i don't think they're looking for anyone's sympathy or moral approval.
interesting article, one that my wife and i can definitely relate to as young (intern) architects. nice to know that we're not the only profession that struggles through these lean early years.
Don't forget too, Student Loans is some of the "best" debt to have. It's a huge advantage when it comes to time for Tax season and that's a big reason why people will hang onto them longer then they need to.
Archmed, I guarantee you doctors liability insurance is a hell of a lot more expensive than a registered architects. Liability insurance in the state of Ohio for an obstetrician a few years back was $250K a year. That's ONLY liability insurance. That does not include malpractice insurance. and all the other things they have to pay for. They aren't raking it in as much as they once were before the time of managed care. Next time to go to your doctor and get your Explanation of Benefits back, look to see how much ACTUALLY goes to the doctor.
Meta,
i worked those kinda hours all the way through school.....
eventually i had to check into rehab.
but i made it out of school without any student loans!
now the livings easy.....
You'd have to have a successful practice (very successful) or be a primary partner at a very large firm to ever make that in architecture (unless, like meta is planning, you work the hours of two jobs, but even then I'll believe it when I see it - there is a leveling off in architecture salaries)
I think there is a big disconnect regarding educating high school students about loans and money. I didn't plan all that well and I don't know many that did.
There are creative ways to make a good living with architecture, or any profession, but it is extremely rare that someone will do it. Personally, it was the debt that helped motivate me to do something more with my career.
Crazy enough, I was reading that article when I came to Archinect and BAM here it is. You have to keep in mind that 250K is for anesthesiologists (sp?), who in general make much more than any family practitioner. In general, I think doctors deserve a lot of what they make. What if you get 300K in debt and drop out??!!
I think I've said this before, but in terms of difficulty and investment of time, money, and energy, (and liability) being a doctor is on par with being a partner or high on the totem pole in the architectural field. You can't compare a doctor and someone that just graduated with an MArch calling himself/herself an architect. With 700K you can start your own practice or even buy into one, and have plenty left over.
BUT as a random rant, hospitals charge ridiculous amounts of money for ridiculous things, i.e. asprin, bed sheets, tissues (the kleenex variety, not skin) sort of like how popcorn costs ridiculously high at the movie theatre - And that pisses me off.
There is nothing good about student loan debt. I don't see any value in getting 25cents on a dollar tax deduction. It's is all a plan by "others" to introduce the American Population to debt as early as possible. This is extremely black and white. Either you owe money or someone owes you money. From as early as High School the guidance conselors never mention how are you going to pay for College. Your teachers and professors all say, "it's ok we have student loans to." Or "try not to work during school so you can concentrate on your classes." Biggest load of shit I ever heard.
So while we were getting our drivers licenses and learning about how our great white fathers started this country because they didn't want to pay their taxes no one ever thought about teaching us how to be financially responsible. My parents learned from the same twisted system. It has been set up for generations that we will continue to be a country of debt so that those to who we are in debt can benefit. Its a house of cards that will get built up and fall down and then built up again.
Right now everyone is afraid that the mortgage crisis will put this country into a depression. The concern is not with the amount of foreclosures, but the tightening of the credit market. Because people can't take out loans then there is no money to spend. Which means no one is going to Home Cheapo or Macy's or Sears or buying shit from Amazon. There is something very wrong were our economy can only flourish if people are borrowing money. It does not seem very sustainable to me.
I paid $80,000 for two bull shit degrees and have learned more about making my Architectural Dreams come true from reading $100 in books educating myself about finance then any fucking class on Architectural History. Libraries are free. Education doesn't have to cost a lot of money. I am working everyday to turn my situation around.
I agree with J's arithmetic -- that kind of simple math is somehow not pointed out to hapless, eager students... and it should be.
But I do have sympathy for people who have gotten into student loan trouble. A lot of sympathy. It is just so ridiculously easy to get yourself in very, very deep. Stupid? Sure. But I'd argue that it's almost encouraged at many levels. What is more important than education, right?
The perceived NECESSITY of student loans, mortgages, car loans and credit cards is something that has developed bizarre momentum. We gotta build up those credit and FICO scores, right? How else might one buy anything worthwhile...? Lots of people -- most? - have all of those debts. Are they all idiots? Can't be. But it won't work for them forever.
Thoreau -- what a clown, right? Building what he needed -- SHEESH!
