Also, it’s interesting to see all the debates about risk in terms of personal investments. It seems that most people here are risk averse. I was always told by my FA to take financial risks while I was young and able and to be aggressive with my funds. You have to be willing to be a bit of a maverick if you want to see bigger returns and not just be satisfied with being able to retire before you die.
There are two types of financial risk, and I think financial people tend to use the same term for both, so that creates confusion for non-financial people.
1) Fluctuation Risk: The stock market goes up and down all the time. However, over a long period of time (10+ years), the "line of best fit" has historically always gone up. So as long as you don't withdraw in the short term, there is almost no risk of your investments being worth less when you sell vs when you bought.
When investment advisors suggest you should be risky with your assets when you are young, this is what they are talking about. Since you are so far away from retirement, the day to day fluctuations of the market don't matter to you because you should not "theoretically" be withdrawing any of this money. By the time you are ready to retire and withdraw, the fluctuations have trended up so you will see a much larger gain than had you been in a safer asset class with less fluctuation.
2) Default Risk: Leveraging yourself so much that you put yourself at the risk of having to sell all of your assets at a loss and file bankruptcy. There is no time in your life where you should really be doing that.
Same example as I said earlier:
If you bought a DVC contract and financed at 15%, and then in two years the economy crashes and you lose your job, your finances will fall apart.
1) With the economy crashing, your DVC resale value has probably tanked
2) Because of the 15% interest rate, you've probably barely paid down the loan at this point.
3) You now don't have a job to be able to pay your monthly loan payments and your maintenance fees bills
This means you are now forced to sell your DVC, however you will owe more on the loan than you will be able to recover because the resale price dropped. You will now have to sell any investments you may have at the low end of a fluctuation cycle (see Fluctuation Risk above), to pay the loan company for the difference between your loan and the cash received from selling your DVC. If you don't have the investments to sell, you could be forced to sell your house, car, or claim bankruptcy.
So you have now lost by paying high interest expenses for two years, and then sold your retirement investments for much lower than the amount you invested. At the end of the day, you have nothing to show for it.