new_man_19[at]hotmail.com (FirstTimer) writes:

- quote -

"with a credit card deal" should be your warning sign.
It's not 100%, but probably a 99% case that if you have
those words at the beginning of an investment idea, it's
a bad idea. The downsides to stepping even the slightest
bit out of line on even the best credit card deals are
usually horrendous. The fine print is usually uglier
than you realized. The upside to going the credit card
deal is probably less of an upside than you think.

- quote -

Exactly why you don't want to make it any worse than it
would be already.

- quote -

That's not exactly what you suggested.

- quote -

And how big a win did they really make on that?



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Thanks very much for your advice so far guys!

I think I am doing currently what you and my Advisor suggest. Its not
glamorous and it takes a while, but I don't mind doing it.

I guess my general principle was this - why wait 18 months to save up
when I could have those savings now, be earning interest on them, and
achieve this with a credit card deal, that I would pay back without
interest for 9 months or even 12 months (as some deals are now).
Surely if I'm confident of paying hefty installments each month (and
don't plan to quit my job) then I've done the right thing?

Its a bit of a gamble - I mean what if I got sacked? But if I got
sacked, it would hit the fan in many ways and not just on this little
plan. Such an offer is one chance to make up for lost time. Though
you're right, I'm a long way from having money I'd be prepared to put
a torch to!

Regarding mortgage payments I take your point Sgt, but waiting for
spare money to get advantage from good investments can take a
lifetime. Isn't there an argument for using OPM now, so long as I
don't waste the money? In the case of credit card repayments, if I
had to pay it back suddenly or ran into trouble, then I'd just use the
money I'd been saving, surely? I'm not planning to put this money on
the horses or spend it on holidays. The idea is to take interest free
credit and use it for relatively low-risk savings and investments.
Like so many students I knew who took out big student loans (at low
interest) and put them in high interest savings accounts.

Anyway, your principles are sound, and I'll try to be more patient. I
appreciate the need for a substantial contingency fund and will
continue saving and not rush into an interest free credit card offer.

I have been working on ideas for further streams of income, and I like
where you're coming from with that suggestion!

Anyone got any further suggestions?

FirstTimer <new_man_19[at]hotmail.com> wrote:

- quote -

That sounds like a good idea.

- quote -

That's OK.

- quote -

You should be trying to maximize your return on your assets. Risk isn't
good taken alone.

- quote -

I don't see how you can get interest free loans.

- quote -

Getting out of debt is the safest thing to do.

--
Ron

"FirstTimer" <new_man_19[at]hotmail.com> wrote in message
news:25f63883.0406091441.2e02b60b[at]posting.google.com...
- quote -

I don't know about your particular demographics, but in
my area (U.S. -- midwest), I'd say you need to double
that -- say 5 to 6 months.

He's pointing you in the right direction, but IMO not quite
far enough.

Theres a reason for this "emergency fund" (later)


- quote -

That's the best kind of emergency to be saving for! But,
unfortunately, not the likely one. Likely you're saving for
an emergency that *will* happen, you just don't know
about it yet.

- quote -

It's not.

- quote -

Fine. You've held off for 31 years -- you'll likely live another 40 or
50 more. What's another 18 months.

Accumulating wealth (the ultimate goal of any savings/investment)
is, more than anything, about planning, patience, and *time*. Instant
gratification is not the way to accumulate wealth. You must wait for
it. The good news is you're thinking about it, and not just sitting back
(as most of my peers in the US are) and ignoring the fact that it's
not gonna happen all by itself.

You're not going to get "rich" (whatever that is) in the next 5 or
10 years. We're talking 20 to 30 at least. Whats another year
or so if you've already waited this long?

You'll be better off in the long run with the emergency fund.

- quote -


You're almost right -- you're at the age you should start
planning, but "taking financial risks" is hardly the way
to go. That's a quick trip to the poorhouse and bankruptcy
courts (or whatever your equivalent is)

- quote -

That, right there, is why those who end up broke
end up broke. They don't want to "wait around"
to get rich.


- quote -

While it's doable (rarely), borrowing your way to wealth
is truly only for the "professionals" -- and most pros I've
spoken with don't do it well.

- quote -

What good, pray tell, does it do to have a 3 month "emergency
fund", if you've got 3 months of salary due in payments to the
credit card.

Let's say you lose your job (Emergency!) -- what good is the
emergency fund going to do. Pay back the credit card, sure, but
what do you live on?

- quote -

Bad idea starting with a bad premise. Just save the money.
It's not going to hurt you.

- quote -

As stated before. You're not going to borrow your way to
prosperity. It won't happen whether it's on a credit card
or a "new deal".

