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Thanks for the reply. I'll start off by saying I absolutely was not referring to a 'keeping up with the jones' mindset, no decision especially financially should be made to 'appear' a certain way to others. Instead I was advocating OP does what he truly wants and shouldn't focus completely on long term. You're absolutely right, when you look at numbers, saving and investing and not spending is the path to more wealth but we all know that right? What you've given is a textbook answer, its lacking a real-life implementation and helpfulness. Personally to me, just thinking the way you've explained is short-sighted; it's just focussing on a long term plan/benefit realisation. Short term and medium term are just as important

I look at this stuff realistically. 99% aren't going to live through their twenties saving or investing all their spare cash and not 'blowing' any, even if you tell them - so to 99% of people that advice is useless IMO. If you start to understand the psychology of people/vast majority of young adults then you'll see this and be able to offer advice they have a higher chance of following. Eg psychology of humans = always live within your means. This is where my 'get your biggest mortgage' advice comes from. Vast majority of people will spend their surplus cash, their lifestyle will subconsciously adjust. So 2 people who earn the same; one buys a £200k house, the other buys a £500k house. Fast forward 10 years its almost certain that the latter has more wealth than that former. The former will be drawn into spending more money over the 10 years on disposable elements, all while the latter will be paying more every month into his mortgage forcing himself to save. On top of this the latter got the short term benefit of living in a nicer house.

For me, the car is unique, I see it as a passion, and it is for alot of people, it is a dream and not because of 'showing it off' but because we're brought up with motorsport and the love of how cool these cars are. However as I said in my first post (again looking at it realistically) what happens in the real world is if people wait to get it, they end up never getting it. I've had countless conversations with older chaps who say they wish they'd bought one when they could before they had kids etc. I can even see it with a couple of my mates. They could absolutely afford one now comfortably and its their dream but their missus and society convinces them its too risky and years have gone by always with 'I'll get it when this happens' but when 'this' happens theres always something else.

I'm not saying OP shouldn't have a long term plan. I'm saying my advice is it's possible to have a short term plan that plays into a long term plan or don't be afraid to base your long term plan around some short term benefits. Look for realistic ways to have what you want in the short term as well as ensuring it turns into something long term.
So here's the thing about good financial advice - the formula, itself, is not complicated. In fact, it's very, very simple. You can pick up the basics in an afternoon, and most of it takes no more than 9th grade math. What's difficult about it is the execution - the will and discipline to stick to it over a very long period of time. So, I'll agree with you on this - 99% of people will find the advice "useless" because they'll lack the will and discipline to put it into practice... not because they can't comprehend the formula.

As far as "text book" versus "real life implementation" - I'm giving you "real life" experience, not something I've read in a text book. I wish, however, there were some actual "text books" distributed to kids in school on this stuff - we'd have a lot less of the population struggling with finances.

"So 2 people who earn the same; one buys a £200k house, the other buys a £500k house. Fast forward 10 years its almost certain that the latter has more wealth than that former. The former will be drawn into spending more money over the 10 years on disposable elements, all while the latter will be paying more every month into his mortgage forcing himself to save."

Let's analyze that theory.

About 12 years ago here in the US we had our last recession - "the Great Recession" as it became known. A large part of the cause was a major housing bubble - people following this kind of approach you're describing... buying the most house they could afford because, "well, housing value only goes up" and "the bank offered it, so I'll take it." Needless to say, it didn't end well. When massive layoffs hit, those who were in very expensive houses that they couldn't afford, found themselves unemployed, debt up to their eyeballs, and no way to pay the mortgage. Meanwhile, because mortgage defaults were widespread, housing prices plummeted. Some areas saw values dive 30, 40, 50%. The market was swamped with houses up in fire sales. Banks were taking possession of houses left and right. Many millions of people found themselves in bankruptcy, even if they got a new job, because it happened to pay less and they couldn't afford their debts. Even many who were lucky to have jobs and were more cautious with their home purchase still found themselves in an underwater property - a mortgage that was much more than the value of the property. Here in CT, many of our wealthiest towns have homes STILL selling below their 2005 - 2007 highs... 15 years later.

