# Money Matters - Debt



## Clint Franklin (Sep 7, 2009)

Hey folks,

I know this is probably a very personal matter for some, but for those who are willing to discuss it... what is your opinion on things like "the value of a dollar" and debt? For example, I look around at the way most people in America handle their money and just have to shake my head. Someone I know recently lost his job (he quit because he was unhappy having to work, more or less) and moved back home a few states away. While he had his job, he ran up a good bit of credit card debt, and somehow thinks that he can get by with a part time job at a grocery store. The kicker is that he hasn't updated his resume at all, and with credit card debts like his, there's no way he can manage.

People seem to not care anymore. They want money, but then treat it like it's worthless. They blow it on things (which isn't a problem, except when they CANNOT AFFORD IT) that they don't need, or even want after a few weeks. It's like responsibility and money are mutually exclusive for most people.

Personally, I have zero debt. I know I can't afford it, so I don't go there. No credit cards, no loans, I pay for what I want or need with cash. I use a prepaid cell phone plan that I can afford. And most importantly, if I can't pay cash for something - I *save* my money up. It does mean that sometimes I miss out, but I'd rather wait than sell my financial soul to some lender who is more than happy to sling money to people who they know can't pay more than the minimum payments (if that).

I'm interested in your opinions. Why is it that money is taken so lightly these days, yet people want it so badly?


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## girlbug2 (Sep 7, 2009)

Our culture of entitlement. 
It drives the economy. 
If we all saved our money and spent responsibly, i.e., within our actual means, we'd be in a bona fide depression right about now, not just this piddling recession.


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## JadecloudAlchemist (Sep 7, 2009)

To me I never really concerned myself with money. My father told me as long as you have enough to live comfortably. I think my situation of being homeless for a period has humbled me with having a roof and food and having a computer is luxury. I remember when a dollar was worth alot of money. $2 was my allowance I thought I was rich when I was a kid. 

But coming back from vacation and spending $30 from Miami to Orlando was a hard hit and a big surprise. 

Here in Florida they want to raise our electric so FPL can buy a new airplane.


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## Makalakumu (Sep 8, 2009)

Money is silly paper.  Its worth something because someone says so.


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## Bruno@MT (Sep 8, 2009)

I'm a saver. No debt except a mortgage.
When we bought the house, we calculated up front how much we could afford to spend, based on
- salaries at that time (not including hypothetical growth of income).
- the fact that we wanted to have 2 kids.
- the fact that we needed 2 cars.

From this, it is remarkably easy to figure out how much you can pay off each month, and from there it is trivial to calculate how much you can afford in total, based on how long you want the mortgage to run.

Aside from that, we put away money into savings at the beginning of the month (when you still have the money). We each put a fixed amount in our household account, which should suffice to get through the month, based on baseline spending. Anything left in our personal accounts at the end of the month can then be used for luxury items.

I don't mind spending money, but I firmly believe that if you cannot get through the month without spending more than you earned that month (on averag of course) then something is very wrong and you should fix it.


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## rdonovan1 (Sep 8, 2009)

Clint Franklin said:


> Hey folks,
> 
> I know this is probably a very personal matter for some, but for those who are willing to discuss it... what is your opinion on things like "the value of a dollar" and debt? For example, I look around at the way most people in America handle their money and just have to shake my head. Someone I know recently lost his job (he quit because he was unhappy having to work, more or less) and moved back home a few states away. While he had his job, he ran up a good bit of credit card debt, and somehow thinks that he can get by with a part time job at a grocery store. The kicker is that he hasn't updated his resume at all, and with credit card debts like his, there's no way he can manage.
> 
> ...


 
I wish I knew what zero debt meant and it would certainly be nice if I could get myself to that level.

If I had my way I would have more money in the bank and in savings than I spend, but for some reason my income and my expenditures just never seem to match up at all as my expenses seem to be more than what I make.

I'm working on trying to correct the problem, but it is not as easy as it sounds especially in this economy that we are living in at the moment.

