Sounds like someone has been reading a bit of Robert Kyosaki!!!
Before you get too excited about Kyosaki you should check out someone who's fact-checked his story John Reed There are some attitudes that he can teach you that are helpful. There are other things he says that are misleading or just plain wrong. And a lot of what he says he did is not easily replicatable except for special circumstances that don't happen very often.
I speak as someone who, like Galen, has made quite a bit of money as a landlord.
quote:
Originally posted by Tinuviel:
I was reading today about a man who purchased a rental home for each of his young children...when it is time for them to go to college, he will re-finance the houses in order to pay for their school. All with tax-free dollars. So he will have many advantages. The kids will have college paid for with no loans. The money he uses to pay for their education will not be taxable (But he will end up being able to get a credit on his taxes for the money he uses to pay their tuition). And the rental houses will still be giving him positive cash flow after the kids are out of school.
I have to say he won't be paying for college with tax-free dollars. He will get a loan (secured by his houses) to come up with the cash to pay for college. Then he will pay back the loan over time with profit from his rent properties. He will pay taxes on those profits. Yes the taxes on those profits will be lessened by the depreciation laws, but he'll use up a lot of that depreciation shortly after the kids graduate and I doubt the loan will be paid off by then.
Having said all that, I must agree that this is a great idea - IF you have a few things going for you.
One is that the area you buy in stays economically healthy for 20 years (more if you have more than one kid.) Pick any 20 year period and you'll see that many areas of the country were economically healthy over that time frame. But many were not. And it is not always possible to tell in advance.
Another thing you must have going for you is that the cost of money (interest rate) relative to the rental market in your area must be suitable. The first place I bought was a duplex. We lived in one side and rented out the other. For quite a number of years, the rent DID NOT cover even half the mortage payment (not to mention repairs, advertising etc). And a few years after we bought the place, it was worth 40,000 less than we paid for it. A drop of about 25%. 20 years later when I finally sold it, it had gone up quite a bit. And over that time, the interest rates had come down and the rents had gone up. So I was able to make a decent cash flow for quite a while. I haven't bothered to figure out if I'd have done better buying a single family and putting the rest of the money in a bank, or the stock market but I doubt it.
The third thing you must understand is that inveting in real estate is somewhere in the middle between investing in the stock market (all you do is decide what+when to buy and when to sell) and having a job (where you work 40 hrs a week). It takes a lot more work than just an investment. And sometimes you don't get to decide when the work needs to be done. And sometimes you have to have the money to replace a furnace or something on the spot, and you don't get to choose. And sometimes really weird stuff happens - like the time the cops woke me up at 11:30 PM because they were staking out my tenant because he had stabbed his girlfriend (she's fine now) and we're not talking trailer trash - they lived in a neighborhood where the average home is worth 300K or more.
But if you are aware of this, are able to meet the challenges, and have the luck (or good fortune) to enjoy a stable economy for 20 years and a decent interest/rent ratio it is possible to do well financially.
I read a bood Missed Fortune 101 by Douglas Andrew. Greatest book I have ever read on this subject. There is a way to take tax free dollars.
I built and moved into a nice home owning every inch. Equyity in a home does not make money except on appreciation. The mortor an bricks just sit there they do not compound yearly. There is a much better way.
Rent property profit is taxable income.
IRA's and 401ks are taxed when you start using them. Except the Roth. Estates are taxed when we are gone. only 22% of money are accutual recieved by our heirs.
Most money professials say term life is the best insurace. There is a much better way.
Only if your messing it up. Ours are tax-free, and they shelter all other income, so we dont pay taxes on ANY income. :-)
Schedule E [you control what your expenses were], and depreciation [straight-line method over 28.5 years, readjusting cost basis every year]
"... Estates are taxed when we are gone"
Only after the first $140,000, before that point there is no tax on them.
"Most money professials say term life is the best insurace."
Insurance policys are gambling.
Gambling by putting my money on the side saying that something wrong is about to happen. If I were to gamble on something, I want my money on the side of the table saying that I will live long, that I will stay healthy, saying that I will prosper.
"Only after the first $140,000, before that point there is no tax on them."
"I'm pretty sure the number is $1,200,000"
Excuse me, you are most likely correct.
I helped someone once with this issue, and I was really tacken-back by the high level that an inheritance had to reach before it was taxed. I had assumed it such limit was lower, because you so often hear people complaining about it. But then Hillary Klinton in the last phase of the Klinton administration, did orchestrate a re-structuring of the 'classes'. During which all these numbers were tweaked, to say that you really were not 'wealthy' unless you earned an astronomical salary, if you only made $150,000/year you were still just middle-class.
I kind of stopped following it closely after that, and only look at those things which effect my tax-planning.
You are most likely correct.
Either way with the 'gift' in place and no limit on how many 'gift's an estate can give to heirs in a single year, even on your death-bed if you can not distribute your wealth tax-free you got too stinking much money, and it should be taxed.
The last time I dealt with 'gift's it was defined as $10,000 and there was no limit on how many such 'gift's an estate can give to each heir, and no limit on time constraints between individual 'gift's [minutely, hourly, daily, etc]. Also 'gift's can be given into trusts, or corporations even when the heirs dont have knowledge of the trust or corporation. So the money can be shifted into the heir's name, quitely, without the heir's knowledge, while the estate holder still lives, and all without taxation.
Ooops yes it has been a couple years since I last took a class on the subject, so my numbers may well be out of date. But the principle remains, only the numbers change with the administrations.
Galen do you have insurace on you car? Is that gambling also?
Why is it when you go to a library and read the text of state laws regulating gambling, they must have specific exemptions written for anything calling itself 'insurance'?
