ChaosHatHop, hop, hop, HA!Trick of the lightRegistered Userregular
The market may tank when you need the funds but what's more likely is that even if it does and you absorb some theoretical losses, you are probably risking losing more money keeping it out of the market.
And if the market goes a few years without tanking, then you're even more golden. If you just put your money in the S&P index at the beginning of 2020 and then got laid off due to covid, yeah that super sucked if you couldn't afford to keep the money in the market. On the other hand, if you had put that money into the index in 2017, the covid crash just brought you back to exactly where you were (or maybe a little higher depending on exactly when in 2017), you didn't lose anything. Life can be unpredictable but for certain you are losing money keeping it in your bank accounts.
Somebody recommended CODs up there? Is that really a thing people do still? I was thinking about this the other day and I could not for the life of me figure out why anyone does that. The percent rate of return is pretty bad and it's extremely illiquid, you will definitely get pounded if you try to withdraw before the term is up.
Invest whatever you feel comfortable doing. Leave yourself an appropriate cushion in a savings/money market account and put the rest into safe indexes, you can even mix bonds into the mix if you really want to hedge.
I doubt they would care. What, are they going to complain you reduced your total outstanding debt and monthly payments making their loan a lower risk?
Often? Yes. In the form of "hey your credit rating dropped because you have fewer open accounts"
My credit rating dropped after our refinance, even though it is more affordable now. Because the duration of payments on the loan are shorter than on the older mortgage that we closed out. Do not try and make sense of FICO.
For what its worth, my credit rating went up significantly when I paid off my car loan. Credit scores don't look at savings, so the only thing they will see is a closed account and a lower total debt burden. This could hurt you if the car loan was one of your oldest forms of credit, but if not is unlikely to adversely affect your score too much.
The bank may request an explanation just to keep track of where the money is coming and going, you can contact your lender and discuss that with them.
I doubt they would care. What, are they going to complain you reduced your total outstanding debt and monthly payments making their loan a lower risk?
Often? Yes. In the form of "hey your credit rating dropped because you have fewer open accounts"
My credit rating dropped after our refinance, even though it is more affordable now. Because the duration of payments on the loan are shorter than on the older mortgage that we closed out. Do not try and make sense of FICO.
Yeah the main thing credit scores tell is whether a bank can make money off of a sucker, oops I mean, potential customer. Being a responsible debtor is secondary.
DisruptedCapitalist on
"Simple, real stupidity beats artificial intelligence every time." -Mustrum Ridcully in Terry Pratchett's Hogfather p. 142 (HarperPrism 1996)
So me and my wife looked into investing more due to all the attention lately. We didn't go in on gamestop, amc, or doge or anything. We only put a couple hundred in to figure out how the brokerage works (td ameritrade). We put some in a mutual fund that her works 401k uses that has been doing well for a few years, a renewable energy company, and then also yolod like $50 into a company I noticed was my warlocks name from wow... So that's probably not the best way to go about investing on that last part.
So me and my wife looked into investing more due to all the attention lately. We didn't go in on gamestop, amc, or doge or anything. We only put a couple hundred in to figure out how the brokerage works (td ameritrade). We put some in a mutual fund that her works 401k uses that has been doing well for a few years, a renewable energy company, and then also yolod like $50 into a company I noticed was my warlocks name from wow... So that's probably not the best way to go about investing on that last part.
The last part is actually likely to outperform professional traders.
Hey, last year USAA (who I've been souring over) transferred all its brokerage accounts to Charles Schwaab, who I learned are "the bad guys." What are some alternatives I could transfer to?
3DS Friendcode 5413-1311-3767
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thatassemblyguyJanitor of Technical Debt.Registered Userregular
Hey, last year USAA (who I've been souring over) transferred all its brokerage accounts to Charles Schwaab, who I learned are "the bad guys." What are some alternatives I could transfer to?
Realistically they’re all the bad guys. Though Vanguard (disclaimer: I have an account) has had a reputation of being less bad guy than the rest.
The focus on Vanguard accounts are long-term investing. I don’t have margin or options enabled on my account with them so I can’t describe how well those are done. The standard trading platform is incredibly simplistic - there’s no fancy trading platform with SmartErrorBarsGoBrrr - but that’s the point. You put money into a Fund or an ETF at a routine cadence and retire in 25-30 years (lol).