I don't know about anyone else, but me and what money I do get just never seem to get along with one another. They say that money talks and from what I have seen in my own life what money I do get always seems to say goodbye to me. 

I'm hoping that maybe one day money will start saying hello to me instead of goodbye all of the time. I can't really be sure, but I could swear that I've seen my money actually flip me the bird as it is walking away from me or at least that is how it always seems to me anyways.


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## Flea (Sep 8, 2009)

Clint,

I don't know why compulsive spending (my term, not necessarily the prevailing view) is the societal norm.  Economists seem to agree unanimously that those days are over thanks to the Great Recession.

Most people mistake frugality for scarcity, and fear comes into play.  In response, many people hoard, either literally with consumer goods or psychologically with compulsive behaviors like eating out all the time.   What most people don't realize is that frugality isn't about deprivation, but about getting the most joy out of your assets.  When you're truly happy with what you have you don't _need_ to be greedy or acquisitive.  

Long before I heard of it I've been an avid follower of the Voluntary Simplicity movement.  I still learn new things all the time, even after 30-some years.  It's a pragmatic thing, like the benefits of hanging up laundry (your clothes last a lot longer!) but there's also a big spiritual dimension.  When you're frugal, it's pretty much a given that you're a better steward of natural resources.  Beyond that, it's humbling to live with less.  And it teaches a lot of faith in oneself and in the Universe that your basic needs will be met, along with a very specific idea of what those basic needs _are_.  I'd recommend it to anyone.

I hope this is helpful ...


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## Flea (Sep 8, 2009)

> I'm hoping that maybe one day money will start saying hello to me instead of goodbye all of the time. I can't really be sure, but I could swear that I've seen my money actually flip me the bird as it is walking away from me or at least that is how it always seems to me anyways.



I empathize.  You may want to look this up - it's a program with accompanying book on making peace with the money in your life.  It's a little time consuming, but then so is tearing your hair out over mountains of bills and collector calls.  :uhyeah:

http://www.yourmoneyoryourlife.org/ 

It's done wonders for me.


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## KELLYG (Sep 8, 2009)

From what I see, people want instant gratification.  The have to keep up with the Jones whether they really want what the Jone's have or not. They also see what this movie star wears, that sport star drives, that singer's jewelry.   Most people are offered credit cards with high limits while they are college age.  Way to young to have massive credit limits.  Some who's parents are very irresponsible often do not teach their children how to handle money.  etc.  etc. etc.


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## still learning (Sep 8, 2009)

Hello, The American way....Lots of debts...?

First our education systems, DO NOT TEACH US PROPER MONEY MANGEMENTS..

Bad spending habits and EASY TO GET CREDIT CARDS....(debt cards-makes better sense)...except for emergencies...?

Bankers knows...more credit given?  ...One can charge more interest  and banks can make more earnings..on the borrow money!

Just like Loan sharking....Credits/Loans from Banks/Etc...ONLY it is legal...

Easy money?  ...easy to purchase those items most of us ARE UNWILLING TO SAVE FOR...!

Debts...part of our life today.....

Owning a home..w/ morgage...part of our systems to be in debt..
For those with Kids in College? ...we have one now..next year one more..and more Debts...we have..

Gas is easier to get at the gas pumps with credit cards...SO EASY..!

We need to learn the true "Chinese arts" of keeping money?

Money-FU.....stretching, forms-(certicates of deposits),  long styles...NO shorts,  Classes start yesterday....Please send money to....learning how? ..

Aloha,    ....NOT Chinese...NO wonder broke?


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## rdonovan1 (Sep 8, 2009)

KELLYG said:


> From what I see, people want instant gratification. The have to keep up with the Jones whether they really want what the Jone's have or not. They also see what this movie star wears, that sport star drives, that singer's jewelry. Most people are offered credit cards with high limits while they are college age. Way to young to have massive credit limits. Some who's parents are very irresponsible often do not teach their children how to handle money. etc. etc. etc.


 
I think that you are right about that and I tend to think that the reason for that has a lot to do with greed.

