I Borrowed $20,000 On Credit Cards To Invest, Now I'm Broke!
TLDRIn the video, financial advisor George addresses a dilemma from Rick, a 27-year-old from Delaware, who used credit cards to invest in ETFs during a stock market crash, hoping to make a quick profit. However, the investment value has dropped, and Rick is now facing a potential loss of $9,000 when the 0% APR on his credit cards ends. George emphasizes the dangers of trying to get rich quick and advises Rick to pay off his credit card debt as soon as possible, even if it means taking a loss, to avoid further financial pain. He also suggests that Rick should work hard to cover the debt, referring to it as a 'stupid tax' for his poor decision. The advisor shares his own experiences with financial mistakes, encouraging Rick to learn from this experience and avoid repeating it in the future.
Takeaways
- 📉 Rick, a 27-year-old from Delaware, followed financial advice by paying with cash or debit but made a significant error by using credit cards to invest in the stock market during a crash.
- 💳 Rick borrowed $20,000 at 0% interest on his credit cards to invest in S&P index ETFs, hoping to profit when the market rebounded.
- 📉 The ETF values dropped further, leading to a loss of $9,000 from his initial $30,000 investment, with the zero percent APR ending in October of the following year.
- 🤔 Rick is now faced with the decision to either pay off his credit card debt now and accept the loss or wait and risk further losses if the market doesn't recover by October.
- 💰 The speaker advises against using credit cards to invest, as it's a high-risk strategy that can lead to significant financial pain.
- 🚫 The concept of a 'stupid tax' is introduced, referring to the financial cost of making poor decisions, which in Rick's case could be as much as $9,000.
- 🍕 Suggests that Rick should work hard, possibly through a job like delivering pizzas for Uber Eats, to pay off his debt as quickly as possible.
- 📚 Emphasizes the importance of learning from financial mistakes and not repeating them, using personal anecdotes of bankruptcy to illustrate the point.
- 🚫 Warns against the arrogance of thinking one can outsmart the system, which often leads to financial pitfalls.
- 🤝 The speaker expresses empathy for Rick's situation, acknowledging that everyone makes mistakes, especially when young.
- 💪 Encourages Rick to take responsibility for his actions, work hard to rectify the situation, and view the experience as a valuable lesson.
- ⏳ Stresses the urgency of paying off the credit card debt as soon as possible to prevent further financial damage.
Q & A
Why did Rick decide to use his credit cards to invest in ETFs when the stock market crashed?
-Rick thought he could take advantage of the stock market crash by buying ETFs at a lower price, hoping to make a quick profit of three to five thousand dollars when the market rebounded.
What was the initial amount of money Rick had in the stock market?
-Rick initially had thirty thousand dollars in the stock market.
How much did Rick lose after the ETF values dropped further?
-After the ETF values dropped, Rick's investment reduced from thirty thousand dollars to twenty one thousand dollars, resulting in a loss of nine thousand dollars.
What is the zero percent APR on Rick's credit cards set to end?
-The zero percent APR on Rick's credit cards is set to end in October of the following year.
What is Rick's annual income?
-Rick makes thirty-five thousand dollars a year.
What does the speaker suggest Rick should do to pay off his credit card debt?
-The speaker suggests that Rick should pay off his credit card debt as quickly as possible, possibly by working extra hours, such as delivering pizzas, to avoid further financial pain.
What is the term used by the speaker to describe the cost of making a financial mistake?
-The speaker refers to the cost of making a financial mistake as the 'stupid tax'.
Why does the speaker advise against borrowing money on credit cards to invest in ETFs?
-The speaker advises against it because it's a high-risk strategy that can lead to significant financial loss if the market does not perform as expected, as demonstrated by Rick's situation.
What is the speaker's opinion on trying to beat the market with borrowed money?
-The speaker strongly dislikes the idea, stating that it often involves a level of arrogance and a get-rich-quick mentality that can lead to financial disaster.
What is the main lesson the speaker wants Rick to learn from his experience?
-The main lesson is to avoid get-rich-quick schemes and not to repeat the same financial mistakes. The speaker emphasizes the importance of learning from one's errors and making wiser decisions in the future.