A house shouldn't be thought of as a forced savings/investment plan... certainly not to the point of being "house poor" (taking the maximum loan amount). Even IF something like the 2008 crash didn't happen, housing, in general, will under-perform the broad equities markets. This is why Warren Buffet famously denounces the idea of putting his wealth into personal real estate. Investment properties (corporate, rentals, etc.) managed appropriately are a different story. Houses are also liabilities - the bigger and nicer the house, the more it costs to maintain it. The same can't be said about owning equities.

Don't get me wrong, I have nothing against buying a nice house - I own a nice house. But to give you an idea of what I think about "house wealth," I don't consider it part of my net worth. Why? It's illiquid. I need a place to live, after all. It's also, as mentioned above, a major liability. Between my yearly taxes, landscaping, repairs that pop up, things that need renovating... I spend tens of thousands a year just to live in my house (and that's not a mortgage). Meanwhile, my brokerage account doesn't have those same liabilities - it just produces more money!

But let's do the math just to prove this point. The guy who buys the $200k house versus the $500k house... it again comes down to discipline. If APPROVED for $500k and choosing to spend $200k, that person is already showing some good financial discipline. So I trust they'd have some discipline to invest the majority of the difference. If you run an amortization table, you'll see just how little you pay in principle during the first 10 years of a mortgage (the vast majority will go to paying interest, even at a low rate). Let's say Guy 1 buys a $500k house at 4%. After 10 years, he paid $181k in interest to the bank, and he has a balance of $392k and $108k paid off. If real estate increased by 2% per year (a realistic long-term rate that mirrors general inflation), his $500k property may now be worth $609k. So, after 10 years, he's spent $181k (in interest) and has gotten a return of $217k - the value of his home equity (paid principle + appreciation). Now, factor in taxes, maintenance, etc, and you'll see the picture gets worse. But let's even leave that out for the moment - $181k produced $217k over 10 years for a measly 1.83% annualized return and total return of $36,000. Pretty terrible. Not surprisingly, the bank made out better. :)

In contrast, the guy who bought the $200k house (Guy 2) saves $1,433/mo on his mortgage payment over Guy 1 (at the same 4% term). He takes that $1,433/mo and invests it in an S&P 500 index and receives an 8% return over 10 years. Wait for it... after 10 years, his investments SOLELY from his invested mortgage payment savings are worth $262k. Regarding his mortgage, he'll have paid $72k in interest, have a balance of $157k, and a house worth $243k (at equal appreciation rates to Guy 1). He'll have spent $72k and gotten a return of $86k, or a total return of $13k with an equally poor 1.8% annualized return on his house.

So, for the exact same cash outlay on a monthly basis, Guy 1 ($500k house) ended up with $217k of equity after 10 years. Guy 2 ($200k house) ended up with $86k of home equity and $262k of stock equity, for a total of $348k - outperforming Guy 1 by a very large $131k. Meanwhile, he'll also have paid less in taxes, maintenance, electricity, heating, etc... none of which is factored in here. Guy 1, to be fair, has enjoyed a nicer property. And therein lies the truth about your primary residence - it's a lifestyle choice, not an investment. As far as investments go, keep those in the market. Your house barely qualifies unless you've found another way to monetize it - it's a liability in most cases.

But to be fair to your original argument... it comes down to discipline. Sure, Guy 2 COULD have simply squandered all of his additional savings on those monthly mortgage payments. If you're going to lack discipline, you won't build wealth. Likewise, if you're going to use a house to "force yourself to save," sure you'll accomplish that... probably at a very poor long-term rate of return compared to the market, all the while putting yourself in a house poor position that leaves little flexibility if "life" should happen along the way. The bank will love you, though. To each his own, but again... the truth lies in the math. So, if you want to dumb it down and automate good behavior for the undisciplined person who needs to be "forced" into properly saving... I'd tell that person to buy the less expensive house and set up an automated brokerage contribution for the remainder of that would-be larger mortgage payment. Done.
 

