A debt perspective

[redpoint5]

Originally Posted by Fat Charlie

The only downside is that money in your .2% bank account is available for emergencies, and once you cut a check to pay off debt it's gone. A cushion of available cash is more important than being a smidgen less in debt because it makes it less likely that you'll slip farther into debt.

...and the only downside to this is that you are paying more in the long run, as Xist points out in his example.

If you are paying down credit card debt by emptying your savings, the credit is still available in emergencies. By not using savings to pay down the credit card debt, you are perpetually paying for the "emergency" by loosing the money spent on the credit interest.

[Xist]

Life is complicated, isn't it? It used to be that when I tried to rent a car, they would not allow me to use my debit card, but some places require debit or cash, so I try to keep money in my checking account. I actually have some in savings, earning slightly more than a penny a year.

[Fat Charlie]

Yeah, if paying down debt can free up credit to cover emergencies, then it's a good move. Available money is more important than money on hand, as long as you can keep moving in the right direction.

[freebeard]

I signed up for a checking account that was supposed to pay me interest through a credit union in 2007.

..a very sad story...

I always wonder how much that cost me.

That sounds like a bank masquerading as a credit union.

[MetroMPG]

Originally Posted by Fat Charlie

Available money is more important than money on hand

It makes sense, but for some people, there's psychological resistance to doing it.

A friend of mine freely admitted she would rather "feel" secure by having cash on hand earning ~1% even though she also had many thousands owing (not counting mortgage debt) on a line of credit at ~5%.

She understood the argument for paying down the debt with cash on hand, but wouldn't do it.

[Xist]

A friend made a big deal out of moving into a gated community, although as far as I know, the gates are kept open. I told her an apartment manager told me gated communities create a false sense of security. My friend effectively told me "It works!"

(she actually said something like "I still feel safer!")

[redpoint5]

Originally Posted by MetroMPG

A friend of mine freely admitted she would rather "feel" secure by having cash on hand earning ~1% even though she also had many thousands owing (not counting mortgage debt) on a line of credit at ~5%.

She understood the argument for paying down the debt with cash on hand, but wouldn't do it.

I wish I had something to sell your friend to make her feel safer.

Some people work for their money, and others make their money work for them.

Originally Posted by Xist

A friend made a big deal out of moving into a gated community, although as far as I know, the gates are kept open. I told her an apartment manager told me gated communities create a false sense of security. My friend effectively told me "It works!"

(she actually said something like "I still feel safer!")

I always wondered how commercials could be profitable, because they are almost entirely lost on me. In fact, I tend to avoid the companies that heavily advertise because I don't want to subsidize the advertising.

The fact is, most of us (people in general) make decisions based on emotion rather than reason.

It seems as if humanity is getting worse in their decision making. Commercials used to run longer, and describe some of the technical aspects of the product being sold. Now we get a commercial showing the new Prius in a police chase, with no information given at all.

We also have a financial advertisement showing dimwitted robots as an analogy of how unwise it is to rely on computer logic to manage investments compared to humans. The truth is, it's the "robot" logic that makes the few big firms that employ them billions of dollars, meanwhile the general public pays for actively managed portfolios that perform no better than the market average.

Somehow our culture has placed perception above reality. I think the majority of people would choose the blue pill from The Matrix rather than the red pill. It's easier to feel good than to be good.

[MetroMPG]

I wish I had something to sell your friend to make her feel safer

You don't happen to have spare manufacturing capacity to make SUV's / CUV's do you?

[redpoint5]

Originally Posted by MetroMPG

You don't happen to have spare manufacturing capacity to make SUV's / CUV's do you?

I was thinking more along the lines of selling a security service that confiscates fingernail clippers and shampoo.

[gone-ot]

Yeah, there's nothing worse than being attacked by a road-raged individual wielding a snapping finernail clipper and a foaming Molotov-shampoo bomb.