Tag Archives: personal finance

Buy Stocks or Real Estate Instead of Paying Down Student Loan Debt

From Mike ‘the lawyer’ Cernovich:

I currently have a relatively large mount of unpaid student loans. My student loan interest rate on the outstanding balance of the two loans is at 2.2% and 3.65%, respectively. I pay the interest only, as the difference between my student loan interest rate and market returns are substantial. (Why pay a 3% loan off when market returns have been crazy high? Every dollar you use to pay off a student loan is a dollar you can’t invest in the market.)

This is brilliant advice. All these talking heads say, ‘pay down your student loans first!’ without even thinking of the alternatives. Put the money in the stock market and make 10-30% a year, which is much higher than the 3-6% interest on student loans. Even the dividends on the S&P 500, which are 3% a year, is good enough. Or put the money in Bay Area real estate and make 15-20% a year doing nothing on a 4% 30-yr mortgage. The obvious downside is if the market crashes and does not recover, but the odds are that won’t happen. The left has been predicting a crash since 2009, and they keep being wrong. Interest rates will remain low, which is good for borrowers, and real estate and stock prices.

This is the mindset or strategy that separates the rich from the poor; smart people use debt to their advantage to build wealth through leverage; the poor and middle class are scared of debt and will do anything to avoid it, even if it means being poorer as a result. The more leverage you can control, the more you can skim off the top. If you control a $1,500,000 home in the Bay Area, you can skim off $20,000 a month just from the appreciation alone using a home equity line of credit. If the mortgage is $6,000 a month, you are keeping $14,000 every month doing nothing.

Why Personal Finance Has Become So Important To Millennials

With on average of 2000 people online at any given moment (on par with the wildly popular /r/aww) why is Reddit’s /r/personalfinance so popular, as well as 4chan’s business & finance board, 4chan.org/biz/ ? But it seems like the topic of personal finance, as well as economics and finance, is poplar everywhere online where high-IQ people congregate. A recent example is a 2014 discussion on Hacker News about investing plans, which got very heated, with everyone having an impassioned opinion as if it were a matter of life or death instead of just money. And the story had nothing to do with computer science, either. Personal finance has become something of religion among smart millennial 20 & 30-somethings, whereas older generations don’t seem to care as much, merely viewing money as a something that has utility, not the Catechism. For older generations, talking about money is considered ‘rude’, almost taboo, whereas having open opinions about religion and politics is not. For the millennials, it’s flipped the other way around: It’s rude to talk about your religion (or lack thereof), but millennials talk freely about wealth & money, how to get it, and who has what ‘net worth’.

Your typical 20-something Reddit/4chan user is a veritable expert in finance, history, syllogistic reasoning/rhetoric, theoretical physics, political science, sociology, and economics. Compare that to many generations ago when a typical 20-something was mostly well-versed in the latest happenings in sports and entertainment and not much else, and typically didn’t hold strong opinions about much of anything outside of the purview of popular culture and possibly some politics, and such opinions when they seldom were expressed tended to be blunt and unsophisticated. Fifty years ago, to be an exert in economics or finance meant you had to study it college; nowadays, it seems everyone is an expert. These smart people, many of whom more fit the ideological mold of a pragmatist or utilitarian than a welfare liberal, can carry on an intelligent discussion about efficient markets, the merits of free markets, or the workings of the US economy – all without having studied it in college. You have a story on Reddit about a dart-throwing chimp beating fund mangers, and in the comments everyone is suddenly an expert in finance – but not faking it – but citing real jargon, studies, and statistics. Then you have the unending online debate between millennials about Automation, Jobs, Wealth Inequality, Basic Income, and Post-Scarcity.

Personal finance is how the smartest generation, in rebuking the collectivism of liberalism, prepares for an economic future where the social safety-net may be non-existent. As the economy becomes more competitive, you have to take matters, including finance, into your own hands and not rely on others, and many millennials know this. This is also why STEM is so important to millennials because finance, which has math, pays well, and plays an integral role in the economy, could be considered STEM. Older generations still want to ‘rock out’, their minds stuck in the 60′s and 70′s; millennials want to read physics, code, and make money. This is why, despite being on the ‘right’, I have faith the in millennials because, as I explain above, they have this congenitally ingrained ‘savvy’ to all issues pertaining to finance and economics that is less prevalent in older generations. Millennials understand that personal finance isn’t a choice or merely a hobby – but a necessity, even a way of life.

Related: We’re All Becoming Economists, Scientists, and Objectivists