A debt perspective

[Frank Lee]

Originally Posted by sid

Next month I celebrate my 30 year anniversary of being debt free. I decided back in college that I would own my own home and be debt free by age 30, and I accomplished it with a couple months to spare. I still feel that was the best financial decision I have ever made in my life.

The weird thing is, back then, I was ridiculed by almost everyone for doing this. Everyone was telling me how I should have kept the debt and invested the money instead. Many of those same people have lost their jobs, a lot of their savings, and some their homes over this past 30 years. Many of my neighbors and friends are now aggressively trying to get rid of their debt after seeing how well I have made out.

Yeah, in the '90s everyone was saying if you weren't all-in in the stock market you were an idiot. If you didn't pull all the equity out of your house to dump into the market you were an idiot. Well I knew my investing track record- dismal, fail, suck- and by that time I also learned why they are called stockbrokers: because they leave you broker- so I went after debt reduction/equity building instead. Aside from potential opportunity cost, it's a sure thing. Didn't make it by 30 (partly because I treated myself to my first new vehicle as a bucket list thing to have by 30; partly from not finding my career start right out of school. P.S. also my first "career" position paid poorly) but not too far off. Being dragged into the child suppoort system didn't help one bit either. If only I was as good a dumpster diver then as now... the government helped me become a master scavenger by teaching me that they can take all my income and liberty should they choose to. Yay.

[freebeard]

I've never understood credit card rewards.

The credit card companies are taking 2-3% off the top for themselves, and have to eat the fraud rampant in a non-blockchained system. Where do the rewards come from? Business-to-business back scratching?

[Frank Lee]

Heh- there's an oldster that loves to brag about his credit rating to me. First of all, I couldn't care less but I more or less politely listen. One of these days I'm going to tell him credit ratings mean squat if you aren't looking to borrow and go into debt.

Well... they do mean something other than that. For some reason the car insurance companies think a low credit rating is an excuse to gouge you, even if your driving record is perfect and you pay with automatic withdrawals and there's never been a payment issue, ever.

[freebeard]

Not only have I never known my own credit rating, I don't even know what the median is.

Originally Posted by Old Mechanic

The wife and I were next door neighbors when we were kids, but she is 4 years older.

Awwww. That's sweet.

I lived on an unheated shop at one point and sublet the office in front to the laser printing business I was in, in 1985. It got down to 28° that winter.

[Frank Lee]

Many consider my house to be unheated, but I do keep it at least 45 deg in there, mainly because that's as low as my 'stat goes, and plumbing.

[ME_Andy]

Originally Posted by freebeard

The credit card companies are taking 2-3% off the top for themselves. Where do the rewards come from?

Volume.

[redpoint5]

Originally Posted by freebeard

The credit card companies are taking 2-3% off the top for themselves, and have to eat the fraud rampant in a non-blockchained system. Where do the rewards come from?

The rewards come from the majority of people who carry a balance on their card and pay the 16%+ financing charge. For every person like me who only profit from rewards cards, there are a dozen people paying interest, fees, late charges, etc.

Our entitlement culture is such that most people spend their entire paycheck each pay period, and when something unexpected comes up, they are forced to use credit to cover the "unexpected" cost. Of course, we should all expect that unforeseen expenses will arise, or that income could fall due to unemployment, and plan for the rainy day.

My wife had about $2k in credit card debt when we married because she had moved from a higher paying job with lower living expenses (Montana), to a lower paying job with higher living expenses (Portland, OR). When her car needed a new radiator and tires, she had put it on credit since she had no cash on hand, and had student loan obligations.

I pay my wife's $10k tuition bill with a CC every 4 months. Getting 2% of the outrageous tuition back makes it hurt a little less.

Originally Posted by Frank Lee

For some reason the car insurance companies think a low credit rating is an excuse to gouge you, even if your driving record is perfect and you pay with automatic withdrawals and there's never been a payment issue, ever.

It makes sense to me. If there is a strong correlation between credit worthiness and responsible driving and making insurance payments on time, then a company would be foolish not to discriminate based on this.

If there is a way to distinguish individuals with little credit history or poor credit who are still responsible drivers, and who pay their bills on time, then there would be strong incentive for an insurance company to specialize in assessing this risk and to sell low premium coverage for these people.

[MetroMPG]

Originally Posted by Fat Charlie

Our first day there I took a jigsaw to the basement door and put in a cat door.

Now I've got ... an invisible fence

For the CAT?

---

One of the problems with debt that I witness over & over is how people seem to get demoralized by it once they're into it a certain amount, after which they seem to have little resistance to adding more and more.

"What's another $1k on the line of credit... a drop in the bucket. It hardly makes a difference."

Corollary: getting out of debt (from the average level) seems insurmountable without going to extremes. (Or what the average person would consider extreme, eg. "WHAT! CANCEL MY SATELLITE/CABLE TV?!?")

[oil pan 4]

Originally Posted by freebeard

I've never understood credit card rewards.

The credit card companies are taking 2-3% off the top for themselves, and have to eat the fraud rampant in a non-blockchained system. Where do the rewards come from? Business-to-business back scratching?

All the suckers paying 20%+ rent on an the average American credit card debt of something to the tune of $16,000.

That reminds me I need to pay mine off since I am going out of town. I usually pay mine off at least twice a month.

[redpoint5]

Originally Posted by MetroMPG

One of the problems with debt that I witness over & over is how people seem to get demoralized by it once they're into it a certain amount, after which they seem to have little resistance to adding more and more.

"What's another $1k on the line of credit... a drop in the bucket. It hardly makes a difference."

Corollary: getting out of debt (from the average level) seems insurmountable without going to extremes. (Or what the average person would consider extreme, eg. "WHAT! CANCEL MY SATELLITE/CABLE TV?!?")

Very good point. Little do they realize that getting out of debt is just about as easy as getting into it. Generally debt is accumulated a little at a time, and the way to get out of debt is to pay it off a little at a time.

When people owe money, I understand that they might not be able to pay it back immediately, but there is no excuse for failing to pay SOMETHING back on a regular basis.