To finance or not to finance ...

[Diggin It]

I haven't had an installment loan balance of any kind in over 10 years, maybe 15 since I paid off my last used car loan a year early. My CCs are paid off in full every month. My house is paid for in full. I had little or no income each month aside from a small pension. That will change in January. My score was hovering between 780 and 810 or so, but the one notice on it advising how to get a better score was 'no recent installment loans'. When the finance company saw my score, they never even asked about income. That 800 was ll they needed to see.

I haven't looked at it since I got the loan to see what it did. Figure I'll get a couple of payments posted to see what effect it had.

 

[RSR]

either one of you ever heard of this guy ?DaveRamsey.com
I bet he has a little better understanding of debt than most

I have heard of him. I have a friend that is an M.D. (someone you would think that would have a ton of disposable cash, and so shouldn't have to worry about money) who swears by him. As you said, if you want to be rich, think and do like a rich person.

If you have a shorter attention span and want to get the gist of his advice in under 3 minutes (because you want the answer and you want it now), one of my favorite SNL skits is Steve Martin, with the 1 page financial planning book, "Don't buy stuff you can't afford."

Acheter à crédit, c'est une farce. (Traduction SNL) - YouTube

Your comment about being a slave to the debt, even if you can earn more money in interest than what your are paying, is a point well taken, but rarely understood. Throwing caution to the wind with regards to taking on debt, and choosing how to invest it was a large contributor to the financial melt down/housing crisis of 2008. Both from the consumer stand point of signing up for loans that one couldn't afford, and from the institutional standpoint of leveraging investments at insane ratios, like 100:1.

There is sage advice in the oft repeated quote, "if you don't learn from history, you are doomed to repeat it."

 

[RSR]

Okay, final, final point: Financing something and then paying it off early helps your credit score a lot. A good credit score will save you more money over the years than almost anything else you can do.

I would politely argue that the best way to save money, is to save your money.

 

[Shaneard]

I would politely argue that the best way to save money, is to save your money.

I agree. I hate it when people have a coupon and say "I saved $20 because I had a coupon". I tell them had you not bought it you could have kept what you spent as well and saved even more!

 

[Rock Crawler]

I agree. I hate it when people have a coupon and say "I saved $20 because I had a coupon". I tell them had you not bought it you could have kept what you spent as well and saved even more!

I go to Harbor Freight every single day after work and buy something, not only do I use a coupon on that item, but I also get a free item. It's like they are paying me to show up! If I keep this up, I'll be rich one day!

 

[Shaneard]

I go to Harbor Freight every single day after work and buy something, not only do I use a coupon on that item, but I also get a free item. It's like they are paying me to show up! If I keep this up, I'll be rich one day!

If your spending money in their store, your not getting anything for free. They just make you think that :laughing:
If you were getting something free, you wouldn't have to pull out any money.

 

[LukeDuke30]

We went through the total money makeover (Dave Ramsey) and finished it last year. There is no way I would ever go back to financing anything. I wish I would have done it 10 years ago.

 

[kenmac]

We went through the total money makeover (Dave Ramsey) and finished it last year. There is no way I would ever go back to financing anything. I wish I would have done it 10 years ago.

Many people just can't do what it takes to get ahead in the financial game.

Many people want it NOW, and they come up with every excuse they can think of to convince themselves and others, they are making the right decisions about financing things they can't afford.
In this day and age financing makes it very easy to stay in debt, and own many things you can't afford to own.

I was brought up by parents that always said, ''as long as you can afford the payment, If you want it, get it''
It was hard for me to break that cycle. Once you break that cycle and start getting ahead though, You don't want to go back to being a slave

 

[kenmac]

Your comment about being a slave to the debt, even if you can earn more money in interest than what your are paying, is a point well taken, but rarely understood.

I think it's understood. It's just another excuse to justify purchasing something you can't afford.
The comment about businesses leasing instead of buying, is a pretty creative way of trying to justify financing something you want, but don't have the cash to buy it LOL

Being patient and paying cash for things you want /need is a lost art. That is the reason for all the Pay day loan / cash advance places

Oh, and the MD friend, and others that you would think should have endless cash. It's not how much you make, it's how much you are able to keep. It's all about one's mindset

 

[RSR]

Many people just can't do what it takes to get ahead in the financial game.

Many people want it NOW, and they come up with every excuse they can think of to convince themselves and others, they are making the right decisions about financing things they can't afford.
In this day and age financing makes it very easy to stay in debt, and own many things you can't afford to own.

I was brought up by parents that always said, ''as long as you can afford the payment, If you want it, get it''
It was hard for me to break that cycle. Once you break that cycle and start getting ahead though, You don't want to go back to being a slave

I was lucky enough to be brought up by parents that took the exact opposite approach.

As a couple of examples; my allowance in the late 80's, was $3 ... per month. Now, to get that, I had to keep a spiral bound notebook that was a ledger of (1) every penny I earned (I was working a summer job starting at 12), (2) every penny I spent (I could only spend 50% of what I earned. The other 50% went into the bank for college), and (3) my cash on hand. If the ledger didn't balance each month, I got no allowance.

I HATED this as a kid. Looking back it was probably one of the best financial lessons my parents could have taught me.

From grade school through high school, my mom made our lunches (later we had to). Our "treat" was getting to buy school lunch once per month. Every day I had to bring home not just the brown paper bag to be reused, but also the plastic bags the food was put in. Let me tell you, there is nothing worse than having broccoli in a bag one day then potato chips the next. Can you say "broccoli flavored potato chips?"


Growing up, I thought we were poor because my parents never made any frivolous purchases, or spent money on anything they didn't see as a necessity. If something broke, you fixed it rather than buying something new. It was only later in life that I learned there is a huge difference between being poor, and being frugal, and they are usually mutually exclusive.