Interesting responses, some of them pretty good. But debt isn't an evil, ignorance of how to use it is.
I remember getting out of school and having a bucket load of student loans and a wife with even more loan debt than I had. It seemed like we paid on that stuff forever, but it was it was only about 4 years. It felt like forever. During that time we did without and made due with what we had. That doesn't mean we didn't live a life, it's just that when friends were buying new cars and taking trips we didn't until we were out from under that debt.
Then we started to save a bit. But that's when we needed new wheels, so we took out loans. Once the loans were paid off in 3 or 4 years we hung on to the vehicles and took the payment and redirected the money into mutual funds. Over the next 4 years we saved enough to pay cash for a new vehicle and kept putting the same amounts in the mutual funds. Our first vehicle made it 15 years, 8 as a primary vehicle and 7 as a third vehicle. We now pay cash for new vehicles when they're needed. In fact, my last car was a 12 month old car and my wife's a year end buy (hint: try to buy vehicles at the end of the month when the dealership is trying to make its sales numbers, or the end of the year when they want to get rid of brand new "old" stock).
If you're married and both work, living off of one income can get you ahead in a meaningful way. Except for a few one time expenses, we've always lived off one income, in fact the small of the two. If you're single or married, take the attitude that nobody is more important than you and that you need to be paid first. Whether that means your 401K or a personal investment, pay yourself first. And if you have more time than money, a like/kind exchange of your skills for a % of a development is a great way to build your own personal REIT.
Your career is the wellspring of your ability to create wealth. If you manage it well, you'll get much. If you don't, you'll still get enough to become wealthy if you manage things well. It's a slow, unglamorous path, but anyone who logs into this site can do it. All it takes is a lot of self disipline and the wise use of debt, and time.
I have been noticing many people on this thread say that credit cards are dumb.
No, they are not. Credit cards are great. People who don't understand the concept of credit cards are dumb.
You can only go into debt with a credit card if you spend money you don't have. That, my friend, is not the credit card's fault; that is your fault. If you have a credit line of $5,000 that doesn't necessarily mean you actually have 'free' money. It's just saying you can spend up to that amount of money on credit.
I only use credit cards because I dislike cash. Every month, I pay my statement in full and have the ability to view where all my money went. I have a phenomenal credit score for someone my age because I haver never abused my credit and I pay my bills on time.
Plus, I have been able to snag many free airplane tickets because I use freqent flier cards.
In closing, credit cards are a means for an irresponsible person to allow themselves to get into serious debt. But again, it's not the credit card's fault.
Amen to credit cards are bad, not. And if you have a good card program, you're flying for free or getting some residual benefit, plus using the credit card companies money for a month at a time for free.
Most Architects I know want to go out like Louis Kahn.
Dead at the Train Station for Three days before anyone
recognized him and only three dollars to his name.
i agree with you n_ that they are not dumb if you pay them off every month. unfortunately, most people do not thus making them dumb. as i said before, credit card debt is dumb not credit cards themselves.
My cousin once told me that his goal is to die before he pays off his student loans (the debt would be exonerated).....he said it would be his way of stickin' it to the man.
Even "good debt" is bad if you have a high payments each month that you could be using to live. My "good debt" student loans sucked up $600 a month in minimum payments, and that just makes life hard when you have so many other expenses to take care of with your modest architect's salary.
Student loans aren't good dept, but sometimes they're necessary. There are times in everyone's life when there's nothing to take a bite out of execept for a crap sandwich. Student loans are one of those times. If you knew that when you were, say, two years old, you'd save your allowance, all the money between the folds of your birthday cards and the change under the pillow after your tooth disappeared over night. Most don't, and I don't know anyone that did that I like. So, you take out a student loan.
If you're going to take out a loan, there's nothing better to use it on than to invest in yourself. Your education is tops. If you do the numbers, you're going to make over $3,000,000 during your career from your education. You are likely going to be your largest signal income producing asset.
architect21- I've been told that the trick to it is to put the income from any side jobs, gambling winnings, bonuses.... basically any 'unexpected' income, take it and put it towards the student loans. If you average just $2000 of this sort of income per year, over the course of 10 years you've paid an extra $20,000 towards your student loan, thereby cutting years (and years worth of interest) off the loan.
Ok, so doin't take out a loan and instead pump gas during the day and schlep tables at night to make it. Or, find a job in a factory watching a big roll of something unwind onto a little roll of something.
If you've got an alternative, I'd love to hear it. So far nobody has offered a solution to debt for certain things like education or a house.
