Dan Snyder buys Johnny Rockets (could get interesting)

Walt, I paid my student loans off about6-7 years after graduating college. Woulda been sooner if I had gotten a GOOD job out of college instead of wasting about 7 years...

I'm on your team, debt-free is the life for me... ;)

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rollergator said:
P.S. Rob - I'm finding myself agreeing with Gonch more and more too. Are we getting smarter...or is he?

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Hey!

Ummm...

....

It's most certainly you guys. ;)

Hehehe... :)

I always knew what made sense, business-wise. I guess I needed someone to show me the hows and whys of "the stupids" getting punished might make them learn better...my "soft" heart was dulling the edge of my sharp wit. ;)

Two against one, Gonch. You're getting smarter. We're already there ;)

Americans do have this fascination with living beyond their means, and it's true that gets a lot of people into trouble. But I stand by my assertion that all debt isn't necessarily bad... it's not like everyone that has a car loan, mortgage, college loan payments or credit card balance is going to go into severe debt, and I don't think bankrupcy is a small step away for most people. As we've been saying, it's all about common sense- balancing what you want with what you can afford. You can't let the pendulum swing to far in either direction.

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Lord Gonchar said:

For me the balance between having what I want (money is for spending....plain and simple...it's useless as almost anything else except a means to acquire stuff) and keeping everything in line (which means having enough money to acquire other stuff should the need arise) is what it's about.

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And in my opinion, it's even better to spend someone else's money than my own. I've never had a problem with debt in and of itself. There are just certain debts that are worse than others. I didnt for a second hesitate in taking out a couple of mortgages for, what my sister calls, my plantation (it's really not that big). Similarly, I was just fine with taking out a loan for my car and I was estatic to get loans for school.

That being said, I generally pay off credit cards monthly and I *hate* to borrow money from friends/family. Is it a "risk" to have debt? I'm sure it is, but so is crossing the street. I feel I have a very stable source of income and I make *more* than enough to cover what I have. Could ish happen and leave me without a pot to p!$$ in? I guess so, but something could drain my savings just as fast...and I still wouldnt have a place to live. At least this way, I have something tangible to barter with (my house) as opposed to if I was trying to save up to get something (home prices ~$500,000 and rising around here).

But I will agree that most consumer products should be bought with cash. Well actually, I use a rewards credit card (got enough rewards for my PS3...if only there were games I wanted to play..), but I have the money before charging. Heck, even my signature (below) was paid off w/o interest. But I'm not morally opposed to debt. Nor do I think anyone needs to be.
lata, jeremy

The people who SHOULD be afraid of debt....are the very same people who are unaware of the hazards... ;)

Some people, and if you believe the news a lot of people, don't know how to handle their debt, and they live outside of their means. I don't think anyone here is talking about that.

Most of the people I know who are strict about not taking on debt are people who are frugal, even cheap. That's OK for them I suppose, but I don't know that I'd describe them as being happier.

Credit made this site possible, allowed me to start a business, and pursue my dreams. If I waited and did it savings style, I might not have ever hit my goals. You can't take the time back.

Time is the double-edged sword. You can't grow your investments without it, and you have less time with "stuff" that you saved for. Obviously a balance between the two is what can contribute most to your happiness.

2Hostyl beat me to it...sorta ;)

Debt can be a very GOOD thing and can net more than saving it up style, actually..

I have a ShareBuilder account, and with it I got the Sharebuilder Visa. On EVERY purchase I get 1% back towards future stock, and when it hits $25 it gets deposited into my account. From there, I can withdraw it as free money, or, instead invest in solid Dividend stocks (like CF ;)) So now I never pay cash unless visa isn't an option. I keep the cash I otherwise would have spent in an interest-bearing savings account (free interest I wouldn't make if paying in cash) and pay in full every month. Free Money (oh, and that builds a stronger credit score, too)

Next let's take my $16k student loan. I'm paying 2.875% fixed interest on it. My ING savings account pays 4.8% right now. It actually costs me money to pay more than the minimum balance. Instead, I put the rest in an ING account and keep it there, earning Interest compounding monthly. That's a free 1.925% I get for NOT paying down my debt (more than the minimum payment, that is) I also have a credit card with ~3000 on it that had a no-transfer-fee purchase check offer and 3.9% fixed interest rate, so I used the purchase check to deposit $3k into my bank account. That's a free 0.9% margin, just for using credit, and paying only the minimum payment.

Capital One is another good one for so-called "Purchase checks" with no transfer fee... count as a purchase (with grace period). Yeah it's my highest rate at 10.9% but with no balance comes no interest, and every time I get a purchase check in the mail (about every 3 months) $4k gets deposited to savings, and when the 26th comes around, it gets paid in full. at 4.8% for approximately a month that's about $15 absolutely free. They just paid for me to park @ Six Flags :) Not a bad use of credit, eh?