One thing I do know is that the $400.00 per month I have been paying for school loans (unsubsidized) throughout the Housing boom would have afforded me and additional 150K of mortgage in 2000, which would have netted me about 300k in equity by now. There is an opportunity cost of borrowing money for school - maybe not so much now with the cooling market....but I really missed the boat while many around me without student debt have profited heavily in the same amount of time.....
so wurdan freo, you mean to tell me your architecture classes didnt set up up for the real world? i dont believe that for a second
daily i am asked to analyze some ancient church in Italy and it relates completely to the door schedule i am working on
please dont tell me any of that is a surprise to you though.
with 80k in education, you bought into it yourself, and i cant imagine it was a surprise to you when you finished school with that amount of debt
i am not sure what the problem is with student loan debt
i have 60k in loan debt and it is not crippling me at all
people need to learn to manage their finances, that is the real problem. i make a large student loan payment, credit card payment, and mortgage payment every month and still am able to put money away into savings
Without asking anyone to be specific about their own situation, can I ask what the monthly payment might be on 60 or 80K worth of student loan debt? Are most paying them over ten years?
my exgirlfriend/future wife's college friend just won 250k in the jeopardy tournament of champions. whats she gonna do with the caish? pay off her student loans a course.
Marmkid you are exactly where they want you to be. What the hell are you going to do with a savings anyway? Earn 4.7% from some online banker on the 5% of your salary that doesn't go to someone else. All the while you're paying 6.5% on a 30 year mortgage, 15% on your credit cards and 5% on your student loans. What if you had no debt and 100% of your salary went towards investments that made you 20-25%. Stick that number in a compounding calculator and let me know what you come up with. I bet the number is so big that you would intuitively tell yourself that there is no way you would be able to make that kind of money. Well why not? It's not that hard if you set yourself up from the start. Once you dig the hole it is very tough, without major changes, to get out of. It kills me that you're ok with the fact that you're putting your hard earned money into someone else's pocket.
I never said I didnt' step into my student loans willfully and ignorantly. My point was I think I would have been better served by 4 years of finances in high school than 4 years of Social Studies or 10 years of English. Shit I have no clue what the fuck a past present participle is anyway. One class in high school may have been the difference from me being an ignorant fool versus me seeking out more education in the area.
The skyrocketing cost of education is ridiculous. My hats off to those of you who managed to pay for it straight up or better yet had the schools pay you to be there or better yet managed to win on Jeopardy!
It would be very hard. But like I said, it would take major changes. The idea is to have your "savings" pay you back enough where you could eat with that money. I think if you start out debt free you can easily be financially free in 10 years. Instead of paying off debt for the next 30 years. Now imagine if you would have started with this plan after high school or before.
your government doesn't want you to be financially independent. it is in their interest for you to be in debt, 1- so you keep paying taxes, social security, etc and 2- so you are less likely to have opinions that you can act on and revolt. that's why they don't teach finance in school, and why it is so easy to take out lots of loans.
Food for Thought: Einstein called compounding interest The 8th Wonder of the World. Take this for example: You give me a penny. The next day you give me two pennies, the next day 4 pennies. Everyday you give me twice as many pennies as you gave me the day before. How much have you given me after a month? Seriously, figure it out and tell me.
Here's another (ben franklin said this one me thinks) "A penny saved is 2 pennies earned." (but he said this because you don't get taxed on the money you save, while you get taxed on the money you earn. so if you earn 1.00, you only get say 66 cents net, but if you save 1.00 you get it all, plus interest. to earn that dollar again instead of saving it you have to earn 1.5 dollars. not to mention the interest you could earn with that dollar now in a savings account.)
By the way, I think my next career will be personal finance. I love this stuff, it is truly fascinating.
you are completely right wurdan
i was an idiot to buy my house
what was i thinking?
you are living in a dream world
you are saying that the entire education system is worthless
who is this "they" that is out to get you
if not for your loans, you would have no education
if you dont like it, go to europe where the university is free
and for the record
i am right where "I" want to be
if you arent where you want to be, go fix it and quit blaming other people for your problems
you are completely right wurdan
i was an idiot to buy my house
what was i thinking?
you are living in a dream world
you are saying that the entire education system is worthless
who is this "they" that is out to get you
if not for your loans, you would have no education
if you dont like it, go to europe where the university is free
and for the record
i am right where "I" want to be
if you arent where you want to be, go fix it and quit blaming other people for your problems
so you're saying debt for school is a bad investment but debt for a house is a good investment? because it builds equity? what about the equity in my brain that school builds?
