The dark side of the pilot shortage.

thegriffinpages said:
Actually, I didn't know he could. It was just an example of someone I know that was successful at it.
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That statement sums it up. He used Dave Ramsey's advice, and was successful, therefore the advice is good, right?

No.

He was successful because he paid off his debts. He could have paid off his debts in the manner that is mathematically most advantageous, but instead, he followed Dave Ramsey's advice, paid more to the banks in interest, and took longer than necessary to do so. All other things being equal, Dave Ramsey's advice hurt him financially.

But, Dave Ramsey is not for those of us for whom this is obvious. It's for the people who don't understand it. For them, the correct route out of poorly managed debt may not be the easiest for them to follow. With the extra cost of the Dave Ramsey way comes instant or more rapid gratification, and for some people that motivation to continue is worth the price.
 
NickH said:
That statement sums it up. He used Dave Ramsey's advice, and was successful, therefore the advice is good, right?

No.

He was successful because he paid off his debts. He could have paid off his debts in the manner that is mathematically most advantageous, but instead, he followed Dave Ramsey's advice, paid more to the banks in interest, and took longer than necessary to do so. All other things being equal, Dave Ramsey's advice hurt him financially.

But, Dave Ramsey is not for those of us for whom this is obvious. It's for the people who don't understand it. For them, the correct route out of poorly managed debt may not be the easiest for them to follow. With the extra cost of the Dave Ramsey way comes instant or more rapid gratification, and for some people that motivation to continue is worth the price.
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Is there any resource you'd recommend one to look at to learn how to do it a more efficient way? Honestly, Dave Ramsy is the only guy I know about that has a prescribed way of doing things - probably because his name comes up all the time.
 
thegriffinpages said:
Is there any resource you'd recommend one to look at to learn how to do it a more efficient way? Honestly, Dave Ramsy is the only guy I know about that has a prescribed way of doing things - probably because his name comes up all the time.
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So here's the answer. Please don't take this as flippant, or rude. An understanding of how interest works is all that's needed to understand how to pay off multiple debts efficiently (and when debt is a positive tool to use to your advantage).

https://en.wikipedia.org/wiki/Interest

This is one long wikipedia page. Most of it isn't helpful to the actual issue here, but it's all useful!
 
Cptnchia said:
Muslim or Jewish? Those two religions got more in common than they want to admit.

FWIW, guy I know who who cooks the best pork loin, and I’ve seen destroy an entire side of bacon. Member of the tribe. It’s all about choices!
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I'm a (bad) Jew and she's a (bad) Muslim. The only thing she does is no pork, and that's more out of feeling guilty towards her parents. But of course I love pork.
 
BigZ said:
"Honey, if I'm halal so is the bacon"
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Sorry, I had to go there’

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NickH said:
So here's the answer. Please don't take this as flippant, or rude. An understanding of how interest works is all that's needed to understand how to pay off multiple debts efficiently (and when debt is a positive tool to use to your advantage).

https://en.wikipedia.org/wiki/Interest

This is one long wikipedia page. Most of it isn't helpful to the actual issue here, but it's all useful!
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Not flippant at all.

The unfortunate reality is that I, personally, wasn't taught much about personal finance until I was an adult and what I learned probably wasn't the *best* advice around. Now people talk about programs such as Dave Ramsey and it ends up being a lot harder than it probably ought to be.

I would probably benefit from taking a face to face class on personal finance.
 
thegriffinpages said:
Not flippant at all.

The unfortunate reality is that I, personally, wasn't taught much about personal finance until I was an adult and what I learned probably wasn't the *best* advice around. Now people talk about programs such as Dave Ramsey and it ends up being a lot harder than it probably ought to be.

I would probably benefit from taking a face to face class on personal finance.
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Honestly these people are making mountains out of molehills. The difference in interest paid is small unless the interest rates are vastly different.

Just like losing weight the important first step is psychological. Same thing with paying off debt. The more you can incentivize people the more successful they will be.

I've never listened to DR but have heard people talk about his reasonings. Again they are for the people who lack self control. So anything he can do to help overcome that issue is a win, even if it costs a little more money.
 
