Made a little extra scratch on a few stocks and paid my runner off last year. God Bless Capitalisam

 

IF all goes good, I'll be as rich (or richer) as some of the members here.

 

My '96 I financed for 3 years (bought new)...but the next one (looking like a 2nd gen) will be paid for in cash

 

I paid cash for mine...Also paid cash for my Ultralight Airplane. I'm 23 and have never had a credit card in my name and I've never bought anything on credit. Guess what! No credit is almost as bad as bad credit! The ONLY reason my landlord rented my current house to me is because I'm military and they know I'll get in trouble at work if I don't pay. I'm getting ready to finance a new dirt bike though at my hometown credit union just to try and establish a credit line. I'll probably pay on it for a year and then just pay it off. Intrest looks like it sucks...

 

I wouldn't worry about any of that, whoever told you that that's a great idea is a bozo and probably broke & in debt. Check out www.daveramsey.com to see what he says about your plan. The only thing you need to finance is a house, and even then you can pay cash for one if you're financially savvy, save your money, and buy something affordable that you like and don't care what the world thinks about it.

 

Man...i cant beleive how many people think credit is bad. If you are "finacially savvy" as you put it, then you will be smart enough to handle credit issues. You arent going to get good interest rates with no credit. You are going to have a hard time renting a house or apartment as well. Dont know how in the world you are going to save $100k for a house while not living anywhere. You need credit to get yourself started. That doesnt mean you get banged with interest rates on your credit cards. Pay everyhing off on time, and your credit is A+ and you wont loose any money in the process. Actually you can make money...I got a nice check for $285 last year from American Express and $77 from MBNA Its all about cash back credit cards! Dont know why in the world you woulldnt use a credit card if you are "finacially savvy" enough to understand them. You win in the end...

UKMyers - GOOD IDEA hooking up with a credit union. They are great for establishing credit. Bank at one if you can too. It's very easy to estblish some credit just by doing that.

 

Congratulations! You're a smart man. You understand that if you pay interest, you're supporting some else's family. It's tough enough to support your own. Interest does suck, and always will!

With a steady job, assets, and your attitude, you can easily obtain a line of credit. Nothing wrong with that. Just don't use it to the point that you pay interest.

The suggestion about cash back credit cards is an excellent one. You're essentially borrowing their money for the month, for free, and paying off the 'line of credit' when the bill is due. And the card companies are sharing their profits with you. Get two cards and rotate your daily purchases. You'll have a 'gold plated' credit rating in no time.

It's easy to use the credit card to buy things you don't really need. A good rule of thumb is to look at each purchase in terms of your hourly pay rate. If you make $20 an hour, and are thinking of buying a $100 jacket, ask yourself if you'd work for five hours for it. Changes your whole attitude about buying 'stuff'. The cost of large items usually forces you to think about the purchase. This helps you think about the daily 'pocket draining' waste.

Your first house is a huge expense. Buy something that meets your needs, not your wants.

Once in a while a good thread comes along. This is one of them.

Keep up the good work.

 

Both my 69 Bronco and 97 4Runner limited are paid off.

 

My 98 isn't, bought it used with 30k, right out of gradschool and needed a replacement for the Chevy cavalier with 140K

Have money in the bank that could pay it off, but have plans on paying cash for a trail rig. That is, unless I decide to buy a Rubicon!

 

Ill sell you my 98 TJ w/ a mere 43k on it and for another $4k we'll turn it into a Rubicon eater.

 

This is exactly how I look at things I buy!!! Good advice.....although sometimes I use other things to benchmark like the number of tanks of gas it might buy or what percent of a new S/C it is. That will slow you down in a hurry.

The whole idea is simply to live within your means and to use credit because you want to, not because you have to (ie you really don't have the money to pay for it now). It is ok to use credit and credit in itself is not at all bad, but it takes serious will power to have the money (ie credit) and not use it. Some people find it easy and some very hard. Credit is almost always a necessity for people to make large purchases unless you independantly wealthy so you do well to build it up. Being financially savvy means just being responsible not necessarily overly clever or becoming some kind of asset wizard.

Credit is what made the US what it is today and continues to allow it to grow in the future. People now have alot more at a much younger age than did people 20-30 years ago thanks to credit. Credit is also a financial bridge for the flow of money worldwide and allows globalization to occur and trading to take place among countries without stunting the economy's progress. Credit is not at all bad but it must be managed properly.

 

Don't you have to pay a fee on them though?

I know you can usually overcome the fee by using the card a lot (more cash back), but it just seems silly for them to charge that fee...when they're giving you money based on usage.

Jim

 

I agree with most of what you say, but I take exception to this statement. They may have more, but they owe more. It's the net asset value that's important. If I drive an old truck that's worth $5K, and paid for, and my neighbour drives a $25K vehicle that he owes $22K on, who's better off? Not only does he have less equity, he has to spend $1K a year to support his debt, plus pay the operating expenses.

In this hypothetical case, the old truck can be operated for the same $1K a year the neighbour is spending to carry his debt.

Interesting, eh? Do they teach this stuff in school yet?

 

Nope...no fee's. There are very few cards nowadays that have fees for using htem. Unless you get those waste of money protection plans, you should NEVER pay more than what you spend at the end of every month.

