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How I Paid Off $35,000 in Debt, and How You Can Too
zenhabits.net — Last December, after twenty years of owing money, I finally paid off all of my debt (except the mortgage — and I’m working on that). Co-incidentally, Leo paid off his debt at the exact same time. I didn’t pay off my debt overnight. It took many years, and I made plenty of mistakes. But with patience and perseverance, I met my goal.
optimusprime01- 1552 diggs
- digg it
- jerang, on 06/23/2008, -10/+12Zen Habits FTW!!
- louiebaur, on 06/23/2008, -10/+6Good job that is something I need to work on as well.
- DeathWish808, on 06/23/2008, -4/+26Good tips because being in debt sucks balls.
- KDAY12, on 06/24/2008, -0/+4I am not sure I see the logic in attacking the smallest loans first. How is that better than attacking the highest interest rate loans first?
- kingmanic, on 06/24/2008, -0/+6I think it's just sense of achievement motivates. Small ones are small milestones while the big one at the end reduces your sense of worry.
- winampman2, on 06/29/2008, -0/+1Lets say you have 5 loans, different amounts. The smallest one is easy to pay, and the biggest one is.. really big and high interest.
After, say, 2 years of paying loans, would you rather have:
a) 1 big high interest loan left to pay
b) 5 loans left to pay (but the big one is a little smaller)
As you can see, having one big loan left to pay is much easier to manage.
- KDAY12, on 06/24/2008, -0/+4I am not sure I see the logic in attacking the smallest loans first. How is that better than attacking the highest interest rate loans first?
- fudged71, on 06/23/2008, -8/+3Is Co-incidentally meant to be hyphenated? never seen that before
- treed, on 06/24/2008, -0/+8No, it really isn't. If you want to be really proper, you can use a diacritic to show that the "oi" is not a diphthong, so "coïncidentally". Pretty rare, though.
- greenlight2001, on 06/24/2008, -1/+13I once bought my girlfriend a diphthong for our 2nd anniversary. She wasn't impressed and never wore it.
- YoctoYotta, on 06/24/2008, -0/+3It's from the Latin root kawinkeedink, no hyphen.
- treed, on 06/24/2008, -0/+8No, it really isn't. If you want to be really proper, you can use a diacritic to show that the "oi" is not a diphthong, so "coïncidentally". Pretty rare, though.
- soundman7718, on 06/24/2008, -10/+200I do this really cool thing called NOT SPENDING MONEY I DONT HAVE. woa.
- Ryan166, on 06/24/2008, -12/+9...so does my grandpa.
- Rusticles, on 06/24/2008, -8/+12This is probably great for a very simple life, but if you're building a business, investing, etc... life's too short not too borrow, you have to take a risk if you want substantial gains. Just make sure you're spending that money on something that will increase in value.
- Firehed, on 06/24/2008, -2/+21There's a difference between getting investors and blowing through credit cards because you can't control your spending.
- herodrink, on 06/24/2008, -3/+44so you didnt go to college?
- soundman7718, on 06/24/2008, -12/+3scholarships.
- reknaps, on 06/24/2008, -0/+17He's right. There are a few circumstances when borrowing money in today's society is necessary - school, mortgage, business startups...etc.
Unfortunately cars are now something most of us have to borrow for today as well.- JoeMerchant, on 06/24/2008, -7/+16You shouldn't have to borrow money to get basic transportation.... a $1000 heap will get you to the job, and save you $29,000 off the shiny new thing that you really really want. Even if the heap needs the occasional $1000 brake job / water pump / whatever, it takes a helluva lot of those to add up to the cost of a new car, and by the time you've done a few, the new car would have been out of warranty and needing the occasional repair too.
Oh, and even with $6/gallon gas, unless you drive 80 miles a day for work, there's not significant money to be saved buying a fancy new 50mpg super sipper as compared to a traditional sub-2 liter econoheap. - aukxsona, on 06/24/2008, -2/+10Scooters are less than 1k and get you to and from cheaper than a car. Most get 65+ MPG and will get you around town just fine.
- JakeyG14, on 06/24/2008, -6/+14^^^
Yeah but you look like a tool driving a scooter so it evens out. - alf86, on 06/24/2008, -0/+4Joe is right. You also have to take into account that nearly all cars lose 50% of their value in the first 2 years of ownership. Most of that in the first year. You'd have to be pretty well off to be able to absorb that kind of loss. If you can't buy it outright, you can't afford it.
- ScottMitchell, on 06/24/2008, -1/+5I agree that buying a house is very hard to do without debt, but it's patently false that university, cars, or business startups require debt.
For school, go to an in state school. Work your way through college. Apply for every grant and scholarship you can find. Live at home, if possible. Share an apartment with six other people, if not. Work like crazy during the summers. Granted, it can still be a stretch, and I'm being a bit hypocritical here since I borrowed $2,000/year for my four year education, but I only worked 10-15 hours a week, and only had one job during the summers. Had I worked 60-80 hours per week in the summer I could have easily made up that shortfall.
The best way to start a business is by working from home part time. Grow the business slowly and from the fruits of your labor. Yes, it's going to take longer than if you run down and borrow $200,000, but it's a helluva lot less risky.
And last time I checked there were plenty of reliable to semi-reliable used cars in the $1,000-$5,000 range in AutoTrader, eBay, and in the classifieds. Sure, it might not impress your coworkers or dates, but if you don't have a car payment (or other debt payments) you have MONEY, which you can save to buy something nicer later down the road.
The secret to success is to delay gratification. Don't blow your wad on some whim today - save up so that you can enjoy a better life tomorrow. - JakeyG14, on 06/24/2008, -1/+2^^^
Is it even legal to work 80 hours in a week, dude..? You're pretty much working 12 hours every day, ***** that with a capital FUH. - Durrok, on 06/24/2008, -0/+1I can back up what Scott said... having a car payment is the worse. There is something to be said for reliable transportation though. The other big thing I see people making the mistake of is not using public transportation. Obviously not available everywhere but if you have a 15 minute walk to any kind of public transportation, use it. That $1,000 clunker will last so much longer if you are not driving it every day. (Just make sure to drive it at least once a week, which obviously shouldn't be hard to do)
- JoeMerchant, on 06/24/2008, -7/+16You shouldn't have to borrow money to get basic transportation.... a $1000 heap will get you to the job, and save you $29,000 off the shiny new thing that you really really want. Even if the heap needs the occasional $1000 brake job / water pump / whatever, it takes a helluva lot of those to add up to the cost of a new car, and by the time you've done a few, the new car would have been out of warranty and needing the occasional repair too.
- judicar, on 06/24/2008, -2/+6Go to college, make more money, but owe more ...
Not go to college, make less money, but owe nothing ...- UrineTrouble, on 06/24/2008, -4/+15Great logic. Enjoy working at Arby's
- Ryan166, on 06/24/2008, -2/+13I know, I'm laughing my way to the bank at these college kids, while burger king is paying me well and I even get some health insurance!!
- TheCasablancan, on 06/24/2008, -4/+15@UrineTrouble and Ryan166
Choice A) Go to College, make more money, but owe more.
Choice B) Not go to college, make less money, but owe nothing.
My Choice) Not go to college.
Become an electrician, and have tuition paid for.
Create useful saving plan.
Become a Journeyman, and work overtime to make 70,000/year.
Go to college at night/weekends, test out of what you can.
Get BS in EE, then Masters in EE.
Make more money, but owe nothing.
Work at Engineering Firm.
Hire college kids to work at my company. - bmoretz82, on 06/24/2008, -1/+6Not always, you'd be surprised at how many people I know with $200,000 educations making $30k / year. ( I have a degree and make ***** loads more than that, but I'm just saying... )
- Ltgeo, on 06/24/2008, -0/+4Or just get a full scholarship that pays all your fees :D
- KingGorilla, on 06/24/2008, -1/+2grants and scholarships ftw!
- dbre2, on 06/24/2008, -0/+10I've heard of this...is it similar to the "Don't Buy Stuff You Can't Afford" program?: http://consumerist.com/consumer/clips/snl-skit-don ...
- JK1150, on 06/24/2008, -2/+5good luck saving up enough to buy a house in cash
- Icyfenix, on 06/24/2008, -1/+2Bad credit saved my ass- I have no debt cuz of mistakes someone else made on my credit. Now I'm mature enough to pay off the cards I have.
- winnestow, on 06/24/2008, -0/+3dave ramsey
- ScottMitchell, on 06/24/2008, -0/+5Act your wage.
- bzkt, on 06/24/2008, -0/+1Yet another "I use common ***** sense" article. Impressive.
- BurnTees, on 06/24/2008, -0/+1of course you and everyone else on digg does that...but the fact remains that MOST people don't.
Watch the documentary Maxed Out...I think it's currently playing on Showtime.
- ThatDustyGuy, on 06/24/2008, -9/+3I'm going to need this after I finish signing my life away buying the iPhone.
- ryleyleckie, on 06/24/2008, -0/+5you're kidding right?
- soot, on 06/24/2008, -0/+5Well, that thing's like a hundred per month for the service plan isn't it?
- ThatDustyGuy, on 06/24/2008, -0/+3Plus the cost of the applications if you wanted any.
- mathcreative, on 06/24/2008, -1/+1Jailbreak!
- ryleyleckie, on 06/24/2008, -0/+1and how is that signing your life away?