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Hey EZ

can you just list some index funds

like their symbols

just refinanced some student loans at 2.5% and wanted to put the extra i now have into index funds

was thinking of swtsx
Charles schwabb fund

any other recs?
Thanks
 

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Hey EZ

can you just list some index funds

like their symbols

just refinanced some student loans at 2.5% and wanted to put the extra i now have into index funds

was thinking of swtsx
Charles schwabb fund

any other recs?
Thanks
With all due respect to the wisdom presented in this thread, this is actually an automotive enthusiast site. So getting financial advice here is going to have an interesting tilt, to say the least. You are smart in wanting to get information about index funds. For someone who isn't versed or interested in the finer points of investing, an index fund is a perfect choice. Actually for most everyone an index fund is a good choice. All the major companies offer them and there are some really good choices out there.

However, giving advice as to a good index fund is really hard to do when one hasn't got a full picture. For example, what does your entire portfolio look like? How old are you? What is your current income status? Lots of questions that obviously you don't want to discuss on a site about R8s.

That said, might I suggest looking at personal finance sites such as bogleheads or early retirement sites or even some of the sites of the major financial companies like Schwab, Vanguard etc. Tons of helpful advice that's geared toward people with exactly your question.
 

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So here's the thing about good financial advice - the formula, itself, is not complicated. In fact, it's very, very simple. You can pick up the basics in an afternoon, and most of it takes no more than 9th grade math. What's difficult about it is the execution - the will and discipline to stick to it over a very long period of time. So, I'll agree with you on this - 99% of people will find the advice "useless" because they'll lack the will and discipline to put it into practice... not because they can't comprehend the formula.

As far as "text book" versus "real life implementation" - I'm giving you "real life" experience, not something I've read in a text book. I wish, however, there were some actual "text books" distributed to kids in school on this stuff - we'd have a lot less of the population struggling with finances.

"So 2 people who earn the same; one buys a £200k house, the other buys a £500k house. Fast forward 10 years its almost certain that the latter has more wealth than that former. The former will be drawn into spending more money over the 10 years on disposable elements, all while the latter will be paying more every month into his mortgage forcing himself to save."

Let's analyze that theory.

About 12 years ago here in the US we had our last recession - "the Great Recession" as it became known. A large part of the cause was a major housing bubble - people following this kind of approach you're describing... buying the most house they could afford because, "well, housing value only goes up" and "the bank offered it, so I'll take it." Needless to say, it didn't end well. When massive layoffs hit, those who were in very expensive houses that they couldn't afford, found themselves unemployed, debt up to their eyeballs, and no way to pay the mortgage. Meanwhile, because mortgage defaults were widespread, housing prices plummeted. Some areas saw values dive 30, 40, 50%. The market was swamped with houses up in fire sales. Banks were taking possession of houses left and right. Many millions of people found themselves in bankruptcy, even if they got a new job, because it happened to pay less and they couldn't afford their debts. Even many who were lucky to have jobs and were more cautious with their home purchase still found themselves in an underwater property - a mortgage that was much more than the value of the property. Here in CT, many of our wealthiest towns have homes STILL selling below their 2005 - 2007 highs... 15 years later.

A house shouldn't be thought of as a forced savings/investment plan... certainly not to the point of being "house poor" (taking the maximum loan amount). Even IF something like the 2008 crash didn't happen, housing, in general, will under-perform the broad equities markets. This is why Warren Buffet famously denounces the idea of putting his wealth into personal real estate. Investment properties (corporate, rentals, etc.) managed appropriately are a different story. Houses are also liabilities - the bigger and nicer the house, the more it costs to maintain it. The same can't be said about owning equities.

Don't get me wrong, I have nothing against buying a nice house - I own a nice house. But to give you an idea of what I think about "house wealth," I don't consider it part of my net worth. Why? It's illiquid. I need a place to live, after all. It's also, as mentioned above, a major liability. Between my yearly taxes, landscaping, repairs that pop up, things that need renovating... I spend tens of thousands a year just to live in my house (and that's not a mortgage). Meanwhile, my brokerage account doesn't have those same liabilities - it just produces more money!

