2 Episode results for "one thousand fourteen dollars"
1034: Is It Risky Borrowing Money To Invest? by Chris Reining on Margin Investing & Investment Portfolio Advice
"The quick we recommend listening to this. Show on spotify where you can listen to all of your favorite artists and podcasts in one place for free without a premium account. spotify has a huge huge catalog of podcasts. On every imaginable topic. Plus you can follow your favorite podcasts. So you never miss an episode. Premium users can download episodes to listen to off off lime wherever and whenever and easily share what. You're listening to with your friends on instagram. So if you haven't done so all right be sure to download the spotify APP search for optimal finance finance daily on spotify or browse podcasts. In the Your Library Tab also make sure to follow me so you never miss an episode of optimal finance daily. This is optimal finance daily episode. Ten thirty four. Is it risky borrowing money to invest by Chris Rining of Chris RINING DOT com. And I'm Dan I'm your host and this is where I read to you from some of the best blogs on personal finance. I'm here every single day bringing you this great content including weekends and holidays. We've actually got five shows where we do this same format but covering different topics so you can search for optimal living daily wherever you're hearing this to find all five of our narration style. Dial podcasts but for now let's get right to our post from Chris as we continue optimizing your life is. Is it. Risky borrowing money to invest by Chris Rining of Chris Rining DOT COM. Today's question comes from Jeremiah. He asks quote. Hey Chris obsessed with your website and advice keep up the great work. I had a question I wanted to run by you. I was looking online at smaller loans and came across some pretty decent terms and had an idea. I wanted to see what you thought about. I can borrow fifteen thousand dollars or possibly more for around three percent interest for three to five years my choice and and was considering doing this and investing that cash into ETF's index funds mutual funds. ETC Now I know the first reaction is probably. Why would you borrow money to invest vest? Fair question my thought process is I can borrow this money at three percent interest and more likely than not be able to get a much greater return than three percent over that three to a five year term. Maybe I'm just being really naive here. Please tell me if that's your honest opinion but I'm really wondering if you think this would be a good idea. Can you help me see where my faults vaults are. If you don't agree and quote since eighteen seventy one. The stock market has returned about nine percent. People will say the market won't have those same returns going forward. That's fine people have been saying lots of things for a long time still wouldn't you're talking about doing is a bad idea and I'll tell you why no one on this planet. Economists analysts strategists nowhere. The market is headed in the short term. On average the market falls ten percent once a year about twenty percent every four or five years and about thirty percent every decade. So can you tell me what happens when you borrow fifteen thousand dollars your investments rise nine percent the next two years but then falls fall save twenty percent. Here's the math. The first year your fifteen thousand rises to sixteen thousand three fifty the second year. Seventeen thousand eight twenty two two and the third year falls to fourteen to fifty eight now. Your loans do in reality. That's not how this would work alone. Requires you to make monthly payments commits. You're constantly selling investments investments. That need to be a taxable brokerage account. So you're also paying short term capital gains tax the way investors typically typically borrow money to invest is with margin. You apply for margin in your brokerage account borrowing money from your broker. Let me tell you a story about margin. There was this twentysomething thing investor who bought a small amount of this biotech stock called Salaya. The stock started doing well so he continued buying more but this time using margin all of a sudden the stocks doc started falling from a high of two hundred seventy six dollars. He's thinking what idiots and uses margin to buy more shares. He can't believe it when it falls to one seventy he. He buys more stunned as it falls to one fifty he buys even more and when it finally hits one thirty. He sells every other stock. He owns raising all the cash he can Dan and margins himself to the Gills. He's convinced the stock is going to rebound and when it does. He's going to make a massive prophet. It then falls to eighty five dollars at this point. His broker is forced to sell his entire position in order to cover his margin debt. Yeah he's sixty thousand dollar brokerage account which took three years to build is wiped out in just two a week's worse he now owes his broker fifteen hundred dollars as for Sarah. It was eventually acquired at eight dollars. You see investing really has nothing to do with money. It's mostly about avoiding bad decisions. And I started using decision trees to help with this after all I'm human and make emotional and psychological mistakes just just like everyone else. Here's a personal example. I like keeping three to five years of living expenses in cash. Should that be sitting in cash in a money market fund or invested did. What's the best decision decision number one cash? Earning zero percent one thousand dollars times. One is one thousand dollars. Decision Decision number two money market funds. Earning two percent one thousand