Debt

[AtomicCEO]

Looking at either a Subaru Outback (popular among the granola set) or a Chrysler Pacifica, actually. I told my wife I refuse to live in the Upper Midwest without at least one of us having a 4WD/AWD vehicle (and she won't give up her PT Crooza)

 

 

I know you're not Mexican... but it is a major stereotype that Mexicans around here drive PT Cruisers.

 

You should complete the south of the border fantasy and get a Chevy HHR. Those things are also retro-Americana styled.

[AtomicCEO]

I will be completely debt free in July this year, minus the 45k I still owe on my mortgage.

 

 

Congrats man.

 

I finished halfway through last month. It feels fantastic. Just two years ago I was paying off a lease with my old upside-down card built into it, and I had like 10K in cc debt.

 

I now have two IRAs and a high yield savings account. Lookit me! I'm a milly-on-aire, maw!

[Chavez]

I know you're not Mexican... but it is a major stereotype that Mexicans around here drive PT Cruisers.

 

You should complete the south of the border fantasy and get a Chevy HHR. Those things are also retro-Americana styled.

 

It's my wife's car.

 

I think the best description I ever saw of the HHR was "it's the car for people who think Chevy makes the PT Cruiser and are too lazy to go to a Chrysler dealership when they find out they're wrong."

[MojoMan]

weigie,

 

Thanks for posting this article. I never understood why banks did all of these high risk loans. Now it is clear...it's a game of hot potato or musical chairs...works great as long as you're not the one left standing when the music stops. I also did not fundamendally understand the Enron scam.

 

Congrats to the huddlers who have worked themselves out of cc debt. It's no easy feat what with the finance companies trying to get you deeper into debt.

[wiegie]

weigie, Thanks for posting this article.

Actually, Cliaz is the one who posted the article, so you need to thank him.

[AtomicCEO]

Actually, Cliaz is the one who posted the article, so you need to thank him.

 

 

Thank you wiegie, for giving proper credit to muck for this.

[cliaz]

Actually, Cliaz is the one who posted the article, so you need to thank him.

 

 

 

I'm becoming a wiegieite.

 

 

All hail wiegie in all of his glory!

[The Holy Roller]

Oh this thread is rich, I tell ya. WE (that's all of us Huddlers) DON'T OWN ANYTHING!

 

 

We are simply renting everything from the goberment. Don't believe me? Don't pay your property taxes for a while. Or your personal property taxes. Eventually the goberment comes and takes it all away and sells it. Heck, they even rob your paycheck before you get it. We are all "renters" forever. So being "debt-free" will always be a myth.

 

I used to be a believer in work hard, save, be thrifty, be-the-ant-not-the-grasshopper type but the whole game is rigged against that type of thinking. I am thankful for my health, the roof over my head, and the clothes on my back. But to think those things are important? Meh. I spend my money and my time with the people I love. The old hymn says it best for me, "...this world is not my home, I'm just a passin' through...". Or James Taylor.

 

The secret of life is enjoyin' the passage of time

Any fool can do it

There ain't nothin' to it

Nobody knows how we got to the top of the hill

But since we're on our way down

We might as well enjoy the ride.

 

Just my

[cliaz]

Oh this thread is rich, I tell ya. WE (that's all of us Huddlers) DON'T OWN ANYTHING!

We are simply renting everything from the goberment. Don't believe me? Don't pay your property taxes for a while. Or your personal property taxes. Eventually the goberment comes and takes it all away and sells it. Heck, they even rob your paycheck before you get it. We are all "renters" forever. So being "debt-free" will always be a myth.

 

I used to be a believer in work hard, save, be thrifty, be-the-ant-not-the-grasshopper type but the whole game is rigged against that type of thinking. I am thankful for my health, the roof over my head, and the clothes on my back. But to think those things are important? Meh. I spend my money and my time with the people I love. The old hymn says it best for me, "...this world is not my home, I'm just a passin' through...". Or James Taylor.

 

The secret of life is enjoyin' the passage of time

Any fool can do it

There ain't nothin' to it

Nobody knows how we got to the top of the hill

But since we're on our way down

We might as well enjoy the ride.