But let's do the math just to prove this point. The guy who buys the $200k house versus the $500k house... it again comes down to discipline. If APPROVED for $500k and choosing to spend $200k, that person is already showing some good financial discipline. So I trust they'd have some discipline to invest the majority of the difference. If you run an amortization table, you'll see just how little you pay in principle during the first 10 years of a mortgage (the vast majority will go to paying interest, even at a low rate). Let's say Guy 1 buys a $500k house at 4%. After 10 years, he paid $181k in interest to the bank, and he has a balance of $392k and $108k paid off. If real estate increased by 2% per year (a realistic long-term rate that mirrors general inflation), his $500k property may now be worth $609k. So, after 10 years, he's spent $181k (in interest) and has gotten a return of $217k - the value of his home equity (paid principle + appreciation). Now, factor in taxes, maintenance, etc, and you'll see the picture gets worse. But let's even leave that out for the moment - $181k produced $217k over 10 years for a measly 1.83% annualized return and total return of $36,000. Pretty terrible. Not surprisingly, the bank made out better. :)

In contrast, the guy who bought the $200k house (Guy 2) saves $1,433/mo on his mortgage payment over Guy 1 (at the same 4% term). He takes that $1,433/mo and invests it in an S&P 500 index and receives an 8% return over 10 years. Wait for it... after 10 years, his investments SOLELY from his invested mortgage payment savings are worth $262k. Regarding his mortgage, he'll have paid $72k in interest, have a balance of $157k, and a house worth $243k (at equal appreciation rates to Guy 1). He'll have spent $72k and gotten a return of $86k, or a total return of $13k with an equally poor 1.8% annualized return on his house.

So, for the exact same cash outlay on a monthly basis, Guy 1 ($500k house) ended up with $217k of equity after 10 years. Guy 2 ($200k house) ended up with $86k of home equity and $262k of stock equity, for a total of $348k - outperforming Guy 1 by a very large $131k. Meanwhile, he'll also have paid less in taxes, maintenance, electricity, heating, etc... none of which is factored in here. Guy 1, to be fair, has enjoyed a nicer property. And therein lies the truth about your primary residence - it's a lifestyle choice, not an investment. As far as investments go, keep those in the market. Your house barely qualifies unless you've found another way to monetize it - it's a liability in most cases.

But to be fair to your original argument... it comes down to discipline. Sure, Guy 2 COULD have simply squandered all of his additional savings on those monthly mortgage payments. If you're going to lack discipline, you won't build wealth. Likewise, if you're going to use a house to "force yourself to save," sure you'll accomplish that... probably at a very poor long-term rate of return compared to the market, all the while putting yourself in a house poor position that leaves little flexibility if "life" should happen along the way. The bank will love you, though. To each his own, but again... the truth lies in the math. So, if you want to dumb it down and automate good behavior for the undisciplined person who needs to be "forced" into properly saving... I'd tell that person to buy the less expensive house and set up an automated brokerage contribution for the remainder of that would-be larger mortgage payment. Done.
Thanks again for the great reply. You're right it fundamentally comes down to discipline and I'm glad you got the point I wasn't saying you were wrong in any way, just that 99% of people lack discipline haha So in your well worked example of the $217k vs $348k the only thing I'd add is I think for the latter person (the $200k house guy) I would probably expect natural psychology to take effect so he wouldn't put the entire $1433/mo spare into Funds, probably like half that. Which would still be a smart move. I'm only talking from my experience as myself and noone I know is disciplined enough to assign every spare amount to long term goals haha I'll always look to have the best of both worlds!

I agree with the part about text books too. Alot of people don't invest because it appears so non-accessible to them. Whereas is actually so easy these days to invest in most indexes. They really should teach some of this stuff in schools properly.

I think I naturally have a different risk profile to yourself too because I'm based in the UK, the impact of the recession didn't reach the levels you mention. For a lot of British owning your own home is a big target, renting really has a stigma here as just being a pure expense whereas Mortgages are seen as an effective savings vehicle while having a proud feeling of owning your own home. I think different locations come into it to as other areas of Europe look at wealth differently and all prefer to rent and focus on other savings/investment vehicles. I can't speak for what the overwhelming culture is like in the US but I suspect as you've described it's definitely more cautious around mortgages following the recession horror stories.

