Announcement

Collapse
No announcement yet.

Debt Repayment Strategy

Collapse
This topic is closed.
X
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • #46
    The big problem with leveraged sector funds (I did find a few 3X tech funds which have returned 30-40% year to date) is the same problem with all high risk investments. You aren’t able to invest significant amounts of money due to the risk of the investment. For example I wouldn’t even blink or think twice about dumping 100K into a s&p index fund, but I wouldn’t do the same for a leveraged sector fund, it just wouldn’t be wise. I actually have some crypto but again you just wouldn’t put a large amount into it so therefore the usefulness of the investment diminishes, and the index fund ends up winning. Well if you want to put a significant amount of money into a leveraged sector fund that’s your business, good luck.

    FLP

    Comment


    • #47





      Is there a general rule regarding debt repayment, or is it specific to one’s own circumstances 
      Click to expand…


      The general rule is not to have cash invested in cash equivalents and carry debt regardless of the rates. Net worth in quality assets without liabilties is so much cleaner that your local banker will rate you AAA. Complexity alone will lower your rating to AA- or A-.

      Of course, what would a banker know.
      Click to expand...


      That makes sense. Lenders were throwing money at me when I took out the loans for the building. Had zero debt at the time and almost perfect FICO/Vantage.

      Sounds like your vote is to take the emergency fund and just pay the entire debt. Looks like at a minimum the resetting ARM and credit card debt will all have to be paid off within the next 4-5 months, as they'd reset to the highest rates.

      A little concern having no emergency fund with average $160K/month expenditures. But hey maybe then I can make my HELOC my true emergency fund until reserves build back up. Gotta have something to pay largest bills (quarterly taxes, business CC, etc.).

      Thanks!

      Comment


      • #48




        The big problem with leveraged sector funds (I did find a few 3X tech funds which have returned 30-40% year to date) is the same problem with all high risk investments. You aren’t able to invest significant amounts of money due to the risk of the investment. For example I wouldn’t even blink or think twice about dumping 100K into a s&p index fund, but I wouldn’t do the same for a leveraged sector fund, it just wouldn’t be wise. I actually have some crypto but again you just wouldn’t put a large amount into it so therefore the usefulness of the investment diminishes, and the index fund ends up winning. Well if you want to put a significant amount of money into a leveraged sector fund that’s your business, good luck.

        FLP
        Click to expand...


        Thanks. But this string is focused on debt repayment strategy, not investing. Not interested in buying any mutual funds in current market.

        Comment


        • #49
          Well you don’t strike me as someone who listens to advice, you’re right and everyone else isn’t as sophisticated as you.

          Debt management isn’t rocket science, pay it off. If you can’t pay it off because you are afraid you can’t cover your expenses then spend less.

          Comment


          • #50
            I make plenty of mistakes, just trying to minimize. Probably average intelligence I'd say.

            I may have overdone the vacationing this year, working on tightening my belt. Wendy's it is.

            Comment


            • #51








              Is there a general rule regarding debt repayment, or is it specific to one’s own circumstances 
              Click to expand…


              The general rule is not to have cash invested in cash equivalents and carry debt regardless of the rates. Net worth in quality assets without liabilties is so much cleaner that your local banker will rate you AAA. Complexity alone will lower your rating to AA- or A-.

              Of course, what would a banker know.
              Click to expand…


              That makes sense. Lenders were throwing money at me when I took out the loans for the building. Had zero debt at the time and almost perfect FICO/Vantage.

              Sounds like your vote is to take the emergency fund and just pay the entire debt. Looks like at a minimum the resetting ARM and credit card debt will all have to be paid off within the next 4-5 months, as they’d reset to the highest rates.

              A little concern having no emergency fund with average $160K/month expenditures. But hey maybe then I can make my HELOC my true emergency fund until reserves build back up. Gotta have something to pay largest bills (quarterly taxes, business CC, etc.).

              Thanks!
              Click to expand...


              LOL 160K in month expenditures... man am I glad I’m not an entrepreneur.

              Comment


              • #52
                $160k monthly expenses

                 

                is that for your practice and personal expenses combined?

                Comment


                • #53




                  $160k monthly expenses

                   

                  is that for your practice and personal expenses combined?
                  Click to expand...


