[OT] Re: The perfect MP3 player (hijacked into amateur financial planning rant)

Michael Halcrow mike at halcrow.us
Sun Sep 18 12:33:29 MDT 2005

On Sun, Sep 18, 2005 at 11:26:53AM -0600, Dave Smith wrote:
> Ross Werner wrote:
> >If you don't have any hobbies, what are you living for anyway? I've
> >never owned an mp3 player either, but I certainly blow large
> >amounts of cash on my various hobbies. If you don't have enough
> >money/time to spend on things you enjoy doing, I'd recommend taking
> >a good hard look at your life and see if there isn't something
> >you'd "rather be doing".
> If there was something I'd rather be doing, I'd be doing it. In 10
> years, I won't have a house payment anymore, and then I will be able
> to do pretty much "whatever I flippin' feel like I want to do." :)

Assuming you still have the same level of physical ability that you do
today and your other commitments/responsibilities are about the
same. Is it worth it to live in self-denial for 10 years, with a
gamble that you will have no major unexpected health or family
liabilities 10 years from now? Life tends to throw all sorts of
curve-balls at you; things rarely go as you plan.

It's all about opportunity costs, and life is one big constant risk.

You could put away $1,000 into a mutual fund and earn 5% interest over
5 years (not the best investment option, BTW) and walk away with
(((1.05 - .03)^5 * 1000) - 1000) = $100.00 extra (assuming 3%
inflation per year), buying a 10% cooler toy in 5 years, or you could
use that $1,000 to buy a toy today, and enjoy it for the next 5
years. Sometimes having the toy for the next 5 years is a better
option, and sometimes the 10% cooler toy 5 years from now is a better
option. In any case, I tend to lean toward the ``Die Broke'' financial
planning strategy; spend every last cent -- leave no assets.

On that note, financial planners will frequently tell you that your
mortgage is the last thing you should pay off, because the interest
rate is relatively low, and the interest on the mortgage loan is
tax-deductible. Hit your car loans first with everything you've got,
then make an extra payment or two on your mortgage principle every
year, and make your student loan payments as small as you possibly can
(even inflation outpaces Stafford loan rates). This is assuming that
you have not made the mistake of running up a credit card balance, of
course (convenience or being too lazy to go to the bank is not an
excuse for doing that -- there really is no good excuse for it at
all). And if you are just accepting a credit card APR over 10% --
well, you know what they say about a fool and his money. ;-)

"Aristotelian ethics, Aristotelian definitions, Aristotelian logic,  
Aristotelian forms, Aristotelian substances, Aristotelian rhetoric,  
Aristotelian laughter... ha-ha, ha-ha."                              
 - Robert Pirsig 
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