Because when lawyers define what 'gambling' is, in each of it's many variations, they are also defining insurance policys.
You are correct in that you do not have to carry insurance on your automobile, if you chose not to you can place a 'surety' bond on each vehicle.
I do have various insurance policys, for each vehicle and for each apartment building, as I do not care to lock-up so much money in bonds.
I would rather put my money into investments that earn me a greater Net Worth.
Gambling by putting my money on the side saying that something wrong is about to happen. If I were to gamble on something, I want my money on the side of the table saying that I will live long, that I will stay healthy, saying that I will prosper.
If one were to live a long and healthy life, and have enough assets to care for one's dependents after passing on, then an insurance policy would not necessarily be worthwhile. An insurance policy is a good thing to have when you haven't yet built up enough for your dependents to live on if you were to die an untimely death.
I don't look at insurance as gambling, but as contingency planning. I'd much rather be in a position where I had an inheritance to pass on so that my fourteen year-old son wouldn't have to work the coal mines to be able to live in the style to which he is accustomed. :D--> But I'm not in that position at this time. If I was to die today, without insurance, those who depend on my financial support would suffer.
Granted, the ideal situation would be to have enough in assets, whether real estate, cash, or what have you so that you could pay all your medical bills without insurance, cover any mishaps with your auto (Nebraska has the option that was mentioned about taking out a bond instead of insurance) or take care of your obligations in case of death. Until I get to that point, I'll have an insurance policy; having one doesn't mean that I'm betting that I'm going to die soon.
I don't look at insurance as gambling, but as contingency planning.
Indeed Oaks, - "risk exposure". It's not really gambling. Gambling creates a risk by some kind of action or non-action taken. The idea of insurance is simply identifying what risk factors exist for a person and deciding how to deal with them. It also assumes risk reduction. If a possibility exists of losing or damaging something you already have, how to be reduce the possibilities. There's no risk created simply for the purpose of getting something out of it, rather just the opposite.
Galen so you insure a piece of sh-t car and you don't insure your life.
Wow that must put a lot of faith in your wife, if per chance you get killed and are not able to provide for her But your car is insured.
My Cult meter just went off.
Man you proably pay more for a piece of steel and plastic than your life. All I can say is WOW.
By the way you didn't say I think life insurace is gambling you said IT IS gambling. You didn't give your opinion you said it as cut and dryed. You know if it is guess what my wife will be real happy at my passing. because she just hit the loto. And as far as your opinion you know where you can stick it.
Well, I'm glad we gambled on the life insurance. If something were to happen to husband or I the surviving spouse would be able to pay off the house and help with college expenses for the kids.
When my dad died, the life insurance helped us care for my mother for the rest of her life(she outlived him by three years and had a terminal illness,) and we didn't have to sell her house and all she owned to do it.
We were able to keep her at home with care until the last 4 months of her life. As her health condition worsened the year before her death her care was enormously expensive. Even with the life insurance we ended up owing 30k(paid out of the estate.)
She spent the last months in a very nice hospice, not the local nursing home(she required 24 hour nursing care.) That wouldn't have happened without the life insurance money.
Oh--and my dad's illness and death pretty much took all their savings.
"Galen so you insure a piece of sh-t car and you don't insure your life."
Our mortgage in Ca has an 'escrow' account, that escrow account includes within it a life-insurance policy against my life as a matter of California law. If the mortgage holder dies, the face value of the mortgage is paid to the holder of the policy [normally the bank]. We insisted that they name Bonnie as benficiary, the bank threw a fit. The law requires one thing but does not require that the insurance money actually be used to pay off the mortgage, just that a policy must exist. Since the law does not say that the bank MUST make the profit, we were able to finally get Bonnie named as beneficiary.
Our mortgage in Ct, is the same.
Our mortage in Wa, did not require such a policy, but it did have an 'escrow' account.
Our 'mortgage' in Scotland was done differently. There they dont do the same kind of mortgages as we do in USA. It was written where you only paid the interest on the principle, and the rest of your payment is an insurance payment. For a life-insurance policy written so that when it did matures it's face-value is rolled over to pay off the balance of the mortgage.
Most everyone in USA who has a mortgage also has an 'escrow' account that pays for a long laundry list of things, some states include in this list, an insurance policy to pay the bank. Few states require that policy's pay-off to be used to pay-off the mortgage. :-)
"Wow that must put a lot of faith in your wife, if per chance you get killed and are not able to provide for her But your car is insured."
It does, Bonnie has a home, PLUS a life long income from the renters in each apartment building.
Hmm, free homes, incomes, hmm.
"My Cult meter just went off."
Really?
"Man you proably pay more for a piece of steel and plastic than your life."
What? a car? Never paid more than $3,000
My bike ['82 gold-wing interstate full-dress] cost me $1,000.
"All I can say is WOW."
Okay.
"By the way you didn't say I think life insurace is gambling you said IT IS gambling. You didn't give your opinion you said it as cut and dryed."
Yes I did.
"You know if it is guess what my wife will be real happy at my passing. because she just hit the loto. And as far as your opinion you know where you can stick it."
Thank you. :-)
If I die, my wife, gets what we have now.
She will lose my pension, which is paid for by the Tax-payers. Thank you again.
But she wont need it. :-)
She can live in Ct, or in Ca, or in Me, or ...
And still bring in a decent income from the renters. All due to what we setup while we were followers of The Way International. :-)
If you've got the money set aside, or a dependable income source, to cover possibilities such as untimely death, catastrophic illness, or expensive car wrecks, then you have a choice on whether insurance is best for you. You can weigh the options: is it better to "tie up" some assets in a surety bond and avoid paying premiums to the insurance company, or is it more cost effective to pay the premiums and invest the cash so that it earns more than what the premium is?