the idea that with a couple finance classes in high school, someone would have the brilliant idea that not paying for college would set them up financially, is a little ridiculous
in a perfect world, you wouldnt have to pay for anything and still get a ton of money for doing a job you love
plus
if all you learned in high school was about how to keep your finances in order, and things that only applied to the "real world", that would leave a pretty bland education
no art
no music
no literature
no sports, except for those few who become pro athletes
oh wait
what if someone wants to become an artist or a musician or a writer?
and if you use the lame excuse that you knew all along when you were young that you knew what you wanted to do with your life, great
but there are far more people who dont know what they want to do with their life before they go to college than do
since you asked, OK you didn't, but from the strawbeary school of personal finance: school and real estate are the ONLY things you should go into debt for. and that debt has to be manageable and planned (aka REALISTIC).
lletdown, this one's for you, an excerpt from one of the best books I've ever read, The Only Investment Guide You'll Ever Need, by Andrew Tobias. Topic = how you can earn better than 40% annual return. Read it a few times. :) and slowly.
"Say you're a couple who drinks one botle of red wine evvery Saturday night. And say, to keep the math simple, you go for the fance stuff - $10 a bottle. Say, finally, your wine shop is like mine: it offers a 10% discount if you buy by the case. What kind of "investment return" can you "earn" buying by the case? Ten percent? No, it's better than that.
The old way, you paid out $10 every week. Buying by the case, you lay out $108 ($120 for twelve bottles, minus the 10% discount). That means tying up an extra $98, but "earning" a $1 discount on every bottle for doing so. In the course of the year, that comes to $52. Gosh! That's quite a reward for keeping, at most, an extra $98 tied up throughout the year. It works out to better than a 53% return - tax-free, no less, since the IRS doesn't tax you for smart shopping... Actually it works out to 177%, see appendix for details.
(from the appendix) This example has sort of evolved. The first time I used it was in 1978, on the Tonight Show. Say you bought a $10 bottle of wine for dinner every Saturday night, but could instead get a 10% discount buying by the case. You'd "make" 10% on the extra money you tied up. And you'd "make" it in just 12 weeks -a bottle a week for 12 weeks equals one case of wine - which works out, I explained, to "better than a 40% annual return."
I didn't explain how much better. I figured 40% was dramatic enough. Where else can you earn 40% tax-free?
As the years passed, I found people were having trouble understanding this little schtick of mine. Why is it 40% if I just got a 10% discount?
So I tried explaining it in a little more detail. What actually happens, I explained, is that instead of going to the store and laying out $10 for one bottle, you are laying out $108 for 12 bottles. That extra $98 is your "investment." By keeping at most that much extra tied up all year, you save $1 a week on wine - $52 a year. And "earning" $52 a year by tying up $98 is earning 53%.
So now I was up to 53%, and even better tax-free return.
This confused people even more. That first $98 is gone, they would tell me, and now you have to come up with a new $98 to buy your next case of wine.
But think about it. If you were someone who planned to spend $10 a week on wine, $520 a year, and who would have LOVED to save 10% buying by the case but just couldn't scrape up enough money all at once to do it, how much financing would you need?
Would you have to go to a bank and ask for a $400 loan in order to change your buying habits?
No, you would need only a $98 credit line - and you would only fully draw it down that very first week. After that, you would replenish it by $10 a week (the $10 you used to spend on wine by the bottle), which means that after 12 weeks, when you needed to buy the next case, you would not only have replenished the full $98, you'd actually have an extra $12 to work with (the money you save buying the case). So now you'd have to draw down only $86 of you $98 credit line.
In other words, to finance this change in buying habits you'd need to borrow a maximum of $98. but you'd only need to borrow that much the first week. Within 10 weeks you'd have paid the balance down to zero; then run it back up to $86 in the 13th week to buy your next case of wine; then paid that off in 9 week; then run it back up to $74 to buy your next case - and so on. On average, over teh curse of the year, you are using far less than the full $98 to finance this change in buying habits.
So the return on your decision to tie up that $98 at first, and then gradually less, is actually much greater than 40% or 53%.
If my friend Less Antman has keyed all this into his Hewlett-Packard financial calculator right - and I've never known him to err - it works out to an annualized 177% rate of return (though try explaining THAT in 40 second on TV.)
It's still only $52 you're earning - $1 a week by getting the 10% discount. but appied to all your regular shopping, it can be the best "investment" in your portfolio.
Next step? Finding a vintage you like for only $8.
It's kinda out there for reasoning, I'm not sure I've completely follow him, but it's interesting nontheless. It certainly challenged my idea of what a dollar is. I recommend this book to anyone and everyone, it changed my life.
