Income Allocation

This is pretty interesting. I'm at a point where since my regular bills are really low, I no longer differentiate whats my BR and whats my living expenses. I play much lower than what I can afford to play I suppose, but I feel like that is justified by where I perceive my skill level to be. Have you always kept BR and living expenses separate?

So..... what is your bankroll

On September 10 2012 17:45 gawdawaful wrote: This is pretty interesting. I'm at a point where since my regular bills are really low, I no longer differentiate whats my BR and whats my living expenses. I play much lower than what I can afford to play I suppose, but I feel like that is justified by where I perceive my skill level to be. Have you always kept BR and living expenses separate?

But we are able to do this because we dont actually have debt, and just have a bunch of $$ sitting in the bank, so theres no real need for the differentiation. Need to buy my investment property =(

also whoosel, how is your debt structured? do u have IO loan? offset acct?

Your contribution %'s for debt vs investments seem very arbitrary. Is one or the other not clearly better?

I imagine your debt is primarily for your mortgage, but anything that you owe substantial amount of interest towards should really be paid off asap before you start contributing to your brokerage account.

"Phase Three:
If my BR is between $40,000 and $100,000 I will allocate 25% of income beyond monthly expenses toward the BR, 35% toward debt, and 40% toward investments in my brokerage account."

Forgive me for asking but would it not be more +EV to pay off your debt as soon as possible before investing? I would try get a number of hands figure in that structure as well so if BR between 40k and 100k and I've played under 100k hands at 10/20 then don't supplement roll (instead try to pay off debt asap). I'm a nub so don't take what I say seriously but I know it is almost always better to put money towards debt then put money towards an investment because
Interest Rate is > Return on Investment 100% of the time.

it depends on the debt interest rate and the returns from investments. Only he would know what his % are and can make the right decision based on that.

btw most investments are leverages on debt

I think he is giving some priority to investment over covering debt because he can still liquidate the money if necessary whereas once he's paid back his debt he thinks that money is gone. So putting money into his investment offer some backup to his bankroll if absolutely necessary but I'm not sure this is the right way to go about things?

Wouldn't it just be better to make the most +EV fund allocation decision based on interest rate % of his debts vs ROI % of his investments and if he has bankroll issues in the future to just borrow money again (that is essentially what he's doing either way).

Would be nice to have some finance gosu come in here and rape this completely.

"Being below 25k is emergency status for anyone playing 5/10"

Are you mainly a live player?

Even if investment capital is liquid whereas debt capital is not, I still think it looks like you dont put enough money into paying of debts.

Difficult to say though. In Sweden we get income tax reductions that makes it somewhat preferrable to have at least some rent losses on debt-capital as set off against income from investment capital. Dont know if you have a system that makes one better than the other or if your reasons for doing A instead of B only stems from the liquid/illiquid-argument.

All in all I really like your structure.

I think paying debt versus investments are mainly "piece of mind" decisions. If you estimate 7% avg annualized return on investments then any interest rate lower than 7% is technically worse EV. The argument I guess would be that paying debt is the safe play and guaranteed return, but for me I think that the safer play is keeping the money as liquid as possible while still working for me in some way. Technically, it could be and probably is +ev to just always take out loans and invest the amount you borrow and you should get a higher return than your interest rate; something to think about I guess would be to find the "breakeven point" of an interest rate on a loan and ROI you would expect for a specific investment. I guess if that was true then people would just take infinite loans and invest the balances. Seems possible, but a lot of things could go wrong. I'll still be attempting to follow my plan as of right now though.

Enough with that tangent. Re-reading my plan, and the comments, make me want to invest all of my money beyond 40k but still keep it mentally earmarked as my "bankroll." Otherwise it is just cash sitting in a safe deposit box, being hurt by inflation. Speaking of inflation, I would think that the longer you keep your debt, the more inflation helps you. A 3.75% interest rate on a loan (like my mortgage) is just barely more than the historic rate of inflation, so it's not really costing much.

Generally paying off debt is the better strategy just because of the fact that any gains you make via annualized return are taxed by the government, correct? So even if you're in the 25% tax bracket (reasonable avg income family) on that 7% you're actually only making 5.25% which is much closer to 3.75% than you would like to be. If you make 5% well then you're just back at 3.75% which is not good... would've been better to pay off the extra money toward the principal instead.

Although, over time if you're invested in index funds and they grow as expected over longer periods of time then you would expect to make much more investing than paying off debt. And inflation would definitely help you in the long run too.

Even TIPS which are fairly indexed to inflation have been doing very well around ~7% annually.

https://personal.vanguard.com/us/fund...=0119&FundIntExt=INT#hist=tab%3A0

I think for most people who can't expect a steady income over decades it's better to pay off the debt though.

Looks like a pretty solid structure though regardless of the debate of the merits of the decision(s); thanks for sharing. Are you going to share what type of investments your portfolio is in in the future?

I have about 50k in student debts to pay off , thankfully with no interest borrowed from family. (And yes, I would do it again because I love my job though maybe to a smaller cheaper school would be a good idea). So I'm definitely looking to invest the majority of my income in the future as I live pretty low key lifestyle with very little expenses.

Hey just out of curiousity, you dont have to answer it obv. since it's personal but... How does the wife feel about being married to a poker hustla?