Not everyone is in that position, however, and for various reasons. I prefer to take advantage of the options available to me, rather than avoiding insurance because I'm afraid that it's gambling.
Or is insurance not gambling when the cash-flow is better than having a surety bond? -->
Galen, in your post you've actually described loosely incorporating a form of insurance - "self-insurance".
I work for an insurance company (although not in sales) so I can't make a statement that would in any way appear binding in any respect but I can say that the following is pretty widely accepted in economic circles - the "differences" between gambling and insurance:
Gambling creates a speculative risk. (the risk doesn't exist prior to the wager or bet and only exists as long as the wager or bet is standing).
Insurance is a technique for dealing with an existing risk. (the risk and the interest in the outcome exists independent of the contract to insure).
With gambling there is a loser for every winner.
(there can be no winner without a loser).
Through insuance all/both parties gain, or stand to, on average.
I can juggle some of those things to produce a gambling kind of a scenario but it won't really stand. That's why state laws DO differentiate between wagering/gambling and contracts of insurance - because there is a difference. Gambling agreements aren't recognized by law, unless the law's name is Vinnie "The Bull" and he's somebody's uncle. ;)--> Contracts of insurance are recognized and indeed governed by law.
I wanted to add (although not specifically to your reference Galen) that if I had a buck for every reference to insurance being bad, wasteful, negative, devilish and tantamount to gambling by smarmy Wayfers, I'd be able to throw down some serious change at the tables.
Estate planning is a good thing, however it's done. Risk management - good. If the advice is to not overinsure or to not use insurance just to cover for reckless or illegal behavior - that's good advice. Personal responsibility is, I think, the key. Thinking and planning - good. If there's any innies out there eavesdropping on this thread - think about it if you're getting advice on your finances and personal affairs. It's your life.
Galen's described a personal lifestyle and plan that he put in to effect while he was IN the Way. If your Way won't let you live and function freely in the economic world you live in, I guess you just gotta ask yourself one question - do I feel lucky? It may come down to a real roll of the dice as to whether "they're" right or wrong.
You pay money to "bet" that something won't happen (a car accident, your death, a fire, whatever). The insurance company takes your money and that of a lot of other people and pays back more money than you put in if the thing happens.
Obviously the aggregate odds are in their favor. If they didn't take in more money than they pay out over time they'd be out of business and there would be no one to take your bet. So for you it's a "bad bet" and that's a good thing otherwise there would be no one to take it.
So when does it make sense? It makes sense when the unlikely but possible thing could have a devistating financial effect. Not unpleasant, but devistating.
If I am the major bread winner in the family and my family would be financially (remember all we're talking about is money) devistated by my death it's probably a good idea for me to have life insurance. If my kids are grown, the spouse makes more money than we need etc. The it probably doesn't make sense because my death would be financially devistating. In both cases, the odds are that the insurance company will "win" the bet but in one case my death would be catastrophic so I "bet". In another case it wouldn't so I don't.
Financially prudent people insure only what will be financially catastrophic events with high deductibles because having to pay a high deductible is uncomfortable but no catastrophic and it saves you premiums. So they buy as little as they need to be financially secure if the unlikely happens.
"I prefer to take advantage of the options available to me, rather than avoiding insurance because I'm afraid that it's gambling.
As I have already said numerous times, I do have insurance policys. I am not sure who you think is 'afraid' of insurance?
There are plenty of instances wherein, if you want to do X you must have insurance. [like escrow accounts in many areas]
By all means do with your money whatever makes the best profit. Personally I like collecting Apartment buidings.
I have spent many years in a career where I was surrounded by young men, who came out of bootcamp each with an allotment paying $40/month for life-insurance. No maturity dates, no borrowing against it, no equity, and no beneficiarys. Single young men dont need life insurance. Canceling it, got them more drinking money. Or shifting that allotment into a mutual fund actually got it into an investment. [yes many funds will take amounts as small as $50/month, but you have to send them a letter explaining that your a poor servicemember and thats all you can afford in an allotment].
socks-
Life insurance for young studs that does not build value and has no cash value, is really difficult to call an investment.
Yes there is some risk, of them dying. But without dependants and no beneficiary, the money paid to insurance companys is just lost money.
I canceled my SGLI policy soon after leaving bootcamp, as soon as I could. and for all the years following, I never carried it. I dont get any benefit from paying my money into a life-insurance policy agains tmy life. By owning MFRs, their escrow accounts include such by law and Bonnie hs fought with banks in the past so she is the named beneficiary of those accounts, so should I pass she is covered. So I still dotn see the benefit to carrying life-insuracne.
If I pay into a policy for three years, and I never wreck my car, or my house never burns down, or I dont die. That policy 'covers' me for that period of time, but then it ends. Unless I actually do wreck that car, or burn tht house, I will never see anything come from spending that money. And then you move on to another country and find another insurance company that under-writes in tha tcountry and you do it all over again. You say that insurance is win-win, everyone walks away a winner. How did I win from paying into all those various policys that I have had over the past 30 years? Other than to say that my risks were 'covered'.
To me an investment, is something that has a cash-value that is ever-increasing. When I put money into it, it's cash value goes up, and because I put money into it, it continues to increase it's value at some advanced rate. If Today it is worth $1, and I put in another $1, and next week it is worth $3 and a month later it is worth $4; that is an investment.