Part of that greed and selfishness comes from our evolutionary past while part of it comes from what we are exposed to by the media.

Greed and corruption have been big time players in our government for a long time and I think that is part of the reason as to why our economy is so screwed up.

That greed and corruption has also spilled over into the corporate world as well and I think that is why so many businesses have gotten themselve's into so much financial trouble.

I once read an article that was written by Robert Kiyosaki that said that the biggest pyramid scheme in America is Corporate America as it tends to have one guy on the top and a lot of people underneath him and I tend to believe that is true because I personally have seen it at at least one company that I worked for.

According to my mother's boyfriend and some of the firearms training instructors that I had with the security company that I am starting to work for, President Obama has made it so that manufacturers of firearm ammunition have cut back on the production of things like bullets, black powder, and prmer and from what I am told that is hurting people that like to shoot guns on the shooting range.

It doesn't surprise me at all because the government even curtailed the production of American made oil which is a major source of revenue for the oil companies and I personally think that is one of the reasons as to why gas prices at the pumps have skyrocketed out of control.


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## rdonovan1 (Sep 8, 2009)

Flea said:


> Clint,
> 
> I don't know why compulsive spending (my term, not necessarily the prevailing view) is the societal norm. Economists seem to agree unanimously that those days are over thanks to the Great Recession.
> 
> ...


 
I've heard that before from Dolf DeRoos in his program relating to real estate investing. 

In his program he stated that most people tend to live in what he called a scarcity mentality and I tend to believe him on that.


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## Ping898 (Sep 8, 2009)

Everyone here seems to be saying that all debt is people going overboard....I have debt, sometimes it can't be helped.  I needed to buy a new car (black car and New Mexico, not a good mix, sucker kept breaking...) that set me on a downward spiral for a while cause I had a small government salary and a car payment I didn't originally have in my budget.  Then I went back to school for my masters, and though my company reimbursed me, I still had to pay about 6k up front, which came in the form of credit check, with a locked in interest rate of 2.99%.  I had to pay more with the interest than I got reimbursed for.  Now I am doing my PhD, looking at a good $150 a month in extra commuting costs minimum, not to mention the school is more expensive than my company will reimburse for, so that's and extra $500 a semester, plus the interest on the loan.  Now, I still took a trip to Ireland last year, cause I decided I was not going to let my debt control my life, and if I am honest, at this point I've paid down enough that I have enough investments to pay off everything but my mortgage and my latest round of school expenses, but I consider that mortgaging my future to pay for today.  So instead, I just pay off everything I can as fast as I can, and try my best to live within my means, some months more successfully than others.  Overall I have good money management skills and investing is a hobby, and I have had more than one stock with >100% return, and pulled  20%, 10% and 12% returns on sold investments in the last month.  Still the debt happened, some people are stupid, just rack up debt on new clothes and new toys, never considering how much it'll cost them in the long run, but that isn't everyone...


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## mj_lover (Sep 8, 2009)

sometimes its necessity, i spent 3 months living off only credit between collage and a job, racked up a substantial amount of debt together with the student loans, so it ended up being greater then my paycheck so more debt to get a better paying job needed to buy a car, etc..
debt has a nasty way of increasing faster then you can make payments.

but once you sell your house and live in a van in your parents backyard, things get better (saving for another house after things get caught up)

and then again, once you hit a certain point with financial stress, you stop caring and splurge a bit..bad habit, but people do it anyway.

blah, nasty stuff money


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## Flea (Sep 8, 2009)

Bravo to you, Ping, for reaching for the educational brass ring.

Please don't think I'm passing judgment about debt.  It's a highly individualized thing.  In your case it's a question of priorities; from your post it seems that you've weighed the options and decided that it's worth the sacrifice to go into debt to reach that goal.  If it works for you and brings you joy in the long run, then that's commendable.

