141–150 of 369 posts
Could someone well-versed with bankruptcy please explain the pros/cons of going that route? I have heard that credit card debt is essentially free money because filing for bankruptcy will wipe out all the debt. If you already own a home/car, and have no intention of getting a loan in the next 10 years, what is wrong with this strategy?
Because they're dumb :)
Debt is just another tool the folks in power have to exploit the poor.
When you have 100 mil, you can hire a smart person to take advantage of debt.
When you have 100 dollars and you live around other people who have 100 dollars, you know what happens, you're the one being taken advantage of.
Everything else is talk.
ps. I am just starting to not be dumb and I'm almost 30 and I've had a ton of support and luck go my way. Most people will hopelessly get exploited and spend their days coping. Just have a look around - don't believe the 'hi how are you' smiling faces, they're pretending and you know it ;)
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I like buying stuff as much as the next guy, but if not buying things you don't need would make you depressed, you probably have deeper issues that need addressing.
If you want to save money, do it on large purchases. Buying a $30k car? Negotiate aggressively so you can buy it for $23-25k. Anything above a few $100 is worth haggling over. Do you know how many people pay the listing price of a car, yet cut coupons to save a few euros/dollars? A lot. It's ridiculous. Some of the joys in life are simple things, such as drinking a $2-3 coffee or having a cocktail in a nice bar, etc.
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I imagine when you "buy" your supplies and don't pay for them until about ninety days after you took delivery of the supplies, that is considered debt as well? I mean if I want to ship something, Fed Ex will ask for payment up front but when Amazon.com ships something they probably don't actually send the money right away. I am still trying to grasp this concept credit terms. I must add that I have had no training in…
I mean if I want to ship something, Fed Ex will ask for payment up front They might ask for payment up front, but they'll quite happily take a credit card instead. Yes, credit cards are a form of transactional debt if you pay them off each month; they allow you to enjoy your purchases for ~ 1 month before paying for them.
I didn't think about that. So essentially, the credit card issuer didn't really spend "their money" at all. Wow. The more I learn the more I realize how little I know.
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I'd disagree on that last part - I'd say that if you're not making a crazy salary his advice is even more valuable. Most people spend an obscene amount of money on things they don't actually really need. Some classic examples: A $3 coffee everyday adds up to about $90 a month, when you can usually just drink free coffee from your office or buy some cheap pre-ground stuff. Spending $5-6 for lunch each day at work can…
This is the best way to get depressed. It's always significantly easier to negotiate a $1k raise than it is to reduce your spending on basic stuff by $1k. Focus on earning more, not saving (on useless expenses).
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I don't think such an absolute position is warranted. It's true that saving up for a big purchase will end up costing you less money than borrowing to pay for it and paying it back. But you will have the item purchased for less time. Suppose you have enough disposable income to pay for a new $1200 TV over the course of 12 months. In scenario 1, you save $100 each month. The bank pays you 0.5% interest. As of January…
> Suppose you have enough disposable income to pay for a new $1200 TV over the course of 12 months. In scenario 1, you save $100 each month. The bank pays you 0.5% interest. As of January 1st next year you'll have a new TV and $2.75. In scenario 2, you put $1200 on a credit card with a 10% APR. You pay $100 each month towards the credit card bill. As of January 1st next year you have a TV you've been watching for a y…
My credit score according to Credit Karma is 811, which I think everyone could agree is very good. I just spot checked two of my credit cards, and they're both at about 16% interest. Now, maybe I could get a lower rate if I asked, but that's what they gave me by default. It doesn't matter to me since I never carry a balance (in fact, I didn't even know what the interest rate was; I had to go look). But 10% does seem pretty optimistic.
That said, I agree with the overall point. It should be acceptable to use credit in the situation described, as long as you're completely aware of the actual cost and are making a rational decision. Unfortunately, too few people do the math, and even for very educated and intelligent people, purchasing decisions can be irrational.
Anyone at a point where they are making monthly payments on multiple credit cards has already lost the debt game. People don't manage debt better because they have been marketed to and taught to use debt completely inappropriately. Debt should be used to purchase an asset that will appreciate or otherwise provide an income in excess of the interest payment on the debt. Full stop. That is how businesses use debt and t…
If you're using it to buy an asset that appreciates more than the interest on the debt, what makes you think that you're a better judge of asset prices than the people lending you the money? Why wouldn't they just buy the asset directly, and cut out the middleman?
Businesses use debt for all sorts of reasons; cash flow, tax, paying out profits in a different form, or simply because debt is cheaper than equity.
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Interesting. What card is this?
American Express has a card "Blue Cash Preferred". You get 6% back on Groceries (up to $6k/yr), 3% back on gas, and the card has a $75 annual fee. If you only use the card to spend $100/week on Groceries, you get $312 in cashback rewards. Subtract the $75/yr fee, and Amex paid you $237 to use their card that year. (Amex isn't the only card like this -- there's lots from MasterCard and Visa as well. This card in parti…
Anyone at a point where they are making monthly payments on multiple credit cards has already lost the debt game. People don't manage debt better because they have been marketed to and taught to use debt completely inappropriately. Debt should be used to purchase an asset that will appreciate or otherwise provide an income in excess of the interest payment on the debt. Full stop. That is how businesses use debt and t…
Consumption smoothing is a perfectly valid use of debt. Suppose I have utility = log(consumption), but my income is volatile. If I have 1 income in year 1 but 10 income in year 2, and use no credit, my utility is log(1)+log(10) = 2.3. If I use credit, I can have utility log(5.5 / (1+r)), with r the interest rate. At 10% interest, that's 3.2. At 20% interest that's 3.0. At 50% interest that's 2.6. So even at 50% inter…
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This whole idea that "oh you have multiple creditors obviously you've made bad decisions" is misguided and naive in the extreme. People have medical bills. People need the counsel of attorneys. You generally need a reliable car to get to work and a roof over your head. You can have huge mountains of debt and be forced to dig your way out by the skin of your teeth through no fault of your own. Paying hundreds a month…
There is no reason to use credit cards for these sorts of debts.
Attorneys aren't banks, it's not unreasonable for them to refuse to finance your counsel.