- soot, on 06/24/2008, -0/+5Well, that thing's like a hundred per month for the service plan isn't it?
- justz00t, on 06/24/2008, -0/+2blank
- Lionhart, on 06/24/2008, -2/+8Your life away = $200? Maybe you should get a standard phone if that is the case, and spend it on a suit to get a real job.
- ThatDustyGuy, on 06/24/2008, -1/+3You forgot about all the service fees and cost of applications.
- DanMiller, on 06/24/2008, -0/+1Okay, lets use some common sense here. You can procure a basic voice plan for the iphone which costs the same as any other phone you buy. The data plan costs 30 dollars a month. Over two years this is $720. You don't have to buy applications to use the phone and many of the applications coming out are going to be free. Yes, one should consider if they can afford 360 dollars a year extra but in general this is hardly make or break money. If this is going to effect your mortgage payment maybe you should forgo the cellphone.
- ryleyleckie, on 06/24/2008, -0/+1it sounds like you should just stick with the two paper cups attached by string for a phone...
- ryleyleckie, on 06/24/2008, -0/+1owned
- ThatDustyGuy, on 06/24/2008, -1/+3You forgot about all the service fees and cost of applications.
- ryleyleckie, on 06/24/2008, -0/+5you're kidding right?
- aukxsona, on 06/24/2008, -10/+5Congrats!
- Yage2006, on 06/24/2008, -7/+2Borrow the money from someone else to pay it off?
- RadiatedAnt, on 06/24/2008, -3/+32i wish my college loans amounted to only 35000 :(
- lisaawesome, on 06/24/2008, -3/+4Damn your school must be expensive. I've been in for 6 years and only have 23,000 racked up! I thought I was bad off. That is unless you've been in for 12 years in which case damn your school is cheap.
- lolwutpear, on 06/24/2008, -6/+0State school = 20k * 4 = 80k. It's better than 45k*4 = 180k for a private school. You should try graduating from community college faster.
- lisaawesome, on 06/24/2008, -0/+4Oregon State University costs me about 10k a year. I should have tried not picking a major that ultimately made me very unhappy and lead me to switch majors half way through adding an extra 3 years onto graduation. You live and learn man. But way to be an ass.
- theartfuldodgr, on 06/24/2008, -0/+3I don't know what state school your going to but I go to Rutgers and pay roughly 12k a year for tuition and books.
- lisaawesome, on 06/24/2008, -0/+1Oregon State University runs me about 10k a year. The University of Central Oklahoma my former school was less than that. At OSU I have been paying about a third of my tuition out of pocket each year which I wasn't factoring in when I made the original comment. I apologize for being so rash in my assessment.
- BurnTees, on 06/24/2008, -0/+1RU RAH RAH!
Rutgers FTW?
- ahwang, on 06/24/2008, -1/+3Goddamn medical school, private college, high school, middle school, elementary school, and preschool!!!
[/jk]
did i use the tag right?
- lolwutpear, on 06/24/2008, -6/+0State school = 20k * 4 = 80k. It's better than 45k*4 = 180k for a private school. You should try graduating from community college faster.
- Elranzer, on 06/24/2008, -0/+1State University of New York costs about $4000/year (before room/board), and they have all four types of degrees (Associates, Bachelors, Masters, Doctorates).
Once you get to grad school, where you went to for undergraduate really doesn't matter, so long as you have an undergraduate degree at all (and a good transcript). I am always amazed by people who think that the prestigiousness of their undergraduate college actually matters.- moogle516, on 06/24/2008, -0/+1In order to get into a good grad school you must of had good work experience from a good job, Its hard to get a good job if you went to a medicore underad college.
- Elranzer, on 06/25/2008, -0/+1"Its hard to get a good job if you went to a medicore underad college"
Not really. Job experience matters more these days, as well as good references. Start small (a job that requires no degree, work hard a few years for the experience, and make good relations with your boss for the good reference).
- Elranzer, on 06/25/2008, -0/+1"Its hard to get a good job if you went to a medicore underad college"
- moogle516, on 06/24/2008, -0/+1In order to get into a good grad school you must of had good work experience from a good job, Its hard to get a good job if you went to a medicore underad college.
- lisaawesome, on 06/24/2008, -3/+4Damn your school must be expensive. I've been in for 6 years and only have 23,000 racked up! I thought I was bad off. That is unless you've been in for 12 years in which case damn your school is cheap.
- minorthreat, on 06/24/2008, -3/+20Well a few years ago I made the mistake of taking out a 15,000 loan for a car. My college was paid off, so it was the only debt I have ever had. I must say I learned a valuable lesson and I will never go in debt again.
- form3hide, on 06/24/2008, -1/+6did you not have a job or something?
- minorthreat, on 06/24/2008, -0/+7no I had a job making good money. But why would you want to go in debt for a car when your other one functions perfect? It makes no sense. If you want a new car, save up 15k. When you have 15k in your hand then you should decide how you want to spend it. Otherwise, you have no idea how much 15k really is.
- Exact0, on 06/24/2008, -3/+0I don't get it. Your two posts make no sense when put together. Maybe I'm missing the point.
Also, how was your college paid? If you did that on your own, good job, and I respect that.
Having to pay for it on your own teaches you VERY quickly the value of money. Really not directed at you, but I really hate seeing a lot of the people I went to school with who had everything paid for...and top of it had a hundy or two sent to them a week by mommy. Never seems to work out for them once they graduate though.
- Exact0, on 06/24/2008, -3/+0I don't get it. Your two posts make no sense when put together. Maybe I'm missing the point.
- minorthreat, on 06/24/2008, -0/+7no I had a job making good money. But why would you want to go in debt for a car when your other one functions perfect? It makes no sense. If you want a new car, save up 15k. When you have 15k in your hand then you should decide how you want to spend it. Otherwise, you have no idea how much 15k really is.
- passedoutghost, on 06/24/2008, -0/+3I don't like being in debt either, even if it's little ones. When friends shout me stuff like beers or food I somehow feel obligated to pay them back even though they insist on me keeping my money. And it's probably why I'm never going to get a credit card, but probably a debit card.
- Flummoxer, on 06/24/2008, -0/+1How are you going to be able to buy a house without a credit history?
- passedoutghost, on 06/24/2008, -1/+2You don't need a credit card to have a credit history.
- Flummoxer, on 06/24/2008, -0/+1How are you going to be able to buy a house without a credit history?
- form3hide, on 06/24/2008, -1/+6did you not have a job or something?
- Bozmanbeyond, on 06/24/2008, -5/+10Wow he finally put down the crack pipe.
- brianrwalters, on 06/24/2008, -6/+91I was raised to believe that there is only one type of loan that is acceptable: a mortgage on a house. I'd also argue that student loans can also be acceptable for some people. I am 100% debt free. No credit cards. No loans. Nothing. I budget, and I buy what I can afford.
Last week I went to Circuit City to check out a specific Samsung TV I saw on Amazon... One of the employees circled around and answered a few questions I had. I started to complain that the price on Amazon was several hundred dollars cheaper compared to their 'sale' price. When I told him that my limit was $1800 which spiraled us into a long conversation about credit/their credit plan. "Just put down your $1800 now, then pay back the remaining $400+ over the next few months when you can." The conversation went on for a while, I even lectured (okay, I 'preached') about how credit is designed to hurt the exact people it claims to be helping. Ultimately, he could not simply understand why I have a "price limit" when they offer 24 months 'same as cash'.
Do people seriously believe that if you push your financial expenditures into the (seemingly) distant future you'll have more money then to pay for it? Admittedly, I even had enough money on my debit card to (just barely) afford that TV right then and there, but even still - I refused to buy it. It wasn't in my budget. So tell me Digg, do people not understand budgeting?- dha07030, on 06/24/2008, -2/+25It's because gadgets are shinny and cool.
- Rusticles, on 06/24/2008, -1/+40People do not understand budgeting.
He was a sales person, it's his job not to understand budgeting.- haiduz, on 06/24/2008, -1/+4brain,
He is a sales person and he couldnt care less about your budgeting.
At the end of the day, he went home without a sale and you went home without a tv. Sure you a constelation prize of knowing that you stayed within your budget. However, prize wont doesnt have hdmi input to play high definition programing. The sales person wasnt going to change the price for you, and the last thing he cares about is your credit phobia or your 1800 budget. thus, the last thing he wants to hear is your lectures which justifies why youre going home without a new tv.- Kenyadigit, on 06/24/2008, -0/+0lol...constelation
- BlackMask, on 06/24/2008, -0/+1you meant to say constipation?
- haiduz, on 06/24/2008, -1/+4brain,
- atbnet, on 06/24/2008, -0/+29If you are smart about your money taking same as cash offers are great. However, people are usually too lazy to think that far ahead and since the money they saved to pay for the purchase is not directly tied up so they use it to buy other ***** they don't need and then month 25 rolls around and they get hit on the head with finance charges and a TV they can no longer afford.
- lisaawesome, on 06/24/2008, -0/+12Exactly. If you actually will pay it off within the designated time period it can be a great tool especially to build credit with. But many people take on these same as cash cards thinking that oh in a year I'll be making more and can pay it off which is not the right approach. If you can't make the necessary monthly payments now it probably isn't for you.
- NoNameFace, on 06/24/2008, -3/+1Why do you need to build credit if you want to be debt free anyways? There is no point. And before you say "but you will need a mortgage" I guarantee you could get a 15-year fixed with 20-25% down without having "good credit". No credit =/= bad credit. How long would it take you to save 30k (for 20% down on 150k) if you didn't have any debts? 2-3 years maybe?