dollars times one point zero two equals one thousand and twenty dollars decision number three invested earning nine percent one thousand dollars times one point nine he qu'ils one thousand and ninety dollars. Investing is the best decision but also also the only decision that involves risk remember on average the market falls ten percent every year about twenty percent every four or five years and about thirty percent every decade okayed. And because there's no way to predict if you're going to get caught in a decline in need to incorporate uncertainty into the decision. Here's how you do that. Let's say you think there's a forty percent chance. The market falls ten percent leaving you with nine hundred dollars and a sixty percent chance. The market goes up nine percent. And you'd have one thousand ninety dollars to who evaluate this decision. You need to work backwards. Nine hundred dollars times point. Four plus one thousand nine hundred times point six equals one thousand fourteen dollars worse. This means you'll probably get worse. Returns from investments earning nine percent one thousand fourteen dollars then from a money market funds. Earning two percent one one thousand twenty dollars decision trees aren't perfect but they are a useful tool to think through options to make the best decision. Make sense we've been in a bull market. Since since March of two thousand nine the market has returned over three hundred percent so anyone invested in this timeframe has made money. And if you've been borrowing money to make money using using margin it's magnified those gains your spouse thinks you're smart. Your friends are jealous. And you're sitting there. Thinking borrowing money to invest. Was a good decision. Okay but but what happens when the market falls like Warren Buffett famously said only when the tide goes out. Do you discover. Who's been swimming naked? Sir Sir. You just listened to the post titled. Is it risky borrowing money to invest by Chris Rining of Chris rining dot com and a real quick thanks to anchor for hosting this podcast. Anchor is the easiest way to make a podcast. They'll distribute podcast for you so it can be heard everywhere spotify a apple podcast Google podcasts. And many more you can easily make money from your podcast to with no minimum listenership anchor gives you everything you need in one one place for free which you can use right from your phone or computer creation tools. Allow you to record and edit your podcast so it sounds great download. The anchor occur APP or go to anchor Dot F._M.. To get started and that'll do it for this installment of optimal finance daily hope. You have a happy rest of your day and I'll see you back here tomorrow. For the Thursday show where your optimal life awaits.
1215: If You Want To Be Bad, Follow A Good Spending Ratio by Sam of Financial Samurai on Getting To Financial Freedom
"Real quick! We recommend listening to this show on spotify where you can listen to all of your favorite artists and podcasts in one place for free without a premium account, spotify has a huge catalog of podcasts on every imaginable topic, plus you can follow your favorite podcasts, said never miss an episode. Premium users can download episodes to listen to off lime, wherever and whenever and easily share what you're listening to with your friends on Instagram, so if you haven't done so all right, be sure to download the spotify APP search for optimal finance daily on spotify or browse podcasts in the your library tab also make sure to follow me, so you never miss an episode of optimal finance daily. This is optimal finance daily episode twelve fifteen. If you want to be bad, follow a good spending ratio by Sam of Financial Samurai. Dot Com. And I'm Dan reading you the best personal finance blogs on the web each and every day we put those great blogs into audio form for you, and if you enjoy this crazy idea of reading blogs to you for free, it'd be great. If you could share this podcast with somebody today you can simply email them or text them a link to old podcast, dot, com, or even better. If you're able to subscribe to the podcast right there on their smartphone, two really big help to keep this show going and growing. But I'll keep this. Short for you so for now, let's hear today's post as we start optimizing your life. Sir. If you want to be bad, follow good spending ratio by Sam of Financial Samurai DOT COM. I have trouble spending money on things I. Don't need because value the freedom that money by S-. Enjoying complete financial freedom for the last four years I never want to be forced to go back to work for money again. Once you have financial freedom shooting through your veins. You'll do anything to keep the high going. At the same time I struggle finding a proper balance between my earnings and spending to earn money is why we wake up at five am commute in painful rush hour, traffic tolerate micromanager work eighty hours a week. Start a business, ignore our spouses, neglect our kids, and do all sorts of other selfish things, thus if we sacrifice so much, surely we are entitled to spend a portion of our earnings on things. We don't need to overcome spending dysfunction. I've come up with no brainer ratio to help. People spend responsibly. Let's just call it. The Financial Samurai responsible spending ratio F S to Rs. The Financial Samurai responsible spending ratio, the F. S. two RS says that in order to spend a dollar on something unnecessary one. Must I spend two dollars on something beneficial? I want to spend up to sixty five thousand dollars on my midlife crisis car. My current vehicle is a twenty thousand dollar Honda fit which I'm