- quote -

*AND* you owe 3 months salary to the credit
card company.

Your financial picture is Assets combined with
Liabilities. Don't forget you owe 3 months salary
to the CC -- and how long will it be zero percent
interest? Ya think? Try again. They wont stay
zero for long.



- quote -

Just wait it out. You'll be glad you did.

- quote -

What is it, exactly, that you think you're proposing? You
*are* using OPM -- the OP just happens to be the CC
folks.


- quote -


I'm no advisor, but I've been successful over the last 10 years or so.

Your steps should be, IMO:

NOTE: This is the way I started, in order of priority.

(a) Eliminate that debt first (the 2500 pounds)

(b) Don't take on any more debt. None. Cash is
king! The "further 6000 pounds" should be
paid for if, and *only* if, you've actually
got the 6000 pounds, in cash.

(c) Make sure you have sufficient insurance: life, medical,
disability, liability etc.

(d) *6* month "emergency fund"

(e) Fully fund whatever retirement account options
you have (here they're 401K, IRA, SEP, Roth, etc --
I have no idea what you've got available)

(f) Put 10% to 15% of your remaining income in *safe*, long
term investments.

(g) Fully fund educational accounts for kids/dependents
college/university

(h) Any other remaining discretionary income is the
play money you're looking for to take "risks"
with.

(i) Reduce all unnecessary expenses to free up
additional funds for (a) through (h) above.

(j) Work on additional streams of income to fund
(a) thru (h) above.

If you can't get at least thru (f), I think you're living
beyond your means, and you're not going to borrow
your way out. If you're beyond your means, you
need to work on (i) and (j) immediately.

I think you're trying to jump in at (h), when you
haven't even got to (a) yet, and are concerned
with how you're going to even make it half way
to (d).

One thing at a time. Good things come to those
who wait. Time is your ally here. Don't wait
idly. Take necessary steps to move you through
the above progression.

- quote -

This is a touchy subject for lots of folks. My simple
rule: Minimize the total payout. In america, we live
by one question: "How much is my monthly payment?"
I think it's wrong. Most folks grab the biggest mortgage
they can, and finance it for as long as possible to minimize
the monthly payment, not realizing that the smaller monthly
payment adds hundreds of thousands of dollars in interest
payment to the total payout to the bank.

Most folks say: "with a smaller monthly mortgage, I can
invest the difference". Great in theory, but nobody actually
does it. In reality, they save on the mortgage every month
and blow the difference on useless stuff. It's never invested.
Don't kid yourself.

This fits in with (a) above -- eliminate the debt. Again, you
likely don't have the cash to buy out the mortgage, but you
can take steps to minimize the money lost.

Here in America, 30 year loans are typical. I reduced mine
to a 15. Was scheduled to payoff in ~11 with regular
advanced additional principal payments each month. Now
paid off completely in under 4 years (but that's another
story (recent inheritance)).

The reduction of the original 30 year to the 11 years
will have netted us over $180,000 less in interest payments
to the bank.

Again, touchy subject with most folks. Ideally, as long as you
can get a higher return on your investments than you pay for
your mortgage interest rates, most would tell you not to pay
off the mortgage and invest the difference. Do you know
anybody actually investing the difference? I don't.

I'm telling you to pay off the mortgage as early
as possible. Then again, that's just my opinion.

NOTE: You said, I quote: "a presently affordable mortgage"
The key words are "presently affordable". Will it be affordable
to you next year? In 5 years? 10? You don't know. Better
to eliminate the unknown and pay off that puppy as soon
as possible.

- quote -

Note that reliance on Social Security (our "government pension
scheme" here in the U.S) is not reflected anywhere in (a) thru
(j) above.

Likely most of these "schemes" will still be in existence
when we need them, just with drastically reduced benefits.

Better to assume they won't even be there and plan to
tough it out on your own.

Hell, you're lucky you can even cash in. Here in the
US we don't get that option. We pay in, but can't
take it out in a "cash-in" scenario. If they choose to
diddle us out of it, we don't have the option to take
it back -- no penalties, no nothin'. We can't get it
back. Consider yourself lucky to at least have this
as an option.

Either way, assume it won't be there. Come on, it's
the government. If they can find a way to diddle you
out of it they will. Consider it gone.

- quote -

Equity is largely useless. It's a bogus wealth
indicator. If housing prices drop, your equity
dries up. If you've cashed it out, borrowed
against it, whatever -- you may end up
being upside down on your mortgage, and
then you'll be in a real pickle.


- quote -

You're not ever going to get a chance if you keep
thinking like this! <grin
- quote -

I've outlined the steps you'll need to get "set for life".
Take those steps, follow them for 20 to 30 years and
you're set.

