My sig explained (finally..and it's a fricken' novel)

Quote:

---

Originally Posted by EsKALad

haha roman noodles...hahaha lol 4 for 1.00 4 meals for a dollar?? im there!

---

Where are you shopping? They're 8 cents here!

I understand that I am VERY fortunate to have learned this lesson so early. My parents have 2 houses, 3 cars, and a boat that are all still being paid for. It got to the point last year where I had to start telling my dad to quit buying things because he had to start thinking about how my mother would pay the bills if he was gone--he's had several open heart surgeries and has been smoking for 40 years.

His reply? "I've got enough life insurance to cover all this." jeez...sometimes you just wanna smack your elders, dont you?

I saw the storm coming, but I really thought it was a summer shower instead of the hurricane it was until I listened to the tapes and read the books. This is the first month I have primarily used cash and I went from spending $300 at Wal-Mart for food and "necessities" for the last 5 months to.....wait for it....$80 this month--because I was using cash out of my "food" envelope that only had $200 in it at the beginning of the month.

I didn't really get the envelope system till this month and omg it's great. Based on my last 5 months (which I was easily able to track since I used my debit card for EVERYTHING, including buying 20oz drinks for a dollar), I put $200 for food, $100 for Gas/Cigarettes, and $60 for eating out. There's a week left and with a full fridge and a full tank, I've got $120 in the food envelope and $40 in the Gas envelope. Holy Crap!

If I consistently have that much left over, I will decrease those amounts and use the extra to pay down more debt. April is the first month I have student loan payments, but it isnt going to affect my budget because I am already paying so much against the cards.

Discover Card is going away in 6 days. YAY!

My Current total debt: $211,173.00
(mortgage, 2 car payments)

Like Dave says, if your friends don't think your crazy then your not doing it right. I saw him on 60 Minutes in November and I have been a convert ever since. I just busted my *** moving my company and got a pretty good bonus for doing so. It is going into building my emergency fund. His plan is easy to understand and implement, it just takes effort and drive. Congradulations on the good work.

It is amazing how secure you can feel by having $1000 bucks of baby step 1 in the bank. The oh **** factor really goes away.

8 cents?????????? **** dude.... my fam owns a grocery store and we sellem for 4 for 1.00... lol thats where i got that from.. but damn 8 cents? thats less than our cost price... go to ur local store buy them alllll and ship them to me lol jk and ill give you 5 bucks for your time lol..cut down sum of that debt!

I went through the same thing. My wife (GF at the time) an I had a total debt of $A50k (US$39k) and we were renting. My Grandmother died and we moved in with my Grandfather (not recommended in all cases!) We paid off the debt in 2.5years because we didn't pay rent and we did a budget. We stopped using credit cards. At the end of it after 3.5 years we bought a house and are now paying it off. Now if only houses were as cheap here as what they are in the US. It would also be nice if the interest rates were as low as yours too.
The point is that if you are sensible with what you spend then you will end up not having to struggle to find money to pay your bill and actually be able to enjoy life rather than worry about how you are going to pay for food this week.

Agree with all the good budgeting stuff (and learning the answer to "Who is Dave Ramsey"?).

However, not all credit is bad, as some of you have mentioned above re real estate and investment.

We use our credit card for everything. If I could pay the mortgage payments with the credit card, I'd do that too. Thing is - we offset the bank account against the mortgage, so the higher the balance in that, the less interest I'm paying on the house. The credit card then gets automagically paid on the last day every month, which means that we have the maximum balance applied against the mortgage.

In Australia - this is an offset account. If that emergency money in your bank account isn't earning you as much as your mortgage is costing you, then you might be able to structure better.

Sure - it's a credit card. But when you treat it like cash (and owe a bank 250,000), then you learn quick.

My .02

C!

@C4M
well, that's...um....interesting....I don't think i fully understand.

So you've got like $10k in the bank and you owe $250k? That I can understand, but if you've got $50k in the bank interest wise I think you'd be much better off putting that towards the principal. I'd rather pay 10% on $200k (20k interest in a year) than 9% on $250k (22.5k interest in a year), unless you are also making a guaranteed hellacious return on that money in the bank.

I'll agree that credit cards are great if you are responsible with them, like I originally was, but most people eventually become irresponsible.

Congrats Wizard on getting things figured out. I read the whole thread and you're now making the right decisions.

I have a horrible spending habit and I'm getting my first Credit Card when I go home this weekend and I hope it will turn out alright for me. It's going to be a real test because I'm now in my first "real" job and making good money but I've finally learned to budget and hopefully won't fall down the same path you did. I plan to NEVER...EVER......EVER hold a balance on any credit card for as long as I live. That's the last thing I want and I never understand why people put things on a credit card and hope to god they can pay it off. Glad to see you've gotten out of that buisness ;).

Bugbyte I'm in the same boat as you with the Mac Mini. About $100 short and saving :p

Cash is definately the best way to buy things, because as you said, its more painful. I know this is nothing compared to what has been posted so far, but I just got my debit card in october, and in just 4 months, have spent maybe $1,000 or so on stuff I didnt really need. However, I am only 19, and live at home, so I have no debt whatsoever (but the money I spent is my money, not my parents). Thatll all change in 6 months or so when I take out a loan to get a car. Planning on paying half up front (even though I have enough for 3/4 or so), and then using another 1k of it for plates and insurance, then having 2-3k for repairs and any other unfortunate stuff.

And the thing about the credit cards and budgeting money is one of the things my parents do very well. Countless people who have 2 new cars in their garage, 3 story house, live on a lake, have a boat, and a "getaway" house cannot afford it. So when they die, their kids now have all their financial responsibilities. However, if my parents were to die today, I would not have any debt to worry about (just some car payments that I could go into their savings to pay off if needed, but I would sell that one anyway). We are not rich, but not poor either. We may not have the newest of everything, but we still have a 2 story house, 2 car garage, 5 vheicles, and all that good stuff. The way my parents got to where they are was by not getting the huge debt like most people end up getting. I dont remember who, but someone said that its a different story about being in debt to pay off a house or car, but their are still guidelines. If you make say 40k a year, you cannot afford a 250,000 house if you ask me.

Good luck though, sounds like you are on the right track now!

Matt

Quote:

---

Originally Posted by wizardPC

@C4M
well, that's...um....interesting....I don't think i fully understand.

So you've got like $10k in the bank and you owe $250k? That I can understand, but if you've got $50k in the bank interest wise I think you'd be much better off putting that towards the principal. I'd rather pay 10% on $200k (20k interest in a year) than 9% on $250k (22.5k interest in a year), unless you are also making a guaranteed hellacious return on that money in the bank.

I'll agree that credit cards are great if you are responsible with them, like I originally was, but most people eventually become irresponsible.

---

The way it works (I use the same system) is that you have your home loan and a savings account linked to your morgage (offset account). All your income (pay, tax checks, gifts, etc) go into the savings account. If you have a loan of $200k and $10K in the savings account, the bank calculates interest on the offset ammount. ($200k-$10k) So the interest is calculated on $190k. So obviously the more money you keep in your savings account the less interest you pay and the better off you are. Here is where the credit card comes in. You live off the credit card to keep the maximum ammount in your savings account for the maximum ammount of time as stated above. You then pay your credit card out in full at the end of every month (or statement date) In essence you are using the banks money to live off and since the money you would usually spend out of your savings account isn't touched you save on interest. I have heard of people who use this method pay off their 30 year home loan in under 10 years. It's true you still have to exercise control, but you have to think that it is your money you are using even though it is a credit card.
Hope that makes a little more sense to you WizzardPC