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  1. #31
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    Quote Originally Posted by ptgatsby View Post
    FWIW, property (land) only increases at inflation (on average) and property (buildings) depreciate in value. Using debt to finance them is only superior because of the amount of leverage available and relative stability, hence not having the debt called on you. That causes the property to rise at inflation and the debt to decrease at inflation, along with the income stream increasing at inflation for the life of the property (building).
    Except when a market is undergoing a correction after a crash and prices are moving back to normal.

    Or when choosing a neighborhood that is increasing in popularity (and price) at a rate that outstrips the local average, and you can reasonably surmise that it will continue to do so for at least the length of the investment.

    It's pretty simple actually.

    Debt is not inherently negative, but is situationally bad simply because needing debt means you do not have the equivalent in cash. For most people means that you bought something you couldn't afford (property included). It doesn't mean that it is sub-optimal to use debt. I'd mortgage myself as much as I could right this moment if someone was willing to do it. I just don't count as security for a loan, sadly.
    It's only situationally bad if you don't know what you're doing.

    General Electric (the largest company in the world) even has to rely on debt (on a daily basis) to cover their operating expenses.

    Debt is only bad if you don't know how much you can afford. To a certain extent, and especially when money is as cheap as it is right now, it makes even more sense to say finance a home purchase and lock in those low rates, while using the rest of the money you would have had to use to buy it cash to invest (either in stocks or reinvest in ones own business) and get a better return on that money.

  2. #32
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    Fifty thousand dollars a year had me sitting pretty.

  3. #33
    Senior Member pinkgraffiti's Avatar
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    Quote Originally Posted by FDG View Post
    I'd say around 45-50k euros gross is a good salary for 2 people to live on (where I live now, western Germany).

    Optogypsy, I gather you're talking about net salary, since you're not considering taxes?



    Why, he's not saying he wants to retire early.

    Moreover, property appreciating in value? Depends on where you live, in the last 20 years properties have taken some strong hits.
    you mean a year??
    please tell me this is a joke. i spend about 1000 euro/month living with my partner (all expenses comprised and for 2 people) in paris and we live fine. our salaries combined are 2000/2200 euro/month (net). we save the rest.

  4. #34
    pathwise dependent FDG's Avatar
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    Quote Originally Posted by pinkgraffiti View Post
    you mean a year??
    please tell me this is a joke. i spend about 1000 euro/month living with my partner (all expenses comprised and for 2 people) in paris and we live fine. our salaries combined are 2000/2200 euro/month (net). we save the rest.
    I mean a year. I said "good salary", implying that you do have some savings. And 2200 net a month summed up over a year makes a salary of roughly 42k euros in Germany (I think taxes are lower in France): I said that's a good salary for TWO people to live on, doesn't mean that they BOTH have to earn 45k a year.
    It's not a joke, really, if you want to live comfortably (meaning: not a student life) you need to have this kind of money coming in. In a fairly expensive city, you may have to spend 700 euros a month to rent an apartment, 300 euros a month for groceries, and another 200 on everything else. Consider then a vacation per year, around 1000 thousand, so 80 euros per month, and you're up to 1300 euros per month fairly quickly.
    1000 euro-month is an extremely low number for Paris, considering that rents are fairly expensive. Kudos to you.
    ENTj 7-3-8 sx/sp

  5. #35
    pathwise dependent FDG's Avatar
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    Quote Originally Posted by DiscoBiscuit View Post
    True.

    What happens if you become disabled and can't work? What happens if you're fired?

    The only certainty is uncertainty. People are living longer (and will continue to do so) and as such spend more years unable to work because of old age.

    Many people say they just wont retire, but age frequently forces our hand on the issue.

    How about if you have a family? Wouldn't you want to pass on a legacy to them?

    How would they survive if you were unable to work? How are the kids going to afford college tuition?