Scraping out your equity, and borrowing (OPM)
will ultimately put you in a worse position.


- quote -

See! "Equity" is almost useless.

- quote -

Look into renting. Often times it makes more
financial sense. Run the numbers.

- quote -

Trying to borrow your way out again...

- quote -

That's a whole different thread. Part of my personal (h)
involves property -- held long-term. Quick flipping is
relatively risky.

I've owned property for 7 of my 10 years investing.
I do recommend it, however it only comes in when
you get to (h).

- quote -

Unless you listen to your advisor -- start with an
emergency fund, or follow the steps I've outlined
above, all of the "options" you have are too risky.

- quote -

You'll never be "set for life" thinking that way.

Being "set for life" involves a *lifetime* effort. Take
your time. Get rich *slowly*. It will happen if you
start planning now.

- quote -

You have. I started at 24. Others earlier. My
wife started at 16 (If only I'd have had that
kind of wisdom at such an early age!)

Others start much later. So what.

That doesn't mean you need to jump the gun, go
off half cocked and make some bad decisions.

- quote -

They're *always* against you. When the economic
trends are against you, you lose. When the economic
trends are with you, that's when you'll blow the transmission
on your car, or need a new roof, or get sued by someone,
or you get laid off, or (you get the picture).

That's what your emergency fund is for. To cover
those situations, so you can keep paying the bills, and
keep investing, and still have the money to cover it all.

- quote -

I guarantee you the *all* lie ahead. It's a foregone
conclusion.

The real questions are:

Will they happen next month, next year, or 15 years
from now. Two things are inevitable in any market:

- The market will go up
- The market will go down

*and* (more importantly)

How are you prepared to deal with it?

Without your emergency fund, you'll lose all your
money when it happens. At least with the emergency
fund you'll be able to deal with it.

BTW -- rumors of gloom and doom have been around
since the beginning of time. Before the "housing market"
even existed. They'll remain until the end of time.

It *will* happen. *When* it happens is what's
important. I wish I could tell you that one.

- quote -

If she's to be your wife, you'll want to already
have your plan in place and moving on it before
you even consider marriage. You'd be amazed
the stats on marriages that crumble due to financial
difficulty.

- quote -

You're not going to do it by jumping in without
a good plan.

I think you'd better listen.

I think you're the one who doesn't appreciate
the value of his advice.

He's right, you're wrong. That's OK. It's *supposed*
to be that way. He's the financial advisor. You're not.
Use your common sense combined with his advice,
and you'll be "set for life"

- quote -

Once your to (h) in my above list, anything in the (h) "risk"
investments should be money you're willing to just lay
out on the table and take a match to.

You give plenty of lip service to your tollerance for
risk, but unless you're willing to simply torch it with
a match, you're not able to afford the risk.

- quote -

Wouldn't you rather be dependent on careful planning,
risk mitigation, precise execution, and proven results -- wouldn't
you rather be dependent on that than this thing you call "good
luck". Good luck doesn't exist as anything *real* -- it's in
the eye of the beholder, usually blinded by the greed of
getting rich overnight. You need a solid foundation, followed
by a solid execution, over the next 20 to 30 years, and then
you'll be (at 50 to 60) "set for life".

- quote -

Listen to your advisor. He's got you started in the right
direction.

- quote -

You are. So what. If you try to "keep up with the Joneses", you'll
ultimately foil the best laid plans and screw yourself royally.

- quote -

I'd consider it grounds to have you committed. Really.

If it were easy, then we'd *all* be rich by now wouldn't
we?

Hello all

I'm new to this, so let me give you a brief summary, then I'd be
grateful for any suggestions as to what to do next.

I'm a salaried 31 year-old doing slightly better than breaking even
each month.
I just bought my first home 18 months ago on a capital and interest
repayment mortgage discounted for the first 2 years with no setup
fees.

I have an employers pension (they match it I think) with the local
government, and have paid in since 1998.

I went to an Independent Financial Advisor (they got me this first
mortgage and advised me to continue paying into my existing pension
scheme) and asked them about starting to invest in stocks and shares.
He said before I do anything I must have 3 months salary saved up.
This was a real drag as I figured it is for an emergency that might
never happen. I didn't want this amount to be wasting away so I'm
paying 200 pounds per month into an ISA to accumulate the 3 months
salary target.

This unfortunately puts my investment plans on hold for about another
18 months or more. So now I have a few new ideas:

I'm at the age where I should be taking financial risks. I don't want
to wait around to accumulate a safety net so I've thought of bumping
up the ISA account using an interest-free credit card deal. That way
I reach the savings target - and some earned interest right away. I
can then, as conventional wisdom has it, go to my advisor and arrange
my prefered stocks and shares portfolio.
But do I use an existing credit card and then transfer the balance to
a new deal, or just start a new deal from scratch (interest-free on
purchases for first 9 months). As part of this strategy I also fancy
a grand in Premium Bonds.