Heck, it's what banks have been doing since the beginning of bank-time - take your savings at a lower rate and lend it out at a higher rate and pocket the diference.

Granted, I don't have the credit limit to live off the proceeds, but you can get a lot more breathing room and make your dollar go further if you use credit. You just have to be smart and not over-extend yourself. That and you've got to use it to get it.

Oh, and for those of you who may think my fico score is saddled from debtload, it's in the top 15% according to trans union - part of getting those great rates is keeping a cushion of available debt unused.

P.S. Free credit tip: Especially cards that you have a balance, if you haven't called your credit card company in at least 6 months, ring them up and ask if a lower rate is available. 9 times out of 10, they will drop it then and there unless you're delinquent. Then try again every 6 months. I've gotten all my cards from the 19.99-25.99 range down to 5.9-10.9 range in about 5 years.

Edit: typo
*** Edited 2/13/2007 11:39:23 AM UTC by dannerman***

Jeff put it well (wow... agreeing with Gonch AND Jeff... in the same post... I think hell just froze over). For me, it's a time issue. I could do what Gemini said and constantly upgrade my car every few months until I was able to pay cash for the one I wanted, but instead I saved time by buying the car I wanted and felt it was better to owe a bank some money. I know people who claim they will never by a new car and that's fine if that works for them, but I always like to buy my cars new, and when you put 35K miles on a car every year, it's not like a car is a luxury for me- it's a necessity. And because it's a necessity, when I find that I need to go out and buy a new car, I do it, regardless of whether or not I have to borrow the money.

If people didn't take out mortgages, how many Americans would own a house? I figure it'd be very few. Plus borrowing money feeds the economy in numerous ways. If people stopped borrowing money, the economy would collapse.

I'm one of those people who doesn't sell a car---I drive it into the ground, and then donate it to a local charity. However, this organization doesn't auction the car. Instead, they "recycle" it to someone who needs transportation, but can't afford it.

By the time I donate it, the value is so small that it's not worth the effort to try to sell to someone else, so I don't mind tossing 2/3 of the value in exchange for helping someone else.

Our "old" car is a 14 year old Subaru compact four-door. Our "new" car is a 6 year old Honda minivan. In another year or so, we'll donate the Subaru, and buy something else, probably a Prius.

I could probably do slightly better by buying a fleet vehicle rather than a new one, but as I'm getting full value out of the car, It's nice to buy a new one every seven years or so. ;)

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If people stopped borrowing money, the economy would collapse.

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If everyone stopped borrowing at the same time, yes, I agree, that would be bad. A gradual change from debt happy to paying cash (which is really just heading back 20 or 30 years to where it had always been before we feel in love with credit cards) is a good thing. It's incorrect to say this economy needs debt.

Putting 35,000 miles on a car in a year is a reason not to buy new. The huge depreciation hit is bad enough, without killing the value even further with miles.

It's a myth that a debt free lifestyle equals being cheap. Even the king of debt free understands that ("I am not a financial guy that says you ought to live in a cave, collect lint, and only come out on triple-coupon Thursday.") What happens, though, is that people reason, "hey, it's just a little debt" or "there's no interest until 2053" and they buy something they really can't afford. There are some who can get away with it, but for so many more, that attitude causes the problem to grow ever so slowly until, all of the sudden, you're just working to pay your bills, living paycheck to paycheck. Everything that comes in, goes out. But without payments, you end up with this stuff called "money." And with it, you can afford to buy things.

There's a reason why the personal savings rate last year was the lowest it has been since the Great Depression. While I understand that everyone here is the exception, people in general are spending everything they make, and then going into debt beyond that. Given that article, I guess I shouldn't be surprised that few would agree with my view of debt, or think that I'm part of some wacko Dave Ramsey Cult.

But I have balance in my life. I use debt to help me. And that's great. Will a little debt ruin your life? Will you be financially ruined if you have a car payment? Probably not. If it's working for you, far be it from me to say otherwise. There are people who have debt and live within their means, but the consumer debt statistics are real. Debt may not ruin you, but you certainly don't "NEED" it, and not having it doesn't mean you'll end up splitting two-ply toilet paper to make it last longer, or that you'll never have anything nice.

Way too many people work all their lives and end up with nothing but a few dollars from social security and a bunch of debt. I want to accomplish more in life. I'm changing my family tree and I'm having fun, buying toys, and spending cash responsibly while doing it. That's my balance.

