How to save money

[tbeltrans]

Originally Posted by Mandobart

Interest is the price you pay to enjoy something you can't really afford. In the US we're trained to believe debt is no problem as long as your cash flow exceeds all your monthly payments....but that's how we got to the point where millions live paycheck to paycheck and could not weather an unexpected $400 expense. We also have millions of aging boomers with no savings and no retirement beyond social security. Sure they're making the house, car, boat, RV, credit card payments, but what happens when you get ill or injured or laid off?

That was my wife's and my consideration at every financial decision point we encountered - what happens if we suddenly don't have the money to pay our bills. As a result, we always chose to live debt-free, with the exception of our mortgage which we got into with the idea that we had to be able to live on one income. We were able to pay it off very early as a result, and then were able to retire early also later on.

However, everybody has different financial priorities and I know from discussions about this stuff with co-workers while I was working full time, that I was definitely "odd man out" - a very small minority. Among all of us in that workplace, only one other person felt as I did about these things.

Tony

[1neeto]

Originally Posted by Mandobart

Interest is the price you pay to enjoy something you can't really afford. In the US we're trained to believe debt is no problem as long as your cash flow exceeds all your monthly payments....but that's how we got to the point where millions live paycheck to paycheck and could not weather an unexpected $400 expense. We also have millions of aging boomers with no savings and no retirement beyond social security. Sure they're making the house, car, boat, RV, credit card payments, but what happens when you get ill or injured or laid off?

There is a way to responsibly leverage credit. You can even use credit to pay off debt, but it takes a whole lot of discipline. Financial literacy should be taught in schools.

[Tony Burns]

Actually my wife and i have been downsizing our clothing ,etc ( sorting, trying stuff on and bagging it up to go ) when you know what you have that you like
- it helps you from not buying anything that you don't need - give it a try ,
stuff like you find a new sweatshirt under a pile of clothes some where that you though you needed to buy.
Theirs also a show on Netfliks's by Marie Kondo- think its called tidding up - good show to reduce clutter and simplify your life .
Allot of us feel the need to buy stuff even when we shouldn't -like its a fun thing to do, buying Crap we don't need .
When you look at this, it's like getting more money in your hands , shopping really isn't all that fun in the first place IMO.
When i am in the stores , I wonder who would buy all this stuff that's not necessary -most of it is junk !

[buddyhu]

Originally Posted by 1neeto

There is a way to responsibly leverage credit. You can even use credit to pay off debt, but it takes a whole lot of discipline. Financial literacy should be taught in schools.

I agree with much of what you have posted. Financial literacy should be taught in schools. And one can use credit is a way that is responsible, perhaps even "wise".

I just want to acknowledge that views of what might constitute a good use of credit change over time.

I knew a fellow who had a fair amount of money, whose family had know Madoff when he was first starting out. He had watched his parents "earn" about 6% interest every year for decades, and as he made money in his chosen profession, he invested nearly all of it with Madoff. Before Madoff's treachery was exposed, my friend had a very large mortgage on his home, and believed that was just "smart" (he was consistently earning 6%, apparently without much risk, and his mortgage was about 4%; as best he knew, he was earning 2% on the $1M house he owned, and the $600K second house he owned...so about $16,000 a year, AND getting a tax deduction on the interest on the loan). Of course, that turned out to be untrue. And he lost both homes and had to start over in his 70's.

I should also note that it was VERY common back in the 1970's and 80's to talk about mortgages with that same attitude: if there is a safe investment that earns you more than the interest rate on your home, keep a big mortgage (back then, you could by a 30 year zero coupon US Government bond and get a yield of 13.75%. I bought some...but wish I had bought A LOT). A TERRIFIC investment with virtually no risk (if the US Government GENUINELY defaults on its loan obligations, I would have much more to worry about than my retirement savings).

In any event, there is a fear of credit in some folks as the result of fearful input from their families, or because of what happened in 2008. Many do not have much familiarity with the concept of "opportunity cost", nor have they seriously looked at important issues related to compound interest (either disadvantagous, as with the deleterious effects of compounding inflation during one's retirement; or advantageous, as with the potentially beneficial effects of compounding a slightly better return on investments over time). And some folks don't have enough sense to fear any financial product if it is packaged in a pretty enough way. they will buy it, even though they don't understand it.

But my main point is to acknowledge that views of different kinds of debt, and different kinds of investments, and different kinds of possessions ("collectibles and fine art"), changes over time, and things that were considered safe, or wise, or "cautious", or as retaining a certain underlying value regardless of financial context, may be viewed VERY differently in 20 years.

[tbeltrans]

I am not sure that folks who choose to not use credit are necessarily "fearful" of it. Fear seems to be tossed around a lot these days, and often where it doesn't really apply. There are certain ideas that some folks believe that are called a "phobia" when in reality, they are quite the opposite, and instead constitute a strong personal conviction.

My view of credit and debt comes from learning from the "Depression Babies" who were the majority of the population of our condo association when my wife and I first moved in, back in 1988. We were then the youngest people in the building. These people were settled in their lives and were doing fine financially. When the economy tanked in 2008, we were largely unaffected by it, other than we had to watch our 401k take a dive before coming back, which resulted in lost opportunity to grow during that time.

