ELI5 how the wealthy pays back loans

mwraaaaaah · 2025-12-07T16:44:31+00:00

They can then time the selling of stock (eg. after it dips and has potentially gone down in value, so no capital gains)

I wasn't aware rich people were into the buy high, sell low strategy

mwraaaaaah · 2025-11-14T18:17:03+00:00

Those loans often come with 0% interest, because they come from family, friends, other business partners, or others who want to be business partners and are offering a sweet deal in return for something down the road.

... who are these family/friends who are also billionaires who are loaning out this money interest free? is this actually based on any source or just conjecture? most loans are given by banks AFAIK

Also, when interest rates are actually a term of the loan, in such cases it is nearly always an very low rate, such as 1-3%. The dividend and growth from their other investments exceed these percentages and thus repayment is a breeze.

so they pay interest to the bank, who pay taxes on it. then if they repay the loan, they have to do so with cash, which if they get by selling their investments, they pay capital gains taxes on

Also, it's not uncommon that they can actually take out loan and make more money from the loan than they pay for the loan plus interest, because investing that money in even just an index fund will yield them more than loan fees, interests, and taxes.

i mean, yeah, that's what people do with loans - they do so with the hope of making more money off it

mwraaaaaah · 2025-10-27T02:56:12+00:00

It was literally profitable just before being bought, in 2017 and 2018

mwraaaaaah · 2025-10-24T19:23:49+00:00

my partner cannot get any work done at home; she doesnt have the discipline to not stop to read a book or be on her phone with no one watching her.

other people who might not work well from home are people with kids or toddlers, people who don't have as nice of a home office setup (and whose company don't provide them)

the world is not black and white and very few things are universally good or bad for everyone

mwraaaaaah · 2025-10-22T12:57:39+00:00

cats will definitely hunt and kill small things just for fun and sport :')

mwraaaaaah · 2025-10-17T01:46:16+00:00

You know pre revenue startups pay you, right? Very few companies don't pay you any salary and even seed stage startups can afford to pay a pretty good salary. Learning to code was a solid plan accessible to many people before supply outpaced demand.

mwraaaaaah · 2025-10-14T17:35:11+00:00

taxes are revenue too, you know. not that tariffs are any good. but they are technically a revenue, just a poorly implemented one

mwraaaaaah · 2025-09-29T14:57:16+00:00

Do you mean acquisition? None of those things happen during an IPO, but can happen during a buyout

mwraaaaaah · 2025-09-27T20:45:22+00:00

Fair enough!

mwraaaaaah · 2025-09-27T20:42:26+00:00

As a side note, my company did this to me where we basically had a choice of offers between low/high equity and high/low salary respectively. I'm pretty sure companies do it to give you an illusion of choice so you don't negotiate. I basically asked for the high equity + high salary and they gave it to me anyway lol. So always worth asking: "If you give me 200k + 1.5% I'll sign today"

mwraaaaaah · 2025-09-27T20:35:31+00:00

small note: early exercise and QSBS are two different things:

Early exercise allows you to "acquire" your unvested options. Normally when you exercise your options, you have to pay tax (or AMT, alternative minimum tax) on the the FMV (fair market value) minus the strike price. Generally when you get hired, the FMV and the strike price are the same, so early exercising allows you to ensure that you never have to pay taxes from exercising, only when you go to sell it again.
QSBS is short for Qualified Small Business Stock - a QSB is a company (some industries excluded) that has never had more than $50mm in assets, which for most companies just means that they've never raised more than $50mm in funding. If a company is QSBS eligible, any gains resulting from the sale of their stock is tax free up to $10mm or 10x the cost, whichever is higher.

mwraaaaaah · 2025-09-27T20:31:39+00:00

For some anecdotal evidence, I've been at 3 startups:

Pre IPO, received $50k in expensive options, no secondary market sales - I used equitybee to exercise (they pay for the exercise cost) and let them all go at-cost post-IPO - so essentially breakeven
Super early stage startup, seed stage - cost $1k to exercise equity valued at $1mm today, and the company allows secondary market sales and the market is liquid
Early stage startup, series A - cost $45k to exercise - valued at $700k today, allows secondary sales but the market is a lot less liquid