Any rational but out-of-the-box ideas? Love to hear them.................
I don't think there is an alternative to taking on debt to buy a house...unless you have a rich uncle that just gifts you the cash up front. Same goes for starting businesses.
As for student loans, I side with the hard core anti-debt crowd that feels there's ways to get an education w/out student loans. I did it myself. However I didn't go to Columbia or any high profile college that has frequent recognition on Archinect. I also spent many hours watching big rolls of stuff roll off into smaller things. Currently I'm building a nest egg before I even consider a graduate degree.
Living debt free takes extreme patience and most people of my generation just don't have it. That's the solution. There is no magic to it.
preceptor- I guess I don't understand what sort of an answer you expect here. Is the general plan of living within ones means lacking for you somehow?
My only interesting idea on how to handle the mortgage thing is to buy either a multi-bedroom house or a duplex, and rent the extra rooms. If you work out the money right, you could end up having a mortgage, and just having other people pay it for you.
you don't have to take out a loan to start a business either. i've been in business for 6+ years and no loan yet. as you said aquapura, it takes patience.
Rationalist- I guess I don't know what kind of answer I'll get! And don't get snooty, my wife and I live off of the smaller of our two incomes, banking and investing the larger. So the idea of living within one's means is a unfamilar concept. We've always lived well below our means.
There's always multiple way's to achieve something. I'm not confident enough to think I know all of them, or that I know THE way. Other people are smart, too.
My apologies. There are so many people out there looking for some majic plan that absolves them of all need for willpower or sacrifice that it's easy to assume that that's where someone is coming from.
architect21- I've been told that the trick to it is to put the income from any side jobs, gambling winnings, bonuses.... basically any 'unexpected' income, take it and put it towards the student loans. If you average just $2000 of this sort of income per year, over the course of 10 years you've paid an extra $20,000 towards your student loan, thereby cutting years (and years worth of interest) off the loan.
Yes, I agree with you Rationalist. Pay them off or never take them out. A friend of mine had $45,000 to pay of out of school 5 years
ago he is still owes $36,000. I owe less than that on my house.
Name Balance Rate Payment Debt
$45,000 @ 6.3% paying only the min. of $300
Your friend would have to pay $43,736 in interest
By Paying an Extra 25.00 a month it will take your friend 20 yrs, 9 months to re pay the loan.
He will still have to pay $35,563 in interest. Yikes
I suggest paying a min. of $200 a month extra
This would only take 10 yrs, 4 months to repay the loan. The interest payments are still high to me $16,075 in intrest.
I'm going to come out of school with a similar amount of debt, hopefully a little lower interest (some of it is locked in at 2.85%, though the new stuff for grad school will be higher). But hopefully my profile will look more like this:
ha, I didn't notice this at the bottom of the loan calculator report when I posted that:
Note: The monthly loan payment was calculated at $477.29 for 120 payments (10 years). Since this amount is less than the $500 minimum, the term of the loan has beenshortened to 113 payments of $500 plus a final payment of $17.89 .
It is estimated that you will need an annual salary of at least $60,000.00 to be able to afford to repay this loan. This estimate assumes that 10% of your gross monthly income will be devoted to repaying your student loans. If you use 15% of your gross monthly income to repay the loan, you will need an annual salary of only $40,000.00 , but you may experience some financial difficulty
Just So I can Say; I Walk it like I Talk it.
I Will Pay off My House in Aug.
Think, an Architect who owns his own Home Free and Clear.
How do you like those Apples?
I think your link is being sold and has turned into an ad? This sounds exactly like something from Dave Ramsey, which I'm sure it has to be. (I don't have time to read through this whole thread. Its probably in there somewhere.) I'm a Ramsey listener/follower, myself. I'll be graduating debt free unless something absolutely catastrophic happens between now and graduation. Its the only way to go in my opinion. Glad to see someone else following this path.
Dave Ramsay I don't know, but Martin Lewis in the UK runs a site called moneysavingexpert. The same chap also appears on BBC TV and radio. While much of what he has to say is specific to the UK, the principles are the same: Getting debt-free.
An Architect I worked for had won the Washington State Lottery.
3 Million Not bad. Took a lump sum payout after tax 1.2 Million.
It was Gone within two years. Easy come Easy go.
I think you should make a distinction. Credit card debt is retarded. Financing a car is retarded. Making payments on furniture or computers is retarded. Using leverage to build equity is the 8th wonder of the world.
Yup, credit card debt = fool
car loan debt = foolish
business loan debt = toss up
It's taken a lot of patience, but I am quite happy the only debt I have is student loans and mortgages. Just bought my car in cash and haven't needed loans or investors for business (although for development that's a different story).
