[OT] Personal Finances: Was The perfect MP3 player

Grant Shipley gshipley at gmail.com
Sun Sep 18 19:43:48 MDT 2005

On 9/18/05, Dave Smith <DavidSmith at byu.net> wrote:
> I agree with your sentence up until "other than". 

I was just quoting (somewhat) President Hinkley from priesthood
session a few years ago.  He also said, if I recall correctly, that we
should pay off our home as soon as possible.

> >>Amass an "emergency fund" of a year of cash.
> >
> > I suggest two years.
> Why? Just out of curiosity, what would an extra year get you? Have you
> heard of an experience where the extra year saved someone?

Yes, I have known people who have been out of a job longer than a
year.  You never know when disaster is going to strike and you need
the money for something.

> >>Pay off house as fast as possible.
> >
> > I believe the money is better saved outside of the home until you have
> > enough to pay the balance off in full.
> This sounds good, except for one problem. Every month you delay paying
> down your mortgage costs you more. Consider Person A and Person B who
> both pay off their houses in 10 years. Person A does it by regularly and
> consistently paying extra from day 1. Person B pays one lump sum on the
> last month of year 10. On a 30 year loan at 5.5% for a $150,000 home,
> Person B would have spent $76K on interest. Person A: $42K. Feel free to
> correct my numbers.

Like my original argument, person B may owe more, but what is the
outcome if both people lost their job after year 9?  Person A would
not have as much savings as person B.  The number should take into the
tax breaks you receive as well.  But either way, paying off your own
is good. :)
> > If a disaster happened (read
> > depression), the banks like to go after the homes that have a ton of
> > equity in them versus someone who still have 20 years on their
> > mortgage.
> Not if you don't have a loan. That doesn't make sense to me. Why would
> the bank try to call the notes that are worth less to them?

It makes perfect sense.  The bank would much rather take a home that
is worth 300k but the home owner only owed 100k on that a home that is
worth 300k but with a 295k mortgage.  The bank makes 200k by selling
the first one and only 5k on selling the second one.

That being said, I would like to point out that as Americans, we can
never really own any land or a home.  The goverment can (will and
does) take your home if you fail to pay your property taxes.  They can
(will and does) take your home/land if they want to build a park or
even a new wal-mart (recent New Jersey happenings).

So, even if you own your 400k home, don't forget to budget in enough
to pay your 5k a year taxes or the government will take it and sell it
the highest bidder.

> > Very sound ---- on the surface.  However, it could all blow up in our
> > faces if the market crashes.  We would lose everything we have saved.
> > This is a very REAL possibility.  My parents lost hundreds of
> > thousands of dollars during the last crash.  However, it is suggested
> > you have at least 10% of your savings in gold and silver cions to
> > offset such a crash.
> If the economy is crashing that hard, why would gold investments be exempt?

Some argue that if the economy were to colapse, the only currency that
would be worth anything (other than food), would be gold and silver. 
I will let Andy B. expound more on this if he desires.

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