patrick.net

It is beyond ridiculous for you to suggest that a guy with $400K in cash and 70% of a 1.5MM house paid off cannot afford to buy a $60K car. Seriously--get a grip.

tatupu70 says

$400K in cash is not rich enough? My lord, what do you consider "rich enough" to take a hit during lean times?

At least 3 Million.

Straw Man says

So instead of sitting on a heated leather seat in your car you decided to freeze your ass muddling through the slush on the streets and catching nasty bugs from fellow bus riders?

Last I'd checked, the heating in my car works fine. And I haven't taken a bus in years.

tatupu70 says

cannot afford to buy a $60K car. Seriously--get a grip.

He can do whatever he likes.

Right now, I can run down to the Porsche dealer and pick one up. I don't do it because I'm not interested in being observed by my old friends and neighbors as some showy guy. I like the low key lifestyle.

Don't you folks know the difference between buying experiences like workshops, travel, etc, versus objects? Most ppl's interest in those objects wane very quickly, unless your hobby is restoring classic cars or racing them. This is why for many, money doesn't buy them happiness because they don't use it, to actually enhance their life experiences.

Rin says

We'll see, after your spouse takes you to the cleaners.

Obligatory:

zzyzzx says

tatupu70 says

$400K in cash is not rich enough? My lord, what do you consider "rich enough" to take a hit during lean times?

At least 3 Million.

See ... zzyzzx knows what I'm talking about. He was a former electrical engineer, who'd seen his career get decimated and thus, has higher savings targets because once you're past your corporate America prime, you'll typically experience declining wages and job opportunities.

Rin says

He can do whatever he likes.

Right now, I can run down to the Porsche dealer and pick one up. I don't do it because I'm not interested in being observed by my old friends and neighbors as some showy guy. I like the low key lifestyle.

Don't you folks know the difference between buying experiences like workshops, travel, etc, versus objects? Most ppl's interest in those objects wane very quickly, unless your hobby is restoring classic cars or racing them. This is why for many, money doesn't buy them happiness because they don't use it, to actually enhance their life experiences.

Guess what--we're not talking about you. At some point before the conversation got derailed, we were talking about the OP. And he would like to have a nice car.

We all know the difference between buying experiences and buying objects, but even with that knowledge, most of us like to buy objects too.

Rin says

See ... zzyzzx knows what I'm talking about. He was a former electrical engineer, who'd seen his career get decimated and thus, has higher savings targets because once you're past your corporate America prime, you'll typically experience declining wages and job opportunities.

OK--this conversation is idiotic at this point.

tatupu70 says

Guess what--we're not talking about you. At some point before the conversation got derailed, we were talking about the OP. And he would like to have a nice car.

We all know the difference between buying experiences and buying objects, but even with that knowledge, most of us like to buy objects too.

There are a lot of ppl out there, who wished that they'd invested more and spent less on objects.

The ppl who generally don't have regrets are typically those who'd spent the cash on some workshops, travel to China, etc, because those memories stay with them.

In fact, when one friend finally got himself out of debt, he never regretted those trips to Europe and Asia during his 20s. Today, he's a lot more like me, has got a solid eggs nest, and buys used cars in that Acura range.

Rin says

There are a lot of ppl out there, who wished that they'd invested more and spent less on objects.

Yes, but I guarantee those folks don't have $400K in cash in addition to a 401K. So obviously the OP is in no danger of being one.

bob2356 says

Either way mortgages are heavily front end loaded. You've paid most of the interest already. Getting to 70% either way means most of the payment is principal with the principal portion increasing every month. You certainly won't be saving 4% or anything close to that at this point.

Correct me, nowadays interest is computed on a reducing balance basis, interest is higher initially because you're paying interest on a higher principal and lower because principal is now lower. Hence, every dollar reduce is saving of 4% interest.

Rin says

In fact, when one friend finally got himself out of debt, he never regretted those trips to Europe and Asia during his 20s. Today, he's a lot more like me, has got a solid eggs nest, and buys used cars in that Acura range.

A solid eggs nest indeed.

Glance through all comments.