To continue this random tangent that Strawbeary has taken us on...
My mother's family is from Detroit. It's not just a stereotype. Our entire Detroit-based family DOES work in the automotive industry.
As such, my mother was able to get a car company "green sheet" discount from her father or brother (I'm not sure if this applies anymore or not) that would give her the at-cost discount/price for a car, which if I recall correctly was about $1,000 per car. She figured out that if she traded the car in every year for - say 10 years - the 10th car was essentially free (assuming the car was $10,000 in this example).
The plan worked. And we got to drive in a new car every year. Pretty sweet.
Strawbeary -- I'm with lletdownl... I'm always ready to learn... willl you PLEASE name a few of your 20 - 25 percent return mutual funds? I'm also interested, what types of properties do you own?
I am currently invested in a few funds that have produced about an average of 23% returns for the past 5 years. Unfortunately, they are all closed to new investors because of their high demand. I have been really happy with DODFX. It's an aggressive international stock fund with low fees. I've been very pleased with the customer service from Dodge and Cox as well.
SandRoad, I don't own any real estate yet, and I don't think it's realistic to expect 20-25% on funds. I think the average for funds is more like 8-12%. I think real estate is the riskiest investment that's why I don't have any. Yet.
Fidelity Diversified International UP 85.36% since I bought it. (This isn't the annual return, but the COST BASIS - my personal gain since I bought it many many years ago.) Over 5 years it is up 20%. Some of my funds have lost 30% too - hence the 8-12% expected average returns.
oh, go to Morningstar.com and look for 4 and 5 star returns. I'm not exactly a financial genious, and I don't want to discuss specifics, but generalities about finance I'm happy to discuss! My mom taught me everything I know about stocks and finance, and she is self taught. I am sure there are some gaps in my knowledge - (disclaimer) I am hardly a professional. I did go to college debt-free by working as a kid and high schooler, and saving and investing that money in mostly energy stocks (we always joke that mid-american energy sent me to college).
Strawbeary -- so's etrade / scottrade, etc. ...for reasearching funds/stocks, they are amazing....Well I certainly wasn't trying to call you out on anything... just hoping we might all give each other a leg up where we architects seem to need it most...finances! An awful lot of mutual funds -- maybe most -- have a tough time even hitting 8 - 12 long term.
I think real estate appears very risky in the current context. ARM's and "flipping" and buying way too much house contribute to this perception. Like everything, it's how you go about it. I'm very conservative.
Money Magazine usually has a yearly break down of high-return mutual funds. Without a doubt, there are many mutual funds with high returns available. Many of these funds produce the 18-25% yearly and have kept the same stanima for many years. They tend to be funds that own a conglomeration of different international company stock. They are aggressive and risky, but usually so is any investment that produces a similar return.
n_ ..... do these typicall have a really tall initial investment figure? I know I've sometimes gotten all excited only to find you need to plunk down like 25K + at a crack...or more.
I have $600 in Fidelity Latin American FLATX a few months ago and it is already up to $900 some.
I have just a few thousand in some of the very well performing funds. I haven't had a problem with not having the minimum required ever.
I think another reason why people don't believe in investing is because usually their first taste is in the company 401k plans which tend to have horrible choices for funds in my opinion.
I am not a professional investor. I am very interested in personal finance but am solely self-educated through books and through long conversations with my dad.
Student Loans
If you think it takes a lot of money to get through architecture school, check this out: Young doctors in debt
Quote: "Chris will likely make $250,000 a year." You'll excuse me if I have a hard time feeling sympathetic.
Yeah these two are doctors. Once they get out of residency they will be making bank.
Plus they didn't have to get condos and and all that other stuff.
We'll never be making 250,000 a year or anything even close.
i know architects who make that much. granted it isn't at all the standard.
i don't think they're looking for anyone's sympathy or moral approval.
interesting article, one that my wife and i can definitely relate to as young (intern) architects. nice to know that we're not the only profession that struggles through these lean early years.
seems like a bad time to introduce baby into the mix
Don't forget too, Student Loans is some of the "best" debt to have. It's a huge advantage when it comes to time for Tax season and that's a big reason why people will hang onto them longer then they need to.
Archmed, I guarantee you doctors liability insurance is a hell of a lot more expensive than a registered architects. Liability insurance in the state of Ohio for an obstetrician a few years back was $250K a year. That's ONLY liability insurance. That does not include malpractice insurance. and all the other things they have to pay for. They aren't raking it in as much as they once were before the time of managed care. Next time to go to your doctor and get your Explanation of Benefits back, look to see how much ACTUALLY goes to the doctor.
