Lottery it is!

[Oxide]

Yeah, it is horrible. And you wonder why we keep pushing building wealth on this forum.


http://news.yahoo.com/s/nm/20060109/od_uk_nm/oukoe_uk_economy_wealth





Remember this - no matter how much money you possibly have, you will always manage to run out. Bill Gates, if he wanted to buy everything he wishes for, would run out. This is the reason people feel they can not accumulate money. The truth is, they are just not giving it a chance. It is the simple law of scarcity - money versus desires.

 

[al77]

Originally posted by Oxide
Yeah, it is horrible.
Remember this - no matter how much money you possibly have, you will always manage to run out.

What is exactly horrible? Most middle class Americans are sitting on a pot of gold: their house and their relatively expensive cars.
But this is mot the main part. They are actually sitting on a much bigger pot of gold: their _extremely_ expensive home loan interest payments. If you buy an average house in average burbs and pay average mortgage, you will pay 2.5 times of the cost of your house in interest. I.e. when you buy a house for yourself, you buy 2.5 similar houses for the bank that gave you a loan.
Nice? Don't forget interest on the cars as well.

No wonder, if people feel poor.
I dislike that kind of journalism: they conduct a survey and do not make any sensible conclusion as to "Why it happened".

 

[Oxide]

You completely missed the point. These people are idiots in the first place because they spend money they do not have. People who DO know what they are doing are making money and using it to make more.

This is about people "Appearing Wealthy" versus being wealthy. This is a guy in a H2 with no money for gas. This is expensive style with maxed out credit cards and no assets. This is America. Welcome.

 

[STR8UP]

Re: Re: Lottery it is!

Originally posted by al77
But this is mot the main part. They are actually sitting on a much bigger pot of gold: their _extremely_ expensive home loan interest payments. If you buy an average house in average burbs and pay average mortgage, you will pay 2.5 times of the cost of your house in interest. I.e. when you buy a house for yourself, you buy 2.5 similar houses for the bank that gave you a loan.
Nice? Don't forget interest on the cars as well.

Interest paid on investment debt is GOOD, remember that. You speak as if it is bad to pay interest. This is only true if what you are buying does not increase in value more than you are paying out.

You gotta get this "all interest is bad" thing out of your head.

 

[STR8UP]

I might print this article.

This is a perfect illustration of how poor people tend to believe that wealth is a result of LUCK and not skill.

I have said this many times.....one of the first steps to building wealth is to understand that you create your own destiny when it comes to money. Luck plays a 1% role. Like one of my business associates always says, "You gotta be in it to win it". The poor buy things that they think make them look rich to others, while the rich buy things that actually make them richer. The poor aren't "in" the game. They are busy playing keep up with the Joneses.

Lets put it this way. I could EASILY sell a couple of my properties and buy the Ferrari 360 Spyder that I have wanted for awhile now. Hell, I could cash out and buy several of them. But instead of doing something stupid lke that, I am instead using that money to invest and make more money. Once you spend the principal, IT'S GONE. Invest the $175k that you would have paid for the car and you can easily make a Ferrari payment with the income you make on that money.

Instead of investing to make money, poor people gamble on the only shot they think they have...the LONG shot. If I win or inherit money, great. But I don't count on luck to get me through life.

 

[ethnomethodologist]

Re: Re: Lottery it is!

Yo, Str8UP, B SR8UP!

Originally posted by al77
What is exactly horrible? Most middle class Americans are sitting on a pot of gold: their house and their relatively expensive cars.
But this is mot the main part. They are actually sitting on a much bigger pot of gold: their _extremely_ expensive home loan interest payments. If you buy an average house in average burbs and pay average mortgage, you will pay 2.5 times of the cost of your house in interest. I.e. when you buy a house for yourself, you buy 2.5 similar houses for the bank that gave you a loan.
Nice? Don't forget interest on the cars as well.

No wonder, if people feel poor.
I dislike that kind of journalism: they conduct a survey and do not make any sensible conclusion as to "Why it happened".