*** Edited 2/13/2007 4:47:43 PM UTC by Gemini***

Putting a lot of miles on a car could be a good reason to buy new if you ignore the depreciation. New cars are new and thus generally without problems... and if there are problems, that's what the warranty period is for. It also depends on what you do with your car. If you're in sales and dealing with clients, it helps to have something nice (projects a good image). I'll admit that low-mileage, late-model cars are good for some people, but it's all a matter of preference. Me? I enjoy a new car. It's a little selfish and probably doesn't make complete sense, but it's all about what you want to do.

If you look at the current economy, it is VERY dependent on people being in debt. Look at the banks on every corner. They employ millions of people, not to mention pay ridiculous amounts of money in rent. If people stop borrowing money, the banks disappear, and with that jobs will disappear. Banking jobs are among the few that can't be sent overseas... at least not right now.

I get what you're saying, Gemini- I really do. But I don't think that all debt is a terrible thing, and despite how it makes sense for some to live without debt, the majority of people already have spending patterns and are unlikely to change them. But if you made the effort to change yours and it worked, I'm truly happy for you.

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Me? I enjoy a new car. It's a little selfish and probably doesn't make complete sense...

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But it only doesn't make sense in terms of someone worried about finances and maximizing their savings.

What about all the ways it does make sense for you?

• Reliability
• Image
• Satisfying A Desire
• Reduced Maintenance (both costs and effort)

Those are the types of things that additional money is buying you. I don't feel like I threw away money in the least when I get a new car. I purchased more than a car, I bought those above things as well.

I know I have an odd perspective on most things, and saving money is no different. Society has led many to belive they must live up to their armpits in debt, but it has also led most to believe that saving money and building wealth for 'the future' is necessary as well. To me they're equally gray areas and it comes down to one thing that I already said, but I'll say again - money is for spending. It is otherwise useless. I don't know too many people who keep things of no use to them laying around.

I guess my main problem with the appraoch is the saving and building wealth always comes with the "for tomorrow" thing attached - but the thing is, tomorrow never comes. There's always a tomorrow right up until the day you die. But when you're dead, money doesn't mean much to you anymore - no matter how far you end in the red or the black.

Living for today - it goes again everything we're taught in life, doesn't it. :)

I do understand Gemini's idea of 'changing the family tree' - that's a very kind gesture. I'm just not interested in gardening. ;)

You hit the nail on the head. Well, everything except for the image thing. I don't really worry about people seeing me in a nice car, it's more of a self-satisfaction thing. Then again, getting back to what I was saying, if you're someone who deals with clients by taking them out to lunch, etc., then image does play into the decision to buy something new. As for me, it's about reliabilty (the whole warranty thing I mentioned) and personal desire. I love cars so unless I'm buying something classic like a 1970 Chevelle 454 SS, I'll always go new. I like the feeling of having a brand-new car, plus the level of comfort that comes from knowing exactly what the car has been through since Day One. With a used car, you rarely have an idea of what it went through before it got to you.

I think you're right about there being two schools of thought- lots of debt or no debt at all. I know people who routinely get their credit card bills up to $40K before struggling to get it all under control. I also know people who watch every dollar as if it's going to turn into an alien and start dancing around the room. I have a mortgage and another 10 or so payments left of my car but I also carry very little credit card debt and no student loans. I have enough money to pay my bills, vacation, buy some of the stuff I want to buy and still toss some into savings when everything is all said and done. Like Gonch, I commend people like Walt for managing their money in a different way but I appreciate the fact that I can live my life without worries and without the need for apologies.

I only added the image thing because you did. :)

I meant it in your context. (which is really the same thing - projecting an image - regardless of who you want or need to project it to)

Image stays on the list, whether you can justify it as necessary or just want to be a dick. ;)

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Gemini said:
What happens, though, is that people reason, "hey, it's just a little debt" or "there's no interest until 2053" and they buy something they really can't afford.

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I think that's a crazy generalization. Of course some people may work that way, but most of the people I know only use credit when they know they can pay it back in a reasonable amount of time. I just bought $2k of furniture with no interest for three years. Is that irresponsible? Who says I can't afford it?

I know people who won't take out student loans because they're paralyzed with fear that it could ruin them. That's nuts.

I think we have to take into account that "we" (i.e., the people reading this board and our friends) are NOT the people for whom debt-accumulation is a fatal flaw in our financial lives. The people "drowning in debt" don't have the spare cash to travel to amusement parks...

Certainly, for the vast majority of people that are posting to these forums, debt is most likely used appropriately. I doubt many of us are living in a paycheck-to-paycheck world where we'd find ourselves homeless in a month if our jobs were suddenly lost.

