally Posted by Frank Drebin

I had a reply typed out but you did it better. Good post.

The only thing I have to add is that I kind of agree with humblegenius, make your money work for you instead of paying down debt with minimal interest. The part in bold is correct as long as they get there at the same time. If you spend your whole life "playing it safe", it dont matter how much money you have when you're 65, you've missed out on most of your life to save cash.

I also don't agree with missing out on stuff like vacations when you're young. It's worth the cash and the financial sacrifice to enjoy life when you're young. That's where its sooo important to find a job that pays well. (easier said than done, I know.)

Thanks Frank.

This is why there are so many personal finance books out today. There are so many different "right" ways of doing things. It is that each person must identify which "right" way is right for them. If they choose a method that is not in alignment with their beliefs, and goals, they will live a life with added stress until the imbalance becomes more balanced. It's all good.

I will agree with the first bold statement only if we are speaking in the extreme circumstance. I cannot speak for Ruben, but I myself agree with Ruben's strategy, however, the key is to have a budget that achieves goals that you can live with. Speaking from personal experience, one can spend most of their life saving cash while at the same time enjoying life. Spending more doesn't equate to having more fun. I budget my expenses and savings, while at the same time there is an "entertainment" and a "vacation" portion to the budget. This allows us to stack money really fast, control spending and enjoy leisure activities and purchases.

For example, at the begining of this year we paid for a trip to Cancun for a week, and a trip to the Cayman islands for this coming November. The point is that with the budget planned, we were able to plan and pay for vacations long in advance without credit card debt and all expenses are covered before even taking the trips (not to mention you often get better deals booking so far in advance).

When you live below your means, this doesn't mean you become a mieser and live in poverty, you simply add structure to your financial life.

Ask yourself this question:

If a fortune 500 company has a budget when they have a multi-billion dollar bank account, why shouldn't I?

The point behind my budgeting and planning is to become 100% debt free and at the same time increase my income. This will allow me to spend more if I choose to because more money will be available through reduced expenses and increased assets and income. The key is to remain disciplined long enough to get a big snow ball of income through asset appreciation acquisition and debt elimination. Then you can loose your grip on the proverbial wallet a bit and spend a little more if you choose to without hindering any progress.

For me, I have found it much more stressful to be under the gun to earn money because I had big bills and huge financial obligations. Making money is not stressful, what is stressful is the what happens if you don't make money when you have big obligations.

[blacksuperman]

Originally Posted by humblegenius

All Im merely saying is debt can work for you if you know how to manage it. Ive prolly come off as sounding like Im massively in debt but Im making all this coin from it, but in reality my total debt is less than one years salary, and thats before I put my wifes in it.

All I was referring to is sometimes you need debt in order to obtain opportunities.

Oh, and when I was talking about leasing the car and taking on that debt, in Oz when you are a salary and wage earner the only way to make the car deductible is to novate lease it. By doing this the car I bought becomes tax deductible, and the savings are 40%. Basically my car only cost me 60% of its purchase price, but without the debt it would have cost me a lot more and I would have had to use my existing capital in order to buy it. The minimal interest I pay is far outweighed by the taxation benefits and the other investments I have made with my capital.

In your case it does appear that you have made the right decision to use debt as a tool. Also, initially, it did appear as though you had mountains of uncontrollable consumer debt. I will also admit to not being familiar at all with Australian monetary policies.

I personally am not 100% against debt either. For the past couple years I have been taking 0% cash and stuffing it into high yield FDIC insured accounts and repaying it before the interest begins to accrue (usually after a year). I never spend the money that is borrowed, I just use the debt to get paid extra interest and pay it back. Back to 0 debt after each year.

So, I do agree that in some cases debt can be a useful tool to propel your financial growth. Most lack the self control and end up hurting themselves with debt.

[humblegenius]

Im interested to see what other peoples ideals are on financial freedom.

[Murdered_Out]

I plan on dying young, so I blow every cent I earn on things that give me immediate gratification.

[rubenramos2]

Since the healthcare bill passed the House, what is it going to do to the stock market?

[RHockey84]

Originally Posted by rubenramos2

Since the healthcare bill passed the House, what is it going to do to the stock market?

That is a very good question...

[rubenramos2]

I can't believe the stock market rose by over 200 pts today. I don't know what to think. I am afraid it is false and only a matter of time 'til it comes crashing down. I hope I am wrong.