Cow Loan and "get rich quick"

[ekb1398]

Also, if you're planning on keeping it in a savings account, open a high yield with AMEX, Discover, Ally, etc. The returns are way better. Personally, I bought a car (a used 2005 Wrangler with less than 100k - spent more than was strictly necessary, but I plan to own it until it's no longer drivable, and it's also a big hobby of mine), maxed two years worth of IRA, and have the remainder making small amounts of money in a high yield, since it's not money I'm willing to lose, or lose access to.

One of the teachers here (CGA) is a CFP as well as Academy grad and current reserve officer, and he gives fantastic training on how to use the loan and otherwise manage money. He also offers classes on financial management, and it's great to have that military perspective. For example, you hear all the time about Academy grads doing the "five and dive," but if the just did 90 extra days, they would get 40% of their GI Bill benefit. So thankful for that class!

Also, related to the AMEX Platinum discussion, the Chase Sapphire line is also fantastic (in many ways better than Platinum in my opinion, although lounge access isn't one of them) and Chase also waives the annual fee for both of their Sapphire cards for military members.

 

[TXWolf]

Apologies, but what is "5 and dive" and doing extra 90 days? Do you mean just to the 5 year commitment and get out immediately, but if you did 90 extra days you would get 40% of the GI Bill benefit?

Also, I own two 2005 TJ's, and my DS has a 2008, if you got a good deal on the 2005, under 100k miles you could probably sell it and make money on the loan, ha.

 

[Capt MJ]

Apologies, but what is "5 and dive" and doing extra 90 days? Do you mean just to the 5 year commitment and get out immediately, but if you did 90 extra days you would get 40% of the GI Bill benefit?

Also, I own two 2005 TJ's, and my DS has a 2008, if you got a good deal on the 2005, under 100k miles you could probably sell it and make money on the loan, ha.

CGA has an unusual entitlement, not sure how it happened, for ADSO + 90 days to get full post-9/11. The DoD SAs have to do 36 months extra time to get full benefit.

 

[ekb1398]

CGA has an unusual entitlement, not sure how it happened, for ADSO + 90 days to get full post-9/11. The DoD SAs have to do 36 months extra time to get full benefit.

This loophole was closed - we now also have to do the full 36 months for the full benefit, but all SA's can get 40% after just 90 days extra! @JasonM yes pretty much exactly what you described! Don't mean to hijack the thread, just point out that it can be good to find one with great knowledge of both general finance and military benefits to learn from, as they cross over a lot but not too many people know both well, at least not at the Academy it seems!

 

[Capt MJ]

This loophole was closed - we now also have to do the full 36 months for the full benefit, but all SA's can get 40% after just 90 days extra! @JasonM yes pretty much exactly what you described! Don't mean to hijack the thread, just point out that it can be good to find one with great knowledge of both general finance and military benefits to learn from, as they cross over a lot but not too many people know both well, at least not at the Academy it seems!

Thank you for clarifying; I knew there was something different. I usually go look for the reference, not very good at that without glasses on the elliptical.

 

[Soldiergriz]

YMMV but I am not a fan of index funds as they include ALL in that index with no ability to make alterations for obvious changes in the economic landscape. For instance Sears and JC Penney have long been on a downward trend with little conceivable way to halt the slide. An index fund would continue to hold and even buy more stock in them (as investors buy more of the index fund) as opposed to putting the money into more timely investments. To put it another way, compare the return on a Dow Index fund to the performance of "The Dogs of the Dow" investment strategy which I believe can also be found in fund form.
BLAB: People can write books, even learned people that I don't agree with.

I am a believer in Index Funds. The one and only thing you can control is fees, and you cannot beat Index fund fees.

They also tend to beat or match active funds...over time, most of the time.

 

[Soldiergriz]

My son took the loan. Set aside money for a car, and invested the rest...we'll see how it goes.

He has a pretty well balanced portfolio...index funds with zero fees...

 

[Humey]

Heck, I'm 58 and have once owned a new car. Prefer the rambling wrecks.

I am 58 (seriously) and have owned a used car once. Having said that, we keep our cars at least 10-12 years

 

[Humey]

I agree with what everyone is saying but i have been watching "The Food that Build America" Mr Hershey (chocolate) took 1 million dollars built a factory, a town and all the infastructures needed to operate in the middle of Dairy land and had not even finished developing how to make milk chocolate until everything was almost complete. Sometimes you have to dream

 

[UHBlackhawk]

DD has been considering the starter loan. I’m glad that she hasn’t rushed into any rash decisions. Couple personal-finance concepts I’ve tried to instill in her:

One, never borrow money to buy a depreciating asset. With one exception, and that’s a car — but always buy used, undamaged and reliable. A house and higher education, I’ve told her, are almost always good long-term investments.

Two, use simple math to determine the opportunity cost. For example, if deciding to pay off a loan early rather than investing in equities, compare the two rates of return, e.g the loan’s interest rate vs. the stock’s long-term projected growth. Whichever has the higher number is where your money should go.

I wish it was mandatory in college to learn simple concepts such as compounding, asset allocation and investor psychology.

I think in some cases the higher education has become a bill of goods. Far too many young people are getting worthless degrees with large debt attached and places of higher education have had no incentive to keep costs down. I see that with the university I attended. At the time I went there in the 1980s tuition was $5000/year and it was considered one of the best private college deals. Now it's $80,000/year and I would be hard-pressed to recommend someone attending it at that price.
Also, there is pressure for people to attend university right after high school but I do think some people should take time off before doing so. I saw this with DD, who after one semester dropped out to enlist. She needed to find herself.
My nephew did the same. Dropped out and enlisted in the Marines. After a couple of tours, he got out and was hiking the Appalachian Trail when he got a letter at one of his stops to call his mom. He'd been accepted to Columbia and need to report for freshman orientation. He is now a well-respected journalist.
I guess since I'm the OP it's okay to highjack the thread to pontificate.

