Credit, loans, debt and the young...
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Judah Himango wrote:
The last one is inevitable; who has enough spare cash to pay for a car outright?
One who buys cheap (used) cars :)
Sensible policy if you asked me - the first owner of the car is the one who finds all of its faults and spends time or money or effort (or all three) having them rectified! :)
"On one of my cards it said I had to find temperatures lower than -8. The numbers I uncovered were -6 and -7 so I thought I had won, and so did the woman in the shop. But when she scanned the card the machine said I hadn't. "I phoned Camelot and they fobbed me off with some story that -6 is higher - not lower - than -8 but I'm not having it." Tina Farrell, a 23 year old thicky from Levenshulme, Manchester.
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I was chatting to some of the younger (20-23 year old) guys and gals at my company today and one of the topics that came up was money - or rather the lack thereof: debt. I was surprised that none of the 15 of them had any savings and that they were all continually overdrawn at the end of the month. I was more surprised that they didn't seem to be particularly concerned by this, or the fact that they all had some kind of personal debt (including loans, credit cards, store cards etc.) with no actual assets (apparently the majority of the loans and credit card debt went on plasma tv's, car enhancements, clothes & etc.) Being the helpful chap I am, I decided to impart my wisdom - which for a change went down quite well! - so I thought I'd share it here as I know there are (at least) some < 24 year olds here. 1) Try and cut back on the lifestyle for a few months and try to build up a bit of nest egg. 2) Treat this fund as a treasured item, and try to add to it regularly. 3) Don't necessarily deny yourself something you really want - dip into your savings... 4) ... BUT imagine you actually borrowed the money from a bank and pay *yourself* back at the same rate and period you'd pay on a loan.
"On one of my cards it said I had to find temperatures lower than -8. The numbers I uncovered were -6 and -7 so I thought I had won, and so did the woman in the shop. But when she scanned the card the machine said I hadn't. "I phoned Camelot and they fobbed me off with some story that -6 is higher - not lower - than -8 but I'm not having it." Tina Farrell, a 23 year old thicky from Levenshulme, Manchester.
I the modern world it is almost impossible to live a dept free life when you are young, without your parents paying your way. I'm 24, have a decently paying job, and a fiancee also with a good job. We have a £15000 student debt each, a £125000 mortgage (100% at the time 1 year ago) and small personal loans for cars, yeah ok, we could possibly cut back a bit and pay off the car loans, but their a small fraction of what we owe. None of these loans are extravagances, the student debt was required to get the good jobs we now enjoy, the mortgage gives us somewhere to live (and repayments just replace rent anyway), and cars are required because british public transport is overpriced, unreliable, dirty, and takes too long. We now want to get married, and an average wedding these days costs upwards of £15000. Our parents can't pay, and we certainly can't afford that, so i guess we'll be heading to the bank for more debt. Or is getting married only for the rich? Belive me, I'd love to live debt free with a nest egg, but it's just not realistic.
Simon
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I the modern world it is almost impossible to live a dept free life when you are young, without your parents paying your way. I'm 24, have a decently paying job, and a fiancee also with a good job. We have a £15000 student debt each, a £125000 mortgage (100% at the time 1 year ago) and small personal loans for cars, yeah ok, we could possibly cut back a bit and pay off the car loans, but their a small fraction of what we owe. None of these loans are extravagances, the student debt was required to get the good jobs we now enjoy, the mortgage gives us somewhere to live (and repayments just replace rent anyway), and cars are required because british public transport is overpriced, unreliable, dirty, and takes too long. We now want to get married, and an average wedding these days costs upwards of £15000. Our parents can't pay, and we certainly can't afford that, so i guess we'll be heading to the bank for more debt. Or is getting married only for the rich? Belive me, I'd love to live debt free with a nest egg, but it's just not realistic.
Simon
There's a difference between an investment and unsecured debt. Your mortgage (although in my opinion the way the housing market has bubbled will prove to be negative equity in the short term - dependant on what you got and where for that price) is an investment, as are the cars and the student debt. Weddings - well it's a special occasion and it costs what it costs (largely because women usually get their say, and budgets tend to go out the window). But there is a very real difference between having a loan on a car (which is essential to most jobs) and having a loan to pay for a 42" Plasma tv, a £200 pair of shoes or £50+ designer shirts. Some of the "kids" I was talking to today had over £40,000 worth of personal debt blown on such frivolities with nothing to show for it - even the short on one guy's back belonged to the bank! Being debt free may be unavoidable, but being asset and equity free is not.