What he's saying here, is that over their lifetime, this family gets to feel rich, if they go around believing what you JUST said "not all interest is bad" and that they want the security of their own home. They are going to PAY 2.5x the worth of their mortgage loan over the lifetime, you are arguing, they should sell their home? I don't believe you are, I have the feeling that you are, trying to get me to, make more money than I spend.

The only thing that pisses me off in the conversations you keep having with people is this. "GO BORROW MONEY, PAY IT BACK LATER AFTER INTEREST ACCUMULATES."

 

[al77]

Originally posted by Oxide
You completely missed the point. These people are idiots in the first place because they spend money they do not have. People who DO know what they are doing are making money and using it to make more.

This is about people "Appearing Wealthy" versus being wealthy. This is a guy in a H2 with no money for gas. This is expensive style with maxed out credit cards and no assets. This is America. Welcome.

I don't think I missed the point since here I totally agree with you.
They spend money they don't have. But look at it realistically: the majority buy homes i.e. spend tons of money they don't have and even more - they pay huge interest on the money they don't have. Look at them: these people are majority in teh country: poor, middle class.. no matter how much they make they still buy houses and have huge debts. It was, it is and it will be like this.
The key is to answer what one can do in order to avoid it?

 

[al77]

Re: Re: Re: Lottery it is!

Originally posted by STR8UP
Interest paid on investment debt is GOOD, remember that. You speak as if it is bad to pay interest. This is only true if what you are buying does not increase in value more than you are paying out.

You gotta get this "all interest is bad" thing out of your head.

What I am saying it doesn't matter if a house increases in value or not. It is irrelevant for those people, they are not going to sell it, they are going to living in it. They are going to sit on that pot of gold and on the pot of gold of intersets they paid.

They do not have business mentality you have, therefore for them it just does not matter. They used to make decision that leads them nowhere. Therefore it is about what and how they think.

And for ordinary people interest is bad since they are not going to use their house to make more money. They simply pay the interest and they lose 2.5*values of their house. This is how most people in US live.

 

[al77]

Re: Re: Re: Lottery it is!

Originally posted by ethnomethodologist


The only thing that pisses me off in the conversations you keep having with people is this. "GO BORROW MONEY, PAY IT BACK LATER AFTER INTEREST ACCUMULATES."

You know, str8up is right, he just can't explain it clearly so people understand. But he doesn't have to have this gift, he is not an educator, he doesn't conduct seminars. He has a business gift, he know what to do to make money - this is much better than to be able to explain things clearly.

I guess if you are interested you may want to go to a local library and pick up a couple of books on REI. Out of 3 books at least one you will understand (at leat I did) and you will see how it works.
Not anyone who is good at what he is doing is able to explain how he is doing it.

 

[Oxide]

Ok, i see what you meant.

To stay on topic - i find this article to be VERY true. I have a friend who just bought a used lexus. with a loan. The guy has about $200 in his checking account and 2 jobs.

Another one bought Eclipse and wants to put a tv in it. He works all the time as well. Both are failing school.


I myself almost got caught in the mix. Almost bought a car about 3 months ago because i thought i could offord it. No matter what people said, i decided to keep riding the junker i have right now, and what do you know, i get fired from my job and now glad to have extra savings to keep me afloat.


To those guys who have the money to spend - STR8Up, back, etc.. - How do you decide if a particular thing is worth buying? If you are at the point where it is OK to buy it just because you want it. (For example, you will buy this car because you can offord 3 times the car's worth)

 

[STR8UP]

Re: Re: Re: Re: Lottery it is!

Originally posted by al77
And for ordinary people interest is bad since they are not going to use their house to make more money.

Too bad for them.

I use EVERY resource I have available to me, including equity from my primary residence. Most people have a huge problem with putting their own house on the line, but money is money. I am confident enough in my abilities that I am willing to use any monetary resource I can get my hands on if it has the potential to make me money.

They simply pay the interest and they lose 2.5*values of their house. This is how most people in US live.

A primary residence isn't really an investment, that I will admit. But what's your point? You think people should save up and pay cash for the thing?