Point is, I think it is a billion times better to struggle, drive an old car, work from your bedroom or whatever before signing your soul away.
Inflation in the US is running around 4% which is high compared to the past few years. You can find banks (not Bank of America or the heavy banking hitters) that are giving a 3-3.25% interest rate. While current interest rates are under our inflation rate, it still makes more sense to save and invest wisely then to spend your money for the sake of spending.
Word around the campfire is wurdan that your savings are insured by the FDIC so that inflation is taken into account. Then again, I was told this by and economics prof (who hardly spoke English) at about 8 in the morning.
Debt Is Dumb
Interesting responses, some of them pretty good. But debt isn't an evil, ignorance of how to use it is.
I remember getting out of school and having a bucket load of student loans and a wife with even more loan debt than I had. It seemed like we paid on that stuff forever, but it was it was only about 4 years. It felt like forever. During that time we did without and made due with what we had. That doesn't mean we didn't live a life, it's just that when friends were buying new cars and taking trips we didn't until we were out from under that debt.
Then we started to save a bit. But that's when we needed new wheels, so we took out loans. Once the loans were paid off in 3 or 4 years we hung on to the vehicles and took the payment and redirected the money into mutual funds. Over the next 4 years we saved enough to pay cash for a new vehicle and kept putting the same amounts in the mutual funds. Our first vehicle made it 15 years, 8 as a primary vehicle and 7 as a third vehicle. We now pay cash for new vehicles when they're needed. In fact, my last car was a 12 month old car and my wife's a year end buy (hint: try to buy vehicles at the end of the month when the dealership is trying to make its sales numbers, or the end of the year when they want to get rid of brand new "old" stock).
If you're married and both work, living off of one income can get you ahead in a meaningful way. Except for a few one time expenses, we've always lived off one income, in fact the small of the two. If you're single or married, take the attitude that nobody is more important than you and that you need to be paid first. Whether that means your 401K or a personal investment, pay yourself first. And if you have more time than money, a like/kind exchange of your skills for a % of a development is a great way to build your own personal REIT.
Your career is the wellspring of your ability to create wealth. If you manage it well, you'll get much. If you don't, you'll still get enough to become wealthy if you manage things well. It's a slow, unglamorous path, but anyone who logs into this site can do it. All it takes is a lot of self disipline and the wise use of debt, and time.
I have been noticing many people on this thread say that credit cards are dumb.
No, they are not. Credit cards are great. People who don't understand the concept of credit cards are dumb.
You can only go into debt with a credit card if you spend money you don't have. That, my friend, is not the credit card's fault; that is your fault. If you have a credit line of $5,000 that doesn't necessarily mean you actually have 'free' money. It's just saying you can spend up to that amount of money on credit.
I only use credit cards because I dislike cash. Every month, I pay my statement in full and have the ability to view where all my money went. I have a phenomenal credit score for someone my age because I haver never abused my credit and I pay my bills on time.
Plus, I have been able to snag many free airplane tickets because I use freqent flier cards.
In closing, credit cards are a means for an irresponsible person to allow themselves to get into serious debt. But again, it's not the credit card's fault.
Amen to credit cards are bad, not. And if you have a good card program, you're flying for free or getting some residual benefit, plus using the credit card companies money for a month at a time for free.
Most Architects I know want to go out like Louis Kahn.
Dead at the Train Station for Three days before anyone
recognized him and only three dollars to his name.
i agree with you n_ that they are not dumb if you pay them off every month. unfortunately, most people do not thus making them dumb. as i said before, credit card debt is dumb not credit cards themselves.
My cousin once told me that his goal is to die before he pays off his student loans (the debt would be exonerated).....he said it would be his way of stickin' it to the man.
Even "good debt" is bad if you have a high payments each month that you could be using to live. My "good debt" student loans sucked up $600 a month in minimum payments, and that just makes life hard when you have so many other expenses to take care of with your modest architect's salary.
Student loans aren't good dept, but sometimes they're necessary. There are times in everyone's life when there's nothing to take a bite out of execept for a crap sandwich. Student loans are one of those times. If you knew that when you were, say, two years old, you'd save your allowance, all the money between the folds of your birthday cards and the change under the pillow after your tooth disappeared over night. Most don't, and I don't know anyone that did that I like. So, you take out a student loan.
If you're going to take out a loan, there's nothing better to use it on than to invest in yourself. Your education is tops. If you do the numbers, you're going to make over $3,000,000 during your career from your education. You are likely going to be your largest signal income producing asset.