"On one of my cards it said I had to find temperatures lower than -8. The numbers I uncovered were -6 and -7 so I thought I had won, and so did the woman in the shop. But when she scanned the card the machine said I hadn't. "I phoned Camelot and they fobbed me off with some story that -6 is higher - not lower - than -8 but I'm not having it." Tina Farrell, a 23 year old thicky from Levenshulme, Manchester.
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I like unsecured debt. I make all large purchases with it and use the 30 days of free time to accrue interest from my other investments. Its like free money. Of course, I haven't owed interest on a credit in years.
Need a C# Consultant? I'm available.
Happiness in intelligent people is the rarest thing I know. -- Ernest HemingwayEnnis Ray Lynch, Jr. wrote:
I make all large purchases with it and use the 30 days of free time to accrue interest from my other investments. Its like free money. Of course, I haven't owed interest on a credit in years.
The only acceptable use of a credit card, in my opinion. Few people have the self control to stick with that. I've often wondered why people who CAN do that, though, DO. If you can afford to pay it off within 30 days, doesn't that mean you could have paid for the item without the card in the first place? Do you do it just for the rewards, e.g., airline miles or "3% back" deals?
It has become appallingly obvious that our technology has exceeded our humanity. - Albert Einstein
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Patrick Sears wrote:
I've come to the conclusion that unsecured debt - credit card debt - is pure and absolute evil. No, it is never useful. Shut up. NO, it isn't. It is pure evil. We survived 10,000 years without it. We don't need it.
being stupid with it (by carrying a balance long term) definitely is bad but that's not the same as saying that denying people without any assets to borrow with is good. The one study taken of people (urban poor in south africa) who were borrowing under what would normally be labeled the most predatory type of loan: 3 (6?) months at 50ish%(higher???) APR, actually found that the people who were granted the loans were better off than those denied. The group consisted a people who fell just below the normal cutoff criteria for granting the loan, but half of which were randomly approved anyway. This was written up a few months ago in The Economist.
-- Help Stamp Out and Abolish Redundancy The preceding is courtesy of the Department of Unnecessarily Redundant Repetition Department.
dan neely wrote:
The one study taken of people (urban poor in south africa) who were borrowing under what would normally be labeled the most predatory type of loan: 3 (6?) months at 50ish%(higher???) APR, actually found that the people who were granted the loans were better off than those denied. The group consisted a people who fell just below the normal cutoff criteria for granting the loan, but half of which were randomly approved anyway. This was written up a few months ago in The Economist.
Ick. There are serious things wrong with this idea, but this isn't the soapbox :)
It has become appallingly obvious that our technology has exceeded our humanity. - Albert Einstein
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Sensible policy if you asked me - the first owner of the car is the one who finds all of its faults and spends time or money or effort (or all three) having them rectified! :)
"On one of my cards it said I had to find temperatures lower than -8. The numbers I uncovered were -6 and -7 so I thought I had won, and so did the woman in the shop. But when she scanned the card the machine said I hadn't. "I phoned Camelot and they fobbed me off with some story that -6 is higher - not lower - than -8 but I'm not having it." Tina Farrell, a 23 year old thicky from Levenshulme, Manchester.
martin_hughes wrote:
Sensible policy if you asked me - the first owner of the car is the one who finds all of its faults and spends time or money or effort (or all three) having them rectified!
Hmmm.. if they really had to go through all that, I probably wouldn't trust the car as far as I could throw the first piece of it that breaks off.
It has become appallingly obvious that our technology has exceeded our humanity. - Albert Einstein
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I the modern world it is almost impossible to live a dept free life when you are young, without your parents paying your way. I'm 24, have a decently paying job, and a fiancee also with a good job. We have a £15000 student debt each, a £125000 mortgage (100% at the time 1 year ago) and small personal loans for cars, yeah ok, we could possibly cut back a bit and pay off the car loans, but their a small fraction of what we owe. None of these loans are extravagances, the student debt was required to get the good jobs we now enjoy, the mortgage gives us somewhere to live (and repayments just replace rent anyway), and cars are required because british public transport is overpriced, unreliable, dirty, and takes too long. We now want to get married, and an average wedding these days costs upwards of £15000. Our parents can't pay, and we certainly can't afford that, so i guess we'll be heading to the bank for more debt. Or is getting married only for the rich? Belive me, I'd love to live debt free with a nest egg, but it's just not realistic.
