Dan Snyder buys Johnny Rockets (could get interesting)

I've planned to do what feels good and I'm following through. ;)

(I'm always the exception, aren't I?)

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Gemini said:
I'm sure you can afford it, but, then again, why do you need to borrow? Why not just drop the cash?

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I don't have $2k sitting around. Whatever is left after the normal expenses probably gets saved or spent on smaller ticket fun stuff. I could wait a couple of months and save it, but then I sleep on the floor for those months. Why would I want to do that when Levin wants to cover the interest for three years? If I offered to reject interest on my checking account, the bank would take me up on it, so why wouldn't I do the same?

I don't see your point, or the implication that it's somehow fiscally irresponsible.

I don't understand the people who shun debt on principle.

Am I the only one who sees the insanity of not taking advantage of the no-interest payments deals? I don't mean for buying stuff on a whim.. I mean in cases where you needed/were going to buy it anyway. For example, let's take Jeff's $2k furniture purchase with no interest for 3 years. You have 2 options (assuming the money is saved up, even though he said it isn't):

A. Pay it in $2k of cash you saved up. What do you have? $2k worth of furniture (and a clear conscience that you didn't have to go into debt, I guess ;) )

B. Use the no-interest financing for 3 years. Put the $2k you have saved in an ING account currently at 4.8% We'll also assume 2.5% of the remaining balance must be paid every month (usually how they go) and take that out of the bank account to pay the monthly payments for the furniture. Assumptions: Interest is compounded monthly, rounded down to the nearest penny, and minimum required monthly payments are rounded up to the nearest dollar Let's take a look at those 36 months (I'll show every 6 months for simplicity):

Month 6: $45.42 Interest Earned, $285 paid (1715 in debt)
Month 12: $85.84 Interest Earned, $540 paid (1460 in debt)
Month 18: 120.68 Interest Earned, $763 paid (1237 in debt)
Month 24: 151.56 Interest Earned, $959 paid (1041 in debt)
Month 30: 178.67 Interest Earned, $1131 paid (869 in debt)
Month 36: $202.46 Interest Earned, paid off $2000. no debt left.
What do you get? $2k in furniture, and $202.46 left in the bank.

that's more than 10% (3.3% annually) that YOU get just by taking advantage of the offer, even though you had the cash to buy it outright. Heck, most banks have automatic payments now so you don't even have to worry about making/forgetting the payments, either.

If you still insist on buying it with cash/check, let me know when you're going to go to Best Buy to buy some expensive stuff, give me the cash/check, and I'll put it on my credit card. You don't owe me anything, and It's my card so YOU don't have to worry about being in debt or making payments. :)

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dannerman said:I don't understand the people who shun debt on principle.

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I don't shun debt on principle, I shun debt on interest. Hehe, couldn't resist.

Bottom line: Cheaper money is better than more expensive money...for borrowers. More expensive money is better than cheaper money...for lenders.

Debt, per se, is only bad when you're either paying too much in interest, or if you simply CANNOT dig yourself out in a timely fashion. Anyone who takes advantage of low/no interest loans IS, in fact, MAKING money if they can get more interest on that money than what they're paying out.

I guess what I don't understand is this: provided that it's so simple a caveman could do it...why aren't more cavemen doing it RIGHT? :)

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dannerman said:
Am I the only one who sees the insanity of not taking advantage of the no-interest payments deals?

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http://seattlepi.nwsource.com/money/300582_zerointeresttrap22.html

The insanity is the people who try to play the debt game. A few people make it work, but most do not. It's like going to Vegas. The banks always win. That's why these deals are everywhere. There are people who like to "out think" debt and use it to their advantage. Dangerous game, in my opinion. At some point, the snake will bite.

I need to find something we can agree on. :) Can we all agree that everyone should have a written budget?

Very good point, dannerman. I'd like to add to your point the fact that most people get wage increases every so often, so making those no-interest payments when the loan comes due in three years should be even easier. It's simple math. Suppose I clear $1000/week right now, and in three years I clear $1100/week. Making a $200 monthly payment will be even easier in the future when I'm making more money.

I'm not convinced there are a ton of people out there that play the debt game... at least not as you make it sound... people purposely accumulating as much debt as they possibly can to get everything they want. I think that the majority of people make somewhat educated purchases, and either charge or take out loans when their current needs/desires extend beyond the range of their income. Jeff bought new furniture and took out a loan to do so, but it's not like he's going to have to replace that furniture in three years and begin the debt cycle all over again. By the time he ends up needing to replace that furniture, it will long be paid off.

