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The value of this gift is much greater than then nominal sum. My parents gave me $3000 for the down-payment on my first house, which cost $100k. Otherwise I wo
by drblast 8y ago
The value of this gift is much greater than then nominal sum.
My parents gave me $3000 for the down-payment on my first house, which cost $100k. Otherwise I wouldn't have been able to afford to buy a house. But I bought instead of renting and ended up selling it for $200k years later. That was a big financial win early on and meant I was never in debt again.
My financial situation at the time was barely-making-ends-meet, so I had to sell the house to recover the equity to buy a car and move across the country when I was transferred.
Had my parents given me $30k as a one-time gift, I wouldn't have had to sell that house at all and would have rented it out in perpetuity. That would have been about $1000k a month of income for me, in addition to keeping the equity in the house.
I've resisted spending money on a lot of things like, say, home renovations, new cars, etc. until I felt like I was paying for it solely from interest earned on investments or the purchase was an absolute necessity. The only reason I was able to start investing at a young age, on a very small income, was the sale of that house. Those savings have compounded, but more importantly I've always had enough cash to cover incidental expenses and that's enabled me to continue investing.
Even small gifts can lift you out of a cycle of poverty. $3000 at the right time made a dramatic difference in my financial situation and will for the rest of my life. But $30k at the right time would ultimately have been worth about an extra $500k to me twenty years later.
$30k a year like in the article would have just ensured I was as rich as my parents. That would have all gone to investments.
- deleted 8y ago[deleted]
- rigged-system 8y agoI sometimes think about debt the same way. In college I scraped by on ramen noodles and avoided doing anything that cost money. For example I wanted to go camping but didn't have say, $100 for a tent. If I had just put the $100 on my credit card, I'd probably have happy memories with friends, but now I can't get that experience back for any price.
- rorykoehler 8y agoWhen I was in college I was broke one summer and not keen on working as I was heavily invested in producing music (which wasn't paying at the time). I took a £500 credit card and then immediately blew it on a weekend at the Edinburgh fringe festival. I spent 3 weeks eating plain white rice afterwards until I started working because I had to as that was all I had left at home. Though I'm now interested in FIRE and have a family and this behaviour is the opposite of what is required I'm still happy I did it. One of the best memories I have. I should note that I definitely did this from a position of privilege and if shit really hit the fan I could have always swallowed my pride and asked for a family bail out. Not sure if I would feel the same way had this not been the case.
- enjeyw 8y ago> I should note that I definitely did this from a position of privilege and if shit really hit the fan I could have always swallowed my pride and asked for a family bail out. I think this is really insightful. The difference between being truly poor and just being a broke college student is that while a broke student may not have any money on their pocket, they can always call it quits if things just too hard.* Makes me think more carefully when people claim "hey I know what it's like to be poor too - I had no money at college!" *assuming they're not also truly poor.
- aidenn0 8y agoMy parents and my wife's parents together loaned me money for 6 months to buy a house and it saved me gobs of money. This was just after the mortgage crash, so the fact that I could make a cash offer probably saved me $50-$100k on the price of the house alone. In both cases, they just exercised an existing line of credit, so just them extending to us the credit they already received was sufficient to save us an absurd amount of money.
- NullPrefix 8y ago>$1000k a month Quite a ROI.
- drblast 8y agoWhoops. Drop the k.