Meta,
i worked those kinda hours all the way through school.....
eventually i had to check into rehab.
but i made it out of school without any student loans!
now the livings easy.....
wait, they live in chicago and have 6k a year in car expenses?
$3300 in health insurance?
$2100 in gifts?
$2800 in cable and phone?
seems kinda frivolous and maybe if they re-evaluated where the money was going, the baby wouldn't be "stretching them to the limit"
Good call, holz.box. What kind of cable and phone plan do these docs have?
Don't forget, these guys are a starting at 250k.
You'd have to have a successful practice (very successful) or be a primary partner at a very large firm to ever make that in architecture (unless, like meta is planning, you work the hours of two jobs, but even then I'll believe it when I see it - there is a leveling off in architecture salaries)
I think there is a big disconnect regarding educating high school students about loans and money. I didn't plan all that well and I don't know many that did.
There are creative ways to make a good living with architecture, or any profession, but it is extremely rare that someone will do it. Personally, it was the debt that helped motivate me to do something more with my career.
Crazy enough, I was reading that article when I came to Archinect and BAM here it is. You have to keep in mind that 250K is for anesthesiologists (sp?), who in general make much more than any family practitioner. In general, I think doctors deserve a lot of what they make. What if you get 300K in debt and drop out??!!
I think I've said this before, but in terms of difficulty and investment of time, money, and energy, (and liability) being a doctor is on par with being a partner or high on the totem pole in the architectural field. You can't compare a doctor and someone that just graduated with an MArch calling himself/herself an architect. With 700K you can start your own practice or even buy into one, and have plenty left over.
BUT as a random rant, hospitals charge ridiculous amounts of money for ridiculous things, i.e. asprin, bed sheets, tissues (the kleenex variety, not skin) sort of like how popcorn costs ridiculously high at the movie theatre - And that pisses me off.
There is nothing good about student loan debt. I don't see any value in getting 25cents on a dollar tax deduction. It's is all a plan by "others" to introduce the American Population to debt as early as possible. This is extremely black and white. Either you owe money or someone owes you money. From as early as High School the guidance conselors never mention how are you going to pay for College. Your teachers and professors all say, "it's ok we have student loans to." Or "try not to work during school so you can concentrate on your classes." Biggest load of shit I ever heard.
So while we were getting our drivers licenses and learning about how our great white fathers started this country because they didn't want to pay their taxes no one ever thought about teaching us how to be financially responsible. My parents learned from the same twisted system. It has been set up for generations that we will continue to be a country of debt so that those to who we are in debt can benefit. Its a house of cards that will get built up and fall down and then built up again.
Right now everyone is afraid that the mortgage crisis will put this country into a depression. The concern is not with the amount of foreclosures, but the tightening of the credit market. Because people can't take out loans then there is no money to spend. Which means no one is going to Home Cheapo or Macy's or Sears or buying shit from Amazon. There is something very wrong were our economy can only flourish if people are borrowing money. It does not seem very sustainable to me.
I paid $80,000 for two bull shit degrees and have learned more about making my Architectural Dreams come true from reading $100 in books educating myself about finance then any fucking class on Architectural History. Libraries are free. Education doesn't have to cost a lot of money. I am working everyday to turn my situation around.
I agree with J's arithmetic -- that kind of simple math is somehow not pointed out to hapless, eager students... and it should be.
But I do have sympathy for people who have gotten into student loan trouble. A lot of sympathy. It is just so ridiculously easy to get yourself in very, very deep. Stupid? Sure. But I'd argue that it's almost encouraged at many levels. What is more important than education, right?
The perceived NECESSITY of student loans, mortgages, car loans and credit cards is something that has developed bizarre momentum. We gotta build up those credit and FICO scores, right? How else might one buy anything worthwhile...? Lots of people -- most? - have all of those debts. Are they all idiots? Can't be. But it won't work for them forever.
Thoreau -- what a clown, right? Building what he needed -- SHEESH!
One thing I do know is that the $400.00 per month I have been paying for school loans (unsubsidized) throughout the Housing boom would have afforded me and additional 150K of mortgage in 2000, which would have netted me about 300k in equity by now. There is an opportunity cost of borrowing money for school - maybe not so much now with the cooling market....but I really missed the boat while many around me without student debt have profited heavily in the same amount of time.....
$400 for 150K of mortgage?