leasing for only two hundred and thirty five dollars a month because I'm turning forty in two thousand seventeen. It's important. I get an impractical car to make sure I continue to feel like a man. In order to spend sixty five thousand dollars cash on a luxury automobile I need to I spend one hundred thirty thousand dollars on something financially beneficial. One. What are you know I did just that by paying down one hundred thirty thousand dollars of a mortgage, so I can lock in two point three seven five percent, and save myself one thousand fourteen dollars a month in cash flow. If you're looking to refinance or get a new mortgage I highly suggest you do so. By checking the latest rates, online rates are at all time lows in twenty. Twenty twenty due to the corona virus and investors seeking the safety of bonds I recommend checking with credible. My favorite online lending marketplace today not only did I reduce debt and increased cashflow I spent several hours producing to twelve hundred plus word posts about my experience that may help increase traffic to Financial Samurai as well. The posts should help other people who are struggling through the same mortgage refinance situation. Use The F. S. two RS ratio along with targets. If you want to really crush, you're spending guilt then I. suggest you not only follow a two dollars good to one dollar, bad spending ratio, but also set yourself goals to achieve first before spending any money on big ticket items. I was very close to buying my midlife crisis car, but the seller stubbornly wouldn't accept my sixty thousand dollar offer after listing his car for sixty five thousand dollars for one month and. And then sixty three five for another two weeks. He's now off to Asia for three weeks for business. The day before he left, he did come back and say that I could have the car for sixty one thousand, but I stuck to my guns because I wasn't one. Hundred percent sure to other ongoing projects were complete one finalisation of my mortgage refinance and to locking in great tenants by depositing their deposit check. When I gave my sixty thousand dollar car offer, my mortgage officer had said my mortgage refinance was complete and that I had nothing to worry about, but given that the process took almost four months I wasn't taking her word for it as for the tenants, I received a strong verbal indication of interest, but they had yet to sign the lease or give me a four thousand dollar deposit check of course the day. The Porsche seller goes to Korea is the day. Day I. Not only see my new mortgage account details online, but I also get assigned lease and deposit check from the tenants I tried my hardest to waste sixty thousand dollars on a toy I didn't need. But alas the spending God's continue to be against me or perhaps my marathon mortgage refinance and extended tenant search were blessings in disguise with a modified black on black race car. With Black Tint I might be getting five hundred dollar. Speeding tickets left and right. For those looking to sell things, and who aren't getting any offers lower your price for goodness sake time destroys the value of unnecessary things. Especially cars don't be stubborn like the Porsche's seller who originally got a sixty two thousand dollar offer for me just prior to my trip to Europe which he rejected if he decides to sell me the car when he returns from his trip next month, I'm an offer fifty nine thousand because I got one less month of ownership. Oh, how I love to negotiate when I just don't care. Keep your finances in check. Having, a financially responsible spending ratio works because no matter how irresponsible you get with your money, you'll probably always be fine because you did something twice as good. Here are some other examples. I can think of. One Cell Two thousand dollars, worth of clothing, shoes, electronics and other household clutter before paying thousand for the latest ultra high definition TV. To pay down ten thousand dollars of student loan debt before spending five thousand dollars on an international vacation. Three by your parents, a five hundred dollar gift before purchasing those stretchy designer jeans. For Fund fifteen thousand dollars of your child's college savings plan before buying a rolex mill Gauss. Five pay down one thousand dollars in mortgage principal before paying five hundred dollars for concert tickets. and. Six contribute twenty five hundred dollars to your digital wealth manager before spending one thousand, two hundred and fifty dollars on a Louis. Vuitton handbag. It's important to spend the good two dollars I before spending the bad one dollar after spending responsibly, you'll probably think more carefully before wasting any money, and even if you do splurge, you'll feel good knowing how to prior moment of responsible spending. You just listen to the post titled If you want to be bad. Follow a good spending ratio by Sam Financial Samurai DOT COM. And a real quick thanks to anchor for hosting this podcast anchor is the easiest way to make a podcast. They'll distribute your podcast for you, so it can be heard everywhere. spotify apple podcast Google podcasts and many more you can easily make money from your podcast to with no minimum listenership anchor gives you everything you need in one place for free which you can use right from your phone or computer creation tools allow you to record and edit your podcast, so it sounds great download the anchor APP or go to anchor. Dot FM to get started. And that you do it for another edition of Optimal Finance daily I will be back with you tomorrow as usual so I'll see there for the Wednesday show where your optimal life awaits.