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Investing while still having debt

Anything related to investing, including crypto

jeandearme

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I have around $9k of debt and $5k in cash - I pay only what I need (credit card), nothing more because in this times if something happens I'd rather be able to just get the cash out and run.

My question is: should I invest some of it into stocks to accelerate it? I've seen a thread by GreyCode and not sure what to think. I start to feel FOMO because I hear that everyone jumped on that train and getting really nice results. So far I was like 'stick to what you actually know', but given that I'm software developer too I have no more excuses.

Would love to hear some opinions on this.
 
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Odysseus M Jones

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I start to feel FOMO because I hear that everyone jumped on that train and getting really nice results.
Don't do it, you'll lose your shirt.
When you hear people talking about how much they made it's time to get out.
No one talks about this at the beginning of a move it's always when they're ready to unload.

Devil take the hindmost.
That's a good book btw
 

amp0193

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I have around $9k of debt and $5k in cash - I pay only what I need (credit card), nothing more because in this times if something happens I'd rather be able to just get the cash out and run.

My question is: should I invest some of it into stocks to accelerate it? I've seen a thread by GreyCode and not sure what to think. I start to feel FOMO because I hear that everyone jumped on that train and getting really nice results. So far I was like 'stick to what you actually know', but given that I'm software developer too I have no more excuses.

Would love to hear some opinions on this.

Dont do it.

keep the cash or pay off the debt.
 

Tossek

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Hi Jeandearme,

it is a great question. And the answer is quite simple as mentioned before: Try to minimize the debt while keeping some extra cash for emergencies. I can recommend here Dave Ramsey's approach of how to deal with debt, but in a nut shell: Tackle the smallest debt amount first, not the highest. His approach is trying to minimize the complexity of the problem while generating small victorious steps easing the money pain.

Why is this the usual and most sane to go? Because, if under some unlucky circumstances you lose your money in the stocks, you will be still penalized by the debt interest. Mathematically it does not make a difference if you kill your debt interest or make the same amount from your wins in the stock market. However, on one side your loss can be quite high as well. Option trading can be a magnitude riskier than stock trading. So why risk it before you are "free"? I know fastlaning is a question of taking risks to create value and thus get a lot of income. Thus, I think that there is a ok situation: If you take a small (!) amount just to play around and learn the game to minimize your future risk if you want to walk this way down further the road. But I would calculate this money as already lost money just to be not emotionally attached.

I know that the monetarian wins like the ones from Greycode might be impressive. Still, it is very risky and people lose fortunes this way. Remember: if you get burned, you will never be on FIRE. Pun intended.
 
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foodiepersecond

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This really depends on how much you make monthly and your monthly costs. 9k debt in the spectrum of debt isn't much and if I can assume, software devs can do alright as far as salary? Also, what how much interest if any is occurring? I would gauge all that first and see how long it would take to pay off the debt without that 5k.

The investing part can be lucrative, but I tend to follow Mark Cuban's suggestion that any money you put into stocks is money you are willing to lose. You can do safe investments that will grow in a long time or the big risk/big reward approach.

I can't really tell you to do it or not. That is just my mindest atm. I put a super humble investment into stocks because my debt is bananas and I don't make nearly as much to comfortably pay it back.
 

minivanman

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Actually there was an article about Buffett the other day and he was telling people to pay off their credit card debt first because even he does not know how to make 18% interest in the stock market.

There is always that 1 person that wins big while the 999 others go home with their tails between their legs and broke. Are ya feelin lucky? :run:
 

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I have around $9k of debt and $5k in cash - I pay only what I need (credit card), nothing more because in this times if something happens I'd rather be able to just get the cash out and run.

My question is: should I invest some of it into stocks to accelerate it? I've seen a thread by GreyCode and not sure what to think. I start to feel FOMO because I hear that everyone jumped on that train and getting really nice results. So far I was like 'stick to what you actually know', but given that I'm software developer too I have no more excuses.

Would love to hear some opinions on this.
Is your debt in the credit card? or outside of the card?
If it's in the card, then pay it off!
If it's outside, then there's a lot of options... see other comments, they know what they are talking about.

I have personal debt on my own, and I'll invest more dollars (more debt) which I gradually pay off. This is not exactly fastlane approach, but it works for me, and I'll be cash positive in a few years :)
 
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peterb0yd

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I was in your shoes exactly about 4 months ago.

I had $12k in credit card debt from various business expenses that I couldn't pay off. It sucked big time. I was a freelance software dev and was hating my client that I had to work with. I was in a mental and financial rut and would do ANYTHING to get out of it.