Yeah ... my arithmetic shows that the payment on $150,000 at a really aggressive 6% for 30 years is about $900 per month.
plus, mortgage rates today are about 2% points lower than they were in 2000.
so wurdan freo, you mean to tell me your architecture classes didnt set up up for the real world? i dont believe that for a second
daily i am asked to analyze some ancient church in Italy and it relates completely to the door schedule i am working on
please dont tell me any of that is a surprise to you though.
with 80k in education, you bought into it yourself, and i cant imagine it was a surprise to you when you finished school with that amount of debt
i am not sure what the problem is with student loan debt
i have 60k in loan debt and it is not crippling me at all
people need to learn to manage their finances, that is the real problem. i make a large student loan payment, credit card payment, and mortgage payment every month and still am able to put money away into savings
Without asking anyone to be specific about their own situation, can I ask what the monthly payment might be on 60 or 80K worth of student loan debt? Are most paying them over ten years?
my exgirlfriend/future wife's college friend just won 250k in the jeopardy tournament of champions. whats she gonna do with the caish? pay off her student loans a course.
SandRoad, with something that high, you're looking at 30 year notes, with payments around 4-600 a month.
Marmkid you are exactly where they want you to be. What the hell are you going to do with a savings anyway? Earn 4.7% from some online banker on the 5% of your salary that doesn't go to someone else. All the while you're paying 6.5% on a 30 year mortgage, 15% on your credit cards and 5% on your student loans. What if you had no debt and 100% of your salary went towards investments that made you 20-25%. Stick that number in a compounding calculator and let me know what you come up with. I bet the number is so big that you would intuitively tell yourself that there is no way you would be able to make that kind of money. Well why not? It's not that hard if you set yourself up from the start. Once you dig the hole it is very tough, without major changes, to get out of. It kills me that you're ok with the fact that you're putting your hard earned money into someone else's pocket.
I never said I didnt' step into my student loans willfully and ignorantly. My point was I think I would have been better served by 4 years of finances in high school than 4 years of Social Studies or 10 years of English. Shit I have no clue what the fuck a past present participle is anyway. One class in high school may have been the difference from me being an ignorant fool versus me seeking out more education in the area.
The skyrocketing cost of education is ridiculous. My hats off to those of you who managed to pay for it straight up or better yet had the schools pay you to be there or better yet managed to win on Jeopardy!
Wow. Who cares what doctors rack up? They can also afford to pay it.
SO, THIS MAY BE A STUPID QUESTION, BUT...
If you die, with no dependents or spouse or parents...who pays the debt?
someone tell me how i get to invest my a few hundred dollars a month in an account that gains me 20-25%... please... please... please tell me how.....
lletdown, some of my mutual funds pay that much. but then again, some don't.
wouldn't it be hard to put 100% of your salary into savings? i mean you still gotta eat...
It would be very hard. But like I said, it would take major changes. The idea is to have your "savings" pay you back enough where you could eat with that money. I think if you start out debt free you can easily be financially free in 10 years. Instead of paying off debt for the next 30 years. Now imagine if you would have started with this plan after high school or before.
your government doesn't want you to be financially independent. it is in their interest for you to be in debt, 1- so you keep paying taxes, social security, etc and 2- so you are less likely to have opinions that you can act on and revolt. that's why they don't teach finance in school, and why it is so easy to take out lots of loans.
Food for Thought: Einstein called compounding interest The 8th Wonder of the World. Take this for example: You give me a penny. The next day you give me two pennies, the next day 4 pennies. Everyday you give me twice as many pennies as you gave me the day before. How much have you given me after a month? Seriously, figure it out and tell me.
Here's another (ben franklin said this one me thinks) "A penny saved is 2 pennies earned." (but he said this because you don't get taxed on the money you save, while you get taxed on the money you earn. so if you earn 1.00, you only get say 66 cents net, but if you save 1.00 you get it all, plus interest. to earn that dollar again instead of saving it you have to earn 1.5 dollars. not to mention the interest you could earn with that dollar now in a savings account.)
By the way, I think my next career will be personal finance. I love this stuff, it is truly fascinating.
