Liability Shortage

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  • March 14, 2009

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Liability Shortage

I said to the 7MITs that this would be a short post – and, Josh hasn’t failed us šŸ™‚ – as I want to wrap up ‘current finances’ as quickly as possible and start working on bridging the gap between the NOW (i.e. your current Net Worth) and your future (i.e. your Number) … in fact, Josh’s post starts that process …

… also, Josh is fortunate, in that he hasn’t (yet) accumulated much in the way of debt. Still, any advice to keep him on track as the ‘requirements’ of life start to mount up?

_______________________

There is a shortageĀ of liabilities in my financial world.Ā  I have no car loan, no mortgage, and no children (for record, I believe allĀ children are a blessing). My monthly bills include phone ($60), car insurance ($110) and food ($100). My internet business has been cash flow positive since December and let’s not forget how I live rent free.

I have been considering taking out an unsecured loan from the bank. Maybe a line of credit that I can tap as IĀ see fit. This would be a way to leverage my good credit and excess capital without waiting for savings to accumulate. This would also force me to “save” every month in the form of paying off the loan, while getting hit with 10% interest.Ā  My argument is that this is the time to invest in stocks, get as much in as you can now.

I’ve observed aĀ pattern the last few years thatĀ I believe will predict the next great top of any widely known security. My grandmother has an uncanny ability to spot the top of any marketĀ and I theorize the bottom too. In 2005, she would quote Oprah saying, “God isn’t makingĀ any more land, that’s whyĀ real estate is going up.” This means it’s time to sell. And now when IĀ tell her I’m investing in stocks, sheĀ tells me, “stocks areĀ doing bad,” that is my signal.

So I have very little inĀ liabilities, but I plan to create some at the same time as creating some rapidly appreciating assets.

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Comment Number:
1
Written by:
Scott
Posted on:
March 14, 2009 at 7:24 am

I agree Josh, this year is the time to start buying stocks. I am saving like mad right now to fuel investments and since stocks are a part of my required growth engine, you can bet i’m looking for bargains in great companies right now as well as real estate. Good luck, i’ll see ya at the top! šŸ˜‰

Comment Number:
2
Written by:
Debbie
Posted on:
March 14, 2009 at 2:07 pm

Next time you go upstate Josh, stop in and visit my kids and see if they can change your mind on that record! šŸ˜‰ just kidding, I agree they are a blessing rather than a liability too. I still don’t know much about investing in stocks but I think you are on to something with taking out the line of credit in order to fund some investing. Not only does it seem now is the time to buy stocks, but you’re in a good position at the moment without having to pay rent (giving you an easier time to pay off your loan, and maybe pay it faster to reduce the amount of interest you actually end up paying). Either way, I would think you would want to also start some sort of short term savings if you haven’t already, for when your living situation does change. Unless you receive a lot of gifts for your first home/apartment, (furniture, dishes, cleaning supplies!) it’s costly to move out.

Comment Number:
3
Written by:
Josh
Posted on:
March 14, 2009 at 7:11 pm

@ Scott, thanks for the vote of confidence, I need it.

Debbie, no plans to move right now or within the next few years.
Also it’s very important to buy well positioned stocks, could be the difference between making 20% per year or 500%. With my humble net worth, I need the later.

Comment Number:
4
Written by:
Adrian
Posted on:
March 15, 2009 at 3:27 am

@ Josh – Great advice from both Scott and Debbie; one of the great advantages of this unique forum …

… between buying stocks on margin and a HELOC to fund your stock/options strategies, you COULD effectively gear 100% (or, even more, with the right option strategies) … a definite MM201 strategy (Good/Bad? High risk / high reward or downright dangerous? Only you can decide if the risk is worth it).

While your costs are low, you have little to lose in testing out your trading strategies … on the other hand, Debbie is right about planning for FUTURE expenses, too.

Comment Number:
5
Written by:
Diane
Posted on:
March 16, 2009 at 6:15 pm

LOL – in adding to Debbie’s low-key advice, let me add that maternity insurance can be costly, but not having it can cost more. Not something to ask on a first date, but other insurance “plans” are definitely worth checking into, and not buying new furniture and such when you move out (in those few years out), but buying from thrift stores and garage sales, etc., and doing it together with the one who convinces you to move out. These are what we all would call “unexpected but blessed” events. And yes, if kids become part of it, the costs skyrocket, blessing or not. Also, as a female who recently left the dating pool, while it’s great to be wined and dined, especially if there is no permanent liaison expected, be careful of over-wining and dining someone that turns into a longer-term proposition: you’ll be trying to live up to those expensive expectations and then if it goes “permanent” having to lower her expectations to what you really would rather live on. Better to show your money smarts (without being seen as a tightwad) while you’re dating by being upfront and honest. From what the experts say, money differences (particularly in saving and spending) are a big issue in most marriages…more so than the children. Diane out. šŸ™‚

Comment Number:
6
Written by:
Josh
Posted on:
March 18, 2009 at 8:45 am

Diane, thats great advice and is appreciated.

No girlfriend for me right now, but who knows, maybe I’ll just wait until I retire, then get married…

Comment Number:
7
Written by:
Adrian
Posted on:
March 19, 2009 at 3:29 pm

@ Josh – that way you’ll have PLENTY of time to help around the house šŸ˜›