Some people go into debt because they're not paying attention as they charge fancy trips to Paris and don't save for retirement, but that's a stereotype.  Especially these days.  I have my own debt story of losing everything to a catastrophic illness - the career, the house, the fiancee, and above all the capacity to work.  I was every candidate's speech fodder in having to make monthly choices between food, prescriptions, and utilities, and so I rang up several thousand on my credit card in the name of survival.  It happens, and I'd be the last person to condemn anyone for falling into debt for any reason.

All the same, I'll be relieved to see this "conspicuous consumption" culture get shaken for a while.  Hopefully it'll give people a chance to think and breathe a little before wandering back into their consumerist daze.


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## Rich Parsons (Sep 8, 2009)

While I live with as little debt as possible, I understand that others choose to otherwise. 

I pay off credit cards monthly, and only have mortgage or new vehicle payments financed, but I always look for the 0 % interest option for vehicles. (* I know not available anymore. *)

But, not having any debt in the system can be bad as well. I mean if you already own a house or plan to rent for life that is ok. But if you plan to buy a house you need to have a credit history. A payment on a small credit card or a store credit card that is paid off regularly or always on time is good for the system to see. 

Althought for the highest points, always paying off each month can lower your overall score a little as it does not show long term payment, but if a credit card is used monthly for one tank of gas, and paid off monthly then you are helping your credit.

If you choose to live off the grid 100% make your own electricity or live without and live without any taxes and not being into a system, I wish you luck in accomplishing this. But, if you choose to use the system to your advantage then credit is not a bad thing.


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## K-man (Sep 8, 2009)

_rdonivan_ mentioned Robert Kiyosaki. He has a number of very good books on the market including one called "Cashflow Quadrant". If you can read that book, and embrace its principles, you will be well on the way to financial independence. I have given Kiyosaki's books to all my children. Perhaps the best advice I was ever given, when I was considering borrowing an enormous amount of money to buy a business 40 years ago, was "just pretend you are playing monopoly". Now I still have huge debt, but it is good debt. It got me through the current GFC, has funded my retirement for the past 10 years and I hope will continue to keep me going for the next 20 to 30 years. Debt of itself is not the problem. The problem is differentiating good debt and bad debt. :asian:


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## Jenny_in_Chico (Sep 8, 2009)

Ping898 said:


> Then I went back to school for my masters, and though my company reimbursed me, I still had to pay about 6k up front, which came in the form of credit check, with a locked in interest rate of 2.99%. I had to pay more with the interest than I got reimbursed for. Now I am doing my PhD, looking at a good $150 a month in extra commuting costs minimum, not to mention the school is more expensive than my company will reimburse for, so that's and extra $500 a semester, plus the interest on the loan.


 
This is exactly why I'm in debt, Ping...a MS followed by a PhD means 8 years of living on about $14,000 a year (from a grad student teaching stipend), which is very, very difficult. Stuff happens, your dog gets sick or your car breaks or your rent goes up, and before you know it you have to take out a student loan just to eat. And now that I've graduated, there are too few science jobs for too many applicants, especially in California...all I can say is, thank god I can train dogs because that may prove to be my fallback career.


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## rdonovan1 (Sep 8, 2009)

K-man said:


> _rdonivan_ mentioned Robert Kiyosaki. He has a number of very good books on the market including one called "Cashflow Quadrant". If you can read that book, and embrace its principles, you will be well on the way to financial independence. I have given Kiyosaki's books to all my children. Perhaps the best advice I was ever given, when I was considering borrowing an enormous amount of money to buy a business 40 years ago, was "just pretend you are playing monopoly". Now I still have huge debt, but it is good debt. It got me through the current GFC, has funded my retirement for the past 10 years and I hope will continue to keep me going for the next 20 to 30 years. Debt of itself is not the problem. The problem is differentiating good debt and bad debt. :asian:


 

I hate debt period, but if I am going to have any kind of debt at all then I would rather have it be good debt than bad debt. 

Being in debt to anyone sucks big time.


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## Ceicei (Sep 8, 2009)

And who invented "interest"?  That is definitely a consumer killer!