- lisaawesome, on 06/24/2008, -0/+1Hah well I have no job so currently I could never save 30k! As for the mortgage bit along with a hefty down payment I would want a great interest rate which is determined primarily by your credit score! You're right that no credit does not equal bad credit because no credit is worse.
- BurnTees, on 06/24/2008, -0/+1"How long would it take you to save 30k (for 20% down on 150k) if you didn't have any debts? 2-3 years maybe?"
where the F do you live? a house for $150K?
here's something most people are missing...financially speaking, it's better to hold on to your money than give it to someone else. if you use store credit to buy that new tv and there's no interest for a year, you take that 1800, put it in ING direct, make a few bucks, pay it off after a year.
- Buzzbean, on 06/24/2008, -0/+7Very true. Zero interest on something you can afford to buy is a good tactic. Spending more than you can afford because it's zero interest is not.
- ScottMitchell, on 06/24/2008, -1/+1Although you have to be very careful. Many of these "same as cash" deals *retroactively* calculate interest due if you do not pay in full by the due date. So say that your payment gets lost in the mail, or "lost" in the billing department. Whoops. No longer is it same as cash!
- uu2b, on 06/24/2008, -0/+2^^^^
That's where responsibility, and scheduled payments online, come in to play.
- lisaawesome, on 06/24/2008, -0/+12Exactly. If you actually will pay it off within the designated time period it can be a great tool especially to build credit with. But many people take on these same as cash cards thinking that oh in a year I'll be making more and can pay it off which is not the right approach. If you can't make the necessary monthly payments now it probably isn't for you.
- shakin, on 06/24/2008, -1/+10People think about what's happening now and hope in the future things will get better.
At the same time, if you think intelligently about the future you can take on some debt now without hurting yourself. For example car loans are not always a bad idea. If you buy a reliable car and drive it for 8 - 10 years your overall expenditure will be very low. You might pay less buying a used car and driving it for 4 - 6 years, but most people would still need a loan to buy a used car. A bad car loan would be paying $400+ per month for four years and then trading it in for a new one as soon as (or before!) it's paid off. Getting a car loan might be a better deal than buying a cheap car that constantly breaks down.
You can also do really well by getting an investment loan. I've got a $30,000 investment loan right now, but in that case I didn't spend the money and my investment will pay off the entire loan and leave me with plenty to spare.
Loans are to be respected and not abused. They are useful tools you can use to generate wealth. They can also cripple you financially for life.- mikeywings, on 06/24/2008, -1/+9Taking on all debt will hurt you (other than your mortgage). Under your scenario, you should never, ever have to finance another vehicle. Here's why: This first car is paid off in 4-5 years. That gives you another 4 years that you should be saving that same monthly payment in an investment account. When your car finally craps out (years 8-10) you should have all the cash needed to buy another car. NO new debt.
As for an investment loan, I've got a brilliant idea. I should run right out and get the biggest mortgage on my house. Then take all that money and drop it in the stock market. Oh, no, wait, real estate. Sure, what are the odds that I might lose a major portion of my investment...or, my house. Heck, the stock market is only down around 5% this year. Real estate is strong, job market looks good. And, I'm sure my job is safe so I don't have to worry about making that monster mortgage payment for the next 30 years. Just what I want to do, being in my 70s making the same mortgage payment when I was in my 40s.
If you don't have the cash to make an investment, then you can't afford it. Period. Investing is what you do with the money you've got when you're not living in debt. Leave debt leveraging to the corporations that specialize in it.
my 2c.- theswoff, on 06/24/2008, -3/+2Sigh...wrong, nothing against you, but that is not correct. Its called working on margins and it is how our society is run. That company building a $100M apartment complex, think they are doing it with their money? NO, they are making money on the margins.
For example, take said $100M. They pay 10% for the right to use this money, or $10M a year. They make 15% with this money, or $15M a year.
Profit? $5M.
Lets take the car example. Say you have the cash for a $20,000 car.
You could, A, drop the money on the car OR
B Take a good loan, lets say 5%, and invest the rest at say 10% interest.
A) After 5 years, you are not in debt from this purchase. This is not a bad thing.
B) After 5 years, you have paid off the car AND your money earned you about $5,000
Lets all think real hard...which one is better? - foofightrs777, on 06/24/2008, -0/+1borrowing on margins...depression time wheeee!
- mikeywings, on 06/24/2008, -1/+0Theswoff,
Where can the average person make "said 10%" interest on their saved investment?? And, why stop at 10%? I demand a 15% RoR. This way I can make even more money!! Your 10% assumption is way off track. If you've been earning that kind of money over the last few years, I need to speak to you!!
I can guarantee that the car loan payment will remain at 5%, but where can you guarantee a positive 10% return for 4 straight years? Last time I checked, the dow was only up 5% over the last 2 years. That's 2 1/2 % per year. And, since the beginning of the year, it's down 8%. And, let's not even get started in the real estate market for investing. Sure, over the very long haul, 10% is attainable, but cars don't last that long.
Naturally, a $100M apartment complex doesn't have all cash. They get their money from investors willing to take on a certain level of risk. These investors are not taking their car payments and funneling into a multimillion dollar commercial development project. If the complex isn't fully rented, guess what, the investors do not make their money.
You've supported what I stated from the beginning. Leave the debt leveraging to corporations, not on your personal daily assets. - theswoff, on 06/24/2008, -0/+0One never gets a guarantee, or else everyone would be doing it.
Keep 6 months or so in liquid savings, ie checking, savings, CD, etc, and invest the rest.
Trim your spending so this 6 months worth of money is even less.
Invest the rest.
10%? Actually, I have done a lot better on my portfolio in the past 5 years. Did I do well on all of them? No. Then again, on some, I made over 200% return.
Are we in a slump right now? Yes.
Did a lot of people see that coming, allowing them to diversify a little into foreign markets? Yes.
If you are dropping 20,000 cash on a car, you had better have money still in the bank to cover day to day costs of living. If this is not the case, you should not be buying the car.
If you do have $20,000 + 6 months of living expenses, and a stream of income, then what is wrong with turning that $20,000 into a long term investment vehicle?
Might you lose a little money? Might you even lose your shirt? Yes.
Might you make a decent bit of money, having your money work for you? Yea, there is a pretty good chance.
The truth is, it is ALMOST impossible to become wealthy strictly trading hours for dollars.
Have some done it? Yes, but there are a lot more that did it by having their money work for them.
In closing, do you know what is the difference between a normal joe and those corporations? Intelligent use of debt leveraging, not some magic formula; it is all just calculated risk and hard work. There is no reason that any given person can not generate wealth with hard work and wise choices.
- theswoff, on 06/24/2008, -3/+2Sigh...wrong, nothing against you, but that is not correct. Its called working on margins and it is how our society is run. That company building a $100M apartment complex, think they are doing it with their money? NO, they are making money on the margins.
- mikeywings, on 06/24/2008, -1/+9Taking on all debt will hurt you (other than your mortgage). Under your scenario, you should never, ever have to finance another vehicle. Here's why: This first car is paid off in 4-5 years. That gives you another 4 years that you should be saving that same monthly payment in an investment account. When your car finally craps out (years 8-10) you should have all the cash needed to buy another car. NO new debt.
- daivos, on 06/24/2008, -0/+10I do. No debt here....other than a mortgage. Three paid for cars, no credit debt, no student loan debt, etc. Budget all vacations a year in advance and have an emergency account for any over-spending.
Blew my stimulas check on a PS3 because I didn't have any debt to pay.
Not rocket science to get out of debt.- mousky, on 06/24/2008, -1/+2I love how people say "no debt here . . . other than a mortgage". If you owe someone money, you are in debt.
- dianebl, on 06/24/2008, -1/+2There is a difference between "good debt" and "bad debt". Good debt lets you invest in useful things that will pay off - like your education, or a house. Bad debt is acquired in the pursuit of "stuff" - things you don't need, could live without, and will still be paying off long after you threw it out or used it up.
- daivos, on 06/24/2008, -1/+1I assume you're unfamiliar with building equity and wealth through a mortgage. That's a good thing, just so you know.
Keep making those checks payable to Discover, MasterCard, VISA and American Express. - mousky, on 06/25/2008, -0/+1dianebl: Debt is debt. Good or bad is a personal issue. Some people may think that going into debt for an amazing once-in-a-lifetime vacation is worth it if it means time with a loved one, just being able to unwind, or see sights they would not ever see.
Daivos: Well you know what they say about people who assume things? I have a mortgage and I understand the whole "building equity and wealth" thing, but a debt is a debt. I'm not going around and telling people "I have no debt" when I am still paying my mortgage. It's that kind of thinking that leads some into debt problems.
Oh, and I pay off my credit cards in full. Anything else you want to assume?
- mousky, on 06/24/2008, -1/+2I love how people say "no debt here . . . other than a mortgage". If you owe someone money, you are in debt.
- passedoutghost, on 06/24/2008, -0/+1Same here. I do not have any outstanding debts because the thought of it just makes me uncomfortable.
- Rizmaster, on 06/24/2008, -7/+8If you have self control and are a reasonable person, there's ABSOLUTELY nothing wrong with credit cards of any type. Store cards in particular because if you CAN budget, they allow you to get stuff 6 months earlier while fitting it into said budget. If you were going to put aside the money over a six month time scale and then make the purchase, you would in fact be able to do EXACTLY the same thing and get the TV same day if you got a store credit card.