Hey, last year USAA (who I've been souring over) transferred all its brokerage accounts to Charles Schwaab, who I learned are "the bad guys." What are some alternatives I could transfer to?
Realistically they’re all the bad guys. Though Vanguard (disclaimer: I have an account) has had a reputation of being less bad guy than the rest.
The focus on Vanguard accounts are long-term investing. I don’t have margin or options enabled on my account with them so I can’t describe how well those are done. The standard trading platform is incredibly simplistic - there’s no fancy trading platform with SmartErrorBarsGoBrrr - but that’s the point. You put money into a Fund or an ETF at a routine cadence and retire in 25-30 years (lol).
Vanguard is also owned by itself rather than a billionaire founder or publicly traded.
Also a good reason to use Credit Unions instead of banks.
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ChaosHatHop, hop, hop, HA!Trick of the lightRegistered Userregular
Yeah I figure the boost to your debt-to-income ratio would be a benefit over the line of credit being closed out.
You can have the same benefit of debt-to-income by just not closing the line out. I had quite a few cards that I opened when I was a kid and dumb, and later realized "I could get cards that give me points for shit I care about at a better rate" so those are my daily drivers. What I did with the old cards is put a random monthly payment on them (spotify, netflix, etc) and it auto pays itself off every month.
Now my debt to income ratio is the same as it would be if I closed the cards, but now I'm scoring high on another part of the credit score: credit utilization. Banks are more hesitant to loan if all your shit is maxed out because it seems like you're behind. Inversely, if you have access to tens of thousands of dollars of credit that you never use up it's reason to think that you're managing your shit well and less likely to go into crippling turbo debt.
Never close out your accounts. If it has an annual fee, call up the company to downgrade it to a no fee card (I did a chase sapphire to whatever free thing they did when I jumped ship to Capital One) and leave it open in perpetuity.
Hey, last year USAA (who I've been souring over) transferred all its brokerage accounts to Charles Schwaab, who I learned are "the bad guys." What are some alternatives I could transfer to?
Realistically they’re all the bad guys. Though Vanguard (disclaimer: I have an account) has had a reputation of being less bad guy than the rest.
The focus on Vanguard accounts are long-term investing. I don’t have margin or options enabled on my account with them so I can’t describe how well those are done. The standard trading platform is incredibly simplistic - there’s no fancy trading platform with SmartErrorBarsGoBrrr - but that’s the point. You put money into a Fund or an ETF at a routine cadence and retire in 25-30 years (lol).
Vanguard is also owned by itself rather than a billionaire founder or publicly traded.
Also a good reason to use Credit Unions instead of banks.
The only thing in my brokerage account is like 99 shares of AMD automatically paying into itself, and long term investing is in them is actually my intention so I may very well make the change.
Hey, last year USAA (who I've been souring over) transferred all its brokerage accounts to Charles Schwaab, who I learned are "the bad guys." What are some alternatives I could transfer to?
Realistically they’re all the bad guys. Though Vanguard (disclaimer: I have an account) has had a reputation of being less bad guy than the rest.
The focus on Vanguard accounts are long-term investing. I don’t have margin or options enabled on my account with them so I can’t describe how well those are done. The standard trading platform is incredibly simplistic - there’s no fancy trading platform with SmartErrorBarsGoBrrr - but that’s the point. You put money into a Fund or an ETF at a routine cadence and retire in 25-30 years (lol).
Vanguard is also owned by itself rather than a billionaire founder or publicly traded.
Also a good reason to use Credit Unions instead of banks.
The only thing in my brokerage account is like 99 shares of AMD automatically paying into itself, and long term investing is in them is actually my intention so I may very well make the change.
I’ll throw in for Vanguard being good for long term too. You can be as broad or as narrow in your investments as you want, choosing from individual stock, overall industries, or general index funds.
I'm curious which feature makes Schwab a bad guy. They are generally a low-fee investment house and they're one of few large brokerages that offers fractional shares.
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firewaterwordSatchitanandaPais Vasco to San FranciscoRegistered Userregular
I'm curious which feature makes Schwab a bad guy. They are generally a low-fee investment house and they're one of few large brokerages that offers fractional shares.
