Practicing Prudence Risky Business

MoneyCents Man · #1 (**permalink**) 05-08-2006, 02:21 PM

There a saying when investing that goes something like this , it takes money to make money.
But when does that saying apply? when you have paid off your debt, raised your credit score and started a saving plan or when you get a bonus or raise?

Everyone knows the greater risk the greater return, but when are you taking to much of a risk?

MoneyCents Man

getforfree · #2 (**permalink**) 05-08-2006, 08:55 PM

I think it takes money anyway. Even for the free after rebates you have to invest some money first.

Haku · #3 (**permalink**) 05-09-2006, 05:13 AM

I think it applies... all the time.

Yes, it takes money to make money. However, you also save money when you reduce expenses and pay down your debts quickly. The reduction and savings translates to more financial means for you to invest. Best of all, paying down debt is easy to do, and the returns in the way of savings can easily beat out many investments.

MoneyCents Man · #4 (**permalink**) 05-09-2006, 07:24 AM

Sounds like you understand the concept how do we get other people on board?

MoneyCents Man

Ima saver · #5 (**permalink**) 05-09-2006, 08:06 AM

If you are talking about a spouse, I don't know. Having them come on this forum to read, might help. It might get them interested!! Make saving money fun!! Like the $20 challenge!! I have already passed the $5000 goal and am heading towards $10,000.

getforfree · #6 (**permalink**) 06-24-2006, 06:59 PM

Congrats lma. I would never be able to save this much for a short period of time, simply because it is more than we make total and still have to pay for mortgage, utility bills and food and all that.

getforfree · #7 (**permalink**) 06-24-2006, 07:10 PM

Quote:

Originally Posted by MoneyCents Man

There a saying when investing that goes something like this , it takes money to make money.
But when does that saying apply? when you have paid off your debt, raised your credit score and started a saving plan or when you get a bonus or raise?

Everyone knows the greater risk the greater return, but when are you taking to much of a risk?

MoneyCents Man

I think taking too much risk would apply if you would borrow money (like 0% intro rate) to make money. You might not be able to return it on time and then pay more in interest than you can earn on it. And you would still have to state the interest earned as the income and pay tax on it, but the money you wasted on the interest, I don't think you can write off those.

What I recently did, I took an equity loan and loaned it to someone with written agreement that they are responcible for all the interest and fees occured and specified the last possible day of returning it. I am not making anything on it, so it's not an income, but I will be able to write that interest of of my taxes. And it's good for that person too, he uses it as a down payment for a house, he'll avoid the PMI (PMI is more than the interest every month). He already made 2 monthly payments plus some extra towards reducing the debt.

cschin4 · #8 (**permalink**) 06-25-2006, 05:39 AM

You are taking too much risk if you are financially devasted if things don't work out as planned. The higher the risk, the greater chance you could lose your principal investment.
So, if you can't afford to lose it, then don't risk it.

Ima saver · #9 (**permalink**) 06-25-2006, 07:01 AM

I think if you can sleep at night, then you are comfortable with the risk. We build spec houses, one at a time right now. We have a lot of money tied up in one house, hoping it will sell. They always have.
We have a friend, who does grading and is also building spec houses. He has close to one million dollars borrowed and is making payments on it. He is making good money, but I could not take that kind of a risk, I would not sleep at night.
On my spec house, I am using my own money, I will have about $300,000 in this house when we finish. That is enough risk for me!!