Says the man with the 7 year old truck.

 

3% was a reference (all be it a little low) to the traditional appreciation of housing. Housing normally appreciates at slightly higher than the inflation rate. That is all you will earn on your money when your mortgage is paid off. Like I stated in one of my original posts, that is what I'm aiming for. ANY debt is risk you are taking on.

Whether I borrow money to buy something or not, is irrelevant to the issue of whether I can buy it with cash.

APT--I had a friend who's theory was to buy a very used car, normally costing <1000. He would drive it until it died. The way he figured it, if it lasted longer than two months he was saving money. They normally lasted 1-2 years, then needed something major fixed. At that time he would call the junk yard and sell it to them for $50. He saved money on the cost of the car and never did the maintenance, since it was a throw away.

 

What is the value of your use of that vehicle per year? Yes it cost you to buy it and use it but it sure beats walking to work or carrying that load of lumber back from Home Depot on your bicycle! That loss of 2671 seems a fair price for the work done. Money invested in a mutual fund is not going to get any of that work done. It may make you enough cash to buy a used truck in the future but what do you do for today? I do not believe in credit cards and do not have any. I fully agree that if you can't afford something you shouldn't buy it. My only exceptions are my house and motor vehicles. I am not blessed with spare cash to plop down on a used truck or minivan. Maybe someday but not today. Raising a family is not cheap and my "spare" cash goes away pretty quickly. The good news is I am not sending any of it to credit card companies. My truck is paid for and has 92K miles. My wife's minivan still belongs to Chrysler Financial and I am allowed to live in my house by Wells Fargo as long as I give them some cash every month.

 

Actually no its not. If there was not a way to borrow money very few, if anybody, would be able to make money. Borrowed money makes the economy go round and round and if there is someone who don't believe that then they don't have a clue how a true economy works nor how a country makes money and raises the GDP.

There is nothing "stupid" about borrowing money for a new car it provides jobs, more jobs then those who pay cash for everything...

 

You guys really crack me up. You mock me because I have a different way of handling money. Please give me some examples of people who got rich by always having car payments, taking out insane lines of credit, and being mortgaged to the hilt. Please give me one example. I bet Sam Walton and Bill Gates became billionares because they borrowed alot of money.

Remember the definition of insanity is doing the same thing over and over again and expecting a different result.

I find it very funny how no one will respond to this.

"The Forbes 400 is a list of the richest 400 people in American as rated by Forbes magazine. When surveyed, 75% or the Forbes 400 said the best way to build wealth is to become and stay debt-free. Walgreen's, Cisco, Microsoft, and Harley Davidson are run debt-free.

History teaches us that debt wasn't always a way of life; in fact three of the biggest lenders today were founded by people who hated debt. Sears now makes more money on credit than on the sale of merchandise. They are nota store; they are a lender with some stuf out front. However, in 1910 the Sears catalog stated, "Buying on Credit is Folly." J.C. Penney department stores make millions annually on their plastic, but their founder was nicknamed James "Cash" Penney because he detested the use of debt.

Henry Ford thought debt was a lazy man's method to purchase items, and his philosophy was so ingrained in Ford Motor Company that Ford didn't offer financing until ten years after GM. The old school saw the folly of debt; the new school saw the opportunity to take advantage of the consumer with debt." - from Financial Peace University by Dave Ramsey

Gee I wonder why rich people don't buy new cars? Because buying new cars and having payments didn't get them to where they are. They also didn't earn a fortune on their Discover points or 0% interest for 6 month credit.

To continue this arguement is pointless. Obviously you've bought into the modern way credit is marketed to consumers today. Remember, right now if you live like no one else, later on you can live like no one else.

 

Nobody is mocking you nor was I stating it’s easy to get rich with a car payment, mortgage or other large loan.

What I was stating was fact and the fact that without credit and debt we would be a much poorer country with a huge unemployment rate. We would have a handful of home owners as well.

It’s easy for the rich to say it’s easy to get rich or stay rich without debt because the fact of the matter is they have large sums of cash.

Fact of the matter is a good 80% of American’s if not more could never afford to pay cash for a home or car, not with the tax rates we middle class have to fork out.

You just seem to make it sound like its nasty or a bad habit for anyone to have debt, or a car payment or mortgage. Well it’s not nasty or a bad habit its reality and reality states without the ability to get a loan for major purchases such as cars or homes they would not be to many people working in America and all these rich idiots who like to make stupid statements about its easy to be debt free would NOT be rich without the rest of us who support them and their habits…

 

The above are moot points because that was in a different time. Back in that time in history you had a family, a husband and wife and generally the wife was able to stay at home and raise the children sometimes many children 5 – 10 and back then the husband could support his entire family and own a home and possible own a car all on just HIS income.