Not to cross the streams too much, but it could refer to the fact that they were among the group of brokers to restrict buying of certain stocks over the last few days. I have always been pleased with them - both as a broker and a bank - so can't really say otherwise.
I have about $7K in credit card debt. I’ve been working this down, and intend to have it gone by end of year, early next at the latest. I’ve consolidated it via balance transfer and paid a 3% fee to do so. It is at 0% for the year, and no deferred interest is accruing.
So is there any real reason I shouldn’t shove money beyond the minimum payment into some mild growth index funds, and wait until the promo rate expires to pay it off? If I can roll it for another year at 3% and my funds are beating that return, is continuing to let the money grow while paying the debt off slowly the wrong play? Am I missing something mathematically?
I just feel like if I’m borrowing at 3% and seeing a 6% or return..and with hopefully a steady economic recovery, that shouldn’t be tough.
Obviously this assumes the ability to be disciplined in saving and not continue accruing debt. Also I don’t intend to finance anything big, I know that would be affected.
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OrcaAlso known as EspressosaurusWrexRegistered Userregular
It's risk. The index funds are not guaranteed to not lose money. Is the benefit of 3% better returns worth the risk of said funds losing 30% of their value because we've crashed?
If the risk seems reasonable to you, then okay. If you'd be fucked because it happen, then maybe it's not such a great idea.
Personally, I would pay off the credit card first, and only then worry about investments, simply because credit card debt has a ruinously high interest rate. But I tend to be quite conservative financially, so the answer that makes sense to you may be different.
I’m paranoid with credit cards. I don’t mind my .09% car payment because the loan rate is never going to change. But even if my CC company was offering 0% interest I’d still pay it off ASAP every month.
Fair. And that’s the one pitfall I saw too. Especially if for some reason I suddenly had no balance transfer offer available at the same time as a crash.
That said my job is rock solid and income is such that I wouldn’t be strapped by the payments anyway.
There’s also a psychological benefit to simply eliminating the debt too, and then investing my own money and not borrowed funds.
I’m paranoid with credit cards. I don’t mind my .09% car payment because the loan rate is never going to change. But even if my CC company was offering 0% interest I’d still pay it off ASAP every month.
Having had a credit card bump my APR from 12% (which is still stupid to let sit) to 27%, I feel that. Credit card debt is like juggling fire.
I spent years scared to death of credit card debt, mainly because when the ex and I were young we managed to build up like $40K worth of it. When our income was not much more than that. It was bad news bears.
I spent the bulk of my 30s fixing that, and this is basically the finish line. This is actually new debt, mostly accrued because I lacked an emergency savings. My income level is decent, I’ve just stayed in a mode where it’s “borrow and pay off” for sudden unexpected expenses rather than “save and spend.” I’m at a point now where I can live comfortably and still have money leftover, just trying to manage the transition.
Oh, and then start saving for retirement. At 40. Whoops! Thank god for pensions.
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Inquisitor772 x Penny Arcade Fight Club ChampionA fixed point in space and timeRegistered Userregular
I have about $7K in credit card debt. I’ve been working this down, and intend to have it gone by end of year, early next at the latest. I’ve consolidated it via balance transfer and paid a 3% fee to do so. It is at 0% for the year, and no deferred interest is accruing.
So is there any real reason I shouldn’t shove money beyond the minimum payment into some mild growth index funds, and wait until the promo rate expires to pay it off? If I can roll it for another year at 3% and my funds are beating that return, is continuing to let the money grow while paying the debt off slowly the wrong play? Am I missing something mathematically?
I just feel like if I’m borrowing at 3% and seeing a 6% or return..and with hopefully a steady economic recovery, that shouldn’t be tough.
Obviously this assumes the ability to be disciplined in saving and not continue accruing debt. Also I don’t intend to finance anything big, I know that would be affected.
Imagine a world in which it was March 2019 and you decided to invest the money because it was all going to be paid off in one giant lump sum in March 2020.
This is the risk you face.
My rough intuition is that you are taking a potential reward of like 5% in order to take the risk of massive, soul-crushing accumulated credit card debt. Because I strongly suspect that if you do not have a zero balance, they will absolutely fuck you by retroactively applying accrued interest on everything you didn't pay over the promo period. Because that is exactly how credit cards fuck you.