Student loans are the worst.
Low teaser rates but Try paying off $50,000
To Pay off $50,000 @6% on an Architects salary
Paying 300.00 a month it will take you 30 years.
Good Luck.
Number of Payments: 359 months or 30 Fricken Years People
Monthly Payment: $ 300.00
Total Payment: $ 107726.56
Total Interest: $ 57726.56
Thus you borrowed $50,000 the bank makes $57,726.
architect21- I've been told that the trick to it is to put the income from any side jobs, gambling winnings, bonuses.... basically any 'unexpected' income, take it and put it towards the student loans. If you average just $2000 of this sort of income per year, over the course of 10 years you've paid an extra $20,000 towards your student loan, thereby cutting years (and years worth of interest) off the loan.
Ok, so doin't take out a loan and instead pump gas during the day and schlep tables at night to make it. Or, find a job in a factory watching a big roll of something unwind onto a little roll of something.
If you've got an alternative, I'd love to hear it. So far nobody has offered a solution to debt for certain things like education or a house.
Any rational but out-of-the-box ideas? Love to hear them.................
I don't think there is an alternative to taking on debt to buy a house...unless you have a rich uncle that just gifts you the cash up front. Same goes for starting businesses.
As for student loans, I side with the hard core anti-debt crowd that feels there's ways to get an education w/out student loans. I did it myself. However I didn't go to Columbia or any high profile college that has frequent recognition on Archinect. I also spent many hours watching big rolls of stuff roll off into smaller things. Currently I'm building a nest egg before I even consider a graduate degree.
Living debt free takes extreme patience and most people of my generation just don't have it. That's the solution. There is no magic to it.
preceptor- I guess I don't understand what sort of an answer you expect here. Is the general plan of living within ones means lacking for you somehow?
My only interesting idea on how to handle the mortgage thing is to buy either a multi-bedroom house or a duplex, and rent the extra rooms. If you work out the money right, you could end up having a mortgage, and just having other people pay it for you.
you don't have to take out a loan to start a business either. i've been in business for 6+ years and no loan yet. as you said aquapura, it takes patience.
Rationalist- I guess I don't know what kind of answer I'll get! And don't get snooty, my wife and I live off of the smaller of our two incomes, banking and investing the larger. So the idea of living within one's means is a unfamilar concept. We've always lived well below our means.
There's always multiple way's to achieve something. I'm not confident enough to think I know all of them, or that I know THE way. Other people are smart, too.
My apologies. There are so many people out there looking for some majic plan that absolves them of all need for willpower or sacrifice that it's easy to assume that that's where someone is coming from.
architect21- I've been told that the trick to it is to put the income from any side jobs, gambling winnings, bonuses.... basically any 'unexpected' income, take it and put it towards the student loans. If you average just $2000 of this sort of income per year, over the course of 10 years you've paid an extra $20,000 towards your student loan, thereby cutting years (and years worth of interest) off the loan.
Yes, I agree with you Rationalist. Pay them off or never take them out. A friend of mine had $45,000 to pay of out of school 5 years
ago he is still owes $36,000. I owe less than that on my house.
I Ran a Debt Summary Report for you.
Name Balance Rate Payment Debt
$45,000 @ 6.3% paying only the min. of $300
Your friend would have to pay $43,736 in interest
By Paying an Extra 25.00 a month it will take your friend 20 yrs, 9 months to re pay the loan.
He will still have to pay $35,563 in interest. Yikes
I suggest paying a min. of $200 a month extra
This would only take 10 yrs, 4 months to repay the loan. The interest payments are still high to me $16,075 in intrest.
Debt Is Dumb
Thanks For the Advice.
I'm going to come out of school with a similar amount of debt, hopefully a little lower interest (some of it is locked in at 2.85%, though the new stuff for grad school will be higher). But hopefully my profile will look more like this:
Loan Balance: $45,000.00
Loan Interest Rate: 5.00%
Loan Term: 9.5 years
Monthly Loan Payment: $500.00
Cumulative Payments: $56,517.89
Total Interest Paid: $11,517.89
ha, I didn't notice this at the bottom of the loan calculator report when I posted that:
Note: The monthly loan payment was calculated at $477.29 for 120 payments (10 years). Since this amount is less than the $500 minimum, the term of the loan has beenshortened to 113 payments of $500 plus a final payment of $17.89 .