 

Just my

 

 

 

 

why do you hate america?

[The Holy Roller]

why do you hate america?

 

 

Oh I love America. It's the British with their bad teeth I hate.

[Coffeeman]

I am impressed with the economic wisdom (and the execution of carefully laid debt-reduction plans) of this crowd. I have to admit to being in a bit of a credit hole and digging my way out just now.

 

Even with two well educated, hard-working adults the lure of easy credit can easily suck you into a bad situation. I look at credit in three classes:

 

A) School loans and home loans = the best kind of debt, using the assumption that these things will increase your cash flow (school) and/or appreciate (house,) respectively.

 

B ) Borrowing to buy big ticket depreciating assets like cars, furniture, appliances, clothes etc. Cash should be used instead here.

 

C) Or worse - using credit cards for things with no resale value that should've been saved for, like Xmas, vacations, or God forbid - weekly groceries and dinners out. These things should always be paid in cash, although Amex is okay if paid in full each month.

 

'Class A debt' as I'll call it, it not a bad thing as long as it truly does increase your income or asset base. Class B debt is seen as a necessary evil by most, if not all, middle class and poor folks. Class C debt is truly dangerous, as it tends to pile up even when the truly dimwits are focusing more on the 'miles I'm getting on United,' etc. Class B and C debt is being traded for lower interest Class A debt at a record pace in the USA, which helps in the short run, but the spending habits that cause Class B & C debt are not changing. A metaphor for this is the corresponding trouble in the US with weight gain - short term diets without long-term lifestyle changes don't work too well, do they?!

 

Having said all that, and knowing all this from young adulthood, I've still fallen down from time to time. I'm in the process this week of cashing out about $15K in 401k stash (with the 10% penalty - ouch) to pay off some credit cards that (I'm extremely embarrassed to admit) my wife and I allowed to creep up on us. A combination of Class B & C debt plus costs like private grade school, insurance and ARM costs (plus 2 more kids and a non-working spouse!) all rising faster than my slowly increasing salary, has caused this to happen over the last 4 years. I could blame it on the high costs of housing, taxes and the piss-poor public schools here in my town in SoCal, but I choose to live here fully knowledgeable about those things, and have a wife that stays home to care for our kids.

 

Severe short-term belt-tightening and long-term lifestyle changes are being done also, and we'll be back on track by the end of this year. But like my waistline, the trick is maintaining it over the long run. Many people, including our own government, simply don't have the character to do this. I hope my family does, and I'm more dedicated than ever to making the hard changes that being TRULY 'debt-free' requires.

 

Wish me luck...

Edited March 27, 2007 by Coffeeman

[jaxfactor]

I am impressed with the economic wisdom (and the execution of carefully laid debt-reduction plans) of this crowd. I have to admit to being in a bit of a credit hole and digging my way out just now.

 

Even with two well educated, hard-working adults the lure of easy credit can easily suck you into a bad situation. I look at credit in three classes:

 

A) School loans and home loans = the best kind of debt, using the assumption that these things will increase your cash flow (school) and/or appreciate (house,) respectively.

 

B ) Borrowing to buy big ticket depreciating assets like cars, furniture, appliances, clothes etc. Cash should be used instead here.

 

C) Or worse - using credit cards for things with no resale value that should've been saved for, like Xmas, vacations, or God forbid - weekly groceries and dinners out. These things should always be paid in cash, although Amex is okay if paid in full each month.

 

'Class A debt' as I'll call it, it not a bad thing as long as it truly does increase your income or asset base. Class B debt is seen as a necessary evil by most, if not all, middle class and poor folks. Class C debt is truly dangerous, as it tends to pile up even when the truly dimwits are focusing more on the 'miles I'm getting on United,' etc. Class B and C debt is being traded for lower interest Class A debt at a record pace in the USA, which helps in the short run, but the spending habits that cause Class B & C debt are not changing. A metaphor for this is the corresponding trouble in the US with weight gain - short term diets without long-term lifestyle changes don't work too well, do they?!