Even in a vacuum, the decision to invest money for a year is NOT risk-free. This is why time horizons for retirement investments run into the decades, rather than just a handful of years. My recommendation is to get out from under the debt so that you can make meaningful long-term decisions that have a floor of "I just lost my investment" rather than a floor of "I lost my investment AND am now back in $7k debt at a 30% APR".
At the very minimum read the agreement very carefully to ensure you won't get fucked if for some reason you don't have the money before even considering that
thatassemblyguyJanitor of Technical Debt.Registered Userregular
~$7k means your 3% balance transfer fee was ~$210
Since you're not getting 6% on the total $7k over 12 months, it'd classically be something like 1/12th of the money every month compounded monthly as you add more to it, you're only going to clear ~$231.
If you wanted to you could stuff it into a high-yield savings account, but you'd only clear $18.99 at the end of the year (because most of them are at or below 0.50%) - but it'd be guaranteed to be there when you need it to pay off the card.
Effectively, it's good you paid the $210 to get the 0% APR instead of the 27% APR, because the original 27% APR would take you ~14 months to pay off and cost you ~$1249.56 in interest charges.
You've basically saved yourself $1k already.
TL;DR:
6% with high-risk (stocks are risky) will get you a benefit of ~$20 ($231-$210).
0.50% with zero/low-risk will get you a benefit of ~$18.99.
You've already saved yourself ~$1k
Conclusion: It's probably best to make the evenly distributed monthly payments because $20 over 12 months (~$1.75/mo) isn't worth the hassle.
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thatassemblyguyJanitor of Technical Debt.Registered Userregular
Fair. And that’s the one pitfall I saw too. Especially if for some reason I suddenly had no balance transfer offer available at the same time as a crash.
That said my job is rock solid and income is such that I wouldn’t be strapped by the payments anyway.
There’s also a psychological benefit to simply eliminating the debt too, and then investing my own money and not borrowed funds.
I’m paranoid with credit cards. I don’t mind my .09% car payment because the loan rate is never going to change. But even if my CC company was offering 0% interest I’d still pay it off ASAP every month.
Having had a credit card bump my APR from 12% (which is still stupid to let sit) to 27%, I feel that. Credit card debt is like juggling fire.
I spent years scared to death of credit card debt, mainly because when the ex and I were young we managed to build up like $40K worth of it. When our income was not much more than that. It was bad news bears.
I spent the bulk of my 30s fixing that, and this is basically the finish line. This is actually new debt, mostly accrued because I lacked an emergency savings. My income level is decent, I’ve just stayed in a mode where it’s “borrow and pay off” for sudden unexpected expenses rather than “save and spend.” I’m at a point now where I can live comfortably and still have money leftover, just trying to manage the transition.
Oh, and then start saving for retirement. At 40. Whoops! Thank god for pensions.
Awesome is for this, and for being at the point that you can live comfortably + still have money leftover to tackle debt/save for the future.
Since you're not getting 6% on the total $7k over 12 months, it'd classically be something like 1/12th of the money every month compounded monthly as you add more to it, you're only going to clear ~$231.
If you wanted to you could stuff it into a high-yield savings account, but you'd only clear $18.99 at the end of the year (because most of them are at or below 0.50%) - but it'd be guaranteed to be there when you need it to pay off the card.
Effectively, it's good you paid the $210 to get the 0% APR instead of the 27% APR, because the original 27% APR would take you ~14 months to pay off and cost you ~$1249.56 in interest charges.
You've basically saved yourself $1k already.
TL;DR:
6% with high-risk (stocks are risky) will get you a benefit of ~$20 ($231-$210).
0.50% with zero/low-risk will get you a benefit of ~$18.99.
You've already saved yourself ~$1k
Conclusion: It's probably best to make the evenly distributed monthly payments because $20 over 12 months (~$1.75/mo) isn't worth the hassle.
Yeah, the 3% flat for the year was an no brainer assuming I couldn't lump it immediately or within a couple months (I couldn't). Good point on the rest, I'm basically trying to figure out how to squeeze out more scraps when I already saved myself enough for a meal.