I decided to suck it up and get a full-time software job. Having never had a full-time job in my entire life, this was not an easy thing to do.

With my paycheck last week, I finally paid off the remainder of the credit card debt. Felt great for 10 minutes. I still have about $11k in student loan debt to pay off, so I'm not finished. But it's not nearly as bad as credit card debt. 20% interest is no joke.

If you don't have a good stream of income already to pay off your debt, then get a job and pay it off slowly.

It's not sexy, but it works. It lets you focus on your fast-lane venture without constant worry that you're going to go broke.

Invest in the stock market? If you don't know what you're doing, you might as well just go to the casino.

That's my 2 cents. Good luck man.
 

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You don't have enough money to make a meaningful difference with investing. If you had more money you can look at it like this...

What is the interest rate on your debt? What are your expected returns?

If it is a car loan or something at 2% that is different than a credit card at 25%.

Even if you are a pro investor, and you're not, you are not going to outpace your credit card's interest charges.

If you do have a high interest credit, try a balance transfer to a 0% card.
 
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P3HSB

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personally I think if you are a skillful investor/trader and you know what you are doing, I would definitely invest. You can always go with an indexfund or an ETFs. Do your due diligence and it will 100% be worth it
 
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Kevin88660

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I have around $9k of debt and $5k in cash - I pay only what I need (credit card), nothing more because in this times if something happens I'd rather be able to just get the cash out and run.

My question is: should I invest some of it into stocks to accelerate it? I've seen a thread by GreyCode and not sure what to think. I start to feel FOMO because I hear that everyone jumped on that train and getting really nice results. So far I was like 'stick to what you actually know', but given that I'm software developer too I have no more excuses.

Would love to hear some opinions on this.
Pay your debt off first.

But If I were in you shoe I will look to have more cash first before paying off my debt.

Paying debt is always a higher priority, because unless you are borrowing using a collateral like a house the interest is going to be substantially higher.

Order of priority

1)Emergency Fund
2) Paying of Debt
3) Investment
 

jeandearme

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Pay your debt off first.

But If I were in you shoe I will look to have more cash first before paying off my debt.

Paying debt is always a higher priority, because unless you are borrowing using a collateral like a house the interest is going to be substantially higher.

Order of priority

1)Emergency Fund
2) Paying of Debt
3) Investment

Yes, definitely in that order! Right now I'm balancing between the first two. Right now I'm having $5k in debt and almost $3k in cash so it's been a little more than a month and almost half of it is paid. I keep cash because no one knows what will actually happen and if something I can just get cash out and run for life. I think within next two months I will pay it completely off (using emergency fund would take month but it's not for that).
 

davehig

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My question is: should I invest some of it into stocks to accelerate it?

Invest... in yourself ;)

I'm of the opinion that investing is largely a waste of time unless you have a big wodge of cash to put into it... And even then you might as well just buy an index fund. By far the biggest ROI you can possibly receive is from investing in yourself and starting your own business. Even if you don't blow up financially you'll still gain experience.
 
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jeandearme

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Invest... in yourself ;)

I'm of the opinion that investing is largely a waste of time unless you have a big wodge of cash to put into it... And even then you might as well just buy an index fund. By far the biggest ROI you can possibly receive is from investing in yourself and starting your own business. Even if you don't blow up financially you'll still gain experience.

Yes, that's true! Right now I'm developing my own business tool app and because I only work on that I don't really have expenses on this one.

Because after paying debt I will have a bit of cash to invest I'm considering investing in my friend's game company. He recently got funded by VC fund with ~$200k and now they are looking to gather money from private share issue and enter stock exchange in the next year. I'm considering it mainly because I know the guy from times when he had nothing except idea in his head (5 years ago) so I know all the story behind and process (also been with him while he was founding new joint-stock company with the fund to make sure all is legit).

My thinking here is that I'd invest for one year and probably see 20% return on it even though most of previous VC's companies yielded returns around 2x - 4x. Entry barrier of investment starts from $2,5k so it's doable even with the amount I will have (I can invest that amount every month after paying debt).

If I'd had better idea to invest in my own business then probably I'd do that instead, but can't think of any right now.
 