Not possible today my friend, not possible…

 

01 XLT:

FYI I'm not rich. I'm just a guy who got fed up with debt and am not going to borrow again except for my home. I seem to detect a bit of a negative attitude from you, especially towards rich people. The fact is most wealth is earned. Among the wealthiest 5% of Americans, 92.5% was earned only 7.5% was inherited. Yes there are trust fund babies who have never worked a day in their life and run around with a bunch of money like idiots (i.e. Paris Hilton). Also rich people provide alot of the jobs in this country. You mentioned the tax code. Actually the "wealthy" of the US support the poor via income redistribution through taxes and social programs. The middle class doesn't support the wealthy. Well except for those middle class people with alot of debt, they are supporting alot of rich bankers and credit card execs. I too think our tax system is absolutely out of control. I support the Fair Tax. If you don't know what that is, google it or buy the book by Neal Boortz and John Linder. However, just saying that's how life is and there's nothing you can do about it is silly.

Uhhm I know lots of people whose wife is a stay at home mom. It's very possible to live on one income. You can only have as many kids as you can afford. You just can't live above your means. I know that is very hard to do becasue alot of people have the attitude of a 3 year old; "I want it and I want it now!" Even worse they think they are entitled to it just because.

The fact is people have more debt today than ever. Why? Because it's so freaking available! How many preapproved credit card applications do you get in the mail every week? How many debt consolidation or home equity loan commercials do you see on TV every day? How many ad's for products do you see where they say 90 days same as cash or no payments and no interest for 6 months? Don't know how to pay for college? Just get a loan silly! Whatever it is, if you can't afford it, no problem! Just borrow the money. I remember in college those stinking credit card people were all over the place signing people up and giving out free T-shirts.

Credit is so well marketed that people think you're abnormal or a weirdo (case in point me) if you don't have debt or are getting out of it forever.

One more thing. There are plenty of people like me, probably millions. https://www.mytotalmoneymakeover.com/ even better http://www.daveramsey.com/etc/tell_y...dspReadStories

Oh yeah I totally understand the home mortgage thing. Like I said earlier that's the only exception I make. Nobody has $100k+ (depending on where you live of course) just to plop down on a house.

 

Sorry for the wrong impression as I do not have any negative feelings toward rich people. I actually respect them more then any useless lazy person holding a homeless sign or collecting welfare. Actually I have absolutely no respect for homeless people or those collecting welfare unless they actually have a medical or mental issue and generally that is a very small percentage.

I also think taxes should be the same for everyone, don’t matter if you earn $20 million or $5,000 a year the rate should be the same.

Again, I was just stating some facts. I too do not enjoy being in debt anymore then I need to be which is not really that bad. I have my vehicle which is financed and a few credit cards that are generally paid off or kept very low to keep my credit score high.

I am currently looking into financing a construction project, purchase the land, make the land ready for a home, build a home, or more likely go with a modular (not mobile home).

Still researching and the reason I am leaning towards a modular is you can get the same, if not a bit better quality, home for less money. Approx. $75 - $90 a square foot compared to a stick built for around $115 - $130 a square foot. Their built in a controlled environment, always on budget, generally always on time, and the methods used qualify the reason they are cheaper per square foot without affecting the quality other then to make the quality a bit better.

Debt sucks and no it doesn’t make anyone rich but there is nothing wrong with debt when needed which purchasing a vehicle or home these days just about puts the vast majority of Americans into the category of going into debt. And debt does grow an economy by providing jobs and creating wealth that would not be possible if everybody was debt free.

 

Kdot--I'm not mocking you. If you re-read my posts you'll see I advocate the wise use of credit. Meaning, like I stated earlier, using credit to buy most consumer items should not occur. If you need credit to buy the new TV then you probably don't need it and the credit you are using is probably too expensive. You and I agree that a mortgage is not all bad for the purchase of a house. Pulling out you equity for consumer purchases probably is not the best source of credit. Again if you need the credit to make these purchases then you probably don't need the items. I have even stated that I am aiming for the house to be paid off and not have be bothered with the monthly payment (even though my money will not grow as quickly).

It seems the only place we really have a disagreement is with the purchase of vehicles and that seems to be interest rate dependent. My point of view is if the rate is too high, >3%, then the vehicle should be purchased using cash, otherwise credit is fine. Yours seems to be NO LOANS, ever, never, never, never. As a person who is looking at retirement at 47, I put all of my resources to making an honest dollar and I am rather good at it.