33, I think student loans are pardoned. But credit cards go to the next of kin? I dunno.
you are completely right wurdan
i was an idiot to buy my house
what was i thinking?
you are living in a dream world
you are saying that the entire education system is worthless
who is this "they" that is out to get you
if not for your loans, you would have no education
if you dont like it, go to europe where the university is free
and for the record
i am right where "I" want to be
if you arent where you want to be, go fix it and quit blaming other people for your problems
you are completely right wurdan
i was an idiot to buy my house
what was i thinking?
you are living in a dream world
you are saying that the entire education system is worthless
who is this "they" that is out to get you
if not for your loans, you would have no education
if you dont like it, go to europe where the university is free
and for the record
i am right where "I" want to be
if you arent where you want to be, go fix it and quit blaming other people for your problems
sorry for the double post, my computer is acting funny tonight
so you're saying debt for school is a bad investment but debt for a house is a good investment? because it builds equity? what about the equity in my brain that school builds?
the idea that with a couple finance classes in high school, someone would have the brilliant idea that not paying for college would set them up financially, is a little ridiculous
in a perfect world, you wouldnt have to pay for anything and still get a ton of money for doing a job you love
plus
if all you learned in high school was about how to keep your finances in order, and things that only applied to the "real world", that would leave a pretty bland education
no art
no music
no literature
no sports, except for those few who become pro athletes
oh wait
what if someone wants to become an artist or a musician or a writer?
and if you use the lame excuse that you knew all along when you were young that you knew what you wanted to do with your life, great
but there are far more people who dont know what they want to do with their life before they go to college than do
since you asked, OK you didn't, but from the strawbeary school of personal finance: school and real estate are the ONLY things you should go into debt for. and that debt has to be manageable and planned (aka REALISTIC).
i want to attend the strawbeary school of personal finance. how much is tuition?;)
it's free if you sign up right now.
lletdown, this one's for you, an excerpt from one of the best books I've ever read, The Only Investment Guide You'll Ever Need, by Andrew Tobias. Topic = how you can earn better than 40% annual return. Read it a few times. :) and slowly.
"Say you're a couple who drinks one botle of red wine evvery Saturday night. And say, to keep the math simple, you go for the fance stuff - $10 a bottle. Say, finally, your wine shop is like mine: it offers a 10% discount if you buy by the case. What kind of "investment return" can you "earn" buying by the case? Ten percent? No, it's better than that.
The old way, you paid out $10 every week. Buying by the case, you lay out $108 ($120 for twelve bottles, minus the 10% discount). That means tying up an extra $98, but "earning" a $1 discount on every bottle for doing so. In the course of the year, that comes to $52. Gosh! That's quite a reward for keeping, at most, an extra $98 tied up throughout the year. It works out to better than a 53% return - tax-free, no less, since the IRS doesn't tax you for smart shopping... Actually it works out to 177%, see appendix for details.
(from the appendix) This example has sort of evolved. The first time I used it was in 1978, on the Tonight Show. Say you bought a $10 bottle of wine for dinner every Saturday night, but could instead get a 10% discount buying by the case. You'd "make" 10% on the extra money you tied up. And you'd "make" it in just 12 weeks -a bottle a week for 12 weeks equals one case of wine - which works out, I explained, to "better than a 40% annual return."
I didn't explain how much better. I figured 40% was dramatic enough. Where else can you earn 40% tax-free?
As the years passed, I found people were having trouble understanding this little schtick of mine. Why is it 40% if I just got a 10% discount?
So I tried explaining it in a little more detail. What actually happens, I explained, is that instead of going to the store and laying out $10 for one bottle, you are laying out $108 for 12 bottles. That extra $98 is your "investment." By keeping at most that much extra tied up all year, you save $1 a week on wine - $52 a year. And "earning" $52 a year by tying up $98 is earning 53%.
So now I was up to 53%, and even better tax-free return.
This confused people even more. That first $98 is gone, they would tell me, and now you have to come up with a new $98 to buy your next case of wine.
But think about it. If you were someone who planned to spend $10 a week on wine, $520 a year, and who would have LOVED to save 10% buying by the case but just couldn't scrape up enough money all at once to do it, how much financing would you need?
Would you have to go to a bank and ask for a $400 loan in order to change your buying habits?
No, you would need only a $98 credit line - and you would only fully draw it down that very first week. After that, you would replenish it by $10 a week (the $10 you used to spend on wine by the bottle), which means that after 12 weeks, when you needed to buy the next case, you would not only have replenished the full $98, you'd actually have an extra $12 to work with (the money you save buying the case). So now you'd have to draw down only $86 of you $98 credit line.
In other words, to finance this change in buying habits you'd need to borrow a maximum of $98. but you'd only need to borrow that much the first week. Within 10 weeks you'd have paid the balance down to zero; then run it back up to $86 in the 13th week to buy your next case of wine; then paid that off in 9 week; then run it back up to $74 to buy your next case - and so on. On average, over teh curse of the year, you are using far less than the full $98 to finance this change in buying habits.
