61% of Americans are still living paycheck to paycheck

[RedSun]

Amun Ra is correct. When inflation is high you want to owe as much as possible so that you are repaying the loan with cheaper money. This assumes that your income and assets will increase in proportion to the inflation rate. There are a lot of seniors still paying down the mortgage on their home that they for bought $200K 20 years ago that is now worth $500K.

This is completely false.

First, it is a big IF that both your income and assets grow at the same pace of inflation.

For your senior who bought a $200,000 house 20 years ago, sure the house value can go up to $500,000. With the money they paid over 20 years, the mortgage could have grown to $2,000,000. You forget both the original down payment 20 years ago, and the mortgage interests they paid over the 20 years.

In any inflammatory case, all people who own assets much grow at faster pace than inflation to become "richer". The same with low inflation scenario. If inflation is at 1%, but my real estate and financial assets grows at 3%, I'll become richer. Same with debt. If I pay 3% interest rate, but I can return 5%, I'm on top too. I'll lose money if I borrow at 3%, but my investment assets can only grow at 1%, or even negative returns.

 

[Amun Ra]

For your senior who bought a $200,000 house 20 years ago, sure the house value can go up to $500,000. With the money they paid over 20 years, the mortgage could have grown to $2,000,000. You forget both the original down payment 20 years ago, and the mortgage interests they paid over the 20 years.

I have no idea what you are trying to say, but I know its wrong.

What are you trying to say? The senior paid $2 million in interest over 20 years on a $200k loan? What would be his interest rate? Like 50%? come on.

 

[RedSun]

I have no idea what you are trying to say, but I know its wrong.

What are you trying to say? The senior paid $2 million in interest over 20 years on a $200k loan? What would be his interest rate? Like 50%? come on.

Do not know why you just do not get it.

You like the example of the $200,000 house growing to a $500,000 value in 20 years. Yet the total mortgage payments over the 20 years could have grown much more than the $300,000 appreciation you mentioned. What is future value of $200,000 compounding at 10% over 20 years? Far more than the $500,000 you mentioned.

Do some math, and come back...

 

[Amun Ra]

Do not know why you just do not get it.

You like the example of the $200,000 house growing to a $500,000 value in 20 years. Yet the total mortgage payments over the 20 years could have grown much more than the $300,000 appreciation you mentioned. What is future value of $200,000 compounding at 10% over 20 years? Far more than the $500,000 you mentioned.

Do some math, and come back...

Ok lets do some math.

$200k mortgage @ 4% over 20 years would be $90,870.56 in interest, not the $300k plus you imagine. Also you wouldn't start with $200k @ 10%. You would only be able to contribute monthly payments if you want a level playing field. So $833 per month at 10% per year gives you $572,520. Uh-oh...looks like you might be winning by $72,520...oh but wait...You forgot you have to have a place to live for 20 years. We'll make rent slightly cheaper than the $1200 mortgage payment so you don't cry foul. Hows $1k sound? Ok...but wait...now we have to have 4% annual increase in your rent. So over 20 years you'll have paid $191,467.

So $527,520 minus $191,467 = $336,053. But now we also have to minus your original contribution of $833 per month over 20 years to get your net profit. So you subtract $200k from that and you're left with $136,053 net profit. I also want to point out that your total monthly payment from rent and investment contributions averaged $2,428.56 per month over those 20 years vs me with only a $1211.96 constant mortgage payment over 20 years. Sure you were only paying $1833 on year one, but by year 20 you were paying $3024.12 per month.

Now lets see the house side. $300k appreciation minus the 90,870.56 in interest = $209,129.44

So for owning the house, you get 50% more money net while spending 50% less per month.

Check freaking mate. Hopefully you learned something. Before challenging someone to "do the math" make sure you already did the math and considered ALL the variables.

 

[RedSun]

Ok lets do some math.

$200k mortgage @ 4% over 20 years would be $90,870.56 in interest, not the $300k plus you imagine. Also you wouldn't start with $200k @ 10%. You would only be able to contribute monthly payments if you want a level playing field. So $833 per month at 10% per year gives you $572,520. Uh-oh...looks like you might be winning by $72,520...oh but wait...You forgot you have to have a place to live for 20 years. We'll make rent slightly cheaper than the $1200 mortgage payment so you don't cry foul. Hows $1k sound? Ok...but wait...now we have to have 4% annual increase in your rent. So over 20 years you'll have paid $191,467.