If the only way to get my money back out of my car insurance is to total my car, then that is not an investment to me. Besides I commonly will pay far more money into a car's insurance policy then that car is worth totaled. I have totaled cars, and I dont think that we have ever seen a check that came near to how much we had paid into the policy. Maybe we should shift the wrecking cars, within the first few months of owning it? :-)
Insurance isn't an investment first of all. It is in that you're putting your money somewhere, it gets "invested" or put towards a policy. It's for covering a specific kind of risk. As long as the coverage is in force you get what you're paying for - coverage if the risk is realized.
Insurance can cover a commodity, a person, property, any number of things. It provides a stop-loss point for what's covered. A car, property, business, can all produce catastrophic loss. The very investments themselves can produce the risk.
quote:
Through insuance all/both parties gain, or stand to, on average.
It is a win-win, in that the coverage is in force to cover a loss, if it occurs. If it does, you have whatever the policy says you do.
A policy with an insurance company isn't the only way to do that of course, unless it's required by law, as you state Galen.
It's absolutely true that for a life free of incident you're paying for something you don't use or want to use and hope you never have to use. Which is where your risk exposure comes in. I haven't had an auto accident, ticket or violation of any kind in over 20 years, and all of the money I've paid into auto insurance won't come back to me. It shouldn't, I got what I paid for - coverage if I needed it for what I was covered for. I didn't need it. If I had, it was paid for, from money I wouldn't have wanted to produce out of other resources at the time.
Life insurance may or may not be the best way for a person to cover their dependents. For most people it's a reliable way to plan for their demise and whatever expenses they leave behind when they're not earning money. If a person had other means for that income to be replaced or a scenario where it wasn't an issue, it might not be worthwhile.
Real estate is a good way to go for investing, yes, I agree. It also has it's risks though. It may not return on the investment in the amount needed at the time it's needed.
Your set up sounds reasonable Galen, but I don't really know the details other than what you've posted here.
I was speaking generally, although your comments about insurance being gambling did inspire me to write what I did.
quote:
As I have already said numerous times, I do have insurance policys
Yup, I've noted that. Yet you call insurance gambling.
Do I understand that they are (according to your view) not gambling when they fit in with your financial plan, or are required by law? Or is gambling okay in these situations?
Just because I used "insurance" and "afraid" in the same sentence doesn't mean that I am saying that anyone is afraid of insurance.
quote:
rather than avoiding insurance because I'm afraid that it's gambling.
Maybe it would have been clearer if I said "...rather than avoid insurance because I think that it's gambling". Maybe not. Sometimes you seem determined to misunderstand. But maybe that's just a misunderstanding on my part ;)-->
My point is that because some folks believe that insurance is gambling, they will avoid insurance because they believe that gambling is "off the Word", evil, or whatever. Thus the formula: if gambling = evil, and if gambling = insurance, the insurance = evil. I don't believe that gambling is especially evil, I don't believe that insurance is gambling, therefore I have no problem with insurance.
None of what I have said should be construed to mean that I think that everyone should have insurance. I don't. If you can work it so you don't need it (which you apparently have in several categories) then don't get it. But lack of insurance should be based on a sound financial plan, not on a belief that taking out an insurance policy is gambling.
Other than your statement that insurance is gambling, I don't have a clue as to your motivations, so I'm not making any assumptions about them. However, unless you are saying that gambling is okay in select situations, I don't understand how you can claim that insurance is gambling, yet carry insurance. -->
I post on various boards and when responses are posted on each board they are e-mailed to me. So at times I get a string of e-mails from alternating boards, often on very similar topics. I am currently debating with some people on using insurance policys as a part of their investment portfolio, then I posted here on this board with that still on my mind.
I most humbly apologize.
I do have insurance policys; on each vehicle I own, on each property, and as a part of each escrow account. I do not carry a medical insurance policy as I am a servicemember and I am treated at military bases courtesy of the American Tax-payer [thank you very much ;-) ].
"Here are some hard facts 75,000,000 (yep million) American's do not have a bank account couldn't if they tried.. for whatever reason, and the Privacy Act is making it even harder to get one (don't believe me ask any woman who's been divorced and remarried u must now prove every name u have had) What we do is allow an entire segment of working people get by, ..."
I recently had to re-register a car.
The state's DMV had burped and 'canceled' the old plates. So in I go. As of 1January they no longer accept military ID cards as a photo-ID.
And I can not do any business in the DMV without a local driver's license. [prior to 1Jan military ID-cards were 'good', and any valid driver's license was 'good']
So to re-register my car [which still had a 'good' tax-sticker], I had to get a new driver's license. But wait my old driver's license was issued in another state and did not have a photo on it. So I give them my old Driver's license and my military ID [which has a photo]. Nope the military-ID is no good anymore. So I bring in my passport.
To accept my old driver's license they need to attach with it a valid photo from another valid ID. So they wnat to cut-out the picture from my passport to attach it to my license, so they can send it in to the naitonal database.
Not accepting a military-ID, cutting-up passports, not accepting valid out-of-state licenses, WHAT?
Any Police officer in the country will accept a military-ID, and a valid driver's license from any state, and passports are generally accpeted as 'holy'.
"What is the point of this? Nothing but i feel so much better."
I think one point is that the 'patriot act' has had huge effects on our society.
Recommended Posts
Top Posters In This Topic
16
11
13
21
Popular Days
Mar 23
23
Mar 19
22
Mar 21
12
Mar 18
8
Top Posters In This Topic
Galen 16 posts
skyrider 11 posts
socks 13 posts
Belle 21 posts
Popular Days
Mar 23 2005
23 posts
Mar 19 2005
22 posts
Mar 21 2005
12 posts
Mar 18 2005
8 posts
My3Cents
Before you get too excited about Kyosaki you should check out someone who's fact-checked his story John Reed There are some attitudes that he can teach you that are helpful. There are other things he says that are misleading or just plain wrong. And a lot of what he says he did is not easily replicatable except for special circumstances that don't happen very often.