 

[STR8UP]

Originally posted by Oxide
To those guys who have the money to spend - STR8Up, back, etc.. - How do you decide if a particular thing is worth being? If you are at the point where it is OK to buy it just because you want it. (For example, you will buy this car because you can offord 3 times the car's worth)

That's a GREAT question.

But I'm afraid it doesn't have a right or wrong answer. Technically ANY money you take away from your investment pool will result in an "opportunity cost". This means that by spending the money you lose the opportunity for it to make you money.

Let's say I cash out of everything I own and pay cash for a shopping center that provides me with a positive cash flow of $10,000 per month for doing practically nothing. Is it ok to spend this cash flow? Well, you still have the asset that is producing it that is increasing in value, and rents usually go up with time. So it's not like you are out of the game if you spend this income.

You can look at it both ways. On one hand you can spend all of this income that will likely continue to flow until the day you die. On the other hand, if you re-invest some of this income your net worth will grow even larger as time goes on.

Try to be as disciplined with money as possible. At the same time keep in mind that you only live once, and all the money in the world isn't gonna do you a damn bit of good when you are six feet under.

Personally I have reached a point where I feel comfortable spending a little money because I have built enough resources to provide me with the means to make enough money to pay for pretty much everything I want and then some. Now that my tax returns show substantial income, I can also borrow more money easily without having to worry so much about having cash in the bank to use as investment capital.

Another thing to be aware of is that if you really know your sh!t when it comes to money, you can have your cake and eat it too. For example-

One of my business partners is a car dealer. So I have an auction card and can buy a new car every few months if I choose to do so, without ever losing a penny on depreciation. Most people walk onto a car lot and sign their life away on a car that drops in value by half within a few years without giving it a second thought. It makes a big difference when you aren't throwing $5,000 or more per year into a car that you will never see a return on.

I analyze EVERY major purchase decision I make to determine whether or not it is consistent with acheiving my goals. Like the fact that I am in the process of buying the townhouse I live in. I paid a hell of a lot of money for it, but the justification for doing so is that it is in the best neighborhood in town that is undegoing massive redevlopment. I believe that despite the fact that I spent over half a mil that it is actually worth far more and the appreciation will far outpace what I am putting into it.

 

[al77]

Re: Re: Re: Re: Re: Lottery it is!

Originally posted by STR8UP
Too bad for them.

A primary residence isn't really an investment, that I will admit. But what's your point? You think people should save up and pay cash for the thing?

Great question. Look, most people are not going to do much in REI. For them it is much better not to pay a lot of interest.
I guess they will be better off by buying a condo and not a house.
Yes, they may want to start saving, when they have about 70% of the price - buy a condo and pay off the rest fairly quickly.

If they still want to buy a house, they are living well beoynd their means: look, the scneario is this:
They buy a house for $200k, after 30 years they will pay not only $200k but another $300k in interest. And thier home get appreciated maybe 2 times. But they still are living in that house! They still overpaid somehting for it ($100k in my ballpark example).
What is the point for them to buy a house? Just to feel like slaves when they go to work every day for 30 years in order to make their bank happy with regular mortgages?
Not all people can do business. Especially do it successfully.
It is about inclination, talents and luck (to meet right people, to be in the right place etc).

 

[ethnomethodologist]

Re: Re: Re: Re: Lottery it is!

Originally posted by al77
You know, str8up is right, he just can't explain it clearly so people understand. But he doesn't have to have this gift, he is not an educator, he doesn't conduct seminars. He has a business gift, he know what to do to make money - this is much better than to be able to explain things clearly.

I guess if you are interested you may want to go to a local library and pick up a couple of books on REI. Out of 3 books at least one you will understand (at leat I did) and you will see how it works.
Not anyone who is good at what he is doing is able to explain how he is doing it.

Very true, but it is also the person that knows the most about the subject, and does not learn how to teach it, that is doing the most wrongs He could do a lot of work in learning how to teach it to us, in our words, it would make me happier, that you can't deny, only I can.

I could also follow your lead, and read up on something that doesn't concern me yet, or I could take your advice from before, and basically just get mad about borrowing money, and living like the general public and paying 2.5 times more for something than it is worth. Again, 2.5 houses, the bank doesn't pocket 0.5 give me the money back, and than give a house to homeless person now do they?