For the people who DO live in that world, carrying a nice sizable debt load IS a very risky venture...and if they're paying the minimum due on a credit card that's charging them upwards of 20% interest, it really CAN easily become a bottomless pit that leads to financial ruin...

bill, VERY thankful that student loans were available for me to get MY degree (even if it hangs uselessly collecting dust in my office, LOL)...
*** Edited 2/13/2007 7:16:35 PM UTC by rollergator***

I guess I should have been more specific about image since it's conditional. As a person that sometimes deals with clients, I want to look as though I'm good at what I do, but when it comes to people in general, I really couldn't care less about what they think of me in relation to what I drive.

I've never taken advantage of one of those "no interest for _______" deals but I can see why people do it. There are times when there are more needs than money will allow, so instead of digging into a saving account, it makes sense to incur some debt, whether it be interest-free or not. Theoretically, I could save enough money for a new car in about 6 or 7 months and pay cash for the entire thing but that's ignoring the possibility of other needs coming about. What if a good vacation opportunity comes about? What if my luggage and a suit or two get lost? What if I need to replace a window? Paying for things over times makes sense for a lot of people if they want to maintain some kind of cash flow while still allowing for unexpected things to crop up.

There are people that pay the bare minimum when it comes to credit cards but I think the majority of people pay more than that so that the debt decreases over time. At least I HOPE most people are smart enough to do that!

*** Edited 2/13/2007 7:17:44 PM UTC by Rob Ascough***

Jeff, I suspect that your circle of acquaintances is probably not representative of US society on average.

That said, your student loan observation is right on. The difference in post-secondary and post-collegiate earning potential is so large---and is compounded over so many years---that student loans for college are perhaps the single best "investment" you can make.

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rollergator said:
bill, VERY thankful that student loans were available for me to get MY degree (even if it hangs uselessly collecting dust in my office, LOL)...

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I went deeply in debt to get a degree that has never brought one penny into my life. I'm hardly alone in that. Happens all the time. I'm glad I went to school, but I wish I knew then what I know now. The "life experience" I got at school was wonderful, but not worth being a 23 year old with a number of monthly payments.

I wish I lived in a world where people who have student loans always get good jobs and never have trouble paying their loans. You can pay cash for college. People do it all the time.

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Lord Gonchar said:
Reduced Maintenance (both costs and effort)

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Is that the same math where it's better to get a new loan and pay $4,200 a year in car payments than to spend $1,000 fixing what you have? :) If you can afford to do take that hit, wonderful. Most people who do take it, can't afford to.

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I guess my main problem with the appraoch is the saving and building wealth always comes with the "for tomorrow" thing attached - but the thing is, tomorrow never comes.

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Not having payments gives you freedom today AND tomorrow. Tomorrow will come, and social security isn't going to save anyone, but the reward of not having payments is felt right now. This is not a lifetime of struggle and sacrifice to have a good retirement. It's decades of living a great life without risk of debt, or paying over and over again for things because of interest, and then still being able to have a great retirement.

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Jeff said:
I just bought $2k of furniture with no interest for three years. Is that irresponsible? Who says I can't afford it?

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I'm sure you can afford it, but, then again, why do you need to borrow? Why not just drop the cash? I know that you'll pay it off, but the vast majority of people (I don't have the exact stat handy) who borrow on some type of free finance deal do not pay it off before the deal ends. I bought an $800 couch last year. It was also interest free, but that's because I wrote a check. :)

Why does, say, a furniture company, offer that deal? Because they're nice? Of course not. They realize that most people won't pay it off, and the deal lures customers into spending more than they would otherwise.

Somewhere in the last 20 years, "can I afford to buy it" turned into "can I afford to make the monthly payment." I have enough faith in the people of CoasterBuzz to think that I can't possibly be the only person who thinks there something wrong with that.

Sure you can have debt and never be in trouble. I understand that, really I do. What I won't accept is that you need debt to live life or to build wealth. The rate of delinquencies, of foreclosures, of bankruptcies, they've never been higher. Despite all the success everyone is having with debt, something is going on here. Most people just accept the notion they need to be in debt. No one here struggles, but the same "debt is good" attitude that is prevalent here is what's getting millions of Americans in deep trouble.

Our generation is the only one who has ever accepted debt on the level that we do. I guess we're all just that smart! The idea that someone who lives debt free must be some sort of cheap weirdo who can't possibly buy things or have fun is astonishing, and a little scary.

There's too much to argue with here, so we'll just have to agree to disagree. :)

"Children do what feels good. Adults devise a plan and follow it."

*** Edited 2/13/2007 10:33:57 PM UTC by Gemini***