I think for the OP none of us can get advice spot on, there could for example be a stock market crash just around when he might need to cash-in his investments, or like you said, if he focusses on a big house the housing market could crash too. Especially with uncertain times at the moment. I think the safest approach always is a balanced 'portfolio'. In our above example, maybe a $350k house + some smart investments + plus the nice car / spending to keep yourself mentally satisfied and motivated.
 

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Can we close this thread down now?
 

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I saw an opportunity so i asked lol. But you are right and I understand its a car enthusiast site but a lot of smart guys on here.
The issue with websites is that I don’t trust them as much as if someone suggested something and then I could due my own research. Im still going to take a look at the websites you suggested.

With all due respect to the wisdom presented in this thread, this is actually an automotive enthusiast site. So getting financial advice here is going to have an interesting tilt, to say the least. You are smart in wanting to get information about index funds. For someone who isn't versed or interested in the finer points of investing, an index fund is a perfect choice. Actually for most everyone an index fund is a good choice. All the major companies offer them and there are some really good choices out there.

However, giving advice as to a good index fund is really hard to do when one hasn't got a full picture. For example, what does your entire portfolio look like? How old are you? What is your current income status? Lots of questions that obviously you don't want to discuss on a site about R8s.

That said, might I suggest looking at personal finance sites such as bogleheads or early retirement sites or even some of the sites of the major financial companies like Schwab, Vanguard etc. Tons of helpful advice that's geared toward people with exactly your question.
 

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Hey EZ

can you just list some index funds

like their symbols

just refinanced some student loans at 2.5% and wanted to put the extra i now have into index funds

was thinking of swtsx
Charles schwabb fund

any other recs?
Thanks
I'll PM you.
 

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Hello! :)

I just signed up and wanted to ask many R8 owners their opinion if they will let me pull the trigger for my absolute dream car.

Income: $145k
Credit Score: 740
Goal: 2017 Audi R8 V10 Plus

I am 22 years old. Currently living in Orlando Florida. I did not go to college. I am single, with no kids. I still live with my family.
I choose to live with my family rather than by my own because I would be very lonely everyday, which is why I still live at home. Other than my parents, I have 2 brothers around my age and we work together and go to the gym together and chill together everyday. I will get my own place once I have a significant other. But for now, I am laser focused on my goals and happily living with my family.

All I do every single day is go to the gym first thing in the morning and go home and work on my e-commerce business, sleep, repeat.

I am at the point where my business brings me in $12k profit every single month. For the past few years I have been steadily putting all my profits back to my business and finally it is able to pay off and create a passive income for me.

The R8 is my freaking dream car and it is driving me crazy not having it yet after dreaming about it for so many years.

I currently own a 2018 Toyota Corolla LE with 45k miles and is paid off and I am planning on keeping it forever until it dies AKA never lol. I’ve always wanted to buy a cheap, but reliable beater. Which is why I chose a Toyota Corolla. And then go straight to my dream car. No middle price car like an M4, RCF, etc. those feels like it will just slow me down to my absolute dream car.

I have $52k saved up in my bank and I am debt free! I pay my mom $500 every month to help her on the mortgage and bills and my car insurance. Other than that, I have no other “big” bills. Food, gas, and gym are my other small bills.

Now my question is, can I just finance an R8?? My ideal R8 is around $130k and I’m guessing my monthly payments will be around $2k?
But that will still leave me at around $9k saved up every month after bills to save/invest!

Is this enough to “afford” my dream car?
I know a lot will say save up and buy in cash but I just can’t see myself throwing away that much to a car at once. I would rather use that money towards my business and future investments.

Also, I have 1.5% cash back rewards on my chase credit card. And I put every single business and personal transactions to that card and pay it off every single night before I go to sleep. And every month I get about $800 in cash back! That seems like free $800 to me just by running my own business!

That is one of my goals, I would love to keep growing my business and would love for my cash back to pay for my R8 so it feels like I’m not really paying for my R8 if that makes sense.

Also, I am currently earning $12k a month with my business and will be guaranteed to make more as time passes by.
I will be starting another business soon which will easily add more income. But then again I can not say it is a fact since it is still an idea. But i have full confidence and belief that it will.