My rough intuition is that you are taking a potential reward of like 5% in order to take the risk of massive, soul-crushing accumulated credit card debt. Because I strongly suspect that if you do not have a zero balance, they will absolutely fuck you by retroactively applying accrued interest on everything you didn't pay over the promo period. Because that is exactly how credit cards fuck you.
No, it is definitely not one of those things. I've seen those kinds of promos before (store cards like Best Buy are notorious for it), and this is 100% not that. It's legitimately a 0% interest rate for one year, if you pay 3% up front, no hidden catch.
The play here from the credit card's end is that a fair portion of customers won't pay it off in that year, so now they got you to transfer your existing debt to them where they will proceed to charge you 14%, 18%, or even 27% starting at month thirteen. It's why in my experience these offers specifically aren't valid for cards both held by the same bank. They want new debt on their books they can squeeze for years. For them, the nightmare scenario is you get another balance transfer offer from elsewhere in a year and they only make 3%.
0% balance transfer options can actually be a great way to catch up and pay off a card while saving a ton on interest if you actually apply the same payments. Obviously...and to be clear, speaking from experience...people who stack up credit card debt are the type to see that new $25 minimum payment (because there's no interest cranking it up) and say "I'll double up next month." And keep spending on dumb shit. That's the risk. Well, that and the fact that you may have actually just opened another credit card which for people struggling to constrain spending may well be the exact wrong move. But it's not a "fine print and hidden gotcha" problem, it's the credit card company knowing their customer, and know how they behave, and taking advantage of those weaknesses.
Awesome is for this, and for being at the point that you can live comfortably + still have money leftover to tackle debt/save for the future.
Thanks! Thank god for this GameStop nonsense, it's literally what spurred me to finally open a brokerage account...and then the "open an IRA" button was like right there. Next thing you know I've gone down the retirement planning rabbit hole. Before that my retirement plan was "I mean I'm not in that great of health, I'll probably just die young."
I've been shoving money into my employer-matched account too, and it's been growing, it's just wayyyy less than it should be at my age. Paying off debt and starting late (didn't finish college until 30) didn't help. Nor did buying the one house in the Puget Sound area that didn't appreciate for shit, and literally selling at a (small!) loss. So it's catch-up time. But it's so much less stressful knowing that I've got a baseline level of income I'll be able to depend on.
Dropping out of college was my best financial move ever
I hear that. It all depends. Mine was paid by the (old) MGIB and reserve benefits. But that just lowers the delta between what I might have been able to make out in the world and the $0 I was earning as a student. I did an engineering degree, and actually like it, so long run that four to five years of deferred wages and savings was probably for the best. It was the “starting with a mountain of personal debt” and a side of “don’t know how to manage money now that I make a little” that really screwed me the last ten years.
The lost salary and wage growth of those years in school didn’t really hit me though until I was staring down the barrel of failing a class and pushing back graduation by even just seven months, and what that would mean financially. Luckily that didn’t happen. But it drilled home that the cost of college isn’t just in tuition and books and fees.
I wish i had used my GI bill for something actually useful. My plan was just to get a degree then go be a contractor doing what i was doing in the army, and went for the degree i could get the most credits for my time in the army. but my security clearance lapsed while i was in school (it lapses after a couple months of not using it) and no one wanted to hire someone who didn't have an active clearance, but they also wanted someone with a degree. so it was kind of a shitty catch 22, and i ended up with a pretty useless international studies degree. so now im applying to a radiology tech program.
itll be a 2 year program and i kind of have some anxiety about not having the dual income for a while. luckily we do have some savings, and stocks we could sell if we really needed to.
Any thoughts on ARK ETFs? Feel free to argue for or against, I'm looking to expand my knowledge about investing in technology trends. It's run by Cathy Woods and the ETFs are based around disruptive tech innovations.
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ChaosHatHop, hop, hop, HA!Trick of the lightRegistered Userregular
Any thoughts on ARK ETFs? Feel free to argue for or against, I'm looking to expand my knowledge about investing in technology trends. It's run by Cathy Woods and the ETFs are based around disruptive tech innovations.
Seems fine if you agree with the prospectus. Higher risk and all the rewards and pitfalls that come with it.