Tough call, I don't know what to think about it.

 

[STR8UP]

Re: Re: Re: Re: Re: Re: Lottery it is!

Originally posted by al77
Yes, they may want to start saving, when they have about 70% of the price - buy a condo and pay off the rest fairly quickly.

You got it all ass-backwards.

You don't save up fifteen years for a 70% downpayment, you learn how to buy it TODAY for very little out of pocket.

What you are proposing is the equvalent of cutting off your nose to spite your face. What's the point in saving $100k in interest when you are losing $150k in appreciation and tax benefits?

Not all people can do business. Especially do it successfully.
It is about inclination, talents and luck (to meet right people, to be in the right place etc).

It's not at all about luck. It's about pretty much everything BUT luck. If you ever experience it you will know what I am talking about.

 

[STR8UP]

Re: Re: Re: Re: Re: Lottery it is!

Originally posted by ethnomethodologist
He could do a lot of work in learning how to teach it to us, in our words, it would make me happier, that you can't deny, only I can.

Unfortunately the terminology I used is about as simple as it gets.

I don't have the benefit of drawing this out on a dry erase board and using props to illustrate my point, so it's gonna take a little extra brainpower on everyone's part to understand where I am coming from.

I could also follow your lead, and read up on something that doesn't concern me yet, or I could take your advice from before, and basically just get mad about borrowing money, and living like the general public and paying 2.5 times more for something than it is worth. Again, 2.5 houses, the bank doesn't pocket 0.5 give me the money back, and than give a house to homeless person now do they?

Tough call, I don't know what to think about it.

Speaking of words......you should really consider phrasing your posts a bit more coherently. I don't understand half of what you are saying.

 

[ethnomethodologist]

Re: Re: Re: Re: Re: Re: Lottery it is!

Originally posted by STR8UP
Unfortunately the terminology I used is about as simple as it gets.

I don't have the benefit of drawing this out on a dry erase board and using props to illustrate my point, so it's gonna take a little extra brainpower on everyone's part to understand where I am coming from.

Speaking of words......you should really consider phrasing your posts a bit more coherently. I don't understand half of what you are saying.

All true, about is not true though. We would understand it better if you tried to relate to our thinking. Like just go off, and say PRETEND, yeah that scary word. I know, us grown-ups hate it. So I said I'm going to read a book, you should have read that part too, but you don't have compassion for what you don't know about. Neither do I, but at least I try, respect me there. I gave you yours first, made a mistake, you deserve it, but I don't respect people who openly disrespect me, and don't give it back when I ask.

Well you do have our minds for the erase board and props don;t you? Of course you are a business man,and underestimating intelligence is how you make money, I get that. Now you are on a seduction website, trying to teach things to people, who don;t want to listen to people giving bad advice. It's true advice, but it is delivered horribly. Sorry for being your friend, but they are honest, that's why we love them. I'm putting in a lot of brainpower, but your points are so skewed, that it seems like a waste of my time. I get what your saying, so do the other 4 people responding to you in the two threads I am talking to you in. They also don't completely understand.

Why didn't you respond to my other post I made to you. The only one with bold writing in it, the one that docs also responded to. The reason was because you keep saying take out loans. Initially people talked to you because you said you were gaining an extra 5k... in the end, after all the bull****, you say oops "I only borrowed it". How great a time of our own did we just waste there?

I'm not saying any of this to scare you away, you told me to be coherent. You finally responded to me with some emotion. That is the only thing I can respond in kind with. Hope you understand now, you've got to care, I am trying my hardest. I will go read a book, well three, and hopefully understand one. We'll talk business after that.

Until than, try to speak our language, it'll help you, and your business skills.

 

[DrMetallica]

Re: Re: Re: Re: Lottery it is!

Originally posted by al77
What I am saying it doesn't matter if a house increases in value or not. It is irrelevant for those people, they are not going to sell it, they are going to living in it. They are going to sit on that pot of gold and on the pot of gold of intersets they paid.