We made conscious choices about how we wanted to handle our finances, just as would anybody who is being fiscally responsible. I am not saying that those who choose differently than we do are fiscally irresponsible, but instead only that those who are fiscally responsible do think about what they intend to do before they do it.

Our choices were not based on fear. For us, a normal aspect of our decision making process is to consider what is the worst that could happen, what is the best that could happen, and what is likely.

Tony

[H165]

Be sure the recreational equipment you buy is, in the long run, zero cost.

There are so many used guitars that fit this criteria you should have no problem finding one. Buy it, play it as long as you want, sell it for the same price you bought it. Same goes for ongoing-cost items like snow skis, golf stuff, motorcycles, and ... the list is endless.

There are lots of no-ongoing-cost sports out there. Surfing, pickleball, Bocce, Croquet, etc. Buy the (used) equipment once; you're done.

Don't be afraid to buy used stuff; just test it first. This year's charity donations are last year's way-overpriced "gotta have-it".

[Wengr]

I do not trade money for "peace of mind".
Therefore I do not want the extended warranty.
In most cases I do not want insurance beyond the minimum required by law.
I do not want the utility lines "protection plan", or the maintenance agreement, or any of that add on nonsense.

Now some may respond with stories of how they were saved by insurance, and of course it happens. But just like I do not go to the casino because the odds are against me, I feel this works the same way.
I will pay as I go. It's served me very well for many decades.

[1neeto]

Originally Posted by buddyhu

I agree with much of what you have posted. Financial literacy should be taught in schools. And one can use credit is a way that is responsible, perhaps even "wise".

I just want to acknowledge that views of what might constitute a good use of credit change over time.

I knew a fellow who had a fair amount of money, whose family had know Madoff when he was first starting out. He had watched his parents "earn" about 6% interest every year for decades, and as he made money in his chosen profession, he invested nearly all of it with Madoff. Before Madoff's treachery was exposed, my friend had a very large mortgage on his home, and believed that was just "smart" (he was consistently earning 6%, apparently without much risk, and his mortgage was about 4%; as best he knew, he was earning 2% on the $1M house he owned, and the $600K second house he owned...so about $16,000 a year, AND getting a tax deduction on the interest on the loan). Of course, that turned out to be untrue. And he lost both homes and had to start over in his 70's.

I should also note that it was VERY common back in the 1970's and 80's to talk about mortgages with that same attitude: if there is a safe investment that earns you more than the interest rate on your home, keep a big mortgage (back then, you could by a 30 year zero coupon US Government bond and get a yield of 13.75%. I bought some...but wish I had bought A LOT). A TERRIFIC investment with virtually no risk (if the US Government GENUINELY defaults on its loan obligations, I would have much more to worry about than my retirement savings).

In any event, there is a fear of credit in some folks as the result of fearful input from their families, or because of what happened in 2008. Many do not have much familiarity with the concept of "opportunity cost", nor have they seriously looked at important issues related to compound interest (either disadvantagous, as with the deleterious effects of compounding inflation during one's retirement; or advantageous, as with the potentially beneficial effects of compounding a slightly better return on investments over time). And some folks don't have enough sense to fear any financial product if it is packaged in a pretty enough way. they will buy it, even though they don't understand it.

But my main point is to acknowledge that views of different kinds of debt, and different kinds of investments, and different kinds of possessions ("collectibles and fine art"), changes over time, and things that were considered safe, or wise, or "cautious", or as retaining a certain underlying value regardless of financial context, may be viewed VERY differently in 20 years.

Nothing to disagree with here. I wanna expand in the folks that will get into any nicely packaged financial product without fully understanding it.

This starts at a very early age when you’re 18 and start getting credit card offers in the mail. Give an uneducated teenager access to what seems like “free” money, and he/she will take it, and be heavily in debt before they turn 20. Me and my wife have a financial literacy side business. We help and coach people in debt payoff strategies. There’s people with tons of debt and no idea how to pay it off because they have no idea how their loans and credit cards are structured.

[1neeto]

Originally Posted by Wengr

I do not trade money for "peace of mind".
Therefore I do not want the extended warranty.
In most cases I do not want insurance beyond the minimum required by law.
I do not want the utility lines "protection plan", or the maintenance agreement, or any of that add on nonsense.

Now some may respond with stories of how they were saved by insurance, and of course it happens. But just like I do not go to the casino because the odds are against me, I feel this works the same way.
I will pay as I go. It's served me very well for many decades.

There wouldn’t be an insurance industry if it was a money-losing industry. But peace of mind can be of value to many. I mean, do you have medical insurance?

[Wengr]

Originally Posted by 1neeto

There wouldn’t be an insurance industry if it was a money-losing industry.

Exactly]But peace of mind can be of value to many. I mean, do you have medical insurance?[/QUOTE]Imo, medical insurance is a misnomer. It's much more often actually a comprehensive health care maintenance plan. And yes I have it, but only because it is provided by my wife's employer and they will not allow us to take the cash instead.