284
votes
Accepted
Why isn't everybody rich?
In my opinion, the ability to have wealth comes down to one thing: Behavior. For many, it is a tough pill to swallow, but once a person realizes that they have control over their financial future ...
- 75.7k
270
votes
Why isn't everybody rich?
It all comes down to 2 things:
Financial illiteracy
Insufficient initial capital
For the first point, a very low number of people even possess basic knowledge of finance. If you don't know any ...
- 4,097
218
votes
Accepted
When someone's ability to pay is suspect, why would it make sense to give them more expensive credit?
It starts to make more sense when you consider a pool of borrowers rather than an individual.
For example, consider a pool of 100 borrowers with a 1 in 100 chance of default, if they all borrow $1,...
- 3,423
192
votes
Why buy insurance?
Because people are Risk Averse.
Suppose that you own an asset worth $10,000 to you.
Suppose that each year, the asset has 1% chance of being stolen (or completely broken).
The expected value is ...
- 10.2k
185
votes
Do I make money in the stock market from other people losing money?
Do I make money in the stock market from other people losing money?
Not normally.*
The stock market as a whole, on average, increases in value over time. So, if we claim that the market is a zero-sum ...
- 115k
152
votes
Why isn't everybody rich?
Because you have to be rich to get rich!
Let's set up a model calculation.
(don´t get hung up on these numbers - do your own calculations with your own goals and premises!)
I define be rich as owning ...
- 5,316
115
votes
Why isn't everybody rich?
Because “rich” is a result of an uneven distribution of wealth. Last I researched, the total US wealth divided by the total population resulted in $160K/person. $320K/couple is not rich. The median ...
103
votes
Bought stock at higher price than current price
I don't understand is it possible to buy stock at higher price than current price?
This is a very common misunderstanding.
Stocks do not have a "current price" that you can buy them for.
Any "stock ...
- 8,106
100
votes
Accepted
Hypothetically, should I pay off the smaller + higher interest rate loan first, or the larger + higher absolute interest cost?
This is an interesting question. Many people would tell you to pay the highest interest rate loan first. There are many others who would tell you to pay off the smallest balance loan first. In your ...
- 115k
99
votes
How can a company use money from stock investors when they are constantly being bought and sold?
The company got its money for those shares when it issued them. When they're subsequently sold (assuming it's not the company doing the buying or selling), that sale doesn't change the company's bank ...
- 3,211
98
votes
How did this day trader lose so much?
The day trader in the article was engaging in short selling. Short selling is a technique used to profit when a stock goes down. The investor borrows shares of a stock from someone else and sells ...
- 115k
81
votes
Why buy insurance?
Discussions around expected values and risk premiums are very useful, but there's another thing to consider: cash flow.
Some individuals have high value assets that are vital to them, such as ...
- 1,553
81
votes
Accepted
Why do financial institutions charge so much to convert currency?
Mainly because they can.
Yes, there is a cost for banks to execute such transactions, and yes, there is a cost to cover the implied risks, but it is far from 3 or 4%.
There are banks that charge a ...
- 37.5k
81
votes
Accepted
Is rent considered a debt?
Rent is not a debt because you have not borrowed any money from the landlord.
Your current month's rent is a (very) short term liability, as are other payments for services rendered (like utility ...
- 50.5k
80
votes
Accepted
Why would the bidding on a foreclosed property start at the outstanding amount of the loan?
The bank only cares about getting paid the owed amount as quickly as possible. Anything more than that the bank has to give to the owners whose property they're auctioning.
Also, a house that could ...
- 2,316
80
votes
Accepted
Numbers in parentheses in financial statements?
It means the number is negative. It's an alternate way of showing negative numbers versus prefacing with a negative sign (-)
In some cases, a negative value also has a different name. For example you'...
- 129k
79
votes
How can I support myself financially as a 17 year old with a loan?
There are two ways to improve your personal finances:
Make more money
Spend less money
That's literally the secret. To afford the car, you either need more income, or lower expenses. Don't fret, ...
- 23.9k
69
votes
What are some effective ways to help someone financially?
Here's some tenets I follow when helping others:
Don't support bad habits
Don't give money to someone to pay gambling debts, or to pay rent because they've spent all of their money on less important ...
- 129k
66
votes
As a 16 year old, how can I keep my money safe from my mother?
I’m sorry to hear about your situation. There are a couple of issues at play.
Parents are responsible financially for their kids until they turn 18. They are required to provide food, shelter, and ...
- 115k
64
votes
Accepted
How do the rich and wealthy withdraw from accounts without leaving home?
Many services are available to people who are wealthy enough to use private banks. The linked Wikipedia article says:
...banking services (deposit taking and payments), discretionary asset
...
- 22.9k
62
votes
Why isn't everybody rich?
First of all, "rich" is not an absolute term, but relative. Compared to people a thousand years ago, we are all fabulously rich - we possess invaluable boons such as modern medicine, electricity, cars,...
- 2,668
58
votes
Accepted
My out-of-the-money call options are near expiration and won't sell in the open market. What are my choices?
Out-of-the-money options close to expiration often have no bids. If no one is willing to pay even $0.01 for them, you will have to let them expire worthless. Your loss essentially already happened ...
- 29.4k
58
votes
When someone's ability to pay is suspect, why would it make sense to give them more expensive credit?
It's not that their ability to pay increases with higher interest rates, it's that the lender is compensated for taking on additional risk.
If I lend you money, and have some concern (not a lot, but ...
- 129k
55
votes
How can a company use money from stock investors when they are constantly being bought and sold?
I think you are missing something about how stocks work. I myself was confused about this for a long time, and so I think I know where you are coming from.
Most of the time when investors buy and ...
- 649
55
votes
Accepted
In what way does technical analysis involve astrology and reading tea leaves?
It doesn't literally involve astrology or tea leaf reading... While some people swear by it, technical analysis is often derided as pseudoscience, similar to astrology or tea leaf reading.
As it's ...
- 8,457
55
votes
Why is Year-Over-Year (YOY) important?
Many business and economic metrics are seasonal - for example, many retailers make the majority of their revenue in the fourth quarter due to holiday sales. Many business make the majority of their ...
- 129k
52
votes
Hypothetically, should I pay off the smaller + higher interest rate loan first, or the larger + higher absolute interest cost?
The total balance is irrelevant. Try thinking about the interest in terms of each dollar borrowed. Just using simple interest, each dollar borrowed at 1.69% costs you $0.0169 for the year. Each dollar ...
- 68.6k
52
votes
What are some effective ways to help someone financially?
It is not your job to assist others financially, in a way that rewards good habits.
It is not your job to train them in good financial habits.
And even if you did try, more than likely, you're not ...
- 75.7k
50
votes
How can I support myself financially as a 17 year old with a loan?
$160 a month is less than $40 a week (except in February when it can be exactly $40 a week). At the Ohio minimum wage of $8.55 an hour, you should have something like $8 an hour left after FICA taxes ...
- 21k
48
votes
Accepted
Buying shares in a company after you quit
US law dictates that you cannot buy / sell shares in a company you
work for except during open trading windows. I understand lockout
periods when you're in a company but what about after you quit?
...
- 162k
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