Their baseline ARKK stock has beaten the comparable VGT (comparable as far as random boring indexes go) even after accounting for the expense ratio which is good but their number one holding is Tesla which is gonna come to earth at some point.
Actively managed funds don't tend to beat the market in the long run. It's easy to beat it some years here and there, it's hard to win every year.
At a quick look:
0.75% is a fairly high expense ratio
Despite having 50ish stocks in them, K & Q have like 10% of their value in Tesla and 20-25% of their value in just 4 companies so I guess it depends on if you think the big holdings are good bets
The Tesla stuff is trimmed for weight and rebalanced, so it's not quite as dire as it could be.
I have some positions since last year, I'm also just curious about more research in what's available.
Be careful about buying into survivorship bias. I think the ARK ETF's have gotten popular lately because their performance has been so good. There are tons of other actively managed ETF's that haven't done as well lately that you don't hear about.
If you agree with the prospectus and believe in the strategy then sure, go for it, but don't go into it believing that it's going to be a winner just because it's been a winner in the past. It's possible that they might have just been in the right place at the right time (according to movements in stock prices) in a way that can't be replicated going forward.
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And if the market goes a few years without tanking, then you're even more golden. If you just put your money in the S&P index at the beginning of 2020 and then got laid off due to covid, yeah that super sucked if you couldn't afford to keep the money in the market. On the other hand, if you had put that money into the index in 2017, the covid crash just brought you back to exactly where you were (or maybe a little higher depending on exactly when in 2017), you didn't lose anything. Life can be unpredictable but for certain you are losing money keeping it in your bank accounts.
Somebody recommended CODs up there? Is that really a thing people do still? I was thinking about this the other day and I could not for the life of me figure out why anyone does that. The percent rate of return is pretty bad and it's extremely illiquid, you will definitely get pounded if you try to withdraw before the term is up.
Invest whatever you feel comfortable doing. Leave yourself an appropriate cushion in a savings/money market account and put the rest into safe indexes, you can even mix bonds into the mix if you really want to hedge.
Often? Yes. In the form of "hey your credit rating dropped because you have fewer open accounts"
My credit rating dropped after our refinance, even though it is more affordable now. Because the duration of payments on the loan are shorter than on the older mortgage that we closed out. Do not try and make sense of FICO.
The bank may request an explanation just to keep track of where the money is coming and going, you can contact your lender and discuss that with them.
You can't give someone a pirate ship in one game, and then take it back in the next game. It's rude.
Yeah the main thing credit scores tell is whether a bank can make money off of a sucker, oops I mean, potential customer. Being a responsible debtor is secondary.
Steam: https://steamcommunity.com/profiles/76561198004484595
Which is in CDN, so...more like under 3K (Ugh).
So I bought 3 shares of Tesla and made $40! Aw yeah, my ship has come in!
The last part is actually likely to outperform professional traders.
Realistically they’re all the bad guys. Though Vanguard (disclaimer: I have an account) has had a reputation of being less bad guy than the rest.
The focus on Vanguard accounts are long-term investing. I don’t have margin or options enabled on my account with them so I can’t describe how well those are done. The standard trading platform is incredibly simplistic - there’s no fancy trading platform with SmartErrorBarsGoBrrr - but that’s the point. You put money into a Fund or an ETF at a routine cadence and retire in 25-30 years (lol).
Vanguard is also owned by itself rather than a billionaire founder or publicly traded.
Also a good reason to use Credit Unions instead of banks.
You can have the same benefit of debt-to-income by just not closing the line out. I had quite a few cards that I opened when I was a kid and dumb, and later realized "I could get cards that give me points for shit I care about at a better rate" so those are my daily drivers. What I did with the old cards is put a random monthly payment on them (spotify, netflix, etc) and it auto pays itself off every month.
Now my debt to income ratio is the same as it would be if I closed the cards, but now I'm scoring high on another part of the credit score: credit utilization. Banks are more hesitant to loan if all your shit is maxed out because it seems like you're behind. Inversely, if you have access to tens of thousands of dollars of credit that you never use up it's reason to think that you're managing your shit well and less likely to go into crippling turbo debt.
Never close out your accounts. If it has an annual fee, call up the company to downgrade it to a no fee card (I did a chase sapphire to whatever free thing they did when I jumped ship to Capital One) and leave it open in perpetuity.
