Order to pay off debts

[SlumTodd_Millionaire]

You typed a lot of words without saying anything of substance. It doesn't matter whether your numbers are $1715 a month in debt or $500, the numbers still work the same way in the end.

Waste of time, I suppose. This is why some people get rich and some people never do.

 

[dasleben]

You typed a lot of words without saying anything of substance. It doesn't matter whether your numbers are $1715 a month in debt or $500, the numbers still work the same way in the end.

Waste of time, I suppose. This is why some people get rich and some people never do.

Todd, as usual, you skim posts and just keep running your mouth. I can tell you've never really faced reality in this industry.

Here are a couple facts for you, since you claim in every thread you're interested in them:

January 3rd, 2000 S&P500 closing price: 1455.22
January 4th, 2010 S&P500 closing price: 1132.99

Within that 10 year span, the S&P500 showed a loss, thousands of pilots lost their jobs, and some (ask TWA pilots) were out for almost that full decade. I flew with furloughed TWA pilots at Cape Air and Omni, and lots of those guys were barely making ends meet. No matter how much they had saved in an investment account, with the markets showing strong losses and paychecks coming in that didn't really even fully cover expenses, all of them were hit hard. Many of these guys ended up having to file for bankruptcy. And while you can show me all sorts of math, I can show you reality that caused the math to break down.

By all means, save and invest. I do so aggressively. But play defensively, too. This industry has a way of swiftly cleaning house when you least expect it.

 

[SlumTodd_Millionaire]

You might be surprised to learn that there are many investments besides the S&P 500, and many of them quite safe. But this conversation is clearly going nowhere, as you're more interested in emotion and gut feelings than you are about facts, so have at it.

 

[gotWXdagain]

Did it ever occur to you gentlemen that there may be multiple ways to skin a cat, so-to-speak?

 

[SlumTodd_Millionaire]

Did it ever occur to you gentlemen that there may be multiple ways to skin a cat, so-to-speak?

There may be multiple ways to skin a cat, but 2+2 will never be 5.

 

[Finny]

You might be surprised to learn that there are many investments besides the S&P 500, and many of them quite safe. But this conversation is clearly going nowhere, as you're more interested in emotion and gut feelings than you are about facts, so have at it.

I'm curious in the previous scenario how the math would work out if both pilots could only make the minimum payments? What would the minimum dollar amount for that scenario to be more beneficial for Pilot B?

 

[SlumTodd_Millionaire]

I'm curious in the previous scenario how the math would work out if both pilots could only make the minimum payments? What would the minimum dollar amount for that scenario to be more beneficial for Pilot B?

I'm not sure that I understand the question. If both pilots can only make minimum payments, then the numbers will end up the same for both of them. Can you clarify?

 

[Finny]

I'm not sure that I understand the question. If both pilots can only make minimum payments, then the numbers will end up the same for both of them. Can you clarify?

Yeah, sorry that was unclear. If both pilot A and pilot B get the same raise and can start to pay or invest money, is there a dollar amount that it make sense to start investing instead of just keeping that money on hand for spare cash?

 

[dasleben]

You might be surprised to learn that there are many investments besides the S&P 500, and many of them quite safe. But this conversation is clearly going nowhere, as you're more interested in emotion and gut feelings than you are about facts, so have at it.

What gut feeling? My points are backed up by reality... Right there, right in front of you. I handed you the numbers on a silver platter. You say you're interested in facts, right?

And sorry, if you're wasting $1,000/mo on a car payment, you're in no position to give financial advice to airline pilots.

 

[SlumTodd_Millionaire]

Yeah, sorry that was unclear. If both pilot A and pilot B get the same raise and can start to pay or invest money, is there a dollar amount that it make sense to start investing instead of just keeping that money on hand for spare cash?

Whether you have one extra dollar per month, or $10,000 extra per month, the math always favors Pilot B. Of course, you always want to have a small amount of cash set aside for unexpected expenses so that you don't need to liquidate investments for that purpose, but keeping more than a month or two of expenses in cash is wasteful. Everything else should be kept in various investments. It's a good idea for the average risk-averse person to have 6-12 months worth of expenses invested in more stable investments, such as treasuries and bonds, but after that, it should all be going into long term investments, unless you're about to hit retirement age.

 

[Cessnaflyer]

I try to stay true to the math like Todd but there are times emotions get in the way and I pay off my $3000 remaining on student loans. There is a nice feeling only having a car payment and a mortgage.

 

[SlumTodd_Millionaire]

 

[gotWXdagain]

I have to say Todd is actually on to something here. My situation was really entirely self-created, where I lived beyond my means with the credit card a little too easily. 9k worth of debt later on like 18% interest as a CFI, there wasn't going to be much getting out of that hole. Then the air ambo gig came along, chipped away at the debt enough to get a zero interest for 14 months card to transfer all that baggage over to, and now I plan my finances such that there's really no reason why that debt won't go to zero by the end of 12 months. Since then I kept my other credit cards open and now use my primary card as if it were my primary checking account, and pay it off with each paycheck. Can anyone say cashback rewards? That being said, I'm really in no hurry to pay off my longer term low interest debt because if you invest smartly, you can make the interest back in the interest in your investments. Once I get that debt finished it'll be time to save up for a house.