On September 11 2012 20:40 xdrb wrote: Generally paying off debt is the better strategy just because of the fact that any gains you make via annualized return are taxed by the government, correct? So even if you're in the 25% tax bracket (reasonable avg income family) on that 7% you're actually only making 5.25% which is much closer to 3.75% than you would like to be. If you make 5% well then you're just back at 3.75% which is not good... would've been better to pay off the extra money toward the principal instead. Although, over time if you're invested in index funds and they grow as expected over longer periods of time then you would expect to make much more investing than paying off debt. And inflation would definitely help you in the long run too. Even TIPS which are fairly indexed to inflation have been doing very well around ~7% annually. https://personal.vanguard.com/us/fund...=0119&FundIntExt=INT#hist=tab%3A0 I think for most people who can't expect a steady income over decades it's better to pay off the debt though. Looks like a pretty solid structure though regardless of the debate of the merits of the decision(s); thanks for sharing. Are you going to share what type of investments your portfolio is in in the future? I have about 50k in student debts to pay off , thankfully with no interest borrowed from family. (And yes, I would do it again because I love my job though maybe to a smaller cheaper school would be a good idea). So I'm definitely looking to invest the majority of my income in the future as I live pretty low key lifestyle with very little expenses.

The taxes with investments, depending on your investing style, can be much lower than your regular income tax. If you are a buy and hold investor, then you will never be subject to capital gains tax because your gains will be "unrealized" gains. You also (for now) have an advantage if you choose companies to invest in which pay a dividend. If you are in the 25% tax bracket, your dividend income will be taxed at a rate of only 15%. So if you focus on investing in strong companies with a history of consistent dividend increases to shareholders each year, then you will never have to sell your stocks and try to time the market, all while enjoying a lower percentage of your income as being taxable. How do you think the richest people only pay 10% of their income to taxes? Through sneaky but legal investing. When I'm making more regular contributions each month to my brokerage account I will probably share my overall portfolio/investment strategy, and what stocks are currently on my watchlist, etc.

Our student debt we have to pay off is extremely high for the job/income category that it created (Teacher). If we did it again it would be at a cheaper school as well. Congrats on getting loans through family with no interest. Although I'd be a little nervous that it could put stress on family relationships, it also comes with the added benefit of your family sharing in your success.

On September 12 2012 03:22 flounder44 wrote: Hey just out of curiousity, you dont have to answer it obv. since it's personal but... How does the wife feel about being married to a poker hustla?

She's really supportive. She tilts me with the "shouldn't have played today" when I lose though lol. At this point though she gets the swongz and is mostly joking when she says it.

i have too much money doing nothing for me v.v

On September 13 2012 02:56 Baalim wrote: i have too much money doing nothing for me v.v

On September 12 2012 09:21 thewh00sel wrote: Show nested quote + On September 11 2012 20:40 xdrb wrote: Generally paying off debt is the better strategy just because of the fact that any gains you make via annualized return are taxed by the government, correct? So even if you're in the 25% tax bracket (reasonable avg income family) on that 7% you're actually only making 5.25% which is much closer to 3.75% than you would like to be. If you make 5% well then you're just back at 3.75% which is not good... would've been better to pay off the extra money toward the principal instead. Although, over time if you're invested in index funds and they grow as expected over longer periods of time then you would expect to make much more investing than paying off debt. And inflation would definitely help you in the long run too. Even TIPS which are fairly indexed to inflation have been doing very well around ~7% annually. https://personal.vanguard.com/us/fund...=0119&FundIntExt=INT#hist=tab%3A0 I think for most people who can't expect a steady income over decades it's better to pay off the debt though. Looks like a pretty solid structure though regardless of the debate of the merits of the decision(s); thanks for sharing. Are you going to share what type of investments your portfolio is in in the future? I have about 50k in student debts to pay off , thankfully with no interest borrowed from family. (And yes, I would do it again because I love my job though maybe to a smaller cheaper school would be a good idea). So I'm definitely looking to invest the majority of my income in the future as I live pretty low key lifestyle with very little expenses. The taxes with investments, depending on your investing style, can be much lower than your regular income tax. If you are a buy and hold investor, then you will never be subject to capital gains tax because your gains will be "unrealized" gains. You also (for now) have an advantage if you choose companies to invest in which pay a dividend. If you are in the 25% tax bracket, your dividend income will be taxed at a rate of only 15%. So if you focus on investing in strong companies with a history of consistent dividend increases to shareholders each year, then you will never have to sell your stocks and try to time the market, all while enjoying a lower percentage of your income as being taxable. How do you think the richest people only pay 10% of their income to taxes? Through sneaky but legal investing. When I'm making more regular contributions each month to my brokerage account I will probably share my overall portfolio/investment strategy, and what stocks are currently on my watchlist, etc. Our student debt we have to pay off is extremely high for the job/income category that it created (Teacher). If we did it again it would be at a cheaper school as well. Congrats on getting loans through family with no interest. Although I'd be a little nervous that it could put stress on family relationships, it also comes with the added benefit of your family sharing in your success.

Thanks for clarifying those things for me.

Yeah, my family is asian so they tend to help out a bit more than most other families in regard to financial things. No strain here, but I gotta pay back the money to get some of my other siblings through college, haha.