49 Unique Guild Members 14 Level 100 characters 401 Website/Forum Members 0 Posts in 24 hours 0 Posts in 7 days 84313 Total Posts Nelthilta is the last poster
49 Unique Guild Members 14 Level 100 characters 401 Website/Forum Members 0 Posts in 24 hours 0 Posts in 7 days 84313 Total Posts Nelthilta is the last poster
Basically if you want to make money off that 10k you're going to have to be lucky. You can't just put it in a mutual fund (for the duration of 4 years) and expect to make a decent amount of change. You're going to need some luck and play the market or go to vegas.
And since you keep talking about costs and other financial terms, you'd know that vegas and stocks come with a larger, as rade put it, beta coefficient than if you were to use the money to pay completely for school.
Bottom line is:
I'm paying all cash for my school, I don't owe the government, it feels nice.
...When you can afford to pay cash or when there's a much lesser chance for getting a solid return.
In my case, as an example, I need to buy another server soon, lets say I really needed a badass server, but I don't have a lot of money laying around. Then, rather than spending my 5k or whatever money I have in reserve, I pay it off in increments (with a reasonable loan rate). In that case, it's better to have that reserve and pay increments than to put my company at risk of some emergency by not having any reserves.
Loans CAN be better, but in this situation, unless rikko knows something we do not, it's not a good idea.
...When you can afford to pay cash or when there's a much lesser chance for getting a solid return.
In my case, as an example, I need to buy another server soon, lets say I really needed a badass server, but I don't have a lot of money laying around. Then, rather than spending my 5k or whatever money I have in reserve, I pay it off in increments (with a reasonable loan rate). In that case, it's better to have that reserve and pay increments than to put my company at risk of some emergency by not having any reserves.
Loans CAN be better, but in this situation, unless rikko knows something we do not, it's not a good idea.
Keep in mind that by owing money, your company is already at risk.
...When you can afford to pay cash or when there's a much lesser chance for getting a solid return.
In my case, as an example, I need to buy another server soon, lets say I really needed a badass server, but I don't have a lot of money laying around. Then, rather than spending my 5k or whatever money I have in reserve, I pay it off in increments (with a reasonable loan rate). In that case, it's better to have that reserve and pay increments than to put my company at risk of some emergency by not having any reserves.
Loans CAN be better, but in this situation, unless rikko knows something we do not, it's not a good idea.
Keep in mind that by owing money, your company is already at risk.
Naturally. But sometimes the alternative is to stop income. If the current server can't handle the load, it stops serving, and I stop getting income. But in certain situations, the options are "Don't go into debt" or "Go into debt to produce income." I'll take option 2. If I only had 3k, for example, but needed 5k for a server, then I have no choice but to go into debt.
If I had reserves, then it wouldn't be an issue. Debt is one of the Risk vs Reward factors of starting a business.
Wal-Mart is and always has been a cash business. That is to say, ever since day 1, they have not borrowed money. Yes, now they are a multi-billion dollar company, but they never once borrowed money to get there. They never expanded to build another store until they had the cash on hand to do it. You're using debt to get there faster, but that doesn't mean you can't do it without debt.
Harley-Davidson is also a cash only company. There's a lot of them out there that refuse to use debt.
If you don't have the money, you can't do it though. It's one thing to wait a few months to have the cash on hand, it's another thing to let your company flounder while the server is dying. Expanding is not the same as Surviving.
I'm not saying debt is good, but that debt is not always bad.
Example: Buying a house and renting it out for more than the mortgage + property taxes = income, and is therefore good.
Read Total Money Makeover by Dave Ramsey. I know it's like asking a Christian to read the Qur'an, but don't let anything your finance classes tell you sway your open-mindedness about it. Get a little different perspective.
my whole analysis on this situation is based on if rikko borrowed the money from the government she would be using the money she saved from not paying in college to invest in an ira or some other form on long term maturity investment.
logic being that borrowing now for college made the money available now for investment when the money is harder to get. ideally when you graduate you will be making more money than you would before you went to college, rather sound thinking because if people didn't expect to make more money with a college degree than without then they wouldn't go.
not only do you expect to make more money but you expect to make enough money to justify the cost of college and the lost time you spent in college that you could have been working, ie the opportunity cost of the next best alternative to college.
now for the math part.
saying in my example what i would do with the 150,000 dollar inheritance.
i would still borrow from the government, lock a majority of the money away in a long term, low risk investment that would pay for my retirement.
i would use the money i saved from borrowing from the government to invest more money sooner in the compounding investment.
so instead of not borrowing, paying in cash, and not investing the extra money i'd be saving myself money over the next 10-20 years but hurting myself when i get to the age of say 65 and plan on retiring and getting money is once again harder, much like it is when you are in school.
i put off investing in my retirement account till i am out of school, therefore i have lost the 4 years i would have gained in school from my money working for me and my costs of living are relatively low and now when i get out of school i am fortunate enough to not have to pay back my student loans but i lost the first 4 years of compounding interest from my investment.
when i get out school i am obviously planning to make a significant amount of money, enough to easily pay off my student loans either in 5 years or 10 years meanwhile my investment is only getting stronger and stronger.
no loans: all of my money goes to college, no investments.
loans: saved myself some money, defered interest, start saving for retirement early, get a jump start on making my money work for me.
