095 Beyond Your Wedding Day Podcast-Why You Don’t Need Debt
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*Very simply, using debt is us wanting something and getting our way (much like a toddler) before we can actually afford them
*A big problem is that we have been told so many times that debt is a tool and that it is not only a good thing, but impossible to avoid!
*Time to address many of the myths that surround debt:
*Myth: debt is a tool and should be used to create prosperity
-often, risk is not calculated in
-this is often spewed by broke finance professors
-75% of the Forbes 400 richest people said that getting and staying out of debt was the #1 key to becoming wealthy
*Myth: If I loan money to friends or family, I am helping them
-is your relationship worth the amount of money being borrowed?
*By cosigning a loan, I am helping a friend or relative
-the reason the person needs a cosigner is because the lender has determined that they are highly unlikely to pay it back! Does this sound like a good idea?
*Cash advance, payday loans, rent-to-own, title pawning, and tote-the-note car lots are needed to help lower income people get ahead
-these are all total rip-offs and keep the poor poor
*Ninety days same as cash equals using other people’s money for free
-First of all, you will often get a discount when you pay with cash
-Second, 89% of contracts convert to debt
*Car payments are a way of life, you’ll always have one
-the amount of money people spend on car payments is mind-blowing.
-I have worked with people who spend more in car payments than on their housing!
-Save up and pay cash!
*Leasing a car is what sophisticated people do. You should lease things that go down in value and take the tax advantage
-The average interest rate on leases is 14 percent!
-The math on these deals shows that they are a terrible idea!
*You can get a good deal on a new car at zero percent interest
-When a car loses 60% of its value in the first 4 years, you are not getting a good deal
*You should get a credit card to build your credit history
-Some criteria to qualify for a mortgage without having to have a history of debt:
*Pay your landlord early or on time for two years
*You have been in the same career field for two years
*You have a good down payment (preferably 20%)
*You have no other credit, good or bad
*Your payment is within 25% of your take home pay
*You need a credit card to rent a car, check into a hotel, or buy online
-the debit card will do all of these things
*The debit card has more risk than a credit card
-Visa, for example, has a zero liability policy if someone fraudulently uses your debit card
*If you pay your credit card off every month, you get the free use of someone else’s money
-60% of people do not pay off their credit cards every month
-The BIGGEST problem is that studies have shown you will spend 12 to 18% more when using a credit card versus using cash
*Your teenager should get a credit card so he or she will learn to be responsible with money
-this is a great way to set up your teen for a lifetime (or at least a decade or so) of debt-filled misery
*Debt consolidation is a good idea because it saves interest and you have one, smaller payment
*debt consolidation in itself is not wrong or evil
*the problem is it makes you feel like you actually did something with your debt, but you didn’t
*78% of the time, someone who consolidates debt racks it up again
*it causes you to be in debt longer b/c it just extends the terms of the debt
*If no one used debt, our economy would collapse
-sure, if everyone quit using debt immediately all at once
-but, if it was done over time, the economy would prosper, just think about it!