So $527,520 minus $191,467 = $336,053. But now we also have to minus your original contribution of $833 per month over 20 years to get your net profit. So you subtract $200k from that and you're left with $136,053 net profit. I also want to point out that your total monthly payment from rent and investment contributions averaged $2,428.56 per month over those 20 years vs me with only a $1211.96 constant mortgage payment over 20 years. Sure you were only paying $1833 on year one, but by year 20 you were paying $3024.12 per month.

Now lets see the house side. $300k appreciation minus the 90,870.56 in interest = $209,129.44

So for owning the house, you get 50% more money net while spending 50% less per month.

Check freaking mate. Hopefully you learned something. Before challenging someone to "do the math" make sure you already did the math and considered ALL the variables.

I do not care how you do your math. I do not think that is correct anyway.

I'll make money if the interest I pay on the debt is lower than the asset appreciation. But it is the capital I put down that really matters. That is my investment. I can invest in the house, or I can invest in stocks. So if the house only goes up 3% and I can make 10% on stock market, I'll be better off investing my $$$ in stock market. But if QQQ is going to be down 15% in 2022, I'd better off investing in house. But house price can go down by 5% in 2022 too.

So how the rich people with debt are better off with high inflation. That is BS. High inflation is not good for anyone. High inflation is going to make mortgage rate very high. It is already one full % higher than just a few months ago. That will put a brake on housing market. All asset values drop except oil and probably gold too. Even BTC will drop.

Get some common sense.

 

[Frederick Foresight]

 

[piezoe]

Show me an individual with a strong work ethic and good money management and I'll put my money on him to succeed with only a GED

I like to show you that, but I'll have a hard time finding a person with a strong work ethic and good money management "with only a GED". These folks are comparatively rare, it seems. I will have much better luck looking for a strong work ethic and good money management among college graduates -- real collages! And I'll easily find them among that subset with a so-called "useless degrees" in English, Math , Languages or History! If your going to look for something, it is always best to look where you'd be more likely to find what you are looking for.

 

[Frederick Foresight]

 

[piezoe]

That is BS. High inflation is not good for anyone.

Well, that's not true. It is good for some people. Namely those whose incomes keep up with inflation and who's interest payments are fixed. For these folks the real cost of debt declines with inflation. They can, in time, find themselves paying back to their creditors dollars worth less in buying power than the dollars they borrowed!

A positive mean inflation rate is one of the important driving factors behind modern Western Economies that are fueled by fractional reserve banking.

 

[Bugsy]

I like to show you that, but I'll have a hard time finding a person with a strong work ethic and good money management "with only a GED" is because those folks are rare. I have much better luck looking for a strong work ethic and good money management among college graduates -- real collages! And I'll easily find them among that subset with a so-called "useless degrees" in English, Math , Languages or History! If your going to look for something, it is always best to look where you'd be more likely to find what you are looking for.

Albeit, I dropped out in the first six weeks of my senior year, but I only have a GED. Kicked out at 17. Caught some felonies due to stupidity. Did several years in prison. I have a criminal record so I was only able to get an entry level job at $7.50 an hour after putting in a ton of applications. Learned to live well below my means. Drove a shitty 90s vehicle for over a decade even though I could have done payments. I busted my ass, learned skills to work everywhere I was needed there. Worked and saved and studied everything I could on the internet on trading, real estate, economics, politics.

I refuse to listen to people who try to make excuses for criminals and victimhood for lazy people. Any person is capable of pulling themselves out of their circumstances IF THEY WANT TO. I couldn't tell you how many other inmates told me that once you have an X on your back you will always come back before I got out. That was almost 2 decades ago.

I saved up $17,000 working thousands of hours of overtime. Lost it all but $1,000 in the futures market in one month. Saved up another $18,000 studying, studying, studying. Currently have close to $200k, around $100k in my brokerage daytrading account, and my home is paid off.

Do some people have things easier in life due to parents and circumstances? Sure, but they aren't responsible for me or my fate.