Driving is a huge part of my day, if not, my absolute favorite part of the day! And driving a slow boring Corolla everyday can make me go crazy at times and just wish I can be driving my R8.

Well anyways, I would really appreciate any feedbacks. I don’t have anyone to talk to about this topic other than my family. They are all saying yes, life is too short. But I need more perspective and opinions especially from Supercar owners with experience. I was never taught anything regarding finances growing up, so please don’t mind if I sound very dumb with my finances. I will learn along the way :)
Hello! :)

I just signed up and wanted to ask many R8 owners their opinion if they will let me pull the trigger for my absolute dream car.

Income: $145k
Credit Score: 740
Goal: 2017 Audi R8 V10 Plus

I am 22 years old. Currently living in Orlando Florida. I did not go to college. I am single, with no kids. I still live with my family.
I choose to live with my family rather than by my own because I would be very lonely everyday, which is why I still live at home. Other than my parents, I have 2 brothers around my age and we work together and go to the gym together and chill together everyday. I will get my own place once I have a significant other. But for now, I am laser focused on my goals and happily living with my family.

All I do every single day is go to the gym first thing in the morning and go home and work on my e-commerce business, sleep, repeat.

I am at the point where my business brings me in $12k profit every single month. For the past few years I have been steadily putting all my profits back to my business and finally it is able to pay off and create a passive income for me.

The R8 is my freaking dream car and it is driving me crazy not having it yet after dreaming about it for so many years.

I currently own a 2018 Toyota Corolla LE with 45k miles and is paid off and I am planning on keeping it forever until it dies AKA never lol. I’ve always wanted to buy a cheap, but reliable beater. Which is why I chose a Toyota Corolla. And then go straight to my dream car. No middle price car like an M4, RCF, etc. those feels like it will just slow me down to my absolute dream car.

I have $52k saved up in my bank and I am debt free! I pay my mom $500 every month to help her on the mortgage and bills and my car insurance. Other than that, I have no other “big” bills. Food, gas, and gym are my other small bills.

Now my question is, can I just finance an R8?? My ideal R8 is around $130k and I’m guessing my monthly payments will be around $2k?
But that will still leave me at around $9k saved up every month after bills to save/invest!

Is this enough to “afford” my dream car?
I know a lot will say save up and buy in cash but I just can’t see myself throwing away that much to a car at once. I would rather use that money towards my business and future investments.

Also, I have 1.5% cash back rewards on my chase credit card. And I put every single business and personal transactions to that card and pay it off every single night before I go to sleep. And every month I get about $800 in cash back! That seems like free $800 to me just by running my own business!

That is one of my goals, I would love to keep growing my business and would love for my cash back to pay for my R8 so it feels like I’m not really paying for my R8 if that makes sense.

Also, I am currently earning $12k a month with my business and will be guaranteed to make more as time passes by.
I will be starting another business soon which will easily add more income. But then again I can not say it is a fact since it is still an idea. But i have full confidence and belief that it will.

Driving is a huge part of my day, if not, my absolute favorite part of the day! And driving a slow boring Corolla everyday can make me go crazy at times and just wish I can be driving my R8.

Well anyways, I would really appreciate any feedbacks. I don’t have anyone to talk to about this topic other than my family. They are all saying yes, life is too short. But I need more perspective and opinions especially from Supercar owners with experience. I was never taught anything regarding finances growing up, so please don’t mind if I sound very dumb with my finances. I will learn along the way :)
People love answering questions like this so I can’t help but throw my own opinion in here. What I’m gonna tell may not be the right answer but for me it is. Personally I don’t think you can afford the car. I look at a car purchase as something I’m gonna buy thatS going to go down in value versus when I buy a stock I expect that to go up in value. Therefore I am of the belief that if you cannot pay cash for the car you should pass on it. And even if you can pay cash for a car and the value went to zero it would have little to no impact on your lifestyle and more importantly on your future
 

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This will be an unpopular opinion, but you are only young once in your life. For me, I’d much rather be in my 20s/30s with an R8 than in my 50s/60s. You can never turn the clock back. That’s not to say that you can or should be reckless with your money, but if you love cars and it is something that gives you great joy in your life, then I would go for it as long as it’s reasonably within your means.
 
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