RE: Cudos to Apex Tool Group

[Leon]

I try to hang out with smart people, it rubs off on me ;~)

[Leon]

Yeah, but I think if this were taught, in a way people could understand, it would give more people some idea's. The problem is the bombardment of advertizing ultimately showing you that you are not keeping up with the Jones'. There are few things as rewarding as not having a rent or mortgage payment.

My son graduated with his masters degree in accounting when he was 22. In the next 5 months he passed all 4 of his CPA exams with a 92 average, all before having his first real full time job. He had been picked out a year earlier to come to work for a big 4 accounting firm. He bought our home from us at market value in Oct 2010. To save paying PMI he put enough cash down to skip that expense. By the summer of 2013 he paid that mortgage off. At age 25 he was debt free and a home owner. He was very successful in college but I think he knew how to handle his money long before he started college.

I often introduce my son as my retirement plan. ;~) I got a big kick out of an introduction a couple of weeks ago. My wife and I and my son were visiting my father, in a memory care center, and met an older couple, he was a resident of the center and his wife was there to visit. She asked my son what grade he was in...;~)

Yeah we are darn proud of that kid, we picked a good one when we brought him home from the hospital 27 years ago.

Sorry for the bragging, it just pops out. ;~)

[krw]

Exactly right. All I did is list some of the changes.

[krw]

It happened in WI. It *can* happen elsewhere. It *will* happen but it might take a major crash first.

I found a report on VT schools, a couple of years ago (which was quickly taken down). Basically, statewide, they had a classroom teacher for every 13 students. For every two classroom teacher, they had not only a teacher's aid but a non-classroom teacher. That's a student to teacher ratio of 6.5:1. That doesn't even count administration, which was equally absurd. Yeah, there's a lot of places to cut without even touching the students but they're irrelevant.

[krw]

Spreadsheets just make more complicated messes. If you can't solve a problem without one, you can't solve it with one.

Interest tables will do the same thing.

Really! Owners tend to be quite conservative, financially, and know the time value of money.

We paid our AL home from a $150K mortgage down to $30K in the three years we lived there. We could have paid this one off when that sold but bought two cars with cash, instead. Our mortgage is less than $30K now and it will be paid off shortly.

Good idea. There are many things that need to be taught but it's not going to happen in the schools.

He was kidding. It's not unusual, at all, for people to pay cash for homes. A quick search finds an article that states that 42% of purchases were cash transactions in Nov '13.

[Ed Pawlowski]

In recent years there have been many problems with home values, mortgages, etc. Anyone watching the news know what I mean. What gets me is the 65 year old couple with a big mortgage problem. WTF? Why do they still have a mortgage at that age? It does not take a lot of brain power to know your income will go down when you retire and it is easier to live your daily life with the house paid off.

[DerbyDad03]

It is not a given that a person's income will go down when they retire. Wit h proper planning a person can have as much, or even more income, when they retire. I see it all the time.

In addition, if you can make more money by investing your money when mortga ge rates are low, retaining the mortgage makes sense. Is there more risk? P ossibly, but with a properly designed portfolio, one that allows you ride o ut the rough times, a lot of that risk can be mitigated. Do some people wan t the peace of mind that the house is paid of? Yes. If it helps you sleep b etter knowing that it is paid off, then by all means get rid of the mortgag e, even if you are paying 3% and making 5%.

Even extremely rich people take out mortgages when they can get a rate that is lower than they can make with the same money. Why tie up millions in a home when they can invest it in a profitable business? That strategy works on smaller scales also.

[Ed Pawlowski]

Sure, but how many people do that? How many have the ability? I'm talking about the other 90%.

Too many homeowners are using the equity in their house like an ATM. Want a new car? Take out a home equity loan and we can get a better car and take a nice vacation. I'm talking about the people that buy a house, live in it for 19 years, owe about 95% of the value rather than have paid down the mortgage.

[Leon]

LOL, are you one of those?

Essentially that is what my spread sheet did, except it let you vary the amount of monthly extra contribution or not and shows you the date that the loan would be paid with or with out contributions and after pay off the amount you saved for the remainder of the original term. Keep in mind that I made up this spread sheet almost 30 years ago. I'm sure that there are better ways now but back then not so much.

Well, it is the norm to have house payments, most don't think of not having them. I also pointed out to him that putting extra money in on his regular payment was like getting the same interest back as a savings account would have done at the time. If his mortgage interest rate was

8% it was like earning 8% on the extra money he paid in each month as he was not paying interest on that amount.

Yeah we had 2 car payments too. As we paid each off that payment went into the house payment.

Hard to say, it mostly depends on whether the big machine allows it or not.

I'm still talking about 20 years ago and late 30's to early 40 somethings. IIRC no one I knew was not paying a mortgage or rent.

[Leon]

Well I can almost understand it these days with interest rates as low as they are. Keep the cash and make a monthly payment that is likely to never be paid off. It is not a great way to look at it but if you have a life expectancy of another 7~8 years and you buy a home with a 30 year mortgage you get to keep most of your cash and have the big house too.

[DerbyDad03]

With proper planning a person can have as much, or even more income, when they retire. I see it all the time.

rtgage rates are low, retaining the mortgage makes sense. Is there more ris k? Possibly, but with a properly designed portfolio, one that allows you ri de out the rough times, a lot of that risk can be mitigated. Do some people want the peace of mind that the house is paid of? Yes. If it helps you sle ep better knowing that it is paid off, then by all means get rid of the mor tgage, even if you are paying 3% and making 5%.

that is lower than they can make with the same money. Why tie up millions i n a home when they can invest it in a profitable business? That strategy wo rks on smaller scales also.

No argument...I was simply responding to both of your blanket statements by offering some alternative scenarios.

"Why do they still have a mortgage at that age?" is a valid question but no t necessarily a WTF question.

There are so many different circumstances (some good, some bad) that I don' t even know if "90%" works (but that's not an argument either). Some people would rather pay their kids' college tuition than pay down their mortgage so the kids aren't saddled with student loans. Others may have had medical or family or job related issues that prevented the payoff. Still others fou nd more profitable things to do with their cash than pay down the mortgage, things that now allow them to have a comfortable retirement even with a mo rtgage payment.

All I am saying is that we can't assume that they are "wrong" to have a mor tgage at 65 until we have a clear picture of their overall financial situat ion.

[Ed Pawlowski]

You can use all the interest tables you want, but the spreadsheet makes quite a difference in perception. For years I just made the payment every month just as most people do and never thought about paying ahead. Then I got a spreadsheet. When I paid my mortgage every month, I'd enter the payment and the extra money. It was an easy visual of how much I'd save. It was an incentive to pay ahead. I quickly made a plan, but as time went by, I paid even more.

[krw]

One of what?

It's called a calculator. They were available back then. ;-)

I still find it amazing. Business owners have to understand interest. that their knowledge of business doesn't translate to their personal life is weird.

We don't have a car payment (on $60K in vehicles), just a small mortgage (less than half that). We chose to pay off the vehicles and keep the mortgage.

Well, there you have your answer.

The numbers for 2013 were up but it wasn't zero 20 years ago. I doubt it's ever been less than 25% but that's just a guess (without searching).

[Puckdropper]

[e-mail] wrote in news: [e-mail]:

if you knew RPN, were only useful, They.

Well, actually I think around 30 years ago TI had come out with the TI30, a scientific calculator still available for less than $30. (They're more like $12 now, with two-line display so the calculator is not read only.)

Puckdropper

[krw]

Is there another way to make calculators? ;-)

There were a myriad of financial calculators around in the '80s.

[krw]

People often look at their mortgage as rent. IMO, it's completely understandable. Most simply don't have the money to pay the mortgage early in its life and later on it loses its leverage. With interest rates as they are, there is a school of thought that says that there are better investments (not that I agree).

[Lew Hodgett]

--------------------------------------------- Still have one that is solar powered as well as Scientific and straight math.

Had it for at least 30 years, and yes less than $20.

Lew

[Lew Hodgett]

Ya made me go dig it out.

It's a TI-36-X solar powered and includes trig and statistics.

If I spent $15, was either hung over of just felt flush.

Lew

[Leon]

Exactly, you get immediate gratification of how any particular payment has saved you money that would normally go to that bottomless pit, interest.

[Leon]

We "had" car payments and a mortgage about 25 years ago. In the last 18 years we have been paying cash for vehicles and paid cash 4 years ago for our current home.