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Pay Off Your Debt or Invest? Post Reply Rate topic
singaporegal Supreme	10-Sep-2007 21:00        singaporegal About Contact  Quote this Post! Style: Technical   Mood: Yells: "Female TA nut"
x 0   x 0  Alert Admin	Hi elfie, Wow! Backpacking! I didn't know you were so adventurous. Northern Laos some more !! My idea of a holiday is to stay in a five star hotel or resort with lots of amenities nearby. hehehehe... How many people are you going with?
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KiLrOy Master	10-Sep-2007 16:50        KiLrOy About Contact  Quote this Post!   Yells: "I buy only what I can see."
x 0   x 0  Alert Admin	Backpacking?  I dont think I can go back and or get used to do this type of 'holidays' anymore. hahaha. Aniway, remember your malaria shot and also your travel insurance.  If got GPS better still, bring it along as I dont leave home without mine if I do travel from pt A to B to C to D. Its becoz most of the kakis are into baccarat so go with them to listen to gossip, whats everyone into these days, stock tips and try whacking the house down - aniway got so many points still might as well put it to good use.
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elfinchilde Elite	10-Sep-2007 16:08        elfinchilde About Contact  Quote this Post!
x 0   x 0  Alert Admin	singaporegal! *hugs* :))) gonna go backpacking end sept to mid oct. North Laos. no email, ,no internet, no tv. ahhhh. Then return and got a 3 week course. so will be out of market til nov, likely. just waiting for fed cuts for the final hurrah. ahhaaa. kilroy, hehe. yea. on the assumption i do play, it's baccarat. best game on the house since even odds. everything else skewed to House. except for that B6 half commission thing. niama. am not much of a 'traditional' gambler in that sense tho... i don't do 4D, Toto etc either. if i'm in a casino, it's mostly to look-see. interesting psychology one learns there. okay, back to work! byebye!
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KiLrOy Master	10-Sep-2007 15:09        KiLrOy About Contact  Quote this Post!   Yells: "I buy only what I can see."
x 0   x 0  Alert Admin	hehehe. What do you think ?
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rickytan Veteran	10-Sep-2007 12:36        rickytan About Contact  Quote this Post!
x 0   x 0  Alert Admin	Hi KiLroy, so did you make a killing over the last weekend ...hehehe...
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KiLrOy Master	09-Sep-2007 21:35        KiLrOy About Contact  Quote this Post!   Yells: "I buy only what I can see."
x 0   x 0  Alert Admin	I can see I am not the only barcarrat player here huh? hehe.
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singaporegal Supreme	09-Sep-2007 10:40        singaporegal About Contact  Quote this Post! Style: Technical   Mood: Yells: "Female TA nut"
x 0   x 0  Alert Admin	Good posts for Kilroy and elfie. Trade/Invest only with money you can afford to lose. I have a traditional mindset - I don't like to be indebted to anyone and will pay off all my debts first.
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singaporegal Supreme	09-Sep-2007 10:37        singaporegal About Contact  Quote this Post! Style: Technical   Mood: Yells: "Female TA nut"
x 0   x 0  Alert Admin	Hey elfie, I heard that you are going on holiday. Where are you going?
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elfinchilde Elite	07-Sep-2007 19:30        elfinchilde About Contact  Quote this Post!
x 1   x 0  Alert Admin	kilroy! gambler! *whack* :P haha. long article. in a nutshell: invest if you can make more returns on your debt than the interest rate charged on it. which was what elf did, actually. just to share with the undergrads/fresh grads who might be out here. the tuition fee loan is charged at CPF interest rate of abt 3% pa. so all you got to do is to beat 3% returns on the market, and you actually make on a debt. so a conservative 10% returns pa on the market, you actually then make 7% pa on a debt. that's what is known as a good debt. a bad debt, on the other hand, is something like a credit card bill which you can't pay, but keep rolling over, and paying only the min sum every month. you end up paying more. Basic rule of money management: it's not how much you earn, it's how much you keep. Elfie plays the market a lot, yes, but i'm also a saver by nature. standard rule of thumb advocated by most investment gurus and financial advisors: minimum 50% of disposable income is to be saved. There should be enough money to last you at least a year without a job in hand (i personally prefer 4 years tho, having graduated at the time when there were practically no jobs on the market, and any respectable job opening had like, 300-600 applicants). Additionally, i also don't factor in CPF in my calculations, since we can't touch that sum anyway, and 62 yrs old (68..72..84.. :P) is a long, long way away. aiyah. in the end, it's simple. never live a champagne lifestyle on a beer budget. Here's to beer! cheers for the weekend! keke. eheh, kilroy, why not tens, jacks and aces? hahahah. okok, will call the "PICTURE!" and "siam ah!" for you too. :P
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KiLrOy Master	07-Sep-2007 11:28        KiLrOy About Contact  Quote this Post!   Yells: "I buy only what I can see."
x 2   x 0  Alert Admin	Here's one for Friday reading before I leave for the usual weekend evening to visit the kings, queens, natural nine, natural eight and call for ' PICTURE! ' on board you know where. Simple math leads to a simple answer Maybe it was the financial planner on CNBC, a casual conversation with a friend, or just the small voice inside, but something has caused you to keep asking yourself the same thing: should I pay off my debt or start investing? This question, perhaps more than any other, has plagued investors for generations. Ironically, it is one that can be easily decided by using a bit of simple math. Whether it's a mortgage, car loan, student loan, credit card, or medical bills, you probably have some amount of debt in your life. It is only natural that you want to pay it off as soon as possible. On the other hand, it is understandable that you want to start putting money away for your retirement or some other important milestone in your life. Since there is only so much cash to go around, a decision normally has to be made between the two, neither of which leaves a person feeling completely satisfied. What should you do? The answer depends on two variables: 1. The rate of after-tax interest you are paying on your debt 2. The after-tax rate of return you expect to earn on your investments Before you answer the first question, you must understand that there are two different kinds of debt. On one end of the spectrum is high-interest credit card debt that originates from things such as credit cards and department store charge accounts. This type is the deadliest and generally should be avoided unless absolutely necessary. The second type of debt is the lower interest variety; your mortgage, student loans, etc. Often, the interest on these types is partially or wholly tax-deductible, making it even more attractive. With that in mind, the answer to the debt reduction vs. investing problem can be solved with this one statement: If you can earn a higher after-tax return on your investments than the after-tax interest rate expense on your debt, you should invest. Otherwise, you should pay off your balance. Example of debt reduction vs. investing calculation Scenario 1 Assume you have a thirty year, $150,000 mortgage with a six percent rate. Also assume you are in the 25% tax bracket. Due to the itemized deduction of mortgage interest, your after tax annual percentage rate is really 4.02% (not the 6.00% you are paying). Hence, if you expect to earn an after-tax return higher than 4.02% on your investments (odds are substantial you will if you have a long-term horizon), then you should invest. <-- This example is a US mortgage but I guess you get the drift on the percentage rate he is talking about. Scenario 2 You have a $10,000 balance on a credit card with a 22% annual percentage rate. Credit card interest expense is not tax deductible, meaning you should only invest if you think you can earn a 22% after tax return on your investments. Given that the historical long-term return on equities has been somewhere around 11-12%, this seems highly unlikely. In this case, it would be foolish to invest. The bottom line Although you may be eager to invest, you need to do what is best for your bottom line. Regardless of which is the wiser course of action at this stage in your life, the ultimate goal should be to have no debt and an abundance of great, lucrative investments. With enough patience and hard work, this is a goal that you can, and will, attain.
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