Superscale/ luxury car is definitely more comfortable. My 7 years Acura TL still feels more comfortable than the 3 months old Toyota Camry XLE.

Your wife is your soulmate, and her happiness is of utmost important. If she is the one who want a BMW, buy it, otherwise just replace the Honda Civic with a new one.

Agree with bloggers who suggest reducing mortgage loan as much as possible, especially from the conversation, alpo is not investment savvy. Any leftover after paying off the loan and car, should be put into an index fund immediately. Selected equities investment is for those who are savvy.

Bigsby says

What a load of nonsense. You can accrue wealth AND buy things you want.

Before Obummer took over you could indeed, now - not so much, esp. with family.

Rin says

Straw Man says

So instead of sitting on a heated leather seat in your car you decided to freeze your ass muddling through the slush on the streets and catching nasty bugs from fellow bus riders?

Last I'd checked, the heating in my car works fine. And I haven't taken a bus in years.

So what this comment was about?

Rin says

During the winter, I'd decided, thanks to the snow, not to drive to Canada.

I thought the thread was about the prudent way to position 200K, not how to be self indulgent. Silly me. I guess we should have quit at hookers and blow.

Anybody whose advice to somebody on how to deploy 200K is to buy A CAR instead of using the money to pay down a mortgage or put it into retirement fund/savings would have to be a Realtor.

CIC and Pat

Do you have any concern on being able to get to the exit when the stock market does correct?

indigenous says

Do you have any concern on being able to get to the exit when the stock market does correct?

As long as I still get my dividends, I really don't care and don't plan on exiting.

In that case buy puts on your own stocks?

Ceffer says

I thought the thread was about the prudent way to position 200K, not how to be self indulgent. Silly me. I guess we should have quit at hookers and blow.

Anybody whose advice to somebody on how to deploy 200K is to buy A CAR instead of using the money to pay down a mortgage or put it into retirement fund/savings would have to be a Realtor.

Thank you Ceffer, you're the best. You've completely gotten it.

I'd both, paid off my mortgage and then, started loading up on a mix of S&P fixed annuity trackers and dividend reinvestment equities (DRIPs), as my bonuses started coming in. And now, as a result of my accruing investments, I can go out and enjoy some hoes, without it impacting my overall retirement plans.

My detractors, with their Puritanical BS, can't seem to figure that out.

Agreed with the upthread poster who suggested putting it in an index fund (use Vanguard). If not that, then Berkshire Hathaway. Buy a Prius.

20k on montreal canadians ( not the hockey team )
180K paydown mortgage..
be a bitch for you to be 100% prudent and be run over by a mack truck tomorrow...

How about of bag of gold coins?

SoftShell says

20k on montreal canadians ( not the hockey team )

180K paydown mortgage..

be a bitch for you to be 100% prudent and be run over by a mack truck tomorrow...

Bingo! And in paying off the mortgage quickly, that liberates some $2K (or more) in monthly cost of living expenses.

Using a simple dividend reinvestment (DRIP) calculator, over the course of 10 years, apply a monthly input of $2K into solid dividend equities, ~4%, over 10 years is $277K. And this assumes a sideways market and no increases in payout.

Ceffer says

I thought the thread was about the prudent way to position 200K, not how to be self indulgent. Silly me

Did you read the OP? Nowhere does he ask for advice on how to invest the money.

I was thinking the same...

Call it Crazy says

alpo says

what should I do with $200K

alpo says

something else...

any ideas?

Yes, thanks for the clarification, pay off the mortgage and then, watch one's monthly cost of living, plummet.

Seriously, back in my parent's generation, everyone looked forward to that day when they'd be making their last mortgage payment. It's only in this generation, where everyone loves to pile on the debt, to enjoy a car or some summer home in the Poconos (PA) or Green Mountains (VT).

so what are you saying? your acl's are intact and you lift weights?

Rin says

Right now, I can run down to the Porsche dealer and pick one up.

Call it Crazy says

You could have saved yourself the time in writing the short novel and just posted the results...

Part of the short story involves a bit of strategy ...

