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  1. #11
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    Credit card interest cost you much more than you can possibly earn with ordinary investments. Paying off card debts is the financially sound thing to do.

  2. #12
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    Mm I