This would result in the following spread:
* An OK pension
* a presently affordable mortgage
* 3 months salary in a cash ISA earning interest
* 1000 pounds in Premium Bonds

This puts me now in a position I would otherwise not be in for over a
year. It also uses what I thought to be a sound starters strategy,
that of using OPM (other people's money) to get me afloat.

I have no debts except for around 2500 pounds which I have accumulated
rennovating this first home, which is on an interest-free credit card
deal with about 6 months of the deal still remaining. There are
further rennovations to do (perhaps a further 6000 pounds) which I
plan to achieve using the same method. I figured this was better than
adding it to the mortgage and paying interest over a long period?

How does all this stack up against increasing my mortgage payments to
reduce that debt sooner? Should I be bothered?

Ultimately my aim is to retire early and live off savings/
investments/ properties, but I'm not even counting on my local
government pension scheme as I feel suspicious they will find a way to
diddle me out of it before I retire (I'm tempted to cash it in, even
paying a penalty, and invest it in property!).

I apparently have a lot of equity in my home. I've never had much
chance of making money before so I am tempted to capitalise on this
equity and also use OPM in any way I can to get "set for life".

The problem with UK house prices at the moment is whatever profit I
might make from selling my current home does not result in a more
desireable home to move "up the ladder" to, as all other homes are
increasing in value too. Also I would like to move to a more
desirable area with more options for employment.

Should I be looking to exploit this "equity" without actually selling
my current home? If I did that, should I be looking to buy further
property to quickly fix-up and sell or should I be seriously thinking
of renting out?

I think I have a number of options, but at 31 I feel quite impatient,
like I've lost a few years and like economic trends may be against me
(rumours of a housing market crash, and poor shares performance for
example all lie ahead.) This is before I bring into the equation the
possibility of taking on a girlfriend who may become a wife.

I appreciate what my high street Financial Advisor tells me, but I
don't think he appreciates the concept of making up for lost time
(which is why I don't want to wait to save up 3 months salary) or the
concept of much risk-taking or entrepenarial spirit. I'm all for
balance, but I want a significant amount of daring in my portfolio, so
that I could have some good luck and "catch a wave".

I'll happily revisit these ideas and fill in any blanks for members of
this forum. I have many stupid questions still to ask. Currently
though I feel I'm only getting to the stage that many of you will have
passed years ago, and I'm thinking of taking risks and using OPM that
some of you would consider childs play?

Thanks to you all.

In article <25f63883.0406091441.2e02b60b[at]posting.google.com> ,
FirstTimer <new_man_19[at]hotmail.com> wrote:

- quote -

Excellent advise. Give that advisor a gold star for the day.

- quote -

You must not be very aware of real life if you still hold that
opinion at 31 years of age. A 20 year old might think that they
are invinciable, but a 31 should be more worldly. The true fact
is that 1 in 8 people ends up disabled prior to retirment, and
1 in 3 are disabled enough to miss a month of work or more at
some point in their career. What would you do if your income
stream came to an abrupt end? Even a war or terrorist attack
could do in your plans--here in the US, many industries are
hurting badly due to 9/11 and the war.

- quote -

One should never take "financial risks". Anyone who thinks that
they can afford to lose a little money will so lose a lot of money.
What you really want is a balanced portfolio that matches reward
and risk.

- quote -

Bad idea. Sort of like playing cricket with a live hand gernade.
You are not sure when it is going to blow up, but it will at some
point in the future. You need to do everything possible to avoid
going into credit card debt. If you get a taste of living beyond
your means on plastic, it will end up eating you alive.

- quote -

Again, credit card debt is very bad. Even at zero percent interest,
you are one accident away from 20% rates and financial ruin. Just
think of what would happen if one of your payments gets lost in the
mail, and the zero percent rate is revoked. It can and does happen
to people. The credit card companies are like pit vipers laying
in the grass waiting to strike people when something like a late
pay or a lost check happens.

My best advice is to put off the renovations until after you are
on-track to achieve your goals. Or do it yourself or with the help
of family and relatives.

- quote -

You are not going to achieve that goal by spending money. You need
to look at your spending from top to bottom, and stop spending on
anything that you don't absolutely need. Next, work on increasing
income. Git rid of debt. Then worry about savings. Once you are
saving at a rate that will meet your goals, then you can think
again about things like redoing the house and doing hobbies.

-john-

--
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John A. Weeks III 952-432-2708 john[at]johnweeks.com
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