                  Personal, practice, real estate expenses, home, retirement funding, quarterly taxes, tithe, all property taxes, private school education.

                  The whole enchilada. I did break this down in prior strings.

                  Wonder of that changes minds regarding emergency funds and thus debt paydown. Once all the debts are paid off, that number should drop by about $22K.

                  Comment


                  • #54
                    For clarification as I specified above, it's expenditures, not expenses. A lot of it stays with me in the end.

                    Comment


                    • #55










                      Is there a general rule regarding debt repayment, or is it specific to one’s own circumstances (income, NW, tax benefits of debt, etc.)?

                      Commercial loan $1.4M 10 year (no balloon) 3.5% fixed, 8 years left, payment is $17K/month

                      Home loan $350K 5 year arm 2.75%, resetting 11/1/2019, payment is currently $1700/month

                      Car loan $65K 6 year loan 1.75%, 3 years left, payment is $1700/month

                      Credit card debt $45K 0% intro term, resetting 1/2020, 4/2020 split about 50/50 on two cards, minimum payment is currently $470/month.

                      CD interest income 2.65%-3% 12-18 month CD terms, savings interest 1.5%-2.3% with combined interest income about $50K/year on $2.1M cash flow reserves for annual expenditures (not expenses) about $1.9M.

                      Pay off highest interest rate debts off first? Pay off smallest loans first to decrease monthly payments/improve cash flow? Pay off non tax-advantaged auto loans first? Pay off by riskiest attached asset? Pay off everything and wipe out reserves? Pay off debts as they reset from low to high interest rate (5 year ARM, credit cards) or refinance them to pay off highest debt rates first.

                      Do not recommend I invest it in these markets instead, you all know how I feel about the current markets, it’s not 2009. I’m more interested in debt repayment strategies. However I proceed, I wanted all debts paid off in next 2-3 years.

                      How would you tackle? Thanks in advance.
                      Click to expand…


                      I would strongly recommend that you take part of your $13M net worth, maybe either your $2M emergency fund or a fraction the $10M you have currently invested and pay off all of this debt tomorrow.

                      I can link to the posts if anyone else can’t find them.
                      Click to expand…


                      Okay, a bold vote to use all cash reserve to pay all existing debt. I have thought about it for sure, but always back off remembering there is the occasional month my expenses shoots beyond $250K, usually when quarterly taxes are due in conjunction with an unusually expensive month at the office.

                      This gets to how much reserve am I comfortable with once these recurring debts are all paid off. I’m thinking about $500K but open to recommendations. That amount could be accumulated over the course of a year, given my savings rate. Maybe one option is to incrementally pay it all down over the next 12 months as this reserve replaces. That would certainly accelerate financial freedom!

                      Food for thought. Thanks!
                      Click to expand...


                      How would that accelerate financial freedom?  The factors that accelerate financial freedom are having more income producing assets and needing less income.  Paying the debt all off today and rebuilding your reserve with cash flow over 12 months doesn't substantially accelerate your personal "financial freedom" compared to holding the reserve, and paying the debt with cash flow over the next 12 months. It's just shuffling money around.

                      I think it's interesting that you ask the question stating you want to get rid of the debt but then write paragraph after paragraph about how much 0% credit cards etc have helped you.  That's one strategy, but not appealing to me as it's not worth my time and mental energy.  If it's worth yours, fine, but if it's such a great strategy why do you want to stop doing it?  At least be consistent.

                      For the record, I would pay off the car and credit card today, as well as the house just to avoid the hassle of the reset, and then come up with a plan for the commercial loan that is consistent with your overall plan.

                      Also, WCI, please make an unlike button for those of us with clumsy fingers who accidentally "like" a post while scrolling!

                      Comment


                      • #56
                        Gotcha. Are you solo FP? You must have a good gross revenue

                        Comment


                        • #57
                          I think it’s clear at this point that OP’s questions are at best rhetorical and at worst complete trolling, not a sincere solicitation for advice.

                          Comment


                          • #58
                            The funny thing is he’s not doing anywhere near as well as he thinks he is. Like literally no one would trade places with him from a financial standpoint. It sounds like a nightmare at least to Fatlittlepig.

                            Comment


                            • #59













                              Is there a general rule regarding debt repayment, or is it specific to one’s own circumstances (income, NW, tax benefits of debt, etc.)?