Sethamus

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How is your credit rating? If it is decent go to all of the local banks until one of them will give you a personal loan, debt consolidation, at a way lower interest rate. Don't carry a balance any longer on any credit cards from month to month to avoid the interest and start paying your loan. When the loan is paid off and you no longer need to carry debt on a credit card month to month and you have a few months of living expenses saved up for emergencies. Then you can start to make these bigger choices of learning to invest, building a business, etc.
That is my opinion. Losing 5k dollars hurts a lot less when you nor your family need the money to survive...still hurts though haha
 

Tubs

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I have around $9k of debt and $5k in cash - I pay only what I need (credit card), nothing more because in this times if something happens I'd rather be able to just get the cash out and run.

My question is: should I invest some of it into stocks to accelerate it? I've seen a thread by GreyCode and not sure what to think. I start to feel FOMO because I hear that everyone jumped on that train and getting really nice results. So far I was like 'stick to what you actually know', but given that I'm software developer too I have no more excuses.

Would love to hear some opinions on this.
Going with the FOMO flow, and doing what everyone else is doing is just gonna make that money flow out of your pocket and into the pockets of someone who's analyzed the situation much better than you have. The reason @GrayCode did so well is because he had studied trading beforehand for years, and saw the opportunity in the market before the majority of people had. At the point he bought in the majority of the people were still fearful about the market going down more, but he saw the market had shot down, and was due for a correction.

He had experience, and analysis on his side. This allowed him to see an opportunity before-hand to jump on it.
What have you got? Fear of missing out?
If you're fearful you're much more likely to act emotionally rather than logically on your trades. Meaning you're much more likely to lose money. I know, I've been there.

Instead get your finances in order, and if you really want to get good at trading then you can study up on it and start doing little trades to get your feet wet(I'd personally rather just invest my money in business, but to each his own.)

Also, if you're inspired by him, maybe you could ask @GrayCode for his advice on how to get good at trading.
 
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jeandearme

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How is your credit rating? If it is decent go to all of the local banks until one of them will give you a personal loan, debt consolidation, at a way lower interest rate. Don't carry a balance any longer on any credit cards from month to month to avoid the interest and start paying your loan. When the loan is paid off and you no longer need to carry debt on a credit card month to month and you have a few months of living expenses saved up for emergencies. Then you can start to make these bigger choices of learning to invest, building a business, etc.

Right now is very low (I'm in 20% of the top end). My credit card has option to consolidate - I need to check how it's going. Still, I'm 2 months from paying it fully back so maybe as for now it doesn't matter that much.

Losing 5k dollars hurts a lot less when you nor your family need the money to survive...still hurts though haha
I know because I spent someone else's money, but pay back with my own...

Going with the FOMO flow, and doing what everyone else is doing is just gonna make that money flow out of your pocket and into the pockets of someone who's analyzed the situation much better than you have. The reason @GrayCode did so well is because he had studied trading beforehand for years, and saw the opportunity in the market before the majority of people had. At the point he bought in the majority of the people were still fearful about the market going down more, but he saw the market had shot down, and was due for a correction.

He had experience, and analysis on his side. This allowed him to see an opportunity before-hand to jump on it.
What have you got? Fear of missing out?
If you're fearful you're much more likely to act emotionally rather than logically on your trades. Meaning you're much more likely to lose money. I know, I've been there.

True. I can't believe I just wrote it month ago. I feel like it was at least couple months back. I think I had worse day, now I know that I need to focus on things that I have knowledge on and start from there.

Instead get your finances in order, and if you really want to get good at trading then you can study up on it and start doing little trades to get your feet wet(I'd personally rather just invest my money in business, but to each his own.)

Also, if you're inspired by him, maybe you could ask @GrayCode for his advice on how to get good at trading.

Yes, first I want to pay all credit off (2 months away) and in the meantime, when I will finally release my first service (SaaS) then I will free some time for learning the ropes of the trading and put around $100-200 to get my feet wet. That's my plan for now at least.
 

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Actually there was an article about Buffett the other day and he was telling people to pay off their credit card debt first because even he does not know how to make 18% interest in the stock market.

There is always that 1 person that wins big while the 999 others go home with their tails between their legs and broke. Are ya feelin lucky? :run:
I so extremely dislike this point of view on the markets. @minivanman I appreciate lots of your posts and all of your experience. But surely we can agree that to some people the markets are not 'just a casino'.

1 in 999 is a random statistic. The average person who has FOMO will likely lose because they're just investing in anything without analysis.

Anyway, just wanted to respond in defense of the markets that it's not just a casino. It's a beautiful mathematical playground loaded with lots of signal (valuable data) and lots more noise (vanity data and FOMO).