I speak as someone who, like Galen, has made quite a bit of money as a landlord.
I have to say he won't be paying for college with tax-free dollars. He will get a loan (secured by his houses) to come up with the cash to pay for college. Then he will pay back the loan over time with profit from his rent properties. He will pay taxes on those profits. Yes the taxes on those profits will be lessened by the depreciation laws, but he'll use up a lot of that depreciation shortly after the kids graduate and I doubt the loan will be paid off by then.
Having said all that, I must agree that this is a great idea - IF you have a few things going for you.
One is that the area you buy in stays economically healthy for 20 years (more if you have more than one kid.) Pick any 20 year period and you'll see that many areas of the country were economically healthy over that time frame. But many were not. And it is not always possible to tell in advance.
Another thing you must have going for you is that the cost of money (interest rate) relative to the rental market in your area must be suitable. The first place I bought was a duplex. We lived in one side and rented out the other. For quite a number of years, the rent DID NOT cover even half the mortage payment (not to mention repairs, advertising etc). And a few years after we bought the place, it was worth 40,000 less than we paid for it. A drop of about 25%. 20 years later when I finally sold it, it had gone up quite a bit. And over that time, the interest rates had come down and the rents had gone up. So I was able to make a decent cash flow for quite a while. I haven't bothered to figure out if I'd have done better buying a single family and putting the rest of the money in a bank, or the stock market but I doubt it.
The third thing you must understand is that inveting in real estate is somewhere in the middle between investing in the stock market (all you do is decide what+when to buy and when to sell) and having a job (where you work 40 hrs a week). It takes a lot more work than just an investment. And sometimes you don't get to decide when the work needs to be done. And sometimes you have to have the money to replace a furnace or something on the spot, and you don't get to choose. And sometimes really weird stuff happens - like the time the cops woke me up at 11:30 PM because they were staking out my tenant because he had stabbed his girlfriend (she's fine now) and we're not talking trailer trash - they lived in a neighborhood where the average home is worth 300K or more.
But if you are aware of this, are able to meet the challenges, and have the luck (or good fortune) to enjoy a stable economy for 20 years and a decent interest/rent ratio it is possible to do well financially.
Link to comment
Share on other sites
Danny
Great points My 3 cents.
I read a bood Missed Fortune 101 by Douglas Andrew. Greatest book I have ever read on this subject. There is a way to take tax free dollars.
I built and moved into a nice home owning every inch. Equyity in a home does not make money except on appreciation. The mortor an bricks just sit there they do not compound yearly. There is a much better way.
Rent property profit is taxable income.
IRA's and 401ks are taxed when you start using them. Except the Roth. Estates are taxed when we are gone. only 22% of money are accutual recieved by our heirs.
Most money professials say term life is the best insurace. There is a much better way.
Link to comment
Share on other sites
Galen
Danny:
"... Rent property profit is taxable income."
Only if your messing it up. Ours are tax-free, and they shelter all other income, so we dont pay taxes on ANY income. :-)
Schedule E [you control what your expenses were], and depreciation [straight-line method over 28.5 years, readjusting cost basis every year]
"... Estates are taxed when we are gone"
Only after the first $140,000, before that point there is no tax on them.
"Most money professials say term life is the best insurace."
Insurance policys are gambling.
Gambling by putting my money on the side saying that something wrong is about to happen. If I were to gamble on something, I want my money on the side of the table saying that I will live long, that I will stay healthy, saying that I will prosper.
"There is a much better way."
True.
I really like "The Millionaire Nextdoor".
Link to comment
Share on other sites
Jim
I'm pretty sure the number is $1,200,000
Link to comment
Share on other sites
Galen
Jim:
"... Estates are taxed when we are gone"
"Only after the first $140,000, before that point there is no tax on them."
"I'm pretty sure the number is $1,200,000"
Excuse me, you are most likely correct.
I helped someone once with this issue, and I was really tacken-back by the high level that an inheritance had to reach before it was taxed. I had assumed it such limit was lower, because you so often hear people complaining about it. But then Hillary Klinton in the last phase of the Klinton administration, did orchestrate a re-structuring of the 'classes'. During which all these numbers were tweaked, to say that you really were not 'wealthy' unless you earned an astronomical salary, if you only made $150,000/year you were still just middle-class.
I kind of stopped following it closely after that, and only look at those things which effect my tax-planning.
You are most likely correct.
Either way with the 'gift' in place and no limit on how many 'gift's an estate can give to heirs in a single year, even on your death-bed if you can not distribute your wealth tax-free you got too stinking much money, and it should be taxed.
The last time I dealt with 'gift's it was defined as $10,000 and there was no limit on how many such 'gift's an estate can give to each heir, and no limit on time constraints between individual 'gift's [minutely, hourly, daily, etc]. Also 'gift's can be given into trusts, or corporations even when the heirs dont have knowledge of the trust or corporation. So the money can be shifted into the heir's name, quitely, without the heir's knowledge, while the estate holder still lives, and all without taxation.
Ooops yes it has been a couple years since I last took a class on the subject, so my numbers may well be out of date. But the principle remains, only the numbers change with the administrations.
:-)
Link to comment
Share on other sites
Danny
Galen do you have insurace on you car? Is that gambling also?
Link to comment
Share on other sites
Galen
Why is it when you go to a library and read the text of state laws regulating gambling, they must have specific exemptions written for anything calling itself 'insurance'?
Because when lawyers define what 'gambling' is, in each of it's many variations, they are also defining insurance policys.