 

Having said all that, and knowing all this from young adulthood, I've still fallen down from time to time. I'm in the process this week of cashing out about $15K in 401k stash (with the 10% penalty - ouch) to pay off some credit cards that (I'm extremely embarrassed to admit) my wife and I allowed to creep up on us. A combination of Class B & C debt plus costs like private grade school, insurance and ARM costs (plus 2 more kids and a non-working spouse!) all rising faster than my slowly increasing salary, has caused this to happen over the last 4 years. I could blame it on the high costs of housing, taxes and the piss-poor public schools here in my town in SoCal, but I choose to live here fully knowledgeable about those things, and have a wife that stays home to care for our kids.

 

Severe short-term belt-tightening and long-term lifestyle changes are being done also, and we'll be back on track by the end of this year. But like my waistline, the trick is maintaining it over the long run. Many people, including our own government, simply don't have the character to do this. I hope my family does, and I'm more dedicated than ever to making the hard changes that being TRULY 'debt-free' requires.

 

Wish me luck...

 

 

Good luck! It may be rough for awhile but the feeling I'm feeling now is awesome. I want to add one thing to my other post. My girl lost her job at one point which is one of the reasons I fell into the credit hole. While she was working, however, it was too easy to use the credit cards to pay for cruises, Christmas, etc. When she lost her job I started using the cards for groceries and that's when I knew something had to be done. I refigured my plan and it will be at the end of July when I'm finally free. And I do have a second mortgage but I didn't list it because it's almost paid for. After July I will work on that and it too will be gone by the end of the year.

For those of you who are in the hole, a second mortgage can be used to pay off your debts. I thought about this but already had one at the time. Bankruptcy is also an option and I almost made the chapter 13 jump but decided against it. I know people who have gone this route and their credit scores are still in the 600s. Chapter 13, unlike chapter 7, is the better option as you are still paying your creditors through a trustee. I'm just glad I did it on my own and hope people who are hurting like myself and Coffeeman choose the right path. Especially if you have kids. You don't want to leave this world and your kids with a bunch of bills. Peace.

[alexgaddis]

There are so many misconceptions about bankruptcy it seems...You can recover very fast from a B/K, even a CH. 7...the key is to re-establish credit...the best thing is to get a small card and use it for ittle things and pay it off...I have seen credit scores in the mid 600's less than two years after a B/K...

[cdrudge]

I see cop cars parked outside those homes thinking “How in the hell does a cop afford a home like that?” Well we know how.

I don't know what it's like where you live, but around here, some police officers are some of the higest paid city employees. Not only do they get a decent base salary, but including overtime. There are usually a few officers pulling in $85k+ a year. Thanks to a old Indiana state law, our sheriff took in $150k a year or two ago because state law permitted him to keep 10% of back taxes he collects.

[cliaz]

I don't know what it's like where you live, but around here, some police officers are some of the higest paid city employees. Not only do they get a decent base salary, but including overtime. There are usually a few officers pulling in $85k+ a year. Thanks to a old Indiana state law, our sheriff took in $150k a year or two ago because state law permitted him to keep 10% of back taxes he collects.

 

 

Ours do not make that much.

[Ursa Majoris]

Add me to those who have been in the hole and climbed out. Four times in all, to a greater or lesser extent, taking multiple years to get back out on two occasions. Sometimes things happen that force the issue. If you're clear of CC debt / large payments e.g. car, and can afford your mortgage(s) (which IMO should not amount to more than 25% of your gross), you're in better shape than most people.

 

Right now I'm out of CC debt completely and have no car payment but I'm well aware that one $hitty event (job loss, illness, etc) could put me back in the hole again.

[SayItAintSoJoe]

Add me to those who have been in the hole and climbed out. Four times in all, to a greater or lesser extent, taking multiple years to get back out on two occasions. Sometimes things happen that force the issue. If you're clear of CC debt / large payments e.g. car, and can afford your mortgage(s) (which IMO should not amount to more than 25% of your gross), you're in better shape than most people.

 

Right now I'm out of CC debt completely and have no car payment but I'm well aware that one $hitty event (job loss, illness, etc) could put me back in the hole again.