What does the speaker suggest could be a possible outcome if Rick waits until October to pay off his credit card debt?
-The speaker suggests that if Rick waits, he might face even more financial pain if the market does not recover by October, potentially increasing his debt beyond the current nine thousand dollars.
How does the speaker relate to Rick's situation?
-The speaker relates to Rick's situation by admitting to having made similar mistakes in the past, including going bankrupt at the age of 28, which helps to establish empathy and credibility.
Outlines
📉 Rick's Risky Investment Strategy
Rick, a 27-year-old from Delaware, has followed financial advice by using cash or debit for payments but has made a significant financial misstep. Despite having over a hundred thousand dollars in open credit, he borrowed twenty thousand dollars on his credit cards at zero percent interest to invest in S&P index ETFs when the stock market crashed, hoping to profit from a market rebound. However, the ETF values have dropped, and he now faces a potential loss of nine thousand dollars. With the zero percent APR ending in October next year, Rick is unsure whether to pay off his credit card debt immediately or wait and risk further losses. The speaker, George, emphasizes the dangers of trying to get rich quickly and advises Rick to accept the loss, work hard to pay off his debt, and learn from his mistake, referring to it as a 'stupid tax.'
💼 Learning from Financial Mistakes
The second paragraph continues with George offering further advice to Rick, acknowledging that everyone, including himself, has made financial mistakes. He admits to having gone bankrupt at 28 with millions in real estate debt. George stresses the importance of learning from these experiences and not repeating them. He suggests that Rick should aim to save up the $9,000 by October to pay off his credit card debt as soon as possible. The speaker also touches on the arrogance often associated with get-rich-quick schemes and the need to clean up one's financial mess while internalizing the lesson learned. He uses the term 'anti-mentor' to describe Rick's situation, highlighting the value in learning from others' mistakes. George concludes by encouraging Rick to view the $9,000 loss as a tuition fee for a life lesson and to use the experience to avoid repeating such financial errors in the future.
Mindmap
Keywords
💡Financial Advice
💡Open Credit
💡ETFs (Exchange-Traded Funds)
💡Zero Percent APR
💡Stock Market Crash
💡Stupid Tax
💡Delivering Pizzas
💡
💡Get Rich Quick
💡Borrowing Money
💡Credit Card Debt
💡Risk Management
💡Life Lessons
Highlights
Rick, a 27-year-old from Delaware, used credit cards to borrow $20,000 at 0% interest to invest in S&P index ETFs when the stock market crashed earlier this year
Rick hoped to make a quick $3,000-$5,000 profit when the market rebounded, but the ETF values have dropped further, resulting in a $9,000 loss
The 0% APR on the credit cards will end in October next year, so Rick is considering whether to pay off the cards now and take the loss or wait and hope the market recovers
The speaker advises Rick against trying to get rich quick and warns that there are no shortcuts to success
The speaker calls the $9,000 loss a 'stupid tax' that Rick has to pay for his poor decision, but emphasizes the importance of learning from mistakes
The speaker suggests Rick should pay off the credit card debt as soon as possible to limit his losses, rather than risking further declines in the ETF values
The speaker shares his own experience of going bankrupt at age 28 with millions in real estate debt, and how he learned from that failure
The speaker recommends Rick save up the $9,000 by October to pay off the credit card debt, and in the meantime work hard to earn the money needed
The speaker warns against the arrogance and get-rich-quick mentality that can lead to risky investments and financial losses
Rick's situation serves as a cautionary tale for others to avoid making similar mistakes and to be more responsible with credit and investments
The speaker emphasizes the importance of learning from failures and not repeating the same mistakes in the future
Rick is encouraged to view the $9,000 loss as a valuable lesson and 'tuition' he had to pay to learn about personal finance and investing
The speaker acknowledges that everyone makes mistakes, especially when young, but the key is to learn from them and not let them define you
The speaker shares his own experience of losing $5,000 on a gold investment when he was around Rick's age, as another example of a costly lesson learned
The speaker advises Rick to cut up his credit cards once the debt is paid off, as a symbolic gesture of his commitment to better financial decisions
The overall message is one of taking responsibility for one's actions, learning from mistakes, and making smarter choices in the future
Transcripts
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