I've heard that point numerous times- why make car payments when the current car can be repaired for less? That's a bit misleading. The older a car gets, the more it requires in repairs. I know that from firsthand experience- I've kept my current car a lot longer than I kept other cars I bought and I'm paying the price. Things are going wrong on the car all the time, and not only is it costing me money but it's also costing me time when I have to bring the thing to my mechanic and get it fixed. I could probably save $1000 next year if I decide to keep the car for anothetr 12 months, or I could buy a new car, incur some debt and be with something brand-new that's reliable and something I feel good about driving.

Just my take...

Lots of people fall into the trap that they'll make more money later, so it's OK to spend it now. Not only is that a risky assumption, but many people simply spend what they earn (re: personal savings rate). As the salary increases, so does the lifestyle. That's why a typical $40,000/year household and a typical $70,000/year household will both tell you they're just making it. The typical reaction to a wage increase is a lifestyle increase to match or go beyond the new wage. Even if you use debt, you should at least have a budget to understand where your money goes.

Most people who do "no interest/no payments" do not pay them off before the end. Those are the facts. That's why it's a trap. If you are in the minority and actually pay it off, you're still taking an added risk, one job layoff away from thinking the debt is maybe not such a good thing.

I'm not saying to repair the same car for 20 years. But how often does a car face a $750 repair and people just go get something new instead? A new car never goes to the garage? The typical 36,000/3-year warranty won't get most people through half their loan. I once put a $2,500 transmission in a vehicle with 55,000 miles that I was still paying on. I guess I could have traded it in and got a new one. Maybe negative equity is tool as well? I mean, the guy on TV said they'll pay off my trade no matter what I owe. Sign me up! I'll just keep rolling the negative from one car to the next.

I can understand the argument where some don't have a problem using a little debt to enhance their lifestyle. If you say the risk and the interest paid are worth what it brings, then I can at least understand your point, even if I don't agree.

Credit and debt have been pushed so hard on this country over the last 30 years, that it requires a complete shift in thinking to believe that you could possibly have a life without borrowing money. That's certainly not something I'm going to change in this thread. However, some of the crazy math being used as justification for debt goes beyond the bounds of common sense.

*** Edited 2/14/2007 9:01:53 PM UTC by Gemini***

*isert joke that combines the no-re-entry policy and food service*

I think this COULD be good, I also think he could drive this into the ground. Oh well, we'll see!

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The Mole said:
*isert joke that combines the no-re-entry policy and food service*

I think this COULD be good, I also think he could drive this into the ground. Oh well, we'll see!

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Sounds like a sit-down restaurant that doesn't give free drink refills.

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Gemini said:
Most people who do "no interest/no payments" do not pay them off before the end. Those are the facts. That's why it's a trap. If you are in the minority and actually pay it off, you're still taking an added risk, one job layoff away from thinking the debt is maybe not such a good thing.

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That's true, and is indeed exactly why those offers exist. However, I'll readily admit I've used these deals a few times. Each time I've been careful to make sure that I DO have enough available that I COULD just pay it off at any time, and I'm VERY careful to make sure that I not only pay it off well in advance (paying much higher than the minimum each month), but also that I make each payment well ahead of the due date (one single late payment, and your "interest free" is all over). Play a fair balance -- make sure you won't get hit by penalties, make sure you can just close it out if you HAVE to, and leverage your money in other ways instead.

Yes, it IS a bit of a gamble, but if you're careful it isn't too bad.

I'm also a firm believer in buying a new car. You never know what kind of abuse that used car was subject to. It might be a good deal, it might have been driven into the ground. A friend of mine bought a used car, and then needed to take it into the shop 5 times in the first year for various problems. She ultimately gave up and bought a new car, and hasn't looked back. Buying a good QUALITY new car that actually keeps some value (like a Honda Civic) is in my opinion a much safer route to go.

