Financial thinking: which strategy makes sense?

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amother

Thu, Oct 21 2021, 3:03 pm

D Ramsey "stay out of debt" vs Rich Dad Poor Dad "avoid bad debt and debt that causes cash flow is good debt":

How do I know what approach to take? Should I take the little savings that I have and try to get a mortgage for a tiny investment property? Or should I pay off a small chunk of my home mortgage? I work long hours and I'm tired... I want to figure out what I should be doing to get to a less stressful pace.

Anyone have suggestions or experience with either or both of these theories?

theoneandonly

Thu, Oct 21 2021, 5:01 pm

Anyone who got rich from real estate has tons of debt. That's literally how you make money, by refinancing the properties. Idk if it makes sense for a tiny little rental property but in theory that's how to get rich.

theoneandonly

Thu, Oct 21 2021, 5:02 pm

You shouldn't take the tiny savings you have and get a rental property. You should invest it with someone who does this who has many rental properties- buy equity in one of their properties. They manage it etc and know how to make money with it and send you quarterly returns

amother

Thu, Oct 21 2021, 5:58 pm

theoneandonly wrote:

I'm scared to do this - We personally and our family have been burned by similar things in the past, people have taken the money and run, trashed things, refused to pay back, etc.

We have to do this independently without partnering with anyone. It would be so painful if the money was lost - we've worked so hard and sacrificed so much, for just this small amount.

amother

Clear

Thu, Oct 21 2021, 6:12 pm

I don't know which one is better but just to comment on the two books. Dave Ramsey got out of debt and built wealth with his strategy whereas rich dad poor dad did not actually get rich from his methods, rather his books and speeches earned him the money. (https://geltguide.com/rich-dad-poor-dad-financial-truths-cliches-exaggerations/)

I personally chose a (mostly) Dave Ramsey approach, I'd rather live with less worries than be Uber wealthy and stressed about real estate.

amother

Emerald

Thu, Oct 21 2021, 6:19 pm

I'd much much rather invest than have the headache of dealing with real estate especially a rental it could be easy or really annoying investment involving tenants, upkeep etc..

An investment in the market or business is less time consuming

bracing

Thu, Oct 21 2021, 6:21 pm

These are questions that may help to answer first:

Do you have cash savings that can ride you over for minimum 3 months but ideally six months should something unforseen happen? That will give you breathing space , don't invest to the max

Is your mortgage going to be repaid when you retire? Or is it interest only? If it's interest only, what do you plan to do when you retire? If it's a repayment mortgage then all the extra repayment does is giving you more breathing space before retirement. So essentially with a low mortgage rate, keeping the funds to invest gives you a cheap form of credit

If you don't invest, how will you fund yourself in retirement - if you have a retirement plan in place then reducing your mortgage gives you easier time now, if you don't have savings for retirement, then you that should be the priority

The kind of returns you are looking at need to be cheaper than the cost of credit (I.e. what it is costing you by not reducing your mortgage)

Your investments should be spread to balance the risks - one investment property is putting all your eggs in one basket - but it also seems the people who make the money don't follow the logical rules 😊

mizle10

Thu, Oct 21 2021, 6:22 pm

I think most wealthy people will tell you the name of the game is making money off the banks money. Putting down the least amount possible, mortgaging, refinancing, loans etc.