 

 

 

I think (thanks to Dave Ramsey) it is also important to have an Emergency fund (4 to 6 mths of expenses) as well as the proper disability insurance to guard against these things.

[yo mama]

I think (thanks to Dave Ramsey) it is also important to have an Emergency fund (4 to 6 mths of expenses) as well as the proper disability insurance to guard against these things.

 

Obviously, if you can swing it. But that goal is pretty hard to attain unless you treat yourself like you're in debt to your emergency fund, just like you treated yourself when you were in debt to your consumer lenders.

[SayItAintSoJoe]

Obviously, if you can swing it. But that goal is pretty hard to attain unless you treat yourself like you're in debt to your emergency fund, just like you treated yourself when you were in debt to your consumer lenders.

 

 

Exactly. That's why I like the comparisons of being in good financial shape to being in good physical shape. We all know what it takes to get there but few have the discipline.

[Bill Swerski]

I think (thanks to Dave Ramsey) it is also important to have an Emergency fund (4 to 6 mths of expenses) as well as the proper disability insurance to guard against these things.

 

I agree with that. The wife and I have decided to put away money and pay off our signature loan ASAP. The down payment on a mortgage can wait a year.

[SayItAintSoJoe]

I agree with that. The wife and I have decided to put away money and pay off our signature loan ASAP. The down payment on a mortgage can wait a year.

 

 

That's awesome! Hopefully you're leaning towards a 15yr fixed rate mortgage when the time does come.

[muck]

Thank you wiegie, for giving proper credit to muck for this.

 

 

My contributions to this thread have been immense. No doubt about it!

 

Go me!

 

[I Like Soup]

I love these Huddler conversations on debt.

 

For myself, I have six months of living expenses in savings (read: I wouldn't have to change my spending habits if I lost an income, not just enough to pay bills), and no credit card debt. I do use my AMEX ,but I get cash back at the end of the year (last year it was $477). I figure, since I have the discipline to not spend more than my income per month, I'll make my credit work for me in the guise of cash back and airline miles. And...

 

I will say, I just bought a car and have that car payment. I didn't have a car payment for a while, but I made sure I have the six months of car payments in savings and I'll chip away at the car like I did my last one. And...don't blindly assume getting a second mortgage to finance a car is the way to go. I put pen to paper and figured out the tax advantages, etc. vs having a car loan, and I came out quite a bit ahead using the car loan...FWIW.

 

Ultimately, I place the onus on the consumer who is living outside of their respective means, not the banks/credit card companies.

[Bill Swerski]

That's awesome! Hopefully you're leaning towards a 15yr fixed rate mortgage when the time does come.

 

It definitely won't be a variable-rate mortgage. We took out a variable-rate signature loan after grad school to pay off credit card debt and it's to the point now where it's at the same interest rate as our cards (~13%).

 

The housing market on the West Coast is ridiculous and I think that it's best to be patient and wait for a a good deal to open up. We're not going to pay $300k for some over-priced piece of crap just for the sake of owning a home when we can stay in our duplex in one of the nicest neighborhoods in town for $825/month (they could easily charge $1,000+... not sure why they don't) AND avoid our city's obnoxiously-high property taxes. Even without being able to deduct a mortgage, we're still saving money. We're going to casually look around the rest of the county (I'd really like to live out in the country) for a year or so. If we find a good deal, great. If not, we'll keep waiting.

 

BTW, Go Sox. Can't wait for next week. Hopefully Buehrle will have a bounce-back year and Contreras will stay healthy.

[yo mama]

Exactly. That's why I like the comparisons of being in good financial shape to being in good physical shape. We all know what it takes to get there but few have the discipline.

 

I don't disagree, but I think reality for many people involves choosing between true necessities. If I have $X dollars in my monthly budget, should I spend it on good private school tuition for my kids, or start an emergency fund? Do I spend my annual bonus replacing a new roof that may not make it another year, or should I pay off my high interest credit cards? While discipline is certainly a problem for some people, even discplined people frequently have tough decisions to make.