You do not have good spending habits, you in fact seem to have poor self control. Or you're just an idiot. Because there's no other way to explain thinking that credit is bad because you don't know how to use it.
Are credit cards there to make credit card companies profit? Duh. Of course they are, *****. As is Circuit City. Don't waste that dude's time if you don't want to buy it in store. If Amazon were able to SUPPLY you with that TV and do a sufficient amount of work to sell it to you, then you'd have bought it on Amazon! IF you have an issue with Circuit City charging a slightly higher price, then why the ***** are you talking to the guy that they pay an hourly wage to keep track of a display model TV? Both of which COST CIRCUIT CITY MONEY WHICH THEY FILTER INTO THE SLIGHTLY HIGHER COSTS OF PRODUCTS?!
Jesus what a douchebag. - njcu, on 06/24/2008, -0/+2yeah... i have the problem where I buy something then I try to figure out how I'm going to pay for it... especially if it's shiny.... I like shiny things.
- sbgskl, on 06/24/2008, -0/+7The salesperson understood perfectly well. It's just that, he's a salesperson.
- minorthreat, on 06/24/2008, -0/+2I can budget. I got a 25k limit credit card that gets paid off every month. Nothing more than 300 bucks or so. You know gas, food, movies, gas, bills, clothes, gas....
- jerrycan, on 06/24/2008, -0/+1Well, it's all about self control. Can you budget for the future? I love taking advantage of those "interest/service charge/administration fee" free credit offers. I know my monthly discretionary budget, when saved over the course of an interest free offer will let me buy the things I want today. So if the numbers work, I get what I want today and save what I need on a monthly basis till the term is up and then pay it all off. Free Financing is ***** great. If you let it bite you in the ass, it is your own damn fault. Sadly, many people just don't have any self control.
- blah247, on 06/24/2008, -2/+44Getting $35k in unsecured consumer debt is ridiculous
- AlaskaLoneWolf, on 06/24/2008, -0/+3...and expensive.
- Aero347, on 06/24/2008, -1/+4My Fiance's parents are 50K in the red.
Didn't happen overnight but they've dug themselves out and they always have had great credit (750ish)- chokeaduck, on 06/24/2008, -3/+1Since when is that a great credit score? I have better credit than that. And that isn't saying much.
- DanMiller, on 06/24/2008, -0/+4750 is a very good credit score, I don't know what yours might be but a 750 score will procure good loans at decent rates.
- chokeaduck, on 06/24/2008, -3/+1Since when is that a great credit score? I have better credit than that. And that isn't saying much.
- chaddles, on 06/24/2008, -0/+3Isn't it equally ridiculous for a lender to provide that level of unsecured personal debt? At least in most cases?
- splorpdotorg, on 06/24/2008, -0/+1Chaddles: Isn't it equally ridiculous for a lender to provide that level of unsecured personal debt?
Yep, but they continue to do it and it worked for me. Several years ago while working at Pizza Hut and with W-2 wages of about $12,500, I had 4 credit cards totaling $45k in AVAILABLE (only $10k used) credit, a $10k unsecured line of credit (used $4800 of it for LASIK and then moved it to a credit card with a 0% for the life of the balance transfer) and then got a $4k credit card from Best Buy to buy an $850 TV (6 months same as cash, paid off in 5 months).
Do the math on that. $59k in available credit while earning W-2 wages of $12,500.
The end of the story?
After moving on from the minimum wage-slave job, I was entirely out of debt by 2004.
It can be done if you're properly motivated. I needed to be out of debt and have enough cash to buy my wife-to-be a nice shiny rock and a wedding band.
I'm now in a 2005 Civic (paid off after trading in the 2005 when it was worth more than I owed) and my wife (second anniversary in September) is in a 2007 Fit (making almost double payments). We're also stacking away money for a downpayment on a house (gotta love the crash and all the idiots in their interest only and pay option ARMs). I can't wait to see those payoption ARMs explode :)
- splorpdotorg, on 06/24/2008, -0/+1Chaddles: Isn't it equally ridiculous for a lender to provide that level of unsecured personal debt?
- Shane4u, on 06/24/2008, -4/+18This is a good plan. And the credit card thing is the biggest rip off of all. They kill you in interest and finance fees. And then credit cards companies go after college students who are broke. That's the biggest scam of all. I control my own money with my debit card. At least I don't own a credit card company a dime. And that's just the way I like it.
- DanMiller, on 06/24/2008, -0/+1Credit cards allow people to purchase things they want know while paying more than if they saved. Irresponsible borrowing is always bad but there is nothing wrong with someone choosing to pay $300 more over the life of the credit loan to have something they want now. The best thing to do in my experience is to finance during promo periods for 0% and then divide the period up into payments. You can have the item now while paying nothing in interest.
- soot, on 06/24/2008, -3/+71How to get out of debt: NEVER START.
Live within your means, its easier than you think.- nascentia, on 06/24/2008, -0/+7Not always. Take me, for example. I couldn't have gone to college if I didn't pay for most of it with student loans. Yes, I had grants and scholarships, they took out about half of college for me. But the rest had to come from loans. Otherwise...no college.
And since I had no family to help, and couldn't work during college due to my class schedules and homework load and being editor of the college paper, I had to use both my loans and credit cards to simply survive.
So for me, it was either go into big debt to make it through college and get a degree, or don't go into debt and stay in my piss-ass small town in NY and dig ditches (literally.)
Even staring at my $50,000 in debt now...I don't regret it.- soot, on 06/24/2008, -0/+9There are bad debts, and there are good debts (Well, not good, but as far as long-term investments go). Many people consider student debts to be acceptable.
I'm talking about people who live on their credit cards. - ScottMitchell, on 06/24/2008, -1/+3Why couldn't you work? Why not reduce the class load (thereby saving on tuition) to free up time for work? And what about working during the summers? Couldn't you have put in 60-80 hours per week those three months?
- thealsir, on 06/24/2008, -1/+4It has been shown over and over again that working while going to class reduces grades. It's better just to borrow at a low interest rate.
- ScottMitchell, on 06/24/2008, -0/+1thealsir, I won't argue that not spending time studying will reduce grades. But are you telling me that during the time a student could be working, they are doing nothing but studying? Chances are they are hanging out with friends, or watching TV or playing games, or socializing. It's been a few years since I was in college, and I did study quite a bit, but I also spent lots of time hanging out with friends. Time that I could have spent working a job.
Also, as you get older and apply to jobs you realize that grades matter less and less. The degree matters, sure, but the GPA much less so. - nascentia, on 06/25/2008, -0/+1My class load was already at 12-13 credit hours a semester, the minimum required to remain full time (and thus get all my grants/scholarships.)
You might have missed the part where I said I was editor of my college paper. I went to school for journalism, so that position WAS my resume. And that was probably a 50 hour a week position.
And I did work during summers. It's what paid my bills during the summer when my loans had run out. And believe me, I put in 60-80 hour weeks. At every job I've ever had, I've always asked for over-time. Even gotten it when the company had a policy against it.
It's still not enough when you have to pay rent, utilities, car insurance, health insurance, internet, food, gas, etc. all on your own, and then pay for tuition, too.
So, I'm in debt :
- soot, on 06/24/2008, -0/+9There are bad debts, and there are good debts (Well, not good, but as far as long-term investments go). Many people consider student debts to be acceptable.
- Grolsch, on 06/24/2008, -0/+6I get paid minimum wage and I need money for college. Welcome to my world.
Never start, right..... - KingGorilla, on 06/24/2008, -0/+2How to stop smoking...NEVER START
How to get off crack...NEVER START
- nascentia, on 06/24/2008, -0/+7Not always. Take me, for example. I couldn't have gone to college if I didn't pay for most of it with student loans. Yes, I had grants and scholarships, they took out about half of college for me. But the rest had to come from loans. Otherwise...no college.
- Commonwealth, on 06/24/2008, -6/+27Sooo... how do I pay off my $95,000 student loan debt on my $10/hr job? What kills me is that I can't pay the loan payments with an entry level job, so I'm just piling up more debt so I can get to a higher paying job. Good times.
- Memnochxx, on 06/24/2008, -1/+54$95,000 and $10/hr? Someone did something wrong.
- centran, on 06/24/2008, -2/+17I hate to be a dick but memnochxx is correct. commonwealth did something wrong. If you are only get $10/hr then your education was a complete utter waste and poor investment choice. You will never pay it off. EVER.
The only acceptable case would be if you are doing an internship and if that is the case then you only slightly messed up. Internships are supposed to be done while you are currently in school. However, it is not unheard of to do it right after. - crapmatic, on 06/24/2008, -0/+7Must be an English history major. :(
- d3so, on 06/24/2008, -1/+1Investing in yourself through education is never a poor investment.
- Hillsfar, on 06/24/2008, -0/+5You can put a dwarf through the best athletic training possible, but he'll still never jump higher than a soapbox and no one will pay to see it. But train him to be a miner, and soon ye shall see...
Anyways, it really depends on what the education is.
- Hillsfar, on 06/24/2008, -0/+5You can put a dwarf through the best athletic training possible, but he'll still never jump higher than a soapbox and no one will pay to see it. But train him to be a miner, and soon ye shall see...