Simon
What he said. I tried to say what you did, only yours came out much better ;P
It has become appallingly obvious that our technology has exceeded our humanity. - Albert Einstein
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martin_hughes wrote:
Sensible policy if you asked me - the first owner of the car is the one who finds all of its faults and spends time or money or effort (or all three) having them rectified!
Hmmm.. if they really had to go through all that, I probably wouldn't trust the car as far as I could throw the first piece of it that breaks off.
It has become appallingly obvious that our technology has exceeded our humanity. - Albert Einstein
Trust me they do - I bought a brand new Mercedes once, and the thing was riddled with bugs, faults, Friday afternoon workmanship. Last brand-new car I will ever buy.
"On one of my cards it said I had to find temperatures lower than -8. The numbers I uncovered were -6 and -7 so I thought I had won, and so did the woman in the shop. But when she scanned the card the machine said I hadn't. "I phoned Camelot and they fobbed me off with some story that -6 is higher - not lower - than -8 but I'm not having it." -Tina Farrell, a 23 year old thicky from Levenshulme, Manchester.
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Ennis Ray Lynch, Jr. wrote:
I make all large purchases with it and use the 30 days of free time to accrue interest from my other investments. Its like free money. Of course, I haven't owed interest on a credit in years.
The only acceptable use of a credit card, in my opinion. Few people have the self control to stick with that. I've often wondered why people who CAN do that, though, DO. If you can afford to pay it off within 30 days, doesn't that mean you could have paid for the item without the card in the first place? Do you do it just for the rewards, e.g., airline miles or "3% back" deals?
It has become appallingly obvious that our technology has exceeded our humanity. - Albert Einstein
Basically, as well as leveraged risk. Don't forget bank errors can empty a bank account, most credit cards have consumer protection, and rewards + interest benefits are nice. There are many, many good reasons. (Also, it builds credit history)
Need a C# Consultant? I'm available.
Happiness in intelligent people is the rarest thing I know. -- Ernest Hemingway -
Ennis Ray Lynch, Jr. wrote:
I make all large purchases with it and use the 30 days of free time to accrue interest from my other investments. Its like free money. Of course, I haven't owed interest on a credit in years.
The only acceptable use of a credit card, in my opinion. Few people have the self control to stick with that. I've often wondered why people who CAN do that, though, DO. If you can afford to pay it off within 30 days, doesn't that mean you could have paid for the item without the card in the first place? Do you do it just for the rewards, e.g., airline miles or "3% back" deals?
It has become appallingly obvious that our technology has exceeded our humanity. - Albert Einstein
Yep, I do that for the air miles.
I'm largely language agnostic
After a while they all bug me :doh:
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Basically, as well as leveraged risk. Don't forget bank errors can empty a bank account, most credit cards have consumer protection, and rewards + interest benefits are nice. There are many, many good reasons. (Also, it builds credit history)
Need a C# Consultant? I'm available.
Happiness in intelligent people is the rarest thing I know. -- Ernest HemingwayTo this list I'll add cashflow management. MY discover card gives almost a month between the billing date and when the payment is due. On average this allows me to borrow upto 6 weeks into the future to cover large purchases or unexpected bills (fixing my old beater car) without having to temporarily borrow from my savings account.
-- Help Stamp Out and Abolish Redundancy The preceding is courtesy of the Department of Unnecessarily Redundant Repetition Department.
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There's a difference between an investment and unsecured debt. Your mortgage (although in my opinion the way the housing market has bubbled will prove to be negative equity in the short term - dependant on what you got and where for that price) is an investment, as are the cars and the student debt. Weddings - well it's a special occasion and it costs what it costs (largely because women usually get their say, and budgets tend to go out the window). But there is a very real difference between having a loan on a car (which is essential to most jobs) and having a loan to pay for a 42" Plasma tv, a £200 pair of shoes or £50+ designer shirts. Some of the "kids" I was talking to today had over £40,000 worth of personal debt blown on such frivolities with nothing to show for it - even the short on one guy's back belonged to the bank! Being debt free may be unavoidable, but being asset and equity free is not.