Without a strong definition of "rich" and access to their financial resources, your statement about most rich don't buy new cars can't be refuted or supported.

 

My definition of "rich" is someone with a net worth or one million or more. Yes it can be supported. In Tom Stanley's book "The Millionare Next Door" he clearly shows after years of studying those worth a million plus that most of them drive used cars. It's not that hard to find a 2 or 3 year old car that came off of a lease with very low miles these days. All the kinks are worked out it may have some warranty left (2 yrs old anyways) and you don't loose all that money in depriciation.

Man you have it made if your house is paid off early. Just take the money that would have been going to a house payment and put it in some good mutual funds. To me that seems like an excellent investment because unlike your house none of the money is just thrown away to interest and your return is 8-12% or possibly more.

One more thing about being "rich" in the US. Check out the data from the IRS, http://www.irs.gov/pub/irs-soi/03in05tr.xls Look at the adjusted gross income current dollars. In 2003 if you made more than $29,019 you're in the top 50% of wage earners! More than $57,343, you're in the top 25% of wage earners! Sadly the top 50% pays 96.54% of all the taxes as well.

 

I don't have the book handy, but if I remember correctly from the three or four times I read it, the used cars are driven by the PAWs not those with a net worth of over 1,000,000. Stanley's assertion was that those with over a million weren't necessarily wealthy, if their worth wasn't in line with their earnings. Example: A 40 year old doctor making 600,000/year would not be considered wealthy by Stanley if they only have 1,000,000 in net worth. These UAW are the ones who are going out and buying the new Mercedes/Lexus/BMW's, etc and were not considered in Stanley's research, if memory serves me. By your definition they are wealthy, but they can't play financial defense to save their lives.

 

There is a difference between becoming debt-free and always been debt free. How did those 400 richest people become debt free? Were they always? Did they ever borrow money?

There is also a huge difference between living beneath ones means and borrowing money. They are separate concepts.

You don't have a definition of rich. First, you started with millionaire. Then you said billionaire. You also said 400 richest people in the world. There are a lot of "rich" people in the world. Most people I personally know do not aspire to become billionaires.

About the 10yr old cars that rich people drive. They may have driven them while building wealth, but once you have enough of it, the rich tend to buy very expensive cars. Bill Gates bought a Porchse 959 in the mid 1980's. It was not leagal in the US because Porsche did not want to chrash test any of them nor change it to pass US emmisions laws. Gates spent millions trying to get it leagalized and succeeded. I wonder what the value is of Jay Leno's car collection? Were any of them financed? I have no idea.

Dave Ramsey makes money from advertisers and from people whp pay him $90/yr for memberships and giving seminars with advise that one can get for free form several oher web sites. Living debt free is fine. It's a mindset and philisophy. It has nothing to do with being or becoming rich. Net worth is assetts minus liabilities. If one has assetts woth $2,000,000 and only a $100k car loan, is he rich? Is he stupid? Becoming rich is all about minimizing how much one spends on depreciating assetts and services while maximizing income. Ramsey even says it. What is a buudget for? To manage cash flow. The more positive cash flow, the quicker one builds wealth. If a person can make more money investing some money than borrwing, then the cash flow increases and wealth is increased. Manage cash flow correctly and one can become rich by whatever definition that person has.

Say one person makes $100k per year and saves/invests $20k/year. He has a $250k mortgage and two car payments of $800/mo total. All bills are paid to maintain the $20k/yr savings. Another person makes $50k/yr with a $150k mortgage and no car payments. He saves $5k/yr after all expenses are paid to live within his comfortable means. Which one is richer? Who is building wealth quicker? The one saving $20k/year despite having much more debt. Could he save even more money? Sure! Does he want to? Of course! Is it worth giving up his larger home and two new vencles? Obviously not as that was his decision to get into the situation in the first place.

Most people only need so much money to pay for their lifestyle. Once they have enough money or income to support that lifestyle, the rest does not require maximum return or can be used for discretionary things. Based on this thread, I'm sure I have more debt than you. Are you richer than I am? Are you building more wealth than I am? I know have enough information to judge. Are you happier? I have no idea nor do I care. I'm pleased with my lifestyle, debt level, and my cash flow situation.

My brother has no debt. He paid off his house in 7 years and pays cash for everything else including vehicles. Obviously, he has a pretty high monthly cash flow. He's happy. Different philosophy than mine, but they both can build wealth.

 

I always thought it was 'he who dies with the most toys, wins'.

 

One Example of someone who got rich ( Twice actually ) on debt:


Donald Trump