- centran, on 06/24/2008, -2/+17I hate to be a dick but memnochxx is correct. commonwealth did something wrong. If you are only get $10/hr then your education was a complete utter waste and poor investment choice. You will never pay it off. EVER.
- Dukaso, on 06/24/2008, -0/+9What did you major in?
- Commonwealth, on 06/24/2008, -1/+10I majored in Broadcast Design which pays very well, but you have to pay your dues in a lower paying position or as an unpaid intern first. Luckily you can get to the top fast through skill, so if I put in the time, I'll be good eventually.
But yeah... Art School. - ruddy, on 06/24/2008, -0/+5pal, i don't know who lied to you, but I feel sorry for you. anything with DESIGN in it doesn't pay. I'm interning as a PHP developer, and I make better money than the full time graphic artists who work there. bad move!
- TheKingInYellow, on 06/24/2008, -0/+4if you're good at what you do and enjoy doing it then anything with DESIGN in it is awesome. regardless of what occupation you go in to you should be smart with your money. this guy makes $10 an hour and was duped into the credit scam like millions of other people. it's instant gratification and we all want it. when you're a struggling art graduate it looks really really good which is why i'm digging myself out of the hole now.
back to what i was saying. art does pay, you just have to be really good at it and have the passion. - ruddy, on 06/24/2008, -0/+2amen. if you like what you do go for it. i didn't mean to put down designers, but in general they don't get paid as well as others. but if you're good at anything there's always the pay
- TheKingInYellow, on 06/24/2008, -0/+1absolutely. although, in the design world there is an abundance of competition which means there's always someone that can do it better and cheaper. this is what employers prey on. when i graduated from college i immediately went to work at a video production facility in town and was treated like crap and was offered 14k a year. to a kid fresh out of school that amount of money was amazing although not realistic. however, since the place i worked saw tons of turnover due to the fresh meat every 6 months they figured it was best to pay for nothing.
- TheKingInYellow, on 06/24/2008, -0/+4if you're good at what you do and enjoy doing it then anything with DESIGN in it is awesome. regardless of what occupation you go in to you should be smart with your money. this guy makes $10 an hour and was duped into the credit scam like millions of other people. it's instant gratification and we all want it. when you're a struggling art graduate it looks really really good which is why i'm digging myself out of the hole now.
- Commonwealth, on 06/24/2008, -1/+10I majored in Broadcast Design which pays very well, but you have to pay your dues in a lower paying position or as an unpaid intern first. Luckily you can get to the top fast through skill, so if I put in the time, I'll be good eventually.
- Aero347, on 06/24/2008, -1/+5Jobs can depend on location and timing, and an entry level job is something even a college graduate has to go through, so be patient and in about 2-3 years you'll be making about double.
A word of advice though, don't use this job to leapfrog to others as soon as more pay is offered, you'll gain a reputation as someone who isn't loyal to their company, and a good reference is sometimes more important then 4 years of college.- Commonwealth, on 06/24/2008, -0/+4Yeah thanks for the support. I'll make very good pay soon enough, but I think it's a horrible system where you're under crushing debt for the first couple years of professional work. I pursued the career I want, and I can suck it up for a year or two, but man, if you're a lower middle class white male, you get no help whatsoever from the government. I don't know anybody else with as much debt because their parents were slightly poorer so they got Pell grants or their parents were rich, so they screwed around in school and ended with a degree and no debt.
- lisaawesome, on 06/24/2008, -0/+2The whole FAFSA system is messed up. It is a good thing to help kids but there is a big gap of people in the lower middle classes who get the short end of the stick. I've also seen a big problem with kids who get no help from their parents and live on their own and are still considered dependent under the FAFSA which screws them out of a lot of help they could use. Just curious though what school did you go to that cost so much?!?! I've been in college for 6 years and only have a tiny fraction of the debt you have so I'm trying to wrap my head around paying so much!
- Commonwealth, on 06/24/2008, -0/+4Yeah thanks for the support. I'll make very good pay soon enough, but I think it's a horrible system where you're under crushing debt for the first couple years of professional work. I pursued the career I want, and I can suck it up for a year or two, but man, if you're a lower middle class white male, you get no help whatsoever from the government. I don't know anybody else with as much debt because their parents were slightly poorer so they got Pell grants or their parents were rich, so they screwed around in school and ended with a degree and no debt.
- bxblox, on 06/24/2008, -0/+7You study liberal arts at princeton?
- AudioPhil3, on 06/24/2008, -6/+3Owned.
- njcu, on 06/24/2008, -0/+1totally
- JoeMerchant, on 06/24/2008, -2/+4If you only need to make $10 per hour, you could have done that on a high school diploma and a couple of years of work experience. I hope you're interning at a really good law firm waiting for a chance to eventually become a partner, or something similar - if $10/hr is all your $95,000 degree can earn, you definitely didn't get value for that education.
- fanclerks, on 06/24/2008, -2/+2Dude, if you spent $95k on college, I would hope you'd have the degree to get paid better than $10/hr. I ended up getting a job out of college I could have done without the degree (ironically enough) and that paid well over $10/hr. I had co-ops that paid better than that! You settled too soon dude.
- passedoutghost, on 06/24/2008, -0/+1You simply can't. I've got a $40,000 (AUD) loan to pay off at the end of my degree plus another $10,000+ for the practical training that I need to do if I expect to make any money. I'm working a part time job at a child care that pays $17/hr. I'm only able to pay $500 every semester to get a discount on the final lump sum. It sucks. But if you're with an entry level job at a company that operates at a field that's relevant to your degree, then keep at it. It will pay off in the end and tells the bosses that you are dedicated and hardworking.
- RedViper1999, on 06/24/2008, -0/+4I'm going to have 200k in loans once I'm done with medical school. Adding in the pile up in interest it'll be closer to 300k. And you wonder why medical care is so expensive in this country. And that's not even adding in the interest that accumulates while I'm making 40k a year in residency.
- JoeMerchant, on 06/24/2008, -0/+0Yeah, but if you specialize in a lucrative field, you can bring in $500K+/year... congrats on beating the AMA's arbitrary entrance lottery - that's why the system is so F'ed up - an engineered shortage of physicians.
- Lawrencesss, on 06/24/2008, -0/+2Enjoy your yacht
- TheKingInYellow, on 06/24/2008, -0/+1medical care in this country is expensive because it's a business first of all and second, it's in high demand. it has nothing to do with how much it costs to become a doctor. spending a bunch of money doesn't make you a good doctor. america's medical system makes me sad because they're out to make money and don't give a ***** about who lives or dies in the process.
- br0ck, on 06/24/2008, -0/+3If you don't make enough, you can defer your loan or set up lower payments, but steer clear of those consolidation loan businesses. The first hit on google was actually a pretty good article about all of the different options you have although you'll probably need to ignore whatever it is that they're trying to sell: http://www.nolo.com/article.cfm/objectId/63C80677- ...
- bsmeteronhigh2, on 06/24/2008, -2/+1I would write something profound, but our slave masters read every word.
- Hillsfar, on 06/24/2008, -0/+1I better digg you down before you get noticed for even thinking of it...
- greeniemeani, on 06/24/2008, -3/+1Haha - I ended up with 10k after finishing college and started with a job paying 50k in a place where 900 dollars a month gets you a 3 bedroom apartment in a nice neighborhood. You guys with debts over 20k majoring in some ***** like marketing, business, or any kind of art got had big time. Lulz on you.
[/*****] - thenoelman, on 06/24/2008, -0/+1Dave Ramsey says get an additional job. Work as much as you can - 2-3 jobs. I have 2 and my wife has 1 and we are working hard with 1 kid @ 2 years old and 1 due in August. Hard work pays off, but I agree with what others have said - keep looking for something better, but it will get better.
- mousky, on 06/24/2008, -0/+1Why can't people work a year or two before going to university or college? We are living longer and those of getting married are getting married later in life, so what is the rush?
- Buckeye17, on 06/24/2008, -1/+2Why work 1-2 years before college, when you could make a lot more money in the 1-2 years after college? Opportunity cost.
- mousky, on 06/25/2008, -0/+1Your model of opportunity cost ignores having to deal with the stress from having a large debt to pay off. You are unable to save and you question why you went to college in the first place. But hey, you are making more money. Too bad you don't get to enjoy that higher salary.
Or you could work for a year or two (hopefully living with mom and dad) and save up a bunch of money for school. You get your degree and still make "a lot more money in the 1-2 years after college" but your debt load is smaller. You can pay off your student debt faster or save some it or do whatever you want. You are doing better than "just barely getting by". You feel like your are on your way to better and bigger things.
- mousky, on 06/25/2008, -0/+1Your model of opportunity cost ignores having to deal with the stress from having a large debt to pay off. You are unable to save and you question why you went to college in the first place. But hey, you are making more money. Too bad you don't get to enjoy that higher salary.
- Buckeye17, on 06/24/2008, -1/+2Why work 1-2 years before college, when you could make a lot more money in the 1-2 years after college? Opportunity cost.
- Memnochxx, on 06/24/2008, -1/+54$95,000 and $10/hr? Someone did something wrong.
- Kent767, on 06/24/2008, -2/+24Good advice, basically the same plan Dave Ramsey ( http://www.daveramsey.com/ ) has been talking about for years. We've been following this strategy and in the past 3 months have paid off my CC (about 2000), my wife's is about half done (5000), and, assuming i don't buy a house would end up paying off my car (15K) in less than a year from now.