So the return on your decision to tie up that $98 at first, and then gradually less, is actually much greater than 40% or 53%.
If my friend Less Antman has keyed all this into his Hewlett-Packard financial calculator right - and I've never known him to err - it works out to an annualized 177% rate of return (though try explaining THAT in 40 second on TV.)
It's still only $52 you're earning - $1 a week by getting the 10% discount. but appied to all your regular shopping, it can be the best "investment" in your portfolio.
Next step? Finding a vintage you like for only $8.
It's kinda out there for reasoning, I'm not sure I've completely follow him, but it's interesting nontheless. It certainly challenged my idea of what a dollar is. I recommend this book to anyone and everyone, it changed my life.
To continue this random tangent that Strawbeary has taken us on...
My mother's family is from Detroit. It's not just a stereotype. Our entire Detroit-based family DOES work in the automotive industry.
As such, my mother was able to get a car company "green sheet" discount from her father or brother (I'm not sure if this applies anymore or not) that would give her the at-cost discount/price for a car, which if I recall correctly was about $1,000 per car. She figured out that if she traded the car in every year for - say 10 years - the 10th car was essentially free (assuming the car was $10,000 in this example).
The plan worked. And we got to drive in a new car every year. Pretty sweet.
Strawbeary -- I'm with lletdownl... I'm always ready to learn... willl you PLEASE name a few of your 20 - 25 percent return mutual funds? I'm also interested, what types of properties do you own?
I am currently invested in a few funds that have produced about an average of 23% returns for the past 5 years. Unfortunately, they are all closed to new investors because of their high demand. I have been really happy with DODFX. It's an aggressive international stock fund with low fees. I've been very pleased with the customer service from Dodge and Cox as well.
SandRoad, I don't own any real estate yet, and I don't think it's realistic to expect 20-25% on funds. I think the average for funds is more like 8-12%. I think real estate is the riskiest investment that's why I don't have any. Yet.
Fidelity Diversified International UP 85.36% since I bought it. (This isn't the annual return, but the COST BASIS - my personal gain since I bought it many many years ago.) Over 5 years it is up 20%. Some of my funds have lost 30% too - hence the 8-12% expected average returns.
Morningstar.com is your friend
n_ --- thank you. I took a quick peek at that one online... No load All Star fund with small expense ratio... very interesting -- thanks again.
oh, go to Morningstar.com and look for 4 and 5 star returns. I'm not exactly a financial genious, and I don't want to discuss specifics, but generalities about finance I'm happy to discuss! My mom taught me everything I know about stocks and finance, and she is self taught. I am sure there are some gaps in my knowledge - (disclaimer) I am hardly a professional. I did go to college debt-free by working as a kid and high schooler, and saving and investing that money in mostly energy stocks (we always joke that mid-american energy sent me to college).
Strawbeary -- so's etrade / scottrade, etc. ...for reasearching funds/stocks, they are amazing....Well I certainly wasn't trying to call you out on anything... just hoping we might all give each other a leg up where we architects seem to need it most...finances! An awful lot of mutual funds -- maybe most -- have a tough time even hitting 8 - 12 long term.
I think real estate appears very risky in the current context. ARM's and "flipping" and buying way too much house contribute to this perception. Like everything, it's how you go about it. I'm very conservative.
Money Magazine usually has a yearly break down of high-return mutual funds. Without a doubt, there are many mutual funds with high returns available. Many of these funds produce the 18-25% yearly and have kept the same stanima for many years. They tend to be funds that own a conglomeration of different international company stock. They are aggressive and risky, but usually so is any investment that produces a similar return.
n_ ..... do these typicall have a really tall initial investment figure? I know I've sometimes gotten all excited only to find you need to plunk down like 25K + at a crack...or more.
The ones I have purchased usually require a $500 initial investment. I think one of them required a $1500.
If you are very conservative investing, I think your odds of getting any more than a 8% return are low.
I have $600 in Fidelity Latin American FLATX a few months ago and it is already up to $900 some.
I have just a few thousand in some of the very well performing funds. I haven't had a problem with not having the minimum required ever.
I think another reason why people don't believe in investing is because usually their first taste is in the company 401k plans which tend to have horrible choices for funds in my opinion.
I need a disclaimer too.
I am not a professional investor. I am very interested in personal finance but am solely self-educated through books and through long conversations with my dad.
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