Being able to separate the signal from the noise is where the bigger gains are. Also, following up on this:
This r/ just made me realize what people will do with stimulus money:
Lose it.
I really hope people realize the amount satire and sarcastic humor that is WSB on reddit. Unfortunately though I imagine quite a lot of those posts are legitimate and people really do 'YOLO' options positions looking for a lottery ticket. Such a bad use of money.
Personally I'd put the 5K into a business.
This is really really generic advice. @jeandearme you're better off just paying off your debt and stacking away your cash, as much as possible, and not investing into a business until you know what you're going to do. Don't just spray and pray.

Also there was someone else who mentioned investing in yourself. I wholeheartedly agree. However don't use this as an excuse to spend 4 years reading every business book under the sun and tricking yourself into thinking you're taking action.

I was in your shoes exactly about 4 months ago.

I had $12k in credit card debt from various business expenses that I couldn't pay off. It sucked big time. I was a freelance software dev and was hating my client that I had to work with. I was in a mental and financial rut and would do ANYTHING to get out of it.

I decided to suck it up and get a full-time software job. Having never had a full-time job in my entire life, this was not an easy thing to do.

With my paycheck last week, I finally paid off the remainder of the credit card debt. Felt great for 10 minutes. I still have about $11k in student loan debt to pay off, so I'm not finished. But it's not nearly as bad as credit card debt. 20% interest is no joke.

If you don't have a good stream of income already to pay off your debt, then get a job and pay it off slowly.

It's not sexy, but it works. It lets you focus on your fast-lane venture without constant worry that you're going to go broke.

Invest in the stock market? If you don't know what you're doing, you might as well just go to the casino.

That's my 2 cents. Good luck man.
This is great advice! and thank you for adding comparison in your approach to calling the markets a casino: "If you don't know what you're doing, you might as well just go to the casino" as opposed to just calling it a casino and waving your hands at the idea.

Going with the FOMO flow, and doing what everyone else is doing is just gonna make that money flow out of your pocket and into the pockets of someone who's analyzed the situation much better than you have. The reason @GrayCode did so well is because he had studied trading beforehand for years, and saw the opportunity in the market before the majority of people had. At the point he bought in the majority of the people were still fearful about the market going down more, but he saw the market had shot down, and was due for a correction.

He had experience, and analysis on his side. This allowed him to see an opportunity before-hand to jump on it.
What have you got? Fear of missing out?
If you're fearful you're much more likely to act emotionally rather than logically on your trades. Meaning you're much more likely to lose money. I know, I've been there.

Instead get your finances in order, and if you really want to get good at trading then you can study up on it and start doing little trades to get your feet wet(I'd personally rather just invest my money in business, but to each his own.)

Also, if you're inspired by him, maybe you could ask @GrayCode for his advice on how to get good at trading.

Thanks @Tubs. You rang, so here I am. I mentioned a bit above but I'll wrap the post with this:

FOMO 99 times out of 100 will cause you to lose money. FOMO happens after a major move has been made and there typically isn't much juice left in the grape.

On how to get good at trading
1. Re-read FOMO message just above.

2. Like anything else it takes time, lots of patience and real world painful lessons sometimes referred to as your tuition to markets school, i.e. painful losses that teach you what not to do.

3. I would start by picking 5-10 companies you know and just take 5-10 mins every trading day for 3 months looking at their charts and learning how their prices move and what their ranges are. Eventually you'll be able to spot inefficiencies (good deals)

4. When looking at your 5-10 companies, be very sure not to fall into the 'I know what this should be' trap. Which goes like this: Person X looks at one of their favorite companies stock and says... "Oh what! this is trading at $31? This should definitely be $54". I've interviewed a lot of investors and also made this mistake myself at the beginning. This is just emotional attachment to feeling safe in the markets with the life jacket of the company you think you know.

This is a good way to lose money.

5. Anyone can make money in the markets. People who are patient are able to do it consistently and larger. People who aren't patient should probably dump their money in ETFs and let someone else do the work for you.

6. Almost no one talks about the importance of size and it causes people who are new to trading to think size literally means trading all of your money on 1 position that is under-researched and is likely a YOLO bet, rather than an investment.

If I can trade with size I can be in an out of a trade within a couple of days and walk away with $5,000+ on that 1 trade. It just depends on the size you're trading with.

Example. If you have 10,000 shares of XYZ inc. and it moves 50 cents to the upside. You just made $5,000

Takeaway
I think beginning investors get really impatient and screw themselves by not realizing that it takes time to build to size and are looking for a get rich quick scheme.

I have loads of knowledge about the markets, but I noticed there are 3 trains of though in the world in regards to trading:

1. The ones who scoff at the markets and call it a casino.
I can't be bothered to explain my opinions to them because more often than not, they were likely burned along the way trading and threw their hands up in the air and relegated anyone who makes money in markets as scam artists or gamblers.