- p_o_b, on 06/24/2008, -0/+10Dave is the MAN!
"Quit buying things you don't need, with money you don't have, to impress people you don't like!" - tonyscha, on 06/24/2008, -3/+3RTFA he mentions Dave Ramsey
- mrshickadance9, on 06/24/2008, -1/+1I'm assuming that RTFA means "read the full article". dugg down for that reason. type the damn sentence. ttds.....
- TheKingInYellow, on 06/24/2008, -0/+2"read the ***** article". you should stfu and rtfm...welcome to the internet!
- mrshickadance9, on 06/24/2008, -0/+1sorry. I guess it doesn't bother me when it takes 5 more seconds to type a full sentence.
- mrshickadance9, on 06/24/2008, -1/+1I'm assuming that RTFA means "read the full article". dugg down for that reason. type the damn sentence. ttds.....
- akatherder, on 06/24/2008, -0/+3Yes I was feeling bitter that he basically just re-stated the basics of the Dave Ramsey plan until he attributed the knowledge to him at the end. He's a good motivator and fun to listen to.
- MinnesotaTwins, on 06/24/2008, -0/+2Dave is the man, following his plan we have paid off our last credit card and are now working on student loans and next the house.
- elveis, on 06/24/2008, -0/+2FREEEEEEEEEEDOMMMMMMMMM!!!!!
- Barbarino, on 06/24/2008, -0/+1Dave changed my life. Paid off 40k ish in 3 years. Hardest part was you have to stop listening to your friends and family who are broke.. My friends would make fun of me for not going out, they didn't understand it, but now that I'm debt free they call me and ask me how I did it. Check out his pod cast on Itunes is the 1st thing I say. You need to hear Dave before you read Dave. The day I paid off all my debt I bought me a 61 inch TV cash...
- ScottMitchell, on 06/24/2008, -0/+1Yes, Dave Ramsey rules. Although he would point out that you shouldn't have "your CC debt" and "your wife's CC debt," but "our CC debt."
- p_o_b, on 06/24/2008, -0/+10Dave is the MAN!
- ragley, on 06/24/2008, -8/+1Simple solution, don't pay your old bills. And let your new bills get old.
- hollywoodphony, on 06/24/2008, -1/+3JD Roth? The host of Fun House??
- bhone17, on 06/24/2008, -1/+12This really seems like just simple common sense to me.
- reknaps, on 06/24/2008, -0/+7The sad part is that you're absolutely right...
- happycat, on 06/24/2008, -0/+0Ya, it's basic common sense, but how many people have common sense? Simply put, don't spend as much as you earn. Unfortunately that can be hard to do with all the superficial materialistic temptations thrown at us.
- mathcreative, on 06/24/2008, -0/+1Yeah, theirs a quote for that,"Easier said then done."
- NightRiderkami, on 06/24/2008, -3/+4There is a great book anyone with financial troubles should read, and even those who don't. It's called 'The Richest Man in Babylon'. It presents everything in this article and more through the eyes of ancient Babylonians. Simple things everyone can do to grow wealth, and stay out of debt. Just a recommendation...
http://www.thesimpledollar.com/2006/12/23/review-t ... - GordonClass, on 06/24/2008, -11/+2Bankruptcy works too.
- jmantra, on 06/24/2008, -0/+1the idea behind paying off debt is to avoid bankruptcy, bankruptcy is not a good thing and with that said:
http://jmnatra.com/duggdown.wav
- jmantra, on 06/24/2008, -0/+1the idea behind paying off debt is to avoid bankruptcy, bankruptcy is not a good thing and with that said:
- Yashar, on 06/24/2008, -1/+7Well I don't agree with never getting a credit card. A credit card such as a secured credit card can help build your credit if you don't have a credit history. Just use the cards once a month or so and pay off the balance right away. Your credit score will go higher by the month. Thus, this will lower your interest rate and put you in a place where you wouldn't have to pay out of the ass every month (and risk it building up into massive debt) for the loan you took out on a car or a mortgage.
I am sure a lot of people know this, but yea. Simple things help.- cgjamj, on 06/24/2008, -1/+1Actually, that's not totally true. If you're starting out and want to establish credit, you need to carry a revolving balance for at least 6-8 months, paying it on time each month. You can pay more than the minimum balance and pay it off completely after 6 months or so. This will increase your credit score. By always paying exactly what you charge, it doesn't show the pattern that you can responsibly repay "debt" and therefore will not improve your score as much as say a car loan.
- Buckeye17, on 06/24/2008, -0/+1Do you have a source? I'm interested, b/c I've been using a credit card like I would a debit card... paying it off each month, assuming my credit score will improve.
- cgjamj, on 06/25/2008, -0/+1Well, I work for a large financial institution, but I'm sure if you google it you'll find sources to back it. Your credit score will increase with what you're doing. It will just increase more/faster if you have some type of revolving balance for at least 6 months. Maybe try leaving $100 unpaid each month, then pay that after 6-8 months. I know several people who use credit cards as you are. There are many benefits to doing that (points, rewards, protection, etc), but they all have car payments, mortgages so they do carry revolving debt.
- Buckeye17, on 06/24/2008, -0/+1Do you have a source? I'm interested, b/c I've been using a credit card like I would a debit card... paying it off each month, assuming my credit score will improve.
- cgjamj, on 06/24/2008, -1/+1Actually, that's not totally true. If you're starting out and want to establish credit, you need to carry a revolving balance for at least 6-8 months, paying it on time each month. You can pay more than the minimum balance and pay it off completely after 6 months or so. This will increase your credit score. By always paying exactly what you charge, it doesn't show the pattern that you can responsibly repay "debt" and therefore will not improve your score as much as say a car loan.
- hotweiss, on 06/24/2008, -2/+1site is already down...
- Lawrencesss, on 06/24/2008, -0/+1Probably didn't pay his host.
- nardokid, on 06/24/2008, -2/+735k? please. I was slapped with 65k out of college in student loans
- reknaps, on 06/24/2008, -1/+5There's a big difference between low interest student loan debt and general credit card consumer debt (which JD had).
- nardokid, on 06/24/2008, -0/+1the first 25k of my student loan was low interest because that's all I could get from the federal government through FAFSA. The rest was a private bank loan with a variable interest rate that shot up to over 11% 6 months after I got out of college.
- joekewle, on 06/24/2008, -1/+1"Slapped"?? Like.. you didnt know it was coming?
- nardokid, on 06/24/2008, -0/+1exactly. After applying for loans so I could finish my degree, I totally forgot that I had to pay them off after I got out of college. douche
- reknaps, on 06/24/2008, -1/+5There's a big difference between low interest student loan debt and general credit card consumer debt (which JD had).
- ipfree, on 06/24/2008, -2/+25It is un American to pay off all of my debt
- Olfster, on 06/24/2008, -0/+1I know right? Was it really smart to pay it off over, what 20 years, vs just claiming bankruptcy? You could have had a cleaned the slate almost three times. Don't try that now though, Mr. Bush made sure that people could not play the system anymore.
- jonnyboyca, on 06/24/2008, -4/+19I work for a major credit card company and the best advice I can give you guys is...... DON'T EVER GET A CREDIT CARD!
- passedoutghost, on 06/24/2008, -1/+1Never really see why I needed it in the first place. It just creates excuses to splurge on consumer goods that you really don't need and if you really do need a new computer if your old one was stolen/destroyed/or from 1999, then go to the bank, withdraw some money and use it in conjunction with your EFTPOS card. That way it's YOUR money that you're spending and you'll get a better idea of saving it up.
- splorpdotorg, on 06/24/2008, -0/+5Why not? My Discover card (never carry a balance) with no annual fee is currently giving me 5% back on my gas purchases. My wife and I use our CitiBank card to buy the groceries and get 1% back. Again, we don't carry a balance and don't have an annual fee.
Ever try to get plane tickets, hotel reservations or rent a car without a credit card? Yes, it can be done, but it's oh, so much easier with a credit card.
Why shouldn't I have credit cards?
- justz00t, on 06/24/2008, -2/+4Here is my emergency fund extra tip.
Buy gold as a way to help make sure that you don't get tempted to spend that fund frivolously. I like to purchase Krugerrands the 1/10 variety due to affordable cost. These can be easily sold in emergency's and the value of gold rises rather than falls like dollars.- JoeMerchant, on 06/24/2008, -0/+1Hope you didn't buy too many during the recent price spike!
- tendonut, on 06/24/2008, -1/+4Theirs GOLD in that thar home! Hehehe! hehehe!
- justz00t, on 06/25/2008, -0/+1And the owner also packs a lot of heat. so no one get any ideas. :)
- dreesemonkey, on 06/24/2008, -0/+2While gold is currently performing well, over time is hasn't even appreciated at the rate of inflation. Just FYI.
- justz00t, on 06/25/2008, -0/+1It may have not followed inflation like a shadow at times but its purchasing power remains for the most part at least the same as the day you bought it.
I also did not mean to imply that this was a investment in gold. I was really just trying to point out that its a nice way to hold money for real emergency's without having the temptation of cash on hand.
Plus its freaking gold and has the added bonus of making you feel like a pirate!$!! :)
- justz00t, on 06/25/2008, -0/+1It may have not followed inflation like a shadow at times but its purchasing power remains for the most part at least the same as the day you bought it.
