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My friend's grandfather worked as a meter reader for the electrical company, and maxed out at $30k/year back in 1990. He retired a millionaire by investing as m

My friend's grandfather worked as a meter reader for the electrical company, and maxed out at $30k/year back in 1990. He retired a millionaire by investing as much as he could and never buying anything on credit, even his house. Most of the growth happened in the electrical company he worked for who's stock didn't grow much, but paid great dividends, which he always turned into new stock purchases.

IAmGraydon 5y ago
Buying things with cash and not credit works against you unless interest rates are very high. Let’s say you have $200,000 and could buy a house with it. Alternately, you could finance the house at 4% and put the $200,000 in an index fund that makes 8% per year. In the end, you’ll end up with far more money if you take the second option. Credit is a tool for creating financial leverage and realizing larger gains, if you know how to use it. The problem is that most people use it to buy things they just can’t afford in the first place.
- MandieD 5y ago
  Interest rates were high enough in the late 70s/early 80s that my grandmother bought a $10,000 20-year US Treasury bond in 1981 that paid her $1500/yr. My parents’ mortgage in 1979 was also somewhere around 12% - I remember my mom gleefully refinancing it in the 90s.
- mlac 5y ago
  Yeah - “affordability” in most people’s minds stops at the monthly payment. It isn’t whether they have $200K to invest in a house or invest in the market. It’s “I can afford a $200K house with the rates they are today. But if they go up, I can only afford the payments on a $150K house”. I think we will have a rude awakening when, for every % we move up in interest, we add ~$200 per month on people’s payments on a $200k house. At 6%+ mortgage rates we will see a lot of people stuck in their current house and a lot of the people who look at affordability through the lens of a monthly payment will suddenly be able to afford a lot less house.

IAmGraydon 5y ago

Buying things with cash and not credit works against you unless interest rates are very high. Let’s say you have $200,000 and could buy a house with it. Alternately, you could finance the house at 4% and put the $200,000 in an index fund that makes 8% per year. In the end, you’ll end up with far more money if you take the second option. Credit is a tool for creating financial leverage and realizing larger gains, if you know how to use it. The problem is that most people use it to buy things they just can’t afford in the first place.

MandieD 5y ago
Interest rates were high enough in the late 70s/early 80s that my grandmother bought a $10,000 20-year US Treasury bond in 1981 that paid her $1500/yr. My parents’ mortgage in 1979 was also somewhere around 12% - I remember my mom gleefully refinancing it in the 90s.
mlac 5y ago
Yeah - “affordability” in most people’s minds stops at the monthly payment. It isn’t whether they have $200K to invest in a house or invest in the market. It’s “I can afford a $200K house with the rates they are today. But if they go up, I can only afford the payments on a $150K house”. I think we will have a rude awakening when, for every % we move up in interest, we add ~$200 per month on people’s payments on a $200k house. At 6%+ mortgage rates we will see a lot of people stuck in their current house and a lot of the people who look at affordability through the lens of a monthly payment will suddenly be able to afford a lot less house.