"On one of my cards it said I had to find temperatures lower than -8. The numbers I uncovered were -6 and -7 so I thought I had won, and so did the woman in the shop. But when she scanned the card the machine said I hadn't. "I phoned Camelot and they fobbed me off with some story that -6 is higher - not lower - than -8 but I'm not having it." Tina Farrell, a 23 year old thicky from Levenshulme, Manchester.
Given how fast it depreciates in value, and how many decades pass before it becomes old enough to begin appreciating as a collectors item I'd dispute the claim about a car actually being an investment. I'm paying the $200/mo in loan and insurance above the insurance + repair costs on my old semi-beater car not because I think I'll end up ahead of where I'd be if I spent 6 years stuffing the money under a mattress, but for the value that the peace of mind from not having to worry about what's going to break *this* month, not having to worry about being stranded on a road trip, and to avoid the extra stress and higher costs (current load is 0%) that would come with having to replace it on no notice because the engine/tranny died. The latter was my biggest concern since I was having persistent undiagnosed issues somewhere in the powertrain.
-- Help Stamp Out and Abolish Redundancy The preceding is courtesy of the Department of Unnecessarily Redundant Repetition Department.
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Judah Himango wrote:
The last one is inevitable; who has enough spare cash to pay for a car outright?
One who buys cheap (used) cars :)
My first car cost $3,000 with 100k miles on. I sold it 2 years later with 125k miles for $2,000! Only thing I replaced was a radiator and hoses, $400. Best damn car I ever owned. Although .. the cooling system really was shot to pieces. And the exhaust was falling off. Add some sensors need replacing. So I got rid of it at an opportune time :)
I'm largely language agnostic
After a while they all bug me :doh:
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Ennis Ray Lynch, Jr. wrote:
I make all large purchases with it and use the 30 days of free time to accrue interest from my other investments. Its like free money. Of course, I haven't owed interest on a credit in years.
The only acceptable use of a credit card, in my opinion. Few people have the self control to stick with that. I've often wondered why people who CAN do that, though, DO. If you can afford to pay it off within 30 days, doesn't that mean you could have paid for the item without the card in the first place? Do you do it just for the rewards, e.g., airline miles or "3% back" deals?
It has become appallingly obvious that our technology has exceeded our humanity. - Albert Einstein
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Given how fast it depreciates in value, and how many decades pass before it becomes old enough to begin appreciating as a collectors item I'd dispute the claim about a car actually being an investment. I'm paying the $200/mo in loan and insurance above the insurance + repair costs on my old semi-beater car not because I think I'll end up ahead of where I'd be if I spent 6 years stuffing the money under a mattress, but for the value that the peace of mind from not having to worry about what's going to break *this* month, not having to worry about being stranded on a road trip, and to avoid the extra stress and higher costs (current load is 0%) that would come with having to replace it on no notice because the engine/tranny died. The latter was my biggest concern since I was having persistent undiagnosed issues somewhere in the powertrain.
-- Help Stamp Out and Abolish Redundancy The preceding is courtesy of the Department of Unnecessarily Redundant Repetition Department.
Ah, you're talking material investment - I'm talking career investment.
"On one of my cards it said I had to find temperatures lower than -8. The numbers I uncovered were -6 and -7 so I thought I had won, and so did the woman in the shop. But when she scanned the card the machine said I hadn't. "I phoned Camelot and they fobbed me off with some story that -6 is higher - not lower - than -8 but I'm not having it." -Tina Farrell, a 23 year old thicky from Levenshulme, Manchester.
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Patrick Sears wrote:
I've come to the conclusion that unsecured debt - credit card debt - is pure and absolute evil. No, it is never useful. Shut up. NO, it isn't. It is pure evil. We survived 10,000 years without it. We don't need it.
being stupid with it (by carrying a balance long term) definitely is bad but that's not the same as saying that denying people without any assets to borrow with is good. The one study taken of people (urban poor in south africa) who were borrowing under what would normally be labeled the most predatory type of loan: 3 (6?) months at 50ish%(higher???) APR, actually found that the people who were granted the loans were better off than those denied. The group consisted a people who fell just below the normal cutoff criteria for granting the loan, but half of which were randomly approved anyway. This was written up a few months ago in The Economist.
-- Help Stamp Out and Abolish Redundancy The preceding is courtesy of the Department of Unnecessarily Redundant Repetition Department.