- joekewle, on 06/24/2008, -0/+2That's crazy, gold is a bad investment, your emergency fund should be a lot more liquid as well.
- astrocreep2k, on 06/24/2008, -0/+2Gold attracts Pirates.
- justz00t, on 06/25/2008, -0/+1Its not meant as a investment, its meant to be a means of storing cash kinda like a piggy bank. So not being too liquid is the point as it would make you look at the emergency more closely and try every other possible option before cashing it in.
- richofsilence, on 06/24/2008, -1/+11I'm going the "take a contractor job in the middle east" route to pay off my debt.
I'll be debt free (and hopefully not dead) in the next few months!- itsthemechanic, on 06/24/2008, -8/+2or ***** dead.
- richofsilence, on 06/24/2008, -1/+6Wow. What's up, no reading comprehension?!
- YukosEyes, on 06/24/2008, -0/+2On principle, I'd rather have personal debt a little longer than be a part of the war effort to pay it off. There are alternatives, but the easiest fixes (for individuals) are usually the most dangerous and morally questionable. The taxpayers will be paying for your contract work; rather, our country will be going into debt to pay for your contract work since there aren't enough people volunteering for the military.
- richofsilence, on 06/27/2008, -0/+0Sucks for you guys. My family's financial future is more important to me than yours.
- itsthemechanic, on 06/24/2008, -8/+2or ***** dead.
- dacoatne, on 06/24/2008, -3/+0One word: wp-cache][ :)
- duder83, on 06/24/2008, -0/+2i have an idea, it's called a budget
- Venkatsubramane, on 06/24/2008, -2/+21How to get out of debt:
1) Send $10 to each of the 10 names below.
2) Reorder the list, removing #1, and moving each name up a slot
3) Add yourself as #10
4) Send this list to 100 different people (more if you want more money)
Oh wait... Why do I get the feeling I just fell for a pyramid scheme?- Aero347, on 06/24/2008, -0/+2I got that letter to, the chain usually ends when someone who's heard of 'too good to be true' receives it.
- fLUx1337, on 06/24/2008, -0/+1Its not a chain though, its a pyramid scheme. A pyramid scheme only stops if everyone who receives it doesn't do it. But it wouldn't even start at all if that was the case.
- Aero347, on 06/24/2008, -0/+2I got that letter to, the chain usually ends when someone who's heard of 'too good to be true' receives it.
- s0nicfreak, on 06/24/2008, -7/+9Well thanks captain obvious! If I had money to pay off my debts and put aside an emergency fund, I wouldn't be in debt.
- Aero347, on 06/24/2008, -0/+4Pay the minimum on all cards.
Save money in the mean time.
Start paying larger payments starting with the smallest balance until you're out of debt.
Just takes a steady job, living within a budget, and plenty of discipline.- s0nicfreak, on 06/24/2008, -3/+2Once again, thank you captain obvious.
I don't have credit cards, couldn't get them if I wanted to because of my bad credit.
I don't have spare money to save.
I don't have enough to pay even my smallest debt.
All my money goes to paying rent and bills.- hoowahman, on 06/24/2008, -0/+8You need to learn a skill.
- aukxsona, on 06/24/2008, -1/+2Indeed. My family of seven on 13k can save and pay off debts. That's sad, very sad. In fact, I a mother of 5, have enough skills to feed, clothe, clean, and care for my children on little to no income for a year or more. When I mean little to no I am talking about 6k or less a YEAR. And no I don't use food stamps. That's right 6k for 7 people. That's less than 3 dollars per day per person, in America. (It's about 2.50 a day) I have done it before, it isn't fun, but it can be done. If you make more than 6k a year and your can't pay off debts as a single person, you need to take a personal finance class, cooking classes, sewing classes, and basic trade classes.
- s0nicfreak, on 06/24/2008, -0/+1@aukxsona
Well that's nice for those people who inherited a farm or some *****... - aukxsona, on 07/01/2008, -0/+1Didn't inherit a farm. I just happen to have a brain and know how to use it!
- s0nicfreak, on 06/24/2008, -3/+2Once again, thank you captain obvious.
- JoeMerchant, on 06/24/2008, -0/+4Odds are that you have some optional expenses that are keeping you in debt....
Could your transportation be cheaper than it is?
Do you pay more than $30 per month in electricity bills? (Hot water is actually a luxury, ditto air conditioning)
Could you cut your rent?
Have you bought new clothes from somewhere more expensive than WalMart lately?
etc. If you already live like it's 1925 and you still don't make enough money to pay your expenses, you need to step up to a real job, like full-time fry cook at McDonalds. Even with a couple of kids, it's entirely possible to live within your means - not much fun, but if you stop watching all the bling on TV, maybe you won't be so tempted to blow all your money on it.- aukxsona, on 06/24/2008, -0/+1Better response.
Do you walk to work?
Do all your monthly bills cost more than 300 a month?
Have you bought ANY new clothes in the past 3 months?
Is your heat a wood stove?
Do you cook your own food?
Do you grow your own food?
Do you replace buttons, mend hems, or even replace zippers to keep clothes usable?
Have you bought new shoes in the past year?- s0nicfreak, on 06/24/2008, -0/+1Yes I walk to work.
Yes my bills are more than $300 a month.
No I have not bought any new clothes.
I live in an apartment, so a woodstove is not allowed.
Yes I cook my own food.
Again I am in an apartment, growing enough food to feed 3 people is not really an option.
Yes I mend clothes.
I bought new shoes about 6 months ago, but only because my current shoes were not allowed at work. The shoes cost $6. Before that I hadn't bought new shoes in about 5 years.
- s0nicfreak, on 06/24/2008, -0/+1Yes I walk to work.
- s0nicfreak, on 06/24/2008, -0/+1I don't watch tv/don't have cable, and besides that am not into "bling".
I have not bought new clothes from anywhere more expensive than walmart lately nor ever. In fact 90% of my clothes come from the goodwill store (less than walmart), 10% from walmart. And I haven't bought new clothes at all in years. - splorpdotorg, on 06/24/2008, -1/+1Hot water is not a luxury. My apartment PAYS for water. I pay for the gas to heat it. Less than $10/month.
- aukxsona, on 06/24/2008, -0/+1Better response.
- Aero347, on 06/24/2008, -0/+4Pay the minimum on all cards.
- freedom998, on 06/24/2008, -5/+0http://www.youtube.com/watch?v=IWgSNCETA7E
- ufia, on 06/24/2008, -3/+3Male prostitution to pay off your debts?
- nycmac247, on 06/24/2008, -0/+1no- interactions cost money; get a yoga book from the library and learn how to blow yourself
- MikeFallopian, on 06/24/2008, -4/+19"This money is for emergencies only. It is not for beer."
OK, well if running out of beer is not an emergency I don't know what the hell is.- KJSatz, on 06/24/2008, -0/+4Thank you, sir.
- lexington86, on 06/24/2008, -3/+39What the hell is wrong with getting a credit card? It's like a lot of you are trying to blame the cards when the root of the problem is dumb people spending tons of money that they don't have.
Just be responsible for your own damn money!!- zoid, on 06/24/2008, -2/+2It's not the idea of a credit card but the credit card companies are scum. They can (and will) up your rate for no reason at all. their whole goal is to trap you into not being able to pay. at this point you are paying 100% interest and not ever getting out of CC hell. If you are "responsible for your own damn money" you will never get a credit card. Check card works just fine and it's your own money.
- lexington86, on 06/24/2008, -0/+5Not sure what credit cards you have... but on my two cards I've been nothing but responsible and my rates have never changed.
And you're wrong on the second point too. Being "responsible for your own damn money" means managing your credit wisely so when it comes time to really need it (e.g. car, house), you get spectacular rates. I bought a brand new car at age 21 and got a crazy good rate because I had been responsibly managing my credit for the three years prior.- lisaawesome, on 06/24/2008, -0/+2I've had two credit cards for about 3 years each and they have never once raised my rates. Probably because I have never had a late payment. Now if you are late you might be saying hello to upped interest rates but that's a different matter. You can be responsible for your own money and have credit cards and a small amount of debt.
- srneu71, on 06/24/2008, -0/+9If you treat your credit card like cash then you can actually come out ahead. The key is to keep a zero balance and do not buy things you cannot afford.
I keep a Discover card for travel expenses and most large purchases. About every 4-6 months I get $40-$60 back from them, and never pay a cent in interest. In 14 years of having the card, I've carried a balance maybe 2 months total. It's not really hard to do if you don't get behind on it.
So to me, I don't care how scummy the credit card people are. I don't overspend my income.
- lexington86, on 06/24/2008, -0/+5Not sure what credit cards you have... but on my two cards I've been nothing but responsible and my rates have never changed.
- passedoutghost, on 06/24/2008, -1/+2Credit cards just make it easier for people to get into debt. So why not get rid of the risk?
- DanMiller, on 06/24/2008, -0/+3Isn't this like saying selling alcohol makes it easier for people to drink and drive so lets get rid of the risk?
- mathcreative, on 06/24/2008, -1/+1Yes!
- passedoutghost, on 06/24/2008, -0/+0I'm talking on an individual level here. Not remove it completely. Don't use credit cards if you're the type of person who easily gets into debt. Same thing with alcohol and driving. Don't take things so literally Dan.
- DanMiller, on 06/24/2008, -0/+3Isn't this like saying selling alcohol makes it easier for people to drink and drive so lets get rid of the risk?