The point where I may disagree with Todd is that it's "never good to be debt free," but that's more a philosophical point. When the student loan payments cease, I don't plan on going to go about getting another student loan. When the mortgage payment (that hasn't started yet because I don't own) ceases, I wouldn't automatically go out and buy another house just to have debt, although there are advantages at that point to maybe getting some kind of home equity if the house needs updating. When the car loan gets paid off I'm not going to go out and buy another car just because I want the debt, although being freed of a previous car loan obligation means I come into a new car with at least some value left over from the old. Mathematically, it makes more sense to give unto Caesar only his due, so-to-speak, but once you've paid off an asset, you don't necessarily have to go out and get another asset just to "pad your net worth." So it's really all philosophical at that point.

 

[SlumTodd_Millionaire]

but once you've paid off an asset, you don't necessarily have to go out and get another asset just to "pad your net worth."

Buying assets doesn't pad your net worth. Investing your money does.

Here's something to think about. You pay off your mortgage after being smart and making only minimum payments for the full 30 years. At the end of that time, you have $300k in equity. Do you sit on that equity? Only if you're a fool. Use it to make more money! Take out a low interest loan secured by the equity in the house and buy a few rental properties. Your equity hasn't gone anywhere, it's just been transferred to other assets that, unlike your home, create income. Suddenly that equity that was just sitting there is now producing more money that can then be invested again, and so on.

This is how you get rich. It's not complicated. Anyone can do it. All you have to do is eschew emotion from your financial decisions and use the numbers. A man in Vermont died a few months ago. His family and neighbors had no idea, but the man was worth about $8 million. He gave it all to charity when he died. What did he do for a living? He was a janitor. Never made more than about $40k his whole life. Most airline pilots who spend most of their lives making six figure incomes die with less than half what this man died with. That's the difference between smart, unemotional financial decisions and the opposite.

 

[RetiredATLATC]

unless you're about to hit retirement age.

And then what?

I am by no means a financial wiz and will be very flush with cash monthly from my few years in the Middle East + my FAA retirement and a trust and have very moderate outflow.

 

[SlumTodd_Millionaire]

And then what?

Less volatile investments for a larger share of the portfolio. More bonds, less equities.

 

[gotWXdagain]

Buying assets doesn't pad your net worth. Investing your money does.

Here's something to think about. You pay off your mortgage after being smart and making only minimum payments for the full 30 years. At the end of that time, you have $300k in equity. Do you sit on that equity? Only if you're a fool. Use it to make more money! Take out a low interest loan secured by the equity in the house and buy a few rental properties. Your equity hasn't gone anywhere, it's just been transferred to other assets that, unlike your home, create income. Suddenly that equity that was just sitting there is now producing more money that can then be invested again, and so on.

This is how you get rich. It's not complicated. Anyone can do it. All you have to do is eschew emotion from your financial decisions and use the numbers. A man in Vermont died a few months ago. His family and neighbors had no idea, but the man was worth about $8 million. He gave it all to charity when he died. What did he do for a living? He was a janitor. Never made more than about $40k his whole life. Most airline pilots who spend most of their lives making six figure incomes die with less than half what this man died with. That's the difference between smart, unemotional financial decisions and the opposite.

The emotional side of me doesn't see other people's homes as dollar signs.

 

[SlumTodd_Millionaire]

The emotional side of me doesn't see other people's homes as dollar signs.

I don't get your meaning. A house is an asset.

 

[gotWXdagain]

I don't get your meaning. A house is an asset.

Investing in rental properties if done correctly can have many societal benefits. Investing in them with the attitude that it's only there to make money is how we got the housing bubble (and how we will probably get another housing bubble). Take for example ISN. I'm in a crew apartment right now, 2 bed 2 bath. An average-sized apartment I would say. In GFK, where I live, I would estimate this apartment is probably worth a little over 1k/mo. And GFK is a little on the high side. Here, the company pays $2400/mo for this apartment. Why? Because some investment firm several states away saw dollar signs. Going back to GFK, more and more people are getting priced out of owning starter homes. Why? Because investors see dollar signs on those types of houses and offer the seller cash up front. For an individual looking to purchase their first home, even with everything squared away for a mortgage, of course the seller is going to choose the cash-up-front option. And now the prospective buyer is back to being a renter (and basically paying a monthly mortgage payment for the privilege). And the rent keeps going up.

 

[DE727UPS]

Tod said its not good to be debt free? Well, good thing I ignore his ass. Not having any debt or mortgage makes me happy and feels great. Nothing like walking into a car dealership and paying cash for a brand new Scion FR-S. They hate that cause they make money off financing. They also hated I was wearing shorts and a t shirt, I'm sure....priceless.