Sure. If you get into the situation where you need medical treatment (for example) and don't have the cash, a usurious loan might let you get treatment and get back to work - even if it takes you years to pay it off, you're still working rather than sick or crippled and unable to support yourself much less save up for treatment. And of course, there's always gambling (using short-term debt to fund a risky investment in hopes that it'll pan out and you'll be able to pay off the debt before the interest eats you).
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...the wind blows over it and it is gone, and its place remembers it no more...
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Basically, as well as leveraged risk. Don't forget bank errors can empty a bank account, most credit cards have consumer protection, and rewards + interest benefits are nice. There are many, many good reasons. (Also, it builds credit history)
Need a C# Consultant? I'm available.
Happiness in intelligent people is the rarest thing I know. -- Ernest Hemingway -
I was chatting to some of the younger (20-23 year old) guys and gals at my company today and one of the topics that came up was money - or rather the lack thereof: debt. I was surprised that none of the 15 of them had any savings and that they were all continually overdrawn at the end of the month. I was more surprised that they didn't seem to be particularly concerned by this, or the fact that they all had some kind of personal debt (including loans, credit cards, store cards etc.) with no actual assets (apparently the majority of the loans and credit card debt went on plasma tv's, car enhancements, clothes & etc.) Being the helpful chap I am, I decided to impart my wisdom - which for a change went down quite well! - so I thought I'd share it here as I know there are (at least) some < 24 year olds here. 1) Try and cut back on the lifestyle for a few months and try to build up a bit of nest egg. 2) Treat this fund as a treasured item, and try to add to it regularly. 3) Don't necessarily deny yourself something you really want - dip into your savings... 4) ... BUT imagine you actually borrowed the money from a bank and pay *yourself* back at the same rate and period you'd pay on a loan.
"On one of my cards it said I had to find temperatures lower than -8. The numbers I uncovered were -6 and -7 so I thought I had won, and so did the woman in the shop. But when she scanned the card the machine said I hadn't. "I phoned Camelot and they fobbed me off with some story that -6 is higher - not lower - than -8 but I'm not having it." Tina Farrell, a 23 year old thicky from Levenshulme, Manchester.
I have a mortgage but my equity is more than what I owe. I have two car payments at about $250 each. I have about $7000 in student loans. I have two credit cards with a total limit of over $10k and I currently have about $2k on them. I remember the days of living paycheck to paycheck. Once I got a real job my husband said, "Now you don't have to buy your shoes at Payless unless you want to!"
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I the modern world it is almost impossible to live a dept free life when you are young, without your parents paying your way. I'm 24, have a decently paying job, and a fiancee also with a good job. We have a £15000 student debt each, a £125000 mortgage (100% at the time 1 year ago) and small personal loans for cars, yeah ok, we could possibly cut back a bit and pay off the car loans, but their a small fraction of what we owe. None of these loans are extravagances, the student debt was required to get the good jobs we now enjoy, the mortgage gives us somewhere to live (and repayments just replace rent anyway), and cars are required because british public transport is overpriced, unreliable, dirty, and takes too long. We now want to get married, and an average wedding these days costs upwards of £15000. Our parents can't pay, and we certainly can't afford that, so i guess we'll be heading to the bank for more debt. Or is getting married only for the rich? Belive me, I'd love to live debt free with a nest egg, but it's just not realistic.
Simon
I find it incredible how much people spend on weddings. When I was a wedding photographer I realized that people who spend more time planning the wedding than planning their marriage will fail. My husband's family could not believe I pulled out a wedding with 250 guests for less than $4000.
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I have a mortgage but my equity is more than what I owe. I have two car payments at about $250 each. I have about $7000 in student loans. I have two credit cards with a total limit of over $10k and I currently have about $2k on them. I remember the days of living paycheck to paycheck. Once I got a real job my husband said, "Now you don't have to buy your shoes at Payless unless you want to!"
leckey wrote:
Once I got a real job my husband said, "Now you don't have to buy your shoes at Payless unless you want to!"
But concluded... "you will be spending it all on the pets, so Payless is still probably the best option" ;)
"On one of my cards it said I had to find temperatures lower than -8. The numbers I uncovered were -6 and -7 so I thought I had won, and so did the woman in the shop. But when she scanned the card the machine said I hadn't. "I phoned Camelot and they fobbed me off with some story that -6 is higher - not lower - than -8 but I'm not having it." -Tina Farrell, a 23 year old thicky from Levenshulme, Manchester.