 

[UHBlackhawk]

Absolutely it can. Key is: 1. proper asset allocation 2. Extremely low costs 3. Buy, hold-rebalance 4. Dont sell when the market crashes-thats a time to buy-equities on sale.

I get irritated when I hear politicians claim that people lost everything in their 401(k)s. I only know a few people who "lost" their 401(k)s, and they invested all of it in company stock. I was shocked as not having all your 401(k) in one basket, much less company stock seems like chapter 1 in the "Book of Duh". A few people panicked when they saw the decrease and moved into safer investments, the worst time to do so.
As with many on this board I have been through several ups and downs in the market, but we always viewed dips as buying opportunities. While we always had payroll deductions into investments, I tried to push more savings into the market during the bull markets.

 

[FrauTeufelshund]

So now that my kid (only child) has a 4 yr AROTC scholarship w/ full room and board from the U (and possibly still at chance at a SA) what do I do with his entire college fund that I have been putting aside since he was a toddler? Do I give it to him in increments? Do I keep it and invest it differently? (Not savvy at that! Lost too much, so I steer clear.) Do I let him invest it? Let a financial advisor invest it? Let him use it as a down payment on a house on campus that he can rent out and later sell? Replace his 16 year old rust bucket car? Retire somewhere where it does not snow? Put it away for my life at the nursing home someday? What would you do in my shoes?

 

[Capt MJ]

Don’t do anything until he safely has butter bars on and is on active duty receiving a salary, well-launched. There is another round of pre-comm physicals coming in a few years, and who knows how his path will twist between now and then.

I have enjoyed seeing the knowledge on the forum as 529s are discussed in these situations. You’ll get some good advice.

 

[jl123]

So now that my kid (only child) has a 4 yr AROTC scholarship w/ full room and board from the U (and possibly still at chance at a SA) what do I do with his entire college fund that I have been putting aside since he was a toddler? Do I give it to him in increments? Do I keep it and invest it differently? (Not savvy at that! Lost too much, so I steer clear.) Do I let him invest it? Let a financial advisor invest it? Let him use it as a down payment on a house on campus that he can rent out and later sell? Replace his 16 year old rust bucket car? Retire somewhere where it does not snow? Put it away for my life at the nursing home someday? What would you do in my shoes?

Many good possibilities, depending on your financial situation. I kept the 529 Plan in place for DS to use for graduate school and any leftover funds for future grandchildren. Nothing beats tax free growth.

 

[Don't Give Up the Ship]

I get irritated when I hear politicians claim that people lost everything in their 401(k)s. I only know a few people who "lost" their 401(k)s, and they invested all of it in company stock. I was shocked as not having all your 401(k) in one basket, much less company stock seems like chapter 1 in the "Book of Duh". A few people panicked when they saw the decrease and moved into safer investments, the worst time to do so.
As with many on this board I have been through several ups and downs in the market, but we always viewed dips as buying opportunities. While we always had payroll deductions into investments, I tried to push more savings into the market during the bull markets.

Yes. The key is to understand that equity markets WILL crash. Its just a matter of time. Dont panic, dont sell. Rebalance to your AA. IF you have cash during a major decline, then buy. IMO, the financial services industry (most of them), make invesing seem much more complex than it really is. I studied this as part of a focused MBA, one DS has a MS in Finance and is working on his CFA-he works for a company that manages a pension system. In professional investing there are some complex hedging techniques-but they are not recommended for us little guys. I like Vanguard for its unique cost and governance structure. I wish they taught financial literacy in High School.

 

[FlyFalcon]

At least in my school personal finance is required class to graduate highschool (includes what type of stock there are and practicing investing). Most take it during their 3 or 4th year. Then again when you live in a state that taxes pretty bad knowing how to spend any leftover money is useful.

 

[Stealth_81]

I can give a down-the-road view of using the loan successfully. Son #1 took the entire $35k at 1/2% interest. He put all of it in a semi-aggressive stock fund after doing his research and let it grow. Four years later he had grown it substantially. He bought a house in Surprise, AZ at his first duty station using a chunk of his fund for 50% down payment. He researched the housing market for demand and bought a 3 br 3 ba house in a price range that targeted the E-5/6 and O-2/3 BAH amounts. When he moved away he started renting out the house. He has never not had a tenant in the house and usually has people calling when it is available simply by word-of-mouth. He did the same thing at his next assignments and now as an O-4 owns four houses, two of which are debt-free. All because he had the seed money from the loan.

Also, since people talked about cars, he drives a 2013 Camry with 100k miles on it. Not what you’d expect from a fighter pilot.

Stealth_81

 

[Bash On]

Also, since people talked about cars, he drives a 2013 Camry with 100k miles on it. Not what you’d expect from a fighter pilot.

Stealth_81

With a license plate frame that says, "My other car is an F-16."

 

[Capt MJ]

With a license plate frame that says, "My other car is an F-16."

Of course it does.

 

[cb7893]

Also, since people talked about cars, he drives a 2013 Camry with 100k miles on it. Not what you’d expect from a fighter pilot.

Stealth_81

This x 100

DS bought a Honda Accord with 70k miles and drove it into the ground. Traded it for his current Nissan Sentra which he bought with about 30k. When we visited him at his previous duty station, that Honda really stood out among the Ford F150's, BMW's and Camaros. He could tell you the MOS and rank of the owner based on the make and model.