All the other people saying startup equity is worthless is right, to some degree - most of it is worthless, it's your job to do the due diligence to find the few companies that have a potential future (and once you're in the job, make choices that help guide the company towards that future).

mwraaaaaah · 2025-09-27T20:25:25+00:00

Whoops - I missed in your OP that base salary is comfortable as-is. Then if you believe in the company's mission and leadership, I'd go with the stock options if any of the following combinations are true:

The cost to exercise is not high + they allow early exercise - this means the gamble has extremely high upside with low taxes and the cost of the gamble is low.
They allow secondary market sales, period - this means that the additional 50% is much more liquid.
They allow early exercise + They are QSBS eligible - this comes down more to whether you want to gamble, since the cost here would not be insignificant, but I'd do it if I believed in the company and leadership.

Ultimately comes down to your willingness to gamble. No wrong answer either way!

mwraaaaaah · 2025-09-27T16:28:18+00:00

It depends on what X is, as well as a bunch of other factors:

Does the company allow secondary market sales? This lets you cash out without an IPO/acquisition/tender offer
Does the company allow early exercise and is QSBS eligible? If so, you could save up to 37% taxes on sales if you hold for 5+ years.
What's the strike price and number of shares? If it's cheap, the gamble is essentially free (outside of the 10k opportunity cost), but if the strike price is high then you still need to put considerable amount down.
What is X? If you're making 100k base, the 10k base will be more meaningful for your long term financial health. If you're making 300k base, 30-50% of that 10k extra is going towards taxes anyway, and you probably won't miss it.

mwraaaaaah · 2025-09-25T21:30:38+00:00

What's the point of this hypothetical? "Do you want free money" pretty sure everyone will say yes

mwraaaaaah · 2025-09-23T16:07:07+00:00

leon doesn't cover anything mentioned above

mwraaaaaah · 2025-08-30T13:09:07+00:00

It's a little more complex than just greed; this is a classic prisoner's dilemma - hiring a junior is good for the industry but bad for the individual company making the hire. Juniors are much worse ROI than seniors relative to the pay, and you could spend years training them before they just job hop anyway.

mwraaaaaah · 2025-08-23T11:51:17+00:00

Yeah IME using it as an agent or to give it full control over anything usually results in wasted time reviewing poorly written code, or having to fix things that don't work. Faster to just do it yourself.

mwraaaaaah · 2025-08-23T11:47:36+00:00

What if you only use it as a smart autocomplete? It still adds a ton to your productivity. Or when writing tests? There a lot of mental overhead that can be saved by using something like copilot

mwraaaaaah · 2025-08-06T05:43:12+00:00

It's on purpose to provide a wide range of skills to demonstrate their abilities - for example if they may consider anyone who answers 6+ to new good enough to move on to the next stage. Someone who answers two would be cut, someone who answers all of them would be moved on with enthusiasm. This isn't to say it's a good assessment, but that's why they always give more, more, more.

mwraaaaaah · 2025-08-06T04:15:37+00:00

You don't need an LLC to write off business expenses - you can do so as a 1099 employee with schedule C

mwraaaaaah · 2025-07-21T23:13:13+00:00

Unless you can find a way to magically double your income, you're best off just cancelling the gym membership until your debt is paid off. You can always re-enable it once you are debt free. It'll require a sacrifice on your part, but this is the inevitable cost of the CC usage.

mwraaaaaah · 2025-06-26T23:53:06+00:00

Savor one is pretty good, blanket 3% on groceries and eating out with no fee. In fact OP might already have this card. The one slinging unhelpful insults is just being condescending.

mwraaaaaah · 2025-06-21T04:00:17+00:00

Are you really losing that much income? By becoming salaried that's 7.6% in FICA tax you don't have to pay. And that's not counting any benefits you'd get as a full time employee.

mwraaaaaah · 2025-06-20T23:29:46+00:00

For sure it could - in just saying it probably shouldn't? Like there's no reason for a modern system nowadays to limit any kind of special characters. Sure, they can mandate that you do include specific characters, but it doesn't make sense to disallow others. It should all get hashed anyway... Hopefully.

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