You are correct in that you do not have to carry insurance on your automobile, if you chose not to you can place a 'surety' bond on each vehicle.
I do have various insurance policys, for each vehicle and for each apartment building, as I do not care to lock-up so much money in bonds.
I would rather put my money into investments that earn me a greater Net Worth.
:-)
Link to comment
Share on other sites
Oakspear
I don't look at insurance as gambling, but as contingency planning. I'd much rather be in a position where I had an inheritance to pass on so that my fourteen year-old son wouldn't have to work the coal mines to be able to live in the style to which he is accustomed.
:D--> But I'm not in that position at this time. If I was to die today, without insurance, those who depend on my financial support would suffer.
Granted, the ideal situation would be to have enough in assets, whether real estate, cash, or what have you so that you could pay all your medical bills without insurance, cover any mishaps with your auto (Nebraska has the option that was mentioned about taking out a bond instead of insurance) or take care of your obligations in case of death. Until I get to that point, I'll have an insurance policy; having one doesn't mean that I'm betting that I'm going to die soon.
Link to comment
Share on other sites
socks
Indeed Oaks, - "risk exposure". It's not really gambling. Gambling creates a risk by some kind of action or non-action taken. The idea of insurance is simply identifying what risk factors exist for a person and deciding how to deal with them. It also assumes risk reduction. If a possibility exists of losing or damaging something you already have, how to be reduce the possibilities. There's no risk created simply for the purpose of getting something out of it, rather just the opposite.
Link to comment
Share on other sites
Danny
Galen so you insure a piece of sh-t car and you don't insure your life.
Wow that must put a lot of faith in your wife, if per chance you get killed and are not able to provide for her But your car is insured.
My Cult meter just went off.
Man you proably pay more for a piece of steel and plastic than your life. All I can say is WOW.
By the way you didn't say I think life insurace is gambling you said IT IS gambling. You didn't give your opinion you said it as cut and dryed. You know if it is guess what my wife will be real happy at my passing. because she just hit the loto. And as far as your opinion you know where you can stick it.
Link to comment
Share on other sites
Bramble
Well, I'm glad we gambled on the life insurance. If something were to happen to husband or I the surviving spouse would be able to pay off the house and help with college expenses for the kids.
When my dad died, the life insurance helped us care for my mother for the rest of her life(she outlived him by three years and had a terminal illness,) and we didn't have to sell her house and all she owned to do it.
We were able to keep her at home with care until the last 4 months of her life. As her health condition worsened the year before her death her care was enormously expensive. Even with the life insurance we ended up owing 30k(paid out of the estate.)
She spent the last months in a very nice hospice, not the local nursing home(she required 24 hour nursing care.) That wouldn't have happened without the life insurance money.
Oh--and my dad's illness and death pretty much took all their savings.
Link to comment
Share on other sites
Galen
Danny:
"Galen so you insure a piece of sh-t car and you don't insure your life."
Our mortgage in Ca has an 'escrow' account, that escrow account includes within it a life-insurance policy against my life as a matter of California law. If the mortgage holder dies, the face value of the mortgage is paid to the holder of the policy [normally the bank]. We insisted that they name Bonnie as benficiary, the bank threw a fit. The law requires one thing but does not require that the insurance money actually be used to pay off the mortgage, just that a policy must exist. Since the law does not say that the bank MUST make the profit, we were able to finally get Bonnie named as beneficiary.
Our mortgage in Ct, is the same.
Our mortage in Wa, did not require such a policy, but it did have an 'escrow' account.
Our 'mortgage' in Scotland was done differently. There they dont do the same kind of mortgages as we do in USA. It was written where you only paid the interest on the principle, and the rest of your payment is an insurance payment. For a life-insurance policy written so that when it did matures it's face-value is rolled over to pay off the balance of the mortgage.
Most everyone in USA who has a mortgage also has an 'escrow' account that pays for a long laundry list of things, some states include in this list, an insurance policy to pay the bank. Few states require that policy's pay-off to be used to pay-off the mortgage. :-)
"Wow that must put a lot of faith in your wife, if per chance you get killed and are not able to provide for her But your car is insured."
It does, Bonnie has a home, PLUS a life long income from the renters in each apartment building.
Hmm, free homes, incomes, hmm.
"My Cult meter just went off."
Really?
"Man you proably pay more for a piece of steel and plastic than your life."
What? a car? Never paid more than $3,000
My bike ['82 gold-wing interstate full-dress] cost me $1,000.
"All I can say is WOW."
Okay.
"By the way you didn't say I think life insurace is gambling you said IT IS gambling. You didn't give your opinion you said it as cut and dryed."
Yes I did.
"You know if it is guess what my wife will be real happy at my passing. because she just hit the loto. And as far as your opinion you know where you can stick it."
Thank you. :-)
If I die, my wife, gets what we have now.
She will lose my pension, which is paid for by the Tax-payers. Thank you again.
But she wont need it. :-)
She can live in Ct, or in Ca, or in Me, or ...
And still bring in a decent income from the renters. All due to what we setup while we were followers of The Way International. :-)
Link to comment
Share on other sites
Oakspear
If you've got the money set aside, or a dependable income source, to cover possibilities such as untimely death, catastrophic illness, or expensive car wrecks, then you have a choice on whether insurance is best for you. You can weigh the options: is it better to "tie up" some assets in a surety bond and avoid paying premiums to the insurance company, or is it more cost effective to pay the premiums and invest the cash so that it earns more than what the premium is?
Not everyone is in that position, however, and for various reasons. I prefer to take advantage of the options available to me, rather than avoiding insurance because I'm afraid that it's gambling.
Or is insurance not gambling when the cash-flow is better than having a surety bond?