- YukosEyes, on 06/24/2008, -0/+0Why is a credit card better than my debit card? I will never have a credit card!
- JensUK, on 06/24/2008, -0/+3People say to avoid credit cards for the same reason they say to avoid donuts. You can remain thin and healthy while having the occasional donut, but if it's even easier without them.
If you are one of the few people that never carries a balance, then it's fine for you, and the advice of not having a credit card shouldn't be a bother - just leave it alone and let it get out there to the masses who can't handle it. - EssPii, on 06/24/2008, -0/+1If people's problem is spending money they don't have, what makes it incredibly easy to do so? Using credit or having a credit card where you can actually spend money that you don't have. If you only use cash, it is hard to spend money you don't have since.... well.... you don't have it.
It's not the responsible people he is telling to not get cards, its the people who think their credit limit is extra cash they have for the month.
- zoid, on 06/24/2008, -2/+2It's not the idea of a credit card but the credit card companies are scum. They can (and will) up your rate for no reason at all. their whole goal is to trap you into not being able to pay. at this point you are paying 100% interest and not ever getting out of CC hell. If you are "responsible for your own damn money" you will never get a credit card. Check card works just fine and it's your own money.
- flogistan, on 06/24/2008, -7/+3I'm curious as to why some guy on the internet would care if I pay back my debts. I imagine the banks will post many articles like this as more people default on their loans. My personal advice is to get drunk, don't pay it, stop answering the phone, and forget about it. That's what everyone else is about to do. The bastards shouldn't have given you credit in the first place.
- mathcreative, on 06/24/2008, -0/+1Anarchist
- nanded, on 06/24/2008, -0/+7While I agree with some of this guy's points, to write of credit cards as not being convenient to use is ridiculous. Obviously, this is predicated on the assumption that you control your spending and you pay off the balance on the card every month, in which case it's as good as cash. It saves me from having to carry around large amount of cash all the time. Even more important, it adds a layer of security between me and my liquid assets. Say some guy gets my credit card information and charges $5000 on there. When I notice this fraud on my statement I can call the credit card company and say "This is a fraudulent charge, I need to cancel this number and you need to have your fraud department look into this" while I have my money in the bank still. Compare this to if some guy gets my debit card information and drains my checking account. I'll be without my money for the 6 months it takes for my bank to sort things out.
- JoeMerchant, on 06/24/2008, -0/+4Not using cards is like dieters not eating carbs - there's no magic in carbohydrate calories, they're just so damn easy to get ahold of in today's world. Same goes for credit cards - I could go out and buy a damn car on my card, and still have balance left over for some fly rims and a killer video system for it, and even when I go over my $20K limit, they don't stop me from charging, just slap on an "over limit" fee....
If you can't control it, make it go away. Odds are that people in debt can't control it. Just like AA - cold turkey is the only answer.- aukxsona, on 06/24/2008, -0/+1Cold Turkey worked for me and cigarettes!
- lholthouser, on 06/24/2008, -2/+0Credit cards are not as good as cash. And, neither are any 'same as cash' offers. You will spend 10%-20% more money on the same purchase if you use a card over cash. Besides, you will NEVER get your identity stolen by using cash.
- JoeMerchant, on 06/24/2008, -0/+4Not using cards is like dieters not eating carbs - there's no magic in carbohydrate calories, they're just so damn easy to get ahold of in today's world. Same goes for credit cards - I could go out and buy a damn car on my card, and still have balance left over for some fly rims and a killer video system for it, and even when I go over my $20K limit, they don't stop me from charging, just slap on an "over limit" fee....
- skoles, on 06/24/2008, -2/+8What worked for me was just as obvious as the article.
- Stop impulse buying
- Accept that you're going to be living frugal for a few months
- Pour everything you make other than for food & gas into paying the cards off
- Learn the ways of Top Ramen: http://www.mattfischer.com/ramen/ - kenners301, on 06/24/2008, -1/+2I use my credit card as a bill savings account, I just deposit my cash into it each week. Fancy that a credit card used as a debit card. Oh and credit cards are a fantastic way of buying stuff over seas. I doubt my business would run as efficiently without having a Credit card there to facilitate payments. Of course I do have a card without monthly fees and no "free to pay this off within 30 days" arrangement either.
I think some of you should relook at debt as being a negative thing :) I'd love a $50,000 bank loan to get my business kick started! - dildoolielly, on 06/24/2008, -3/+6Heres a better tip:
If you find you are barely able to pay the high interest on your credit cards and can barely pay your minimum credit payments and nothing in the future shows your hardship getting better, like the fact that your house isn't worth nearly as much as you paid for it in this economy, your best financial strategy is to file a Chapter 7
Don't believe me? Go ask a lawyer- joekewle, on 06/24/2008, -0/+1Of course a lawyer is going to say that... they get MONEY for it.
- blackhappy, on 06/24/2008, -10/+4I just quit paying , changed my phone number and address and haven't heard ***** since and that was 5 years ago. 2 more years and I will be debt free as it expires after seven years.
- JoeMerchant, on 06/24/2008, -0/+3
I believe this is called chapter FO bankruptcy, it's just about as bad for your credit as any other chapter, but effectively the same.
By the way, the collectors will keep calling after 7 years, you will get a lot of practice sending cease and desist notices to them before they all shut up.- blackhappy, on 06/24/2008, -1/+2I still won't owe people *****!!! Haven't heard from them in 5 years what makes you think I'll hear from them ever again. People get to hyped up over credit scores I own a house and a car and with a ***** score. Besides that what else do you need a high score for? It like kids who freak out over their grades in school to only realize they don't mean ***** in reality.
- elveis, on 06/24/2008, -0/+1Sounds like the rational of a solid D+ student. But then again, grades don't mean *****.
- blackhappy, on 06/24/2008, -0/+2C+ and I hold a masters degree, but nice try. Besides a house and a car what else you need a credit score for? More credit cards?
- DanMiller, on 06/24/2008, -0/+1Have you ever considered that you are paying a much higher rate on that nice house and car? While I don't believe your absurd claim in the first place the idea that borrowing money and then running away is acceptable is absurd. You may be happy paying on a loan 3 points higher than someone who has a good score but I would much rather have that money paid in interest to go on nice vacations and improve my quality of life.
- blackhappy, on 06/24/2008, -1/+2I still won't owe people *****!!! Haven't heard from them in 5 years what makes you think I'll hear from them ever again. People get to hyped up over credit scores I own a house and a car and with a ***** score. Besides that what else do you need a high score for? It like kids who freak out over their grades in school to only realize they don't mean ***** in reality.
- JoeMerchant, on 06/24/2008, -0/+3
- rnelsonee, on 06/24/2008, -2/+8Just an FYI - the article says to attack the debt with the lowest balance first, and then move to the next lowest, etc. This is great psychologically - but not the smartest way. You want to eliminate the debt with the highest rate first, and then the next highest, etc. It will always be cheaper. Putting extra money down for a 3.75% student loan is stupid if you're paying 19.99% for a credit card balance. If you have an extra $1000 to throw towards the principal, put it towards the credit card and you'll save $(199-37.50) = $161.50 every year you still have each of those debts.
- Buzzbean, on 06/24/2008, -0/+2Both ways of doing it are good advice. Either way will work. The way you outlined will indeed save more money, but what good is a plan if you can't follow through with it? The point of paying off the lowest balance first is that you have positive results quickly, giving you positive reinforcement and making it more likely you'll stick to the plan. I think the best way is to start with the balances you can pay off in a few months. Once the smallest balance would take you close to a year, I'd shoot for the highest interest rate. If it's going to take a year to get a balance paid off, it defeats the purpose of paying off the lowest balance first.
- JensUK, on 06/24/2008, -0/+2You aren't considering cash flow. It can be very beneficial to have a minimum amount of required outgoing funds per month. If you pay off the smallest first, you'll quickly get to a happy place where if the furnace dies, you can get it fixed w/out going into debt. On your highest-interest-first plan, there's less chance of having that non-mandatory cash.
- DanMiller, on 06/24/2008, -0/+1You also should consider that minimum payments tend to stack. Even high balance cards tend to have low minimum payments. It can be a great relief to pay off those 3 low balance cards costing $30 a month each rather than paying those and trying to tackle the high balance on at the same time. Lets be realistic. 161 in a year isn't much.
- MadEnvoy, on 06/24/2008, -8/+4I'm just going to let my children pay of my debts, what are kids for anyway?
- danharlow, on 06/24/2008, -2/+4If you need a list like this to help you get out of debt then you are too dumb to ever get out of debt anyway. I mean, come on! This is nothing but common sense stuff your mommy should have taught you when you first had a lemonade stand and paper route to pay for that new bike.
Duh FTW!!!! - dvdchris, on 06/24/2008, -4/+7This is a complete rip of the Dave Ramsey plan, down to the phrases he uses.
- stevecody, on 06/24/2008, -0/+0Dude, he references Dave Ramsey's book "Total Money Makeover" in his story. He is obviously following Dave Ramsey's plan and telling people to follow it as well.
- billllyboobs34, on 06/24/2008, -8/+2Ehh. I just declared bankruptcy.
- dagamer34, on 06/24/2008, -0/+3Unless it's for school or a mortgage, people shouldn't be having debt in the first place.
- truman48, on 06/24/2008, -2/+1I view one of my kidneys as my safety net. He could have gone to India and had a simple procedure to eliminate his debt.
-
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