I have the:
American Express Blue Cash card (3% cash back...they say 5% but you have to carry a balance):
http://home4.americanexpress.com/blu...nks=benefits67

Platinum Plus: similar to the MBNA World Points Card (1% cash back when you spend LOTS): https://www.mbnaworldpoints.com/WCap...ormPage=RCCash

With Visa and Mastercard you will not find a card that gives more than 1% back whether its plane tickets or cash...the rates charged to the merchant arent high enough to give you more. American Express gives up to 3% because they get 5-7% of every purchase you make. So they give you some of it back. Only place I cannot use my American express is at the grocery store and every now and then at a mom and pop shop.

As far as getting travel points vs cash back. You get a travel point for every dollar spent. 25000 travel points gets you a $250 plane ticket. Personally, Id rather take the $250 cash and buy my own plane ticket or something for my non-existent 4Runner. So go wiht cash back.

 

But if no one bought those expensive cars...then car makers wouldnt sell any -> no reason to make anything better or more desirable. Also, banks wouldnt make nearly as much money as they would -> no reason to open a bank -> keep your money in a sock under your bed. Yes, these are extreme cases, but borrowing money and yes paying interest is NOT a bad idea...as long as you understand what you are doing and how much more you will pay in the end. Then decide if its worth and and if you can afford it. Some things are. Some people buy new because of waranties and reliability for the first 3+ years. That peice of mind that they will get to work w/o problems could be worth it to them. DONT SAY GO BUY A TOYOTA.

 

I agree, especially the part about understanding what you're doing, and why.

 

my 4r isn't paid off, but I hope to this year, if I don't get too crazy elsewhere.

on credit... hmmm. Love that REI visa card; 1% back on everything, 10% on anything bought at REI (which tends to be a lot!).

I try to use the only principle I ever learned in college econ when deciding what to buy. It's called "opportunity cost". This basically means you look at the next few things on your wish list that you won't be able to get if you get this.

For instance, I figure it's going to cost me about $3K to get my truck where I want it (initally, at least!). But for that same money, I could get the kayak I want, a motorcycle I'm looking at, a couple of pretty awesome dive vacations or other travel, or any of the other 2.7 million things on my toy list.

I do recommend having and using a credit card, but not so much to get things you can't afford right now, but to build credit, and simplify the actual purchase. Anything else should be for emergency use only. (for instance, people are trying to put together a jambo in late march, and my rig isn't ready yet. *that's* an emergency! )

 

Bill, I think we are saying the same thing here. I didn't say that the people "own" more, just that they "have" more, but many people "have" alot of items in their posession that they don't "own", right? Otherwise why do repo-men exist? There has been a definate change in mentality from then and now. Back then you are taught to save for the future, today (many blame it on the media), but we are taught to live in the present and pay for it later. Enjoy all you can, while you can.....but as you and I well know this is not a sustainable situation.

Many today play games with investing and interest rates. If the guy that owes 22k had the cash but decided to invest it instead, then it may not be that bad of an idea if his ROI is higher than the interest rate he is paying to borrow the money. Would it be better to live more within your means....sure.....but not everyone is willing to do so. Many would consider this line of thinking clever but I do tend to agree with you and always try to live comfortably but not extravagantly. It is really up to the person and what their mantality is. You also need to be careful that your investments stay ahead of the interest rate, which is not always something you can control either. Understanding is usually the source of the credit problems.

Unfortunately not enough. :pat:

 

One of my rules is: "Cash for toys". By my definition, toys included cars, trucks, boats, airplanes, or any other depreciating asset, although there are examples of all the above that appreciate during parts of their useful life. Those are the toys I try to buy, new or used, resell and make a little bit on about 4-6 times annually. I'd do it more often, but then I'd have to get a dealer's license (KISS).

I didn't start out that way, it took a lifetime of saving and investing to get here. I drove my share of beaters, and didn't get into nicer cars until I got a job that furnished company cars. After some homework, I started buying and selling new and used toys on the side, and still do today. I bat around .800 profitability, a good average for an amateur, and get to drive some decent iron including the occasional exotic.

I've posted before how I go about buying new vehicles through fleet departments, live in a state with no sales tax and very low TT&L, ~$40/yr. Then there's the other part of the program: I pay cash, and lease back to myself at exorbitant rates. The lease company takes the payments, depreciation and management expenses (guess who manages) and enjoys other benefits like annual stockholder meetings in locations that I get to choose. I also hire young relatives to give them a start, fund their Roth IRA's, and help them invest at a rate that will easily yield over $1M at their retirement so maybe they'll remember their Uncle Bob.

That brings up another rule: "Whatever Toyota Motor Sales can do, I can do". Well, maybe not the Gulfstream V, but the choices available through a low cost, low management LLC make it the choice of business entity for the small investor like me. If you haven't already, read "The Millionaire Next Door" and similar books for more ideas, especially investing in residential real estate (my primary investment vehicle) where true, low risk wealth can accumulate with minimal management.

 

Bob, you definately have your head on straight and follow much of the same methods I do for generating wealth too. I love LLC's......too bad they don't have them in Canada or I would do it here too.