2. The ones who do zero research, lose money and become person #1 ^

3. The ones who make amazing money from trading
(depending on what you define that as).
These people generally don't share much because of reasons #1 and #2 and everyone typically just thinks they're a charlatan, a crook or a gambler. They quietly go about their business and are behind the scenes in the markets making large amounts of money and the only stories we typically hear are the people on Wall Street Bets reddit who are losing stupid amounts of money actually gambling, typically to the people grouped in #3.

Finally - there are the mind-numbing youtube and instagram trading gurus who are more than likely actual crooks. Because if they knew how to make money in the markets, they wouldn't sell your their 'secrets' for $999 or whatever the F*ck they're selling it for.

If you can't spot these people out. You need to work on your ability to read people and psychology before diving into trading. Because if you don't have strong psychology. The markets will take advantage of you and your bank account.

----
p.s - DO NOT PAY ANYONE to teach you how to trade.
 

jeandearme

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@GrayCode I'm floored. Literally, I really appreciate you took time to make such reply. Kudos to you!

Here in Poland we have a well known day trader (Rafał Zaorski) that makes live sessions from time to time. Last time he made around $500k within 3 hours (10% to charity) and he says the same. No good trader would even bother thinking about selling courses let alone making them. Money they make is simply just to big.

After reading all this I'm thinking about such gameplan:
  • right now I'm making from full-time job $3,750/month
  • $2,500 for the next two months goes for paying the debt (while still maintaining separate $2,500 in cash as emergency fund - it's like a 3 months buffer in worst case scenario)
  • after that I will can save that $2,500 or invest in the company that I know from the ground up
  • at the same time I can learn about trading like you laid out. 5 minutes per day for 3 months (I could actually start earlier because of low overhead and barrier of entry)
Sounds like a plan or you would play it out differently?

My question about trading: which tools should I use for day trading? Should I read more about trading (psychology, strategies, potential traps) or more about actual companies (where to invest and when) or probably both?
 
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After reading all this I'm thinking about such gameplan:
  • right now I'm making from full-time job $3,750/month
  • $2,500 for the next two months goes for paying the debt (while still maintaining separate $2,500 in cash as emergency fund - it's like a 3 months buffer in worst case scenario)
  • after that I will can save that $2,500 or invest in the company that I know from the ground up
  • at the same time I can learn about trading like you laid out. 5 minutes per day for 3 months (I could actually start earlier because of low overhead and barrier of entry)
Sounds like a plan or you would play it out differently?

My question about trading: which tools should I use for day trading? Should I read more about trading (psychology, strategies, potential traps) or more about actual companies (where to invest and when) or probably both?

Looking at your game plan it seems to be the best approach because it's really the only thing you can do while you build up. I like it.

If I were to recommend any two books to begin putting you on the path to learning trading - I would highly recommend:

1) Market Wizards
2) Dark Pools

Market Wizards is an interview style book where the author speaks with top traders around the world and digs into their approach. There are important lessons in each of the 20 or so interviews. Plus one overarching lesson which I believe you'll pick up somewhere along the way and we'll be able to chat about it then.

Dark Pools is a fun read. It takes you through the evolution of the markets as we now know it. From in-person market makers on the floor of the stock exchange to high-speed high frequency trading algorithms and retail traders we have now. This book will likely blow your mind. As well as provide key understanding into the inner workings of the markets. An understanding 99% of people (retail traders) don't have.

Also somewhere along the way you'll start to laugh anytime you hear anyone on WallStreet Bets or anywhere else talk about things like:

"Lol, the algos are running the price up"
"Lol, the algos are running the price down"
"The algos are keeping us back"
"The algos will help us break through this resistance line"

And my all-time favorite (me exaggerating):

"We're 3 levels of fibonacci before we re-test the lows but only if the RSI is around 45 on the weekly and SMA is below the 20 day EMA after we multiply the market cap by the number of people who've drowned in the Atlantic Ocean."


This is my take on the laughable rationalizing of market indicators stacked on top of other market indicators and then people blaming it on the algos.

Anyway, enjoy! and let me know how you progress.
 

Tubs

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"We're 3 levels of fibonacci before we re-test the lows but only if the RSI is around 45 on the weekly and SMA is below the 20 day EMA after we multiply the market cap by the number of people who've drowned in the Atlantic Ocean."
C'mon bro, with proof like that it's gotta go up! All in bro!
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