From the example, $1.4K/month is a $168K balance, over ten years, assuming that this is the period where much of it is a principal and not the interest. Thus $300K - $168K is $132K. That $132K, using the fixed S&P500 tracking annuity calculator is $308K in ten years.

And then, that $1.4K monthly extra cash can also go into a DRIP fund with will be $200K holdings in a worst case ten year scenario. The net result here is a paid off home and a nice eggs nest. With the home paid off, one can contract and live in other cities, if the local job market sours for some time period. This then removes the biggest anchor of them all and that's renting in one location for work, but paying off a mortgage in another.

The dependency here is that the short term studio or room subletting is not very expensive in the destination area.

alpo says

I have around 400K of total savings (besides 401k) and a house that is 70% paid off. I am trying to figure out if i should spend $200K of my savings:

1. leave it in savings and continue to live poor now and driving my 10 year old honda civic with lot of body damage inflicted by other people.

2. buy 2015 BMW X5 for $60K + remodel home for $100K and put the rest ($40K) in retirement account?

3. live poor and continue driving beat up honda civic, but use $200K as downpayment for a second home in hawaii - my long term goal is to own two homes fully paid off - live in one and rent out the other for spending money.

Alpo,

I would use the money and pay-off the house. Personally, I don't like the idea of buying a second home. Are you sure you want to travel to the same place all the times? Don't mine if you want to get a new car if you can pay cash for it, and it doesn't hurt your bottom line. Remodeling your house is not a bad idea. Not a fan of retirement account. It's a freaking scam. Only contribute to your 401k up to maximum your company will match and not a penny more.

Once your house is paid off and you have some money stashed away, you are essentially untouchable. Don't you want to be untouchable? Untouchable means f-you money.

http://www.mymoneyblog.com/f-you-money-gambler-movie.html

E-man says

Alpo,

I would use the money and pay-off the house.

Yeah, thats what I am trying to do.

Personally, I don't like the idea of buying a second home. Are you sure you want to travel to the same place all the times?

Actually its more about retirement rather than vacationing. If I own two homes outright, then I could live in one and rent out the other for income. That, at least to me, appears to be a "stable" source of income during retirement rather than relying on insurance company annuity or financial markets which have started to look downright unstable to me.

Don't mine if you want to get a new car if you can pay cash for it, and it doesn't hurt your bottom line.

I can pay for it with cash and it won't hurt my bottom line. The only thing holding me back is that my house is not yet fully paid off and a bit of insecurity around job loss etc. If my house was paid off, I would have bought it by now. May buy by end of the year though even though the house probably won't be paid off by then

Once your house is paid off and you have some money stashed away, you are essentially untouchable. Don't you want to be untouchable? Untouchable means f-you money.

http://www.mymoneyblog.com/f-you-money-gambler-movie.html

After the 2003 artificially engineered housing boom, the 2008 financial crisis where sane experts were warning end of western financial system, and the financial engineering that followed afterwards to revive the economy, the whole finance sector appears to be unstable to me.

So to me what makes sense is to have two houses fully paid off: live in one and rent the other and as far as I can see Silicon Valley is a long way from becoming a Detroit. I need an asset in retirement that can reliably produce income. I don't think putting money in annuity etc qualifies as "reliable". But as long as there are people in Silicon Vally, they will need a house to live in. It may fall and rise in value, but at the end of the day people tend to spend a large portion of their income in housing, plus property taxes are more predictable then rent.

Rin says

From the example, $1.4K/month is a $168K balance, over ten years, assuming that this is the period where much of it is a principal and not the interest. Thus $300K - $168K is $132K. That $132K, using the fixed S&P500 tracking annuity calculator is $308K in ten years.

Stashing money away in insurance companies for a long time just means that you are giving the insurance company a long time to go bankrupt. 10 years is a long time for any insurance company to go bankrupt these days (AIG went bust last time, who is next?). I invested in GM bonds sometime in 2004-05 timeframe. For a while I got good interest, but then it turned out that GM was making money by financing cars (financial engineering) rather than by its automotive engineering operations which were going in loss. I lost a bulk of what I put in when GM went bankrupt. I wouldn't invest in any company for more than two years, I think that is the predictable time frame, after that you might as well toss a coin.