now say i do borrow the money, defer the interest till i graduate, and spend my money that i saved and adding that to my investment, still keeping enough money for myself to live nicely off of, i'd be investing more earlier when my return is lesser but will get me more money later.
im losing money in the early years after graduation, say from the age of 22-35 im losing money on paying off loans but im also making more money than i ever have before and it doesn't hurt me nearly as bad as it would if i still was in school and making almost no money.
the whole basis of my arguement is that you borrow when you are young, pay borrowings off when you are making good money so you can live off your investment you made when you were younger when you get older and your income once again declines.
i know i was a little ambiguous about the whole thing but to me it's a rather sound logic. of course my investments would be diversified to try and minimize the risk factors since it is a long term investment.
i was looking at this whole situation not just 5-10 years down the road, but 40.
they will always tell you based off these principles that it's never too early to get your money working for you.
i can provide the numbers but once again due to tax considerations and other factors that are not 100% definable (interest rate on investment, inflation, other factors) there would be many assumptions made and some of which would have a negative impact on the results.
If you have more money at 25, you'll have more money at 65.
Whether or not your money was "working" for you is irrelevant to the fact that you'll have less money after school is done if you paid with loans, than if you paid cash up front. At 25, if you have net 153k (assets - debt) without loans, THEN invest, you'll have more than if at 25 you have net $152k with loans.
That's what you're missing.
How much you have invested has nothing to do with how much you HAVE. With the numbers I've presented, which you've not refuted, you will have less money after school is done to invest.
And about business school, here's something to consider:
In every chosen profession, you tend to learn best from those who know first-hand how to do what they teach. In the hard sciences, the best place to learn about physics is from a physicist, and where do you find physicists? At universities doing researching and teaching physics. It gets a little less with something like Music. The best musicians are professional musicians, generally in symphonies or whatnot, but you'll still find quality musicians in the music departments of schools: Composers, Musical theoreticians. These people have a mastery of many different instruments and techniques.
Now consider business. Where do you find the best business people, at the top of large businesses. The people that teach in business school are people who might have read a lot about business but have little practical business experience, because if they REALLY did know business well, they'd be running major companies.
So essentially, everything you're learning, you're learning from failures: People who didn't have it to make it in the business world. The old maxim "If you can, do, if you can't teach" applies more directly in business than anywhere else.
You wrote a lot there Tanaca, but you're still wrong.
It's actually very simple, you pay college if you can, if you can't pay for college you get loans. The reason you get loans is because you can't pay for it, not because you plan on making more money off of investing the money you do have that could pay for college. Your logic makes no sense at all, and your numbers do not add up. I think at best, in your scenario, you could break even.
The people who think loans are a good idea are the people who call those bankruptcy ads on television in a few years. Or the people who think they can keep taking mortgages out on their homes. You're going to be a business major that goes bankrupt if you continue your thoughts imo.
If you have more money at 25, you'll have more money at 65.
that's a pretty broad assumption
Quote
Whether or not your money was "working" for you is irrelevant to the fact that you'll have less money after school is done if you paid with loans, than if you paid cash up front.
how much money you have at graduation is irrelevant due to the fact that you will be getting a career.
im gonna graduate with maybe 500 dollars to my name and about 10,000-15,000 dollars in debt to my name. but that doesn't mean im in trouble b/c you have a career, positive income, the most income you've ever had coming in before. paying back 10,000-15,000 dollars over 10 years when you are making 35,000+ a year is nothing, where as the time you would have lost not investing is something that you cannot make up without taking on more risk.
rikko can graduate with still thousands of dollars to her name and tens of thousands of dollars in a retirement fund that will secure her retirement before she even started working.
that's the way i see it.
im not gonna end up bankrupt because i borrowed 10,000-15,000 dollars from the government.
You wrote a lot there Tanaca, but you're still wrong.
It's actually very simple, you pay college if you can, if you can't pay for college you get loans. The reason you get loans is because you can't pay for it, not because you plan on making more money off of investing the money you do have that could pay for college. Your logic makes no sense at all, and your numbers do not add up. I think at best, in your scenario, you could break even.
The people who think loans are a good idea are the people who call those bankruptcy ads on television in a few years. Or the people who think they can keep taking mortgages out on their homes. You're going to be a business major that goes bankrupt if you continue your thoughts imo.
you are comparing me to those morons who take out a second mortgage on their house.
private lending institutions != federal student aid.
You wrote a lot there Tanaca, but you're still wrong.
It's actually very simple, you pay college if you can, if you can't pay for college you get loans. The reason you get loans is because you can't pay for it, not because you plan on making more money off of investing the money you do have that could pay for college. Your logic makes no sense at all, and your numbers do not add up. I think at best, in your scenario, you could break even.
The people who think loans are a good idea are the people who call those bankruptcy ads on television in a few years. Or the people who think they can keep taking mortgages out on their homes. You're going to be a business major that goes bankrupt if you continue your thoughts imo.
you are comparing me to those morons who take out a second mortgage on their house.
private lending institutions != federal student aid.
Just saying, with your amazing financial skills, I wouldn't be surprised if you end up bankrupt.
you don't borrow unless you hope to make a positive return due to your borrowing.
maybe that is where our difference of opinion comes from. i view college as an investment that is going to have a huge positive return for me, one that is much greater than the interest that is gonna be paid back on the student aid loan and i also view the borrowing as a cheap alternative to get me more money when i am younger to get more money when i am older.
