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PrintableThreadBare said: truefunksoldier said: DR has some great principles. I'm considering changing cars, using his theory. My calculations are bearing out that theory of his. The car payment is the bane of the middle class. Buy a cheap car, and make payments to yourself. After a year or so, you'll have saved money. Use that to pay cash for a better car, all the while paying yourself. Every time you sell the car and use your savings, you'll be able to step up in car, all without paying anybody. Bottom line....Debt is Dumb. This is a great book for getting your finances in order: http://totalmoneymakeover.com/ Bottom line is: 1. Make minimum payments on all your bills. Squeeze your budget until you've accumulated $1,000 cash. This is your beginner Emergency Fund. 2. Pay off your debts in order of smallest balance to largest. "Snowball" the payments as you go. 3. Create a full-fledged Emergency Fund containing 3 to 6 months' worth of expenses. 4. Direct 15% of your annual pre-tax income into your retirement plans. Utilize tax-advantaged accounts such as 401ks and Roth IRAs, if eligible. 5. Take care of college funding. Fully fund Educational Savings Accounts and/or utilize 529 plans. 6. Become financially "ultrafit" and 100% debt-free: Pay off your home early. 7. Get to the point where your money works harder than you do: Build wealth (mutual funds, real estate, etc.), have fun, and give! It's about "living like no one else, so that later you can live like no one else"! Dave?? Dave??? DAVE!!! Is that you? Coming to the Org all this time? 
[Edited 12/4/07 19:23pm] I listen to that guy sometimes. He makes sense, but then when he starts to preach it seems a little out of place. My Legacy
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heartbeatocean said: truefunksoldier said: Bottom line is: 1. Make minimum payments on all your bills. Squeeze your budget until you've accumulated $1,000 cash. This is your beginner Emergency Fund. and put it in a high interest savings, CD or money market account. The emergency fund is not really there to make money, but to provide in case the car breaks down, etc. The interest you would get on 1000 is negligible, so it's more important to have the money easily accessible than it is to worry about interest in this case. heartbeatocean said: 2. Pay off your debts in order of smallest balance to largest. "Snowball" the payments as you go.
It doesn't matter how much the balance is. Pay off the highest interest first. And negotiate with cards to get the other balances you carry on 0% or very low interest. From a strictly dollars point of view that's true. But this is meant for people who are in a lot of debt and need a lifestyle change. In that instance, the emotional boost you get from getting things completely paid off (small debts) fuels the person to stick to the plan. Besides, if someone is really working hard to knock these out, they'll be gone shortly anyway, and the small amount of interest won't make that much of a difference anyway. 3. Create a full-fledged Emergency Fund containing 3 to 6 months' worth of expenses.
heartbeatocean said: If you're going to do that, then make sure you're earning interest on the savings. (see above)
Agreed on this one. | |
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truefunksoldier said: heartbeatocean said: It doesn't matter how much the balance is. Pay off the highest interest first. And negotiate with cards to get the other balances you carry on 0% or very low interest. From a strictly dollars point of view that's true. But this is meant for people who are in a lot of debt and need a lifestyle change. In that instance, the emotional boost you get from getting things completely paid off (small debts) fuels the person to stick to the plan. Besides, if someone is really working hard to knock these out, they'll be gone shortly anyway, and the small amount of interest won't make that much of a difference anyway. See, this is the thing. If people stop looking at money emotionally and actually calculate the numbers and act according to that, they'll be in much better shape. People who carry debts on credit cards can be eating ridiculous amounts of money in interest, especially if they've missed payments in the past. Credit cards often charge 34% interest if you're late on three payments. If a person sat down, did the calculations of what they're saving by paying off high interest cards first -- then put that money in a special fund, they could reap the emotional rewards they so depend on and save more money too. | |
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heartbeatocean said: truefunksoldier said: From a strictly dollars point of view that's true. But this is meant for people who are in a lot of debt and need a lifestyle change. In that instance, the emotional boost you get from getting things completely paid off (small debts) fuels the person to stick to the plan. Besides, if someone is really working hard to knock these out, they'll be gone shortly anyway, and the small amount of interest won't make that much of a difference anyway. See, this is the thing. If people stop looking at money emotionally and actually calculate the numbers and act according to that, they'll be in much better shape. People who carry debts on credit cards can be eating ridiculous amounts of money in interest, especially if they've missed payments in the past. Credit cards often charge 34% interest if you're late on three payments. If a person sat down, did the calculations of what they're saving by paying off high interest cards first -- then put that money in a special fund, they could reap the emotional rewards they so depend on and save more money too. what about transferring the balance to a lower rate account first? My Legacy
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Outside of student loans, I'm in for about 3 grand now. That's below the national average so I don't worry too much. I do think about it though. 
So far this Christmas i've racked up about $800 debt. That really makes me want to throw a fit. But what can you do? You have to buy presents for people! And I have quite a few people to buy for. In spite of the cost of living, it's still popular. |
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NDRU said: heartbeatocean said: See, this is the thing. If people stop looking at money emotionally and actually calculate the numbers and act according to that, they'll be in much better shape. People who carry debts on credit cards can be eating ridiculous amounts of money in interest, especially if they've missed payments in the past. Credit cards often charge 34% interest if you're late on three payments. If a person sat down, did the calculations of what they're saving by paying off high interest cards first -- then put that money in a special fund, they could reap the emotional rewards they so depend on and save more money too. what about transferring the balance to a lower rate account first? definitely | |
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Getting a loan is not always a bad thing. Without loans many new businesses would never get off the ground. They can be good for personal economy as well since they give you financial momentum and open up opportunities. Then when you've accomplished what you set out to do it's of course a good idea to pay them off as soon as possible, but the value of getting that initial boost shouldn't be underestimated. | |
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DevotedPuppy said: Luckily something really good happened to me (not a new job...yet) that is going to alleviate some of my debt. It happened about 3 weeks ago and I cannot tell you how much less stress I feel. Even though I still have to be very budget conscious, knowing that I have a bit more of a cushion has made it feel like a huge weight was lifted off of me. If I can just find a new job soon it will be the icing on the cake.
Just paid off my two credit cards with the largest balances, now I just have one more to go! (And that one will be paid off with in a month or two.)  | |
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heartbeatocean said: truefunksoldier said: From a strictly dollars point of view that's true. But this is meant for people who are in a lot of debt and need a lifestyle change. In that instance, the emotional boost you get from getting things completely paid off (small debts) fuels the person to stick to the plan. Besides, if someone is really working hard to knock these out, they'll be gone shortly anyway, and the small amount of interest won't make that much of a difference anyway. See, this is the thing. If people stop looking at money emotionally and actually calculate the numbers and act according to that, they'll be in much better shape. People who carry debts on credit cards can be eating ridiculous amounts of money in interest, especially if they've missed payments in the past. Credit cards often charge 34% interest if you're late on three payments. If a person sat down, did the calculations of what they're saving by paying off high interest cards first -- then put that money in a special fund, they could reap the emotional rewards they so depend on and save more money too. My gosh!!! That's what I'm talking about!!! I did some calculations of my financial picture without debt:  Just saving tons of money for a change is going to be so cool, in a couple of months. | |
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