-->
Link to comment
Share on other sites
socks
Galen, in your post you've actually described loosely incorporating a form of insurance - "self-insurance".
I work for an insurance company (although not in sales) so I can't make a statement that would in any way appear binding in any respect but I can say that the following is pretty widely accepted in economic circles - the "differences" between gambling and insurance:
Gambling creates a speculative risk. (the risk doesn't exist prior to the wager or bet and only exists as long as the wager or bet is standing).
Insurance is a technique for dealing with an existing risk. (the risk and the interest in the outcome exists independent of the contract to insure).
With gambling there is a loser for every winner.
(there can be no winner without a loser).
Through insuance all/both parties gain, or stand to, on average.
I can juggle some of those things to produce a gambling kind of a scenario but it won't really stand. That's why state laws DO differentiate between wagering/gambling and contracts of insurance - because there is a difference. Gambling agreements aren't recognized by law, unless the law's name is Vinnie "The Bull" and he's somebody's uncle.
;)--> Contracts of insurance are recognized and indeed governed by law.
Link to comment
Share on other sites
socks
I wanted to add (although not specifically to your reference Galen) that if I had a buck for every reference to insurance being bad, wasteful, negative, devilish and tantamount to gambling by smarmy Wayfers, I'd be able to throw down some serious change at the tables.
Estate planning is a good thing, however it's done. Risk management - good. If the advice is to not overinsure or to not use insurance just to cover for reckless or illegal behavior - that's good advice. Personal responsibility is, I think, the key. Thinking and planning - good. If there's any innies out there eavesdropping on this thread - think about it if you're getting advice on your finances and personal affairs. It's your life.
Galen's described a personal lifestyle and plan that he put in to effect while he was IN the Way. If your Way won't let you live and function freely in the economic world you live in, I guess you just gotta ask yourself one question - do I feel lucky? It may come down to a real roll of the dice as to whether "they're" right or wrong.
Link to comment
Share on other sites
My3Cents
Insurance is a bet of sorts.
You pay money to "bet" that something won't happen (a car accident, your death, a fire, whatever). The insurance company takes your money and that of a lot of other people and pays back more money than you put in if the thing happens.
Obviously the aggregate odds are in their favor. If they didn't take in more money than they pay out over time they'd be out of business and there would be no one to take your bet. So for you it's a "bad bet" and that's a good thing otherwise there would be no one to take it.
So when does it make sense? It makes sense when the unlikely but possible thing could have a devistating financial effect. Not unpleasant, but devistating.
If I am the major bread winner in the family and my family would be financially (remember all we're talking about is money) devistated by my death it's probably a good idea for me to have life insurance. If my kids are grown, the spouse makes more money than we need etc. The it probably doesn't make sense because my death would be financially devistating. In both cases, the odds are that the insurance company will "win" the bet but in one case my death would be catastrophic so I "bet". In another case it wouldn't so I don't.
Financially prudent people insure only what will be financially catastrophic events with high deductibles because having to pay a high deductible is uncomfortable but no catastrophic and it saves you premiums. So they buy as little as they need to be financially secure if the unlikely happens.
That's my story and I'm sticking to it.
Link to comment
Share on other sites
Galen
Oakspear:
"I prefer to take advantage of the options available to me, rather than avoiding insurance because I'm afraid that it's gambling.
As I have already said numerous times, I do have insurance policys. I am not sure who you think is 'afraid' of insurance?
There are plenty of instances wherein, if you want to do X you must have insurance. [like escrow accounts in many areas]
By all means do with your money whatever makes the best profit. Personally I like collecting Apartment buidings.
I have spent many years in a career where I was surrounded by young men, who came out of bootcamp each with an allotment paying $40/month for life-insurance. No maturity dates, no borrowing against it, no equity, and no beneficiarys. Single young men dont need life insurance. Canceling it, got them more drinking money. Or shifting that allotment into a mutual fund actually got it into an investment. [yes many funds will take amounts as small as $50/month, but you have to send them a letter explaining that your a poor servicemember and thats all you can afford in an allotment].
socks-
Life insurance for young studs that does not build value and has no cash value, is really difficult to call an investment.
Yes there is some risk, of them dying. But without dependants and no beneficiary, the money paid to insurance companys is just lost money.
I canceled my SGLI policy soon after leaving bootcamp, as soon as I could. and for all the years following, I never carried it. I dont get any benefit from paying my money into a life-insurance policy agains tmy life. By owning MFRs, their escrow accounts include such by law and Bonnie hs fought with banks in the past so she is the named beneficiary of those accounts, so should I pass she is covered. So I still dotn see the benefit to carrying life-insuracne.
If I pay into a policy for three years, and I never wreck my car, or my house never burns down, or I dont die. That policy 'covers' me for that period of time, but then it ends. Unless I actually do wreck that car, or burn tht house, I will never see anything come from spending that money. And then you move on to another country and find another insurance company that under-writes in tha tcountry and you do it all over again. You say that insurance is win-win, everyone walks away a winner. How did I win from paying into all those various policys that I have had over the past 30 years? Other than to say that my risks were 'covered'.
To me an investment, is something that has a cash-value that is ever-increasing. When I put money into it, it's cash value goes up, and because I put money into it, it continues to increase it's value at some advanced rate. If Today it is worth $1, and I put in another $1, and next week it is worth $3 and a month later it is worth $4; that is an investment.