                              Commercial loan $1.4M 10 year (no balloon) 3.5% fixed, 8 years left, payment is $17K/month

                              Home loan $350K 5 year arm 2.75%, resetting 11/1/2019, payment is currently $1700/month

                              Car loan $65K 6 year loan 1.75%, 3 years left, payment is $1700/month

                              Credit card debt $45K 0% intro term, resetting 1/2020, 4/2020 split about 50/50 on two cards, minimum payment is currently $470/month.

                              CD interest income 2.65%-3% 12-18 month CD terms, savings interest 1.5%-2.3% with combined interest income about $50K/year on $2.1M cash flow reserves for annual expenditures (not expenses) about $1.9M.

                              Pay off highest interest rate debts off first? Pay off smallest loans first to decrease monthly payments/improve cash flow? Pay off non tax-advantaged auto loans first? Pay off by riskiest attached asset? Pay off everything and wipe out reserves? Pay off debts as they reset from low to high interest rate (5 year ARM, credit cards) or refinance them to pay off highest debt rates first.

                              Do not recommend I invest it in these markets instead, you all know how I feel about the current markets, it’s not 2009. I’m more interested in debt repayment strategies. However I proceed, I wanted all debts paid off in next 2-3 years.

                              How would you tackle? Thanks in advance.
                              Click to expand…


                              I would strongly recommend that you take part of your $13M net worth, maybe either your $2M emergency fund or a fraction the $10M you have currently invested and pay off all of this debt tomorrow.

                              I can link to the posts if anyone else can’t find them.
                              Click to expand…


                              Okay, a bold vote to use all cash reserve to pay all existing debt. I have thought about it for sure, but always back off remembering there is the occasional month my expenses shoots beyond $250K, usually when quarterly taxes are due in conjunction with an unusually expensive month at the office.

                              This gets to how much reserve am I comfortable with once these recurring debts are all paid off. I’m thinking about $500K but open to recommendations. That amount could be accumulated over the course of a year, given my savings rate. Maybe one option is to incrementally pay it all down over the next 12 months as this reserve replaces. That would certainly accelerate financial freedom!

                              Food for thought. Thanks!
                              Click to expand…


                              How would that accelerate financial freedom?  The factors that accelerate financial freedom are having more income producing assets and needing less income.  Paying the debt all off today and rebuilding your reserve with cash flow over 12 months doesn’t substantially accelerate your personal “financial freedom” compared to holding the reserve, and paying the debt with cash flow over the next 12 months. It’s just shuffling money around.

                              I think it’s interesting that you ask the question stating you want to get rid of the debt but then write paragraph after paragraph about how much 0% credit cards etc have helped you.  That’s one strategy, but not appealing to me as it’s not worth my time and mental energy.  If it’s worth yours, fine, but if it’s such a great strategy why do you want to stop doing it?  At least be consistent.

                              For the record, I would pay off the car and credit card today, as well as the house just to avoid the hassle of the reset, and then come up with a plan for the commercial loan that is consistent with your overall plan.

                              Also, WCI, please make an unlike button for those of us with clumsy fingers who accidentally “like” a post while scrolling!
                              Click to expand...


                              Paying the debt off today would theoretically save me all the interest payments versus paying over the next 12 months. No? The office building is an income producing asset. Also, paying off the debt means less need for income, as this would wipe out about $22K in monthly recurring debt payments. Doesn't this all accelerate financial freedom as you say?

                              Also, I don't just produce credit card debt thru purchases. When I accumulate mortgage debt, like the office building, I wind up transferring portions to 0% cards, effectively lowering my real interest rate. When I have no recurring loan debt, which was true in the few years leading up to the office building, I did not open any credit cards as there was no debt to transfer.

                              Anyway the plan is to pay off all the debt, probably in a similar order to what you recommend.

                              Clumsy finger. Uh oh. Aren't you a surgeon?

                              Comment


                              • #60




                                Gotcha. Are you solo FP? You must have a good gross revenue
                                Click to expand...


                                I have a PA, an APRN, and a pharmacist for the in house pharmacy. So 3 medical providers and a pharmacy. Office buildings have 5 medical tenants, a total of 19K sq ft.

                                Comment

                                Working...
                                X