Huge amount of money in savings?

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Rasputin
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Re: Huge amount of money in savings?

Post by Rasputin » Tue Nov 07, 2017 4:58 pm

I'm not sure I agree with you on a few of those points about housing.

In the first place, I wouldn't say that the finance cost attaches to the housing itself so much as the related borrowing - which is the same for any asset that is financed. I also don't agree that it is not income producing. Of course if you live in it yourself it is not going to produce income, but then you are getting a benefit in kind. In principle it does produce a rental income, whether actual or nominal.

I believe housing prices have been increasing significantly faster than income in the UK for a long long time. If someone buys an old house they will often get the pre-registration deeds, which may show for example that in 1880 the house belonged to a labourer, in 1910 to a shopkeeper, in 1930 to a manager, in 1960 to a doctor... This is driven by long term trends like population growth, increased planning control and higher labour costs, I think, and isn't really an indication that housing is in a bubble.

glassynails
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Re: Huge amount of money in savings?

Post by glassynails » Tue Nov 07, 2017 7:27 pm

Thanks all! I'm in no big rush. I am going to first pay off a credit card I have that's costing me over a $1000 interest every year and I do need a new car in a few months. I'm wondering though if I should use this money to pay off a car or take out a loan. I'm only going to buy a second hand car under or up to $10k. I'm not a rich person at all or even middle class.

Thanks again.
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Mike Steede
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Re: Huge amount of money in savings?

Post by Mike Steede » Tue Nov 07, 2017 9:04 pm

General rule, always pay off consumer debt first. The return on investment by saving your money will never equal the outlay to the bank or credit cards in interest, or mortgage interest on your home. If you find an investment that pays more please let me know! So, pay off your credit cards, purchase the vehicle free and clear, invest the rest.
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Casey
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Re: Huge amount of money in savings?

Post by Casey » Tue Nov 07, 2017 11:25 pm

^^+1000^^

glassynails
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Re: Huge amount of money in savings?

Post by glassynails » Tue Nov 07, 2017 11:36 pm

What about putting a down payment on a small house and renting it to pay it off?
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Mike Steede
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Re: Huge amount of money in savings?

Post by Mike Steede » Wed Nov 08, 2017 12:06 am

I'd do that provided you're in an area where there is a steady appreciation in home value. Otherwise if in a stable housing market you're just parking your equity like in the saving account IMHO. Also, don't forget home ownership always involves a lot of maintenance - the roof goes, the water tank blows, landscaping costs. All worthwhile providing your equity is appreciating in excess of all that.
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Mike Steede
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Re: Huge amount of money in savings?

Post by Mike Steede » Wed Nov 08, 2017 12:17 am

Reiterating previous comments, get yourself a qualified independent(!) investment adviser, and not 'advisor' with a financial institution who'll sell you their products to their benefit. Always beware of management fees - they're usually a rip-off.
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Casey
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Re: Huge amount of money in savings?

Post by Casey » Wed Nov 08, 2017 12:04 pm

The residential landlords will likely tell you to shy away from single family homes as rentals because it’s all or nothing. Multi family spreads risk better.

One thing you may consider is buying a duplex where you live in one unit and rent out the other. My son just graduated from college and plans on doing this.

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Andrew Fryer
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Re: Huge amount of money in savings?

Post by Andrew Fryer » Wed Nov 08, 2017 12:05 pm

Casey wrote:
Tue Nov 07, 2017 4:12 pm
The definition of bubble that resonates with me is when asset prices rise significantly faster than wages & income.
Yes, but gold has been doing that and that's why people invest in it, making it do it more
gold is often leased between the largest players in the financial system and technically would throw off income in that scenario
That's interesting. It's also a bit worrying, isn't it? I don't quite understand short-term leases (for profit, as opposed to a cheaper way to rent), as I assume there's a devil catch the hindmost aspect? It's also a mechanism for stoking a potential bubble isn't it? Just speculating.
glassynails wrote:
Tue Nov 07, 2017 7:27 pm
Thanks all! I'm in no big rush. I am going to first pay off a credit card I have that's costing me over a $1000 interest every year and I do need a new car in a few months. I'm wondering though if I should use this money to pay off a car or take out a loan.
And Bingo!

Buy the car, unless the money can be invested in something that earns more than the loan will.

Mind, I knew someone who had carefully used cards for investment in fine art this way and when his lump sum came along and he paid the cards off, the bank repossessed them all to his surprise - they looked upon it as killing a potentially toxic debtor.
Pay off the cards (almost the most expensive form of debt on the planet), glassy, but have a follow-up plan.

Thing is, glassy, you are starting to give us information you should have given us in your OP.
And your situtation is a very basic one, and I suspect that every penny spent on a financial advisor will be money wasted (sledgehammer to crack a nut). Perhaps that's why you asked us in the first place.
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Casey
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Re: Huge amount of money in savings?

Post by Casey » Thu Nov 09, 2017 3:17 am

You'll know gold is in a bubble when everyone is borrowing money hand over fist to get some. The way your friend did with fine art (a watch that belonged to dead actor Paul Newman just sold for $17M USD) and most everyone in the US did with housing. After the credit boom comes default and a credit bust when the economy slows down and interest rates rise followed by a collapse in the price of the assets bought previously with borrowed money. Unlike the alien invasions posited by my friend Rasputin, this has happened time and time and time and time again and will keep happening so long as we keep falling for it. After a French hyperinflation we got the Napoleonic Wars. After Weimar hyperinflation we got Hitler. This is not an unserious idea.

My grandad lived through the US depression. He said two things, one, learn a trade, and two, don't trust banks. I thought he was crazy when I was young and I knew it all. Now I think he's the smartest guy I've ever known.

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Casey
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Re: Huge amount of money in savings?

Post by Casey » Thu Nov 09, 2017 3:42 am

With consumer debt to pay off and other priorities it should be clear at this point in the thread the OP might not have any business in metals just yet. Still, with some caveats I think he should keep them in mind. It's important to be careful in these discussions not to become dogmatic because so often the idea of money and what it is becomes an article of faith. The USD is backed by the "full faith and credit" of the good ol' US of A since it lost its backing by gold in 1971 when Nixon closed the gold window as de Gaulle had inspired a global run on the dollar where countries were cashing USD in for gold. There are those who believe the USD has maintained its desirability because the Kingdom of Saud agreed with Kissinger in the 70's to only accept USD for its oil. The idea of gold as money, on the other hand, is backed by the fact that it 'twas ever thus, for thousands of years and counting it has always had value to our species. Even that, though, is not etched in stone.

Who's to say who is right? Can both or neither be right?

I agree wholeheartedly with everyone on this site who says "get a teacher" to someone just starting out with CG. I don't agree with this advice in this circumstance and instead believe you need to take full responsibility for this financial stuff on yourself. It's a moral issue, you have to own it.

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Casey
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Re: Huge amount of money in savings?

Post by Casey » Thu Nov 09, 2017 3:47 am

I forgot to mention to my friend Andrew that I don't understand gold leasing, either, except that it sounds like musical chairs to me, as well.

FHC
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Re: Huge amount of money in savings?

Post by FHC » Fri Nov 10, 2017 12:49 am

Pay off debts.
Set aside 3-6 months for an emergency fund.
Invest 15% of gross income toward retirement.
Pay off your mortgage.

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Casey
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Re: Huge amount of money in savings?

Post by Casey » Fri Nov 10, 2017 4:34 am

Can’t go wrong with that. You know it in your heart.

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