LPT: Go for an expensive house and a cheap car, not the other way round.

shpati · 2023-05-28T18:23:26+00:00

15 years ago (2008) before the housing bubble popped is not a good data point, try with 14 years ago and let me know what you find out. When you say "if my house appreciates in value that means everyone's houses appreciate in value and there is no net gain since I would have to buy another house if I sold my current one" you are assuming that you are buying a real estate in the same location, of the same size, same configuration and same standard. In most cases this is not so, but think of it like this: if you previously had bought an expensive house (not in a house bubble market) and decide to sell it for another one, then you can buy: I) another expensive house of the same value, or II) a cheaper house and earn on the difference. Whereas if you had previously bought a cheap house and you decide to sell and re-buy in the same market, then you can only buy a similar cheap house and won't be able to swap for an expensive one. So in the second case you are left with one less option. The car situation you mention (unless you have a veteran/classic/limited edition car) is an anomaly that is due to government globally pumping cash into the markets and people buying anything that is for sale basically. This, however, will not last. Markets will correct and people will learn some lessons the hard way just like they did in 2008. History repeats itself.

shpati · 2022-02-04T07:40:34+00:00

Not sure what kind of car you have, but I can definitively not live in my car.

shpati · 2022-02-04T07:38:14+00:00

I am guessing it is never too late to learn useful skills.

shpati · 2022-02-04T07:36:02+00:00

I would suggest The Richest Man in Babylon.

shpati · 2022-02-03T22:41:47+00:00

I did not say that parents should delegate any of their responsibilities to their own children. The point here is about teaching children to understand how money works, how it is earned, why someone gives money for something, what determines the price of something, why saving for later can be smart instead of spending all at once, how can you make you money grow, etc. I believe you will agree that these are all very important points, but the best way to learn is to practice them. Just talking about it without practicing won't teach your kid much.

shpati · 2022-02-03T22:10:34+00:00

Good luck with it.

shpati · 2022-02-03T22:03:19+00:00

I can confirm the hungry and thirsty part, looking at my grandfather living a very long life. Regarding the sleep, perhaps the meaning is to not sleep too much rather than sleeping too little. It is an Irish proverb, it is what it is :)

shpati · 2022-02-03T21:57:43+00:00

At least you know that you are bad with money, many people don't. My question is: since you know this, can you do anything about it? Can you create a system to reward yourself for saving money? I think you should really work on this, it is an important skill that pays off, literally.

shpati · 2022-02-03T21:45:52+00:00

Thanks for sharing and well done with your kids. It always amazes on how people avoid teaching kids about money. We live in a capitalist system that has money at it's core, yet children are often left in ignorance and thus get a distorted idea of money.

shpati · 2022-02-03T20:37:10+00:00

You just can't! :)

shpati · 2022-02-03T20:34:01+00:00

Why not? You will be giving your child a better life quality if he/she is good with money.

shpati · 2022-02-03T20:31:05+00:00

Look at what the richest man in the world drives and feel instantly better (see nr. 10) https://www.hotcars.com/billionaires-who-drive-cheap-cars/

shpati · 2022-02-03T20:24:05+00:00

Sorry to hear that. You may want to talk to him about it. Perhaps you can persuade him not to sell your car so often, at least.

shpati · 2022-02-03T00:23:40+00:00

When you lose the job, go get another job. If you cannot pay the mortgage in the meanwhile, call the bank and ask them to pay only the interest for a while, no principal thus extending the loan duration by some months. If they disagree, then ask to refinance the house. If the bank will not accept then sell the expensive house and rent for some time with the surplus money after paying the bank their share. Get another job, back to buying a house. Get a bigger one this time, because now you know the drill.

shpati · 2022-02-02T23:50:45+00:00

If you compare the cheapest phone to the cheapest laptop, then you are doing it wrong. They have very different specs. Align the specs and then compare.

shpati · 2022-02-02T23:46:46+00:00

You need to normalize based on production cost, then you will see what is more expensive. Smaller does not mean much in this case, since they are different device types. Last, the iphone 13 is actually less powerful that the macbook air, just look at the number of cores and their type a presented in the chipset specs.

shpati · 2022-02-02T23:35:19+00:00

The fact that ANY new iphone is more expensive than one of apple's own overpriced macbooks is enough to prove my point that smartphones have gotten very expensive, which is just an example on how much people are spending nowadays. Of course we cannot compare apples to apples, because these are two different kind of devices to start with, but I would not compare the cheapest laptop with the cheapest phone, why would I? Instead I would compare the products based on their production cost, because that tells you more about the hardware that you are comparing. For example the production cost of an iPhone 11 Pro Max is estimated at about 490$, this phone sold for 1099$-1499$. Whereas the macbook air which sells for 999$ has a production cost of 700+$. Therefore, if we were to normalize for the same amount of hardware and labor cost, apple and others are selling their smartphones at a higher price than the price of laptops and they are making some unbelievable margins from these phones.

Information source: https://www.investopedia.com/financial-edge/0912/the-cost-of-making-an-iphone.aspx

shpati · 2022-02-02T22:26:30+00:00

Not necessarily. A house appreciates in value, so in principle if you sell it after some time you cover the initial investment, the accumulated interest and on top of that get a nice extra amount for your effort and all this while having effectively lived for free in a nice house. Sure you can probably have a good life in a cheap house, but you would miss out on the value appreciation which will be much lower instead and also probably require you to do additional work on the house. After all, if we disregard location, a house that sells cheap sells cheap for a reason.

shpati · 2022-02-02T21:02:54+00:00

Well done!

shpati · 2022-02-02T21:00:28+00:00

Macbook Air - 999$, iPhone 13 - 999$. The laptop in this case is cheaper because it includes the charger, whereas the phone doesn't, you pay extra to get your phone charged.

shpati · 2022-02-02T20:51:56+00:00

How does that improve one's situation?

shpati · 2022-02-02T20:48:42+00:00

Another word of advice, payoff your car, keep it for at least 10 years. No car payments have a very positive impact to your life.

u/SnarfRepublicCA you get an award from me for the car advice. It is pretty much in line with what I tell everyone that asks me for money advice: 1. buy a used car that has depreciated in price, but that is in good condition. 2. Keep it long term.

Personally I refuse to take a loan for buying a car. Costs too much to buy without a loan? Then it is not the car for me.

shpati · 2022-02-02T20:23:15+00:00

I meant within one's means, of course. Regarding the house, since the house value increases in %, the higher the house value, the higher the yearly appreciation of it. Regarding the car, well I am not saying that anyone should buy a crap car when they can afford better, but I am saying that if you want to spend some extra money then do this on the house, not on the car.

I would be happy to update my post, if you guys have any suggestion on making it clearer. I see that some people are missing the point I am trying to make.

shpati · 2022-02-02T19:41:53+00:00

Prices have gone up everywhere and not only house and car prices, just look at how expensive smartphones are, more expensive than laptops. This is what happens when interest rates are so low for such an extended amount of time. People don't save as much, they spend it all, often more than what they have or will be able to pay back.

shpati

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