The only thing in my brokerage account is like 99 shares of AMD automatically paying into itself, and long term investing is in them is actually my intention so I may very well make the change.
I’ll throw in for Vanguard being good for long term too. You can be as broad or as narrow in your investments as you want, choosing from individual stock, overall industries, or general index funds.
Not to cross the streams too much, but it could refer to the fact that they were among the group of brokers to restrict buying of certain stocks over the last few days. I have always been pleased with them - both as a broker and a bank - so can't really say otherwise.
I have about $7K in credit card debt. I’ve been working this down, and intend to have it gone by end of year, early next at the latest. I’ve consolidated it via balance transfer and paid a 3% fee to do so. It is at 0% for the year, and no deferred interest is accruing.
So is there any real reason I shouldn’t shove money beyond the minimum payment into some mild growth index funds, and wait until the promo rate expires to pay it off? If I can roll it for another year at 3% and my funds are beating that return, is continuing to let the money grow while paying the debt off slowly the wrong play? Am I missing something mathematically?
I just feel like if I’m borrowing at 3% and seeing a 6% or return..and with hopefully a steady economic recovery, that shouldn’t be tough.
Obviously this assumes the ability to be disciplined in saving and not continue accruing debt. Also I don’t intend to finance anything big, I know that would be affected.
If the risk seems reasonable to you, then okay. If you'd be fucked because it happen, then maybe it's not such a great idea.
Personally, I would pay off the credit card first, and only then worry about investments, simply because credit card debt has a ruinously high interest rate. But I tend to be quite conservative financially, so the answer that makes sense to you may be different.
That said my job is rock solid and income is such that I wouldn’t be strapped by the payments anyway.
There’s also a psychological benefit to simply eliminating the debt too, and then investing my own money and not borrowed funds.
Having had a credit card bump my APR from 12% (which is still stupid to let sit) to 27%, I feel that. Credit card debt is like juggling fire.
I spent years scared to death of credit card debt, mainly because when the ex and I were young we managed to build up like $40K worth of it. When our income was not much more than that. It was bad news bears.
I spent the bulk of my 30s fixing that, and this is basically the finish line. This is actually new debt, mostly accrued because I lacked an emergency savings. My income level is decent, I’ve just stayed in a mode where it’s “borrow and pay off” for sudden unexpected expenses rather than “save and spend.” I’m at a point now where I can live comfortably and still have money leftover, just trying to manage the transition.
Oh, and then start saving for retirement. At 40. Whoops! Thank god for pensions.
Imagine a world in which it was March 2019 and you decided to invest the money because it was all going to be paid off in one giant lump sum in March 2020.
This is the risk you face.
My rough intuition is that you are taking a potential reward of like 5% in order to take the risk of massive, soul-crushing accumulated credit card debt. Because I strongly suspect that if you do not have a zero balance, they will absolutely fuck you by retroactively applying accrued interest on everything you didn't pay over the promo period. Because that is exactly how credit cards fuck you.
Even in a vacuum, the decision to invest money for a year is NOT risk-free. This is why time horizons for retirement investments run into the decades, rather than just a handful of years. My recommendation is to get out from under the debt so that you can make meaningful long-term decisions that have a floor of "I just lost my investment" rather than a floor of "I lost my investment AND am now back in $7k debt at a 30% APR".
Since you're not getting 6% on the total $7k over 12 months, it'd classically be something like 1/12th of the money every month compounded monthly as you add more to it, you're only going to clear ~$231.
If you wanted to you could stuff it into a high-yield savings account, but you'd only clear $18.99 at the end of the year (because most of them are at or below 0.50%) - but it'd be guaranteed to be there when you need it to pay off the card.
Effectively, it's good you paid the $210 to get the 0% APR instead of the 27% APR, because the original 27% APR would take you ~14 months to pay off and cost you ~$1249.56 in interest charges.
You've basically saved yourself $1k already.
TL;DR:
6% with high-risk (stocks are risky) will get you a benefit of ~$20 ($231-$210).
0.50% with zero/low-risk will get you a benefit of ~$18.99.
You've already saved yourself ~$1k
Conclusion: It's probably best to make the evenly distributed monthly payments because $20 over 12 months (~$1.75/mo) isn't worth the hassle.