Boris Badenov said:
I don't think anyone disputes that, you know, cool stuff has happened in the last 50 years. And yes we like our consumer electronics. What does any of this have to do with the vast, rapid, and exponentially increasing stratification of capital access?
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If you spend your money on stuff that will be worthless in a few years, you have no right to complain.

Buy things that make money and you'll be fine, especially on a six figure income which is almost double the median. That should be everyone's priority leaving school and into your first job.

You don't have to be stingy forever. Just long enough to get over the hump where your investments are throwing off decent passive gains.
 
thegriffinpages said:
Is there any resource you'd recommend one to look at to learn how to do it a more efficient way? Honestly, Dave Ramsy is the only guy I know about that has a prescribed way of doing things - probably because his name comes up all the time.
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This is a good question, and I think it's one of the travesties of our education system. In my opinion, personal finance should be a mandatory high school class. I get that much should can/should be taught at home, by the parents, but with the large number of people who are uninformed on this topic I think it needs to start with the schools. Replace one elective course with a personal finance course and I think it would do wonders.

@ATN_Pilot is very well versed on all of this, so please jump in if you spot any issues with the below.

Short, simple answer @thegriffinpages : any time your loan's interest rate is lower than what you could reasonably get by investing your money elsewhere (i.e. the S&P 500), you should be investing any excess cash you have into the market rather than into repaying your loan faster. At the end of your loan, you will have more money in your bank account than you otherwise would have had if you simply accelerated the repayments of your loan. There is an element here that we should discuss about risk-adjusted returns, but we can save that maybe for another thread in the Investing forum (see below for a flavor of this, if interested).

Longer answer with a simple example:

Say on 12/31/2016, you took out a $100 loan, with a term of 1-year and an interest rate of 4%. For simplicity, assume you paid both the $100 principal and $4 interest on 12/31/2017, with no other payments in between.

Scenario 1: suppose you woke up on 1/1/2017 and decided you actually didn't want the loan, so you give the money back to the bank, without penalty. You're effective return was 4%, since you avoided the $4 interest payment and saved yourself this expense.

Scenario 2: suppose you woke up on 1/1/2017 and decided to invest your $100 loan into the SPY S&P 500 Spider Index. Well, in 2017 SPY returned ~21%, so your $100 would have grown to $121. On 12/31/2017, you could have repaid your $100 principal back in full, paid the $4 interest charge, and had $17 left over to keep for yourself.

This example obviously works because the stock market did so well last year, but it illustrates the general principle: simply repaying any debt "as fast as possible" can actually be value destructive, and perhaps very value destructive at that. Generally speaking, the S&P's 90-year annual average return is ~10%, so if your interest rates are less than say, 7%, you are mathematically better off making only the minimum payments and investing your excess money into the markets. If you're interest rates are close to this (say, 7% or higher), you are better off repaying the loan faster as this represents the best return you can get on your cash. I use 7% only as an illustrative example to show that there should be a spread/gap between your target minimum prepayment interest rate and your target stock market return. Repaying your loan is considered "risk free", since you are guaranteeing that you save yourself from future 7% interest payments. Investing in the stock market is not "risk free", so the 3% gap between your target interest rate and the market return represents the compensation you require for the extra risk of losing your principal.

Hopefully this helps. We should probably create a separate thread for further discussion and to not continue derailing the thread.
 
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NovemberEcho said:
I'm a (bad) Jew and she's a (bad) Muslim. The only thing she does is no pork, and that's more out of feeling guilty towards her parents. But of course I love pork.
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I prescribe one schweinshaxe! Possibly better than bacon.
 

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gliderboy said:
Prior to the shortage that has improved so many of our lives, most small operaters were staffed by a cadre of skilled pilots who stayed on at those low-paying jobs because it was the best flying gig they could get. Now that most have been snapped up by the airlines, it seems like many under-trained, low-time pilots are being rushed into the vacant left seats, with predictable results.
Or is it just my imagination?
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Has there been a rise in accidents? If not, it is just your imagination.
 
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