- Ceicei


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## rdonovan1 (Sep 8, 2009)

Ceicei said:


> And who invented "interest"? That is definitely a consumer killer!
> 
> - Ceicei


 
I'm pretty sure it was a rich suit that invented that. Those guys are almost as bad as those who tax you without representation.


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## rdonovan1 (Sep 8, 2009)

Jenny_in_Chico said:


> This is exactly why I'm in debt, Ping...a MS followed by a PhD means 8 years of living on about $14,000 a year (from a grad student teaching stipend), which is very, very difficult. Stuff happens, your dog gets sick or your car breaks or your rent goes up, and before you know it you have to take out a student loan just to eat. And now that I've graduated, there are too few science jobs for too many applicants, especially in California...all I can say is, thank god I can train dogs because that may prove to be my fallback career.


 
I don't have the degree at all, but I certainly know what it is like to be so far in debt that when you go to McDonald's for a cheeseburger they start to look at you funny before they run your credit report so that you can finance the cheeseburger. 

They tend to laugh at me though when I apply for a cheeseburger loan.


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## Makalakumu (Sep 9, 2009)

Ceicei said:


> And who invented "interest"?



A few hundred years ago, the charging of interest or usury, was a crime in most countries...a capital offense in a few!

The thing about money is that it's just a game that humans made up.  Learn the rules and you'll play well.  Don't take the game so seriously and play to win.


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## rdonovan1 (Sep 9, 2009)

Ceicei said:


> And who invented "interest"? That is definitely a consumer killer!
> 
> - Ceicei


 
Probably a rich suit.


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## Clint Franklin (Sep 9, 2009)

Hey all, thank you for all the thoughtful responses!

I'm not saying all debt is bad... most people will need to owe someone something at some point in life, whether you need to buy a home, a car, pay medical bills... that's just life. Also, credit-building is essential for today's life. What has me scratching my head though is why people feel they have to live "high on the hog", buying things they really don't need in large quantities, until they have painted themselves into a corner.

I know I like to buy nice things and splurge from time to time, no doubt. But I also have moments (a lot of them) where I have to say "hold yer hosses, pard" and either save my money or do without. I have to justify those things in my head, and sometimes I end up not getting something I really want (but thankfully, I usually get over not having it fairly quickly).

It is a disappointment when I can't have something I want, but the alternative just seems to be unnecessarily stressful.


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## Flea (Sep 9, 2009)

Clint Franklin said:


> What has me scratching my head though is why people feel they have to live "high on the hog", buying things they really don't need in large quantities, until they have painted themselves into a corner.



Fear of death, that's my theory.  We try to distract ourselves from the inevitable with lots of pretty baubles, and fiddle as Rome burns.  %-}


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## Stuey (Sep 9, 2009)

Good and bad credit is definitely the way to think about it. Build up good credit by using a credit card for gas or something and always pay off in full every month. If you pay the minimum you will be paying for 30+ years even for a little amount! If you need a car or something VERY important which requires finance, get the best deal around. Learn how interest works. APR, Flat rate, etc. all work differently. If in doubt ask the total repayment after the term. You will be shocked at the differences. Another great myth is to have loans and credit card bills whilst also having saving! You may want a comforter for a rainy day, but surely the available debt you pay off with savings could cover that? 
I take measured risks. I recently got out a £22000 loan for a caravan, which will cost me £28000 after the term. I dont mind this because I am buying into something which will pay me back. I also have a flat which I bought from the council at a £38000 discount. I now rent that having moved into a different place! Debt can be necessary, I know I have been lucky. Or have I? Is it because I have been savvy? I cant entirely believe either way, but I am more for it being because I am savvy with money.
There is a 'scheme' here, (for want of a better word). Its called stoodging, (spelling?). It is where you get a corner credit card which will allow free transfers, then you get another cred card with 0% for X months and put the balance into the corner card. The positive balance from that goes into your own account for saving. Since you pay 0% and earn whatever savings interest its free money. Just change the card at the end of the 0% term. It has been reported that one person managed to earn £5000 a year from this technique! Get money smart people!


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