If the only way to get my money back out of my car insurance is to total my car, then that is not an investment to me. Besides I commonly will pay far more money into a car's insurance policy then that car is worth totaled. I have totaled cars, and I dont think that we have ever seen a check that came near to how much we had paid into the policy. Maybe we should shift the wrecking cars, within the first few months of owning it? :-)
Link to comment
Share on other sites
socks
Insurance isn't an investment first of all. It is in that you're putting your money somewhere, it gets "invested" or put towards a policy. It's for covering a specific kind of risk. As long as the coverage is in force you get what you're paying for - coverage if the risk is realized.
Insurance can cover a commodity, a person, property, any number of things. It provides a stop-loss point for what's covered. A car, property, business, can all produce catastrophic loss. The very investments themselves can produce the risk.
It is a win-win, in that the coverage is in force to cover a loss, if it occurs. If it does, you have whatever the policy says you do.
A policy with an insurance company isn't the only way to do that of course, unless it's required by law, as you state Galen.
It's absolutely true that for a life free of incident you're paying for something you don't use or want to use and hope you never have to use. Which is where your risk exposure comes in. I haven't had an auto accident, ticket or violation of any kind in over 20 years, and all of the money I've paid into auto insurance won't come back to me. It shouldn't, I got what I paid for - coverage if I needed it for what I was covered for. I didn't need it. If I had, it was paid for, from money I wouldn't have wanted to produce out of other resources at the time.
Life insurance may or may not be the best way for a person to cover their dependents. For most people it's a reliable way to plan for their demise and whatever expenses they leave behind when they're not earning money. If a person had other means for that income to be replaced or a scenario where it wasn't an issue, it might not be worthwhile.
Real estate is a good way to go for investing, yes, I agree. It also has it's risks though. It may not return on the investment in the amount needed at the time it's needed.
Your set up sounds reasonable Galen, but I don't really know the details other than what you've posted here.
Link to comment
Share on other sites
Oakspear
Galen:
A couple of things:
I was speaking generally, although your comments about insurance being gambling did inspire me to write what I did.
Yup, I've noted that. Yet you call insurance gambling.Do I understand that they are (according to your view) not gambling when they fit in with your financial plan, or are required by law? Or is gambling okay in these situations?
Just because I used "insurance" and "afraid" in the same sentence doesn't mean that I am saying that anyone is afraid of insurance.
Maybe it would have been clearer if I said "...rather than avoid insurance because I think that it's gambling". Maybe not. Sometimes you seem determined to misunderstand.My point is that because some folks believe that insurance is gambling, they will avoid insurance because they believe that gambling is "off the Word", evil, or whatever. Thus the formula: if gambling = evil, and if gambling = insurance, the insurance = evil. I don't believe that gambling is especially evil, I don't believe that insurance is gambling, therefore I have no problem with insurance.
None of what I have said should be construed to mean that I think that everyone should have insurance. I don't. If you can work it so you don't need it (which you apparently have in several categories) then don't get it. But lack of insurance should be based on a sound financial plan, not on a belief that taking out an insurance policy is gambling.
Other than your statement that insurance is gambling, I don't have a clue as to your motivations, so I'm not making any assumptions about them. However, unless you are saying that gambling is okay in select situations, I don't understand how you can claim that insurance is gambling, yet carry insurance.
-->
Link to comment
Share on other sites
Oakspear
Nice beard btw.
Link to comment
Share on other sites
socks
I've been meaning to say the same thing, Oaks. Galen, you got the beard thing going. Mine's trimmed tighter, but beards - can't beat 'em.
Link to comment
Share on other sites
Galen
Thanks
:-)
Link to comment
Share on other sites
Galen
Danny:
I made a terrible mistake.
I post on various boards and when responses are posted on each board they are e-mailed to me. So at times I get a string of e-mails from alternating boards, often on very similar topics. I am currently debating with some people on using insurance policys as a part of their investment portfolio, then I posted here on this board with that still on my mind.
I most humbly apologize.
I do have insurance policys; on each vehicle I own, on each property, and as a part of each escrow account. I do not carry a medical insurance policy as I am a servicemember and I am treated at military bases courtesy of the American Tax-payer [thank you very much ;-) ].
Link to comment
Share on other sites
Galen
sharon:
"ok..i have been sitting here thinking...
and thinking...(which occasionally is painful)"
But you do such a wonderful job of it.
"Here are some hard facts 75,000,000 (yep million) American's do not have a bank account couldn't if they tried.. for whatever reason, and the Privacy Act is making it even harder to get one (don't believe me ask any woman who's been divorced and remarried u must now prove every name u have had) What we do is allow an entire segment of working people get by, ..."
I recently had to re-register a car.
The state's DMV had burped and 'canceled' the old plates. So in I go. As of 1January they no longer accept military ID cards as a photo-ID.
And I can not do any business in the DMV without a local driver's license. [prior to 1Jan military ID-cards were 'good', and any valid driver's license was 'good']
So to re-register my car [which still had a 'good' tax-sticker], I had to get a new driver's license. But wait my old driver's license was issued in another state and did not have a photo on it. So I give them my old Driver's license and my military ID [which has a photo]. Nope the military-ID is no good anymore. So I bring in my passport.
To accept my old driver's license they need to attach with it a valid photo from another valid ID. So they wnat to cut-out the picture from my passport to attach it to my license, so they can send it in to the naitonal database.
Not accepting a military-ID, cutting-up passports, not accepting valid out-of-state licenses, WHAT?
Any Police officer in the country will accept a military-ID, and a valid driver's license from any state, and passports are generally accpeted as 'holy'.
"What is the point of this? Nothing but i feel so much better."
I think one point is that the 'patriot act' has had huge effects on our society.
"Can I offer anyone a cookie?"
Yes thank you.
Link to comment
Share on other sites
Join the conversation
You can post now and register later. If you have an account, sign in now to post with your account.