Awesome is for this, and for being at the point that you can live comfortably + still have money leftover to tackle debt/save for the future.
Yeah, the 3% flat for the year was an no brainer assuming I couldn't lump it immediately or within a couple months (I couldn't). Good point on the rest, I'm basically trying to figure out how to squeeze out more scraps when I already saved myself enough for a meal.
No, it is definitely not one of those things. I've seen those kinds of promos before (store cards like Best Buy are notorious for it), and this is 100% not that. It's legitimately a 0% interest rate for one year, if you pay 3% up front, no hidden catch.
The play here from the credit card's end is that a fair portion of customers won't pay it off in that year, so now they got you to transfer your existing debt to them where they will proceed to charge you 14%, 18%, or even 27% starting at month thirteen. It's why in my experience these offers specifically aren't valid for cards both held by the same bank. They want new debt on their books they can squeeze for years. For them, the nightmare scenario is you get another balance transfer offer from elsewhere in a year and they only make 3%.
0% balance transfer options can actually be a great way to catch up and pay off a card while saving a ton on interest if you actually apply the same payments. Obviously...and to be clear, speaking from experience...people who stack up credit card debt are the type to see that new $25 minimum payment (because there's no interest cranking it up) and say "I'll double up next month." And keep spending on dumb shit. That's the risk. Well, that and the fact that you may have actually just opened another credit card which for people struggling to constrain spending may well be the exact wrong move. But it's not a "fine print and hidden gotcha" problem, it's the credit card company knowing their customer, and know how they behave, and taking advantage of those weaknesses.
Thanks! Thank god for this GameStop nonsense, it's literally what spurred me to finally open a brokerage account...and then the "open an IRA" button was like right there. Next thing you know I've gone down the retirement planning rabbit hole. Before that my retirement plan was "I mean I'm not in that great of health, I'll probably just die young."
I've been shoving money into my employer-matched account too, and it's been growing, it's just wayyyy less than it should be at my age. Paying off debt and starting late (didn't finish college until 30) didn't help. Nor did buying the one house in the Puget Sound area that didn't appreciate for shit, and literally selling at a (small!) loss. So it's catch-up time. But it's so much less stressful knowing that I've got a baseline level of income I'll be able to depend on.
Dropping out of college was my best financial move ever
I hear that. It all depends. Mine was paid by the (old) MGIB and reserve benefits. But that just lowers the delta between what I might have been able to make out in the world and the $0 I was earning as a student. I did an engineering degree, and actually like it, so long run that four to five years of deferred wages and savings was probably for the best. It was the “starting with a mountain of personal debt” and a side of “don’t know how to manage money now that I make a little” that really screwed me the last ten years.
The lost salary and wage growth of those years in school didn’t really hit me though until I was staring down the barrel of failing a class and pushing back graduation by even just seven months, and what that would mean financially. Luckily that didn’t happen. But it drilled home that the cost of college isn’t just in tuition and books and fees.
itll be a 2 year program and i kind of have some anxiety about not having the dual income for a while. luckily we do have some savings, and stocks we could sell if we really needed to.
Steam: https://steamcommunity.com/profiles/76561198004484595
Seems fine if you agree with the prospectus. Higher risk and all the rewards and pitfalls that come with it.
Their baseline ARKK stock has beaten the comparable VGT (comparable as far as random boring indexes go) even after accounting for the expense ratio which is good but their number one holding is Tesla which is gonna come to earth at some point.
Actively managed funds don't tend to beat the market in the long run. It's easy to beat it some years here and there, it's hard to win every year.
0.75% is a fairly high expense ratio
Despite having 50ish stocks in them, K & Q have like 10% of their value in Tesla and 20-25% of their value in just 4 companies so I guess it depends on if you think the big holdings are good bets
I have some positions since last year, I'm also just curious about more research in what's available.
If you agree with the prospectus and believe in the strategy then sure, go for it, but don't go into it believing that it's going to be a winner just because it's been a winner in the past. It's possible that they might have just been in the right place at the right time (according to movements in stock prices) in a way that can't be replicated going forward.
The thought of a true space ETF is getting my nerd wallet twitching.
It's tiny, but nasdaq:ufo