It is estimated that you will need an annual salary of at least $60,000.00 to be able to afford to repay this loan. This estimate assumes that 10% of your gross monthly income will be devoted to repaying your student loans. If you use 15% of your gross monthly income to repay the loan, you will need an annual salary of only $40,000.00 , but you may experience some financial difficulty
Rationalist
The best thing you could have done, would have been to never to have gone into debt.
Just So I can Say; I Walk it like I Talk it.
I Will Pay off My House in Aug.
Think, an Architect who owns his own Home Free and Clear.
How do you like those Apples?
link
Way to go RTT!
I think your link is being sold and has turned into an ad? This sounds exactly like something from Dave Ramsey, which I'm sure it has to be. (I don't have time to read through this whole thread. Its probably in there somewhere.) I'm a Ramsey listener/follower, myself. I'll be graduating debt free unless something absolutely catastrophic happens between now and graduation. Its the only way to go in my opinion. Glad to see someone else following this path.
Dave Ramsay I don't know, but Martin Lewis in the UK runs a site called moneysavingexpert. The same chap also appears on BBC TV and radio. While much of what he has to say is specific to the UK, the principles are the same: Getting debt-free.
"The Money is not yours anyway it's Gods"
What would God do with money? Get a haircut? New Robe? Beard Bleach?
Tell God to get a job (or a line of credit) and stay out of my bank account.
God NEEDS all your money to build/maintain cathedrals so that we architect types have something to study for the first couple of years in school.
...afterall, the song tells us he doesn't buy beer with it and the wine is crap!!!
Debt is only dumb if you can't earn more with the money than you pay for it...
fictitious school loan rate: 4%
fictitious ING rate: 4.5%
your debt is earning .5% for you.
borrowing $ to start your own firm... cash money.
let's all remember that all saving & no debt crashed Japan's economy and created the first & scariest negative inflation ever (= economic black hole)
dumb debt is dumb. Smart debt is why we have advanced civilization (not dumb)
"borrowing $ to start your own firm... cash money."
not necessarily.
An Architect I worked for had won the Washington State Lottery.
3 Million Not bad. Took a lump sum payout after tax 1.2 Million.
It was Gone within two years. Easy come Easy go.
re: "not necessarily".. some people (even some architects) have poor management skills (see above), and 2 out of every 3 new business ventures fail.
Most successful entrepreneurs fail 2 or 3 times first... wish I could cite that tho!
blowing through 1.2 mil in 2 years is either real ghetto
or they sent 3 kids to college.
exactly my point conormac. just because you borrow money to start your own firm does not mean you will turn it into cash money.
good work + contacts and relationships + good management skills + not underselling your services = cash money
I think you should make a distinction. Credit card debt is retarded. Financing a car is retarded. Making payments on furniture or computers is retarded. Using leverage to build equity is the 8th wonder of the world.
I wish someone had told me credit card debt was dumb when I was 19.
If you are 19 and reading this: credit card debt is dumb.
DEBT IS NOT KING?
DEBT IS SLAVERY!
for the last 18 months...i've paid 13.5k towards my private loan and only 3k of that went to the pricipal
debt is king
Ok, I see your point.
How about this:
The Debtor is Slave to the Lender.
Debt is Your King and you are Debt's Slave.
Or
Debt is your Pimp and you are Debt’s Hoe.
Very informative.This is really useful for credit card holders who do not think about future.!Great work
------------------------
p004
Don't be a victim. Stop credit card debt now. We can help.
<a href="http://www.stop-credit-card-debt.com"www.stop-credit-card-debt.com</a>
Yup, credit card debt = fool
car loan debt = foolish
business loan debt = toss up
It's taken a lot of patience, but I am quite happy the only debt I have is student loans and mortgages. Just bought my car in cash and haven't needed loans or investors for business (although for development that's a different story).
Point is, I think it is a billion times better to struggle, drive an old car, work from your bedroom or whatever before signing your soul away.
Hey RqTecT
What's the point of saving when the interest rate is at 1.25% and inflation is somewhere around 7%?
Your money that is in savings is basically disapearing.
Where are you living right now, wurdan freo?
Inflation in the US is running around 4% which is high compared to the past few years. You can find banks (not Bank of America or the heavy banking hitters) that are giving a 3-3.25% interest rate. While current interest rates are under our inflation rate, it still makes more sense to save and invest wisely then to spend your money for the sake of spending.
Word around the campfire is wurdan that your savings are insured by the FDIC so that inflation is taken into account. Then again, I was told this by and economics prof (who hardly spoke English) at about 8 in the morning.
Saving and investing are two completely different things. My point was a savings account is a terrible investment vehicle.
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