As for student loans, as the oldest of 5 kids (having that many is something I'd NEVER do myself, but that's another discussion entirely) there was NO WAY I'd have been able to go to Carnegie Mellon without them. I took out every possible student loan available to me. Those are long since paid off, and I've never regretted taking them -- that degree in Computer Engineering from CMU has been worth much, much more than the tuition spent to earn it.
*** Edited 2/15/2007 4:35:23 AM UTC by GregLeg***

Without a credit card, I literally wouldn't be able to work. I don't have 50K in the bank, and I currently don't own 50K worth of photography equipment. When I shoot, everything (travel expenses, pens/notebooks, lunch, cameras/lenses/lights/studios) goes on an AMEX card. Once the shoot is complete, the final invoice is sent to my client and they send me a check a few days later.

Without it, I have nothing.

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GregLeg said:

I'm also a firm believer in buying a new car. You never know what kind of abuse that used car was subject to. It might be a good deal, it might have been driven into the ground. A friend of mine bought a used car, and then needed to take it into the shop 5 times in the first year for various problems. She ultimately gave up and bought a new car, and hasn't looked back. Buying a good QUALITY new car that actually keeps some value (like a Honda Civic) is in my opinion a much safer route to go.

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Now, on this point, I'm actually on the "debt-free" siders side. Well sort of as I actually financed my *used* car. ;) But I just dont ever see myself buying a new car. It's been my experience that the major domestic cars (Ford, GM, Chrysler (sort of domestic)) while reasonably priced (relatively) just are completely shot after 100,000 miles, no matter what type of maintenace you've done up to that point. And the long lasting imports (Toyota, Honda) are just way overpriced brand new. So my current car was a three-yr old Toyota Avalon. It was actually cheaper than a similarly styled domestic and though it had high mileage, it was in fine shape (never be afraid to take a used car to *your* mechanic).

Have things gone wrong with it? Of course, no car is maintainece -free (anyone who tells you differently is selling something). I just pay a little more, avoiding the 'shade-tree mechanics' and take it straight to a dealership (good ppl there). IMO, I got the best of both worlds. I got a nice quality auto, and someone else took the big depreciation hit. Not that I ever plan on selling it, but it's nice to know.
lata, jeremy
--is it riding season yet?

I agree that "American" cars (I put American in quotes because I'm referencing GM, Ford and Chrysler products even though they're not all made in the U.S., while some "foreign" cars are) have a life expectancy of about 100K miles. They run for a long time but not without problems. I think there's an old saying that goes, "A GM car will run bad longer than most cars run at all." Probably some truth in that statement.

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Gemini said:

I'm not saying to repair the same car for 20 years. But how often does a car face a $750 repair and people just go get something new instead? A new car never goes to the garage? The typical 36,000/3-year warranty won't get most people through half their loan. I once put a $2,500 transmission in a vehicle with 55,000 miles that I was still paying on. I guess I could have traded it in and got a new one. I can understand the argument where some don't have a problem using a little debt to enhance their lifestyle. If you say the risk and the interest paid are worth what it brings, then I can at least understand your point, even if I don't agree.

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I've been there. I once had a "new" car with 57K miles blow a transmission, sticking me with a $3000 bill. It downright sucked, and I'll never buy a car from that company again. And while I agree the 4 year/50K mile warranty on the car that I put 35K a year on was worthless not long after I bought the thing, chances are that car- the car I bought new and took care of since the very first day- is going to be more reliable than a used car I can buy. And by used, I mean the kind of car that is going to cost significantly less than a new year, not one of those so-called "pre-owned" deals where the late model used car with the warranty goes for only a few thousand less than a comparable brand-new model.

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Credit and debt have been pushed so hard on this country over the last 30 years, that it requires a complete shift in thinking to believe that you could possibly have a life without borrowing money. That's certainly not something I'm going to change in this thread. However, some of the crazy math being used as justification for debt goes beyond the bounds of common sense.

Again, I completely understand what you're saying, I just don't agree with what you're insinuating about most people getting themselves into debt without thinking. There are a lot of people that take big risks and pay the price by going so far as declaring personal bankrupcy, but there are also a lot of people that are intelligent about their debt and use it to make a better life for themselves. Assuming debt is a big risk because you're basically expecting yourself to have an income for the rest of your life, but as it was said elsewhere, you also take a risk by crossing the street every day. For me, and apparantly a lot of other people, taking out some kind of a loan to pay for something that I don't have the cash for NOW but expect to have in the future is a risk worth taking.

And as far as credit cards go, I think they're absolutely a neccessity. I wouldn't want to think about what I'd have to go through to rent a car without a credit card. And credit cards can be a useful tool- I buy stuff with me card, get tons of airline miles and pay it off right away. There's a slight reward there.

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