    As long as you aren't in an over valued real estate market, I would definitely recommend investing in rental properties.
    Yes, yes, these are all good motives, but I don't think they imply you should start saving loads of money when you're 23. I PERSONALLY think it's not an happiness-maximizing strategy, considering that later in life you will have a family and have to work hard for your children and have very little time to enjoy your money.
    Some people may disagree with me and that's fine, it's my own personal idea - if someone wants to start a family when he's 24, then he should indeed save money as soon as possible.
    ENTj 7-3-8 sx/sp

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    pathwise dependent FDG's Avatar
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    Quote Originally Posted by DiscoBiscuit View Post
    General Electric (the largest company in the world) even has to rely on debt (on a daily basis) to cover their operating expenses.
    Allright, if you're a company with an enormous amount of capital and cash flow which allows you to land relatively low interest rates you can manage with this strategy. I wouldn't recommend it for private investors who have to work, unless they're on the verge of making it big.
    ENTj 7-3-8 sx/sp

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    Quote Originally Posted by FDG View Post
    Allright, if you're a company with an enormous amount of capital and cash flow which allows you to land relatively low interest rates you can manage with this strategy. I wouldn't recommend it for private investors who have to work, unless they're on the verge of making it big.
    That's all a part of knowing your personal financial standing and knowing how much debt makes sense for you to take on.

  8. #38
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    Quote Originally Posted by FDG View Post
    Yes, yes, these are all good motives, but I don't think they imply you should start saving loads of money when you're 23. I PERSONALLY think it's not an happiness-maximizing strategy, considering that later in life you will have a family and have to work hard for your children and have very little time to enjoy your money.
    Some people may disagree with me and that's fine, it's my own personal idea - if someone wants to start a family when he's 24, then he should indeed save money as soon as possible.
    The earlier you start, the less you have to save as a percentage of income.

    And compound interest. If you don't fuck it up and start young, there's no reason your Roth IRA can't be worth 7 million by the time you retire.

    To build an empire it helps to start young.

  9. #39
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    If wealth accumulation is not your goal at all, then you can pretty much ignore anything I've said.

  10. #40
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    It also depends highly on what one's lifestyle is like, and what their definition of being comfortable is. One should be very realistic about what their spending habits will truly be like. I'd recommend keep a spreadsheet to see trends in one's spending in broad areas. Are you eating out everyday? How much are you spending on the weekends? Shopping? What is your most expensive leisure activity? Hobby? How often do you partake in it? Do you like to collect something, that can be expensive?

    Meaning, account for indulgence habits. We can all assume that we'll have self-control and know exactly how we're going to spend our money, but you'll be surprised to realize that most people are unaware of how much money adds up for little things that they didn't even account for. Because it is an indulgence habit.

    From my personal experience, I've found that it's counter-productive to set a budget without realistically acknowledging, and, accounting for one's vices/indulgences, etc, as an unspecified "savings" - for those moments when your spending habits catch up with you or your call to answer your indulgence is too strong to make the responsible, mature decision to resist.

    I know that my Archille's heel is that I love to travel. I travel, on average, 3 times a year. And one of those 3 is a big trip, usually. Like going away for a month. And, I like to do stuff. I'm not a fan of just lazing on the beach. I like to explore the place, try different experiences, which can get very, very expensive. Did a trip last year to New Zealand and AUS lasting a little over a month. We moved to a new city after every 2 days, and did some excursion every day. We planned the hell out of it, to minimize costs (yay, ESTJ friend!) but, taking over 15 flights, hotels/hostels, food, transport within the cities/towns, big excursions, enjoying the nightlife, it adds up. Total cost, little over 8.5K.

    For the priorities in my life, what I call comfort, is to be able to do this, without needing to worry about the money first. Whether I'll be able to afford it. Whether I'll have a debt because of it (fyi, I would never travel by creating a debt for myself). Whether after such an expense, I'll be able to afford my everyday living expenses. Rent, gas, food, bills, etc. etc.

    So, I save. Not for any imminent trip, or a particular thing in near future, but because I know, am aware, of this "vice" (hobby) of mine. And I don't want to feel restricted. So I have my "fun bank", and I put away a bit to be able to partake in what I love, what gives me joy, which, ultimately brings me a sense of comfort.

    In this regards, it made sense to me to start saving young. Because, young is when I'll be able to do these kinds of exploring, as once I'm bogged down with family, etc., of course, I won't be able to partake (as much) in this lifestyle. My indulgence savings helped greatly in this regard.

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