They do not have business mentality you have, therefore for them it just does not matter. They used to make decision that leads them nowhere. Therefore it is about what and how they think.

And for ordinary people interest is bad since they are not going to use their house to make more money. They simply pay the interest and they lose 2.5*values of their house. This is how most people in US live.

It's the cost of doing business, friend.

The bank has many things to worry about, such as the risk of lending out $500,000, plus you need to remember about the bank's enemy... inflation. Your number of 2.5, where did you get that? Anyways, the bank must make a profit. Are you suggesting people take their $30,000 (or whatever they have accumulated in savings for a downpayment on a house) and buy a trailor in a nice trailor park?

No, people want nice things, they will pay out the ass to have nice things now... always remember that $1 today is infinitely more valuable than $1 tomorrow, because of the oppurtunity of time.

 

[al77]

Re: Re: Re: Re: Re: Lottery it is!

Originally posted by DrMetallica


1. It's the cost of doing business, friend.

2. Your number of 2.5, where did you get that? Anyways, the bank must make a profit.

3. Are you suggesting people take their $30,000 (or whatever they have accumulated in savings for a downpayment on a house) and buy a trailor in a nice trailor park?

4. No, people want nice things, they will pay out the ass to have nice things now...

1. It is. But we are no talking about banks, it is their problem what it cost them. We are talking about ordinary people, you and me. For us paying $250k instead of paying $100k is to much.
We have to figure out somehting in order to not to get in the slavery of the banks.

2. You have any other numbers??
Anyway, that is simple. Go to any bank (websites), get a 30 year loan numbers, add them up and you will see where 2.5 came from.

3. I suggest buying a condo. Why the heck you need a house?
So you can mow the lawn and go to home depot every sunday to so you could part with your cash for some odd home imporvements? To feel like everyone else? Thats doesn't make sense: to live beyond your means just to belnd with the society standards.

4. It is not a problem. The problem is they buy what they cannot afford and they go into the slavery of the banks. Do you want to be a slave with all those "nice things" like a golden collar and cuffs?

 

[al77]

Re: Re: Re: Re: Re: Re: Re: Lottery it is!

Originally posted by STR8UP

1. You don't save up fifteen years for a 70% downpayment, you learn how to buy it TODAY for very little out of pocket.

2. What's the point in saving $100k in interest when you are losing $150k in appreciation and tax benefits?

3. It's not at all about luck. It's about pretty much everything BUT luck. If you ever experience it you will know what I am talking about.

1. Yes, it sure can be done. But .. why? Does it make sense for sombody who is going to live in a house?
Lets see:

A house costs $100k. After 30 years the buyer will pay $250k.
He lost $150k.

You added:
But after 30 years his house will cost much more, lets say $200.
Even if it get to $250k, we should not forget the inflation.
$100k 30 years ago was a huge amount of money. Now? Not anymore.
But that is not even so crucial: he is not going to sell the house, he needs a place to live, so he is simply is sitting on that pot of gold for 30 years, feel like a slave to a bank and work every day just to pay his mortgage. Is this situation even remotely reminds you financial freedom? Or fulfillemtn of his dreams?

What I suggest is a solution for somebody who is not doing REI: busy at work, no talent and no inclination.
The approach is to save $60-70k (I think it is doable for a family? This is not a huge amount of money if you have a decent job), but a condo under $100k and pay the rest off quickly.
Advatanges:
1. Can be done in a couple of years (saving the downpayment).
I.e. not being in the slavery to the bank!
2. Overcost is much lower than for a house
3. Many people can afford it (Not all, ok, but many).
4. Paying less taxes
5. Not thinking and paying for outside repairs
6. They will get their place in a couple of years and in another couple of years they will have a place to live and free of any kind mortgages. i.e. for next 30 years they will enjoy not paying that outrageous $1000+ mortgage to the bank. Would anyone enjoy having extra $1000+ a month for next 30 years?

Disadvatanges:
1. Not having a lawn to mow.
2. Having less space
3. Not being able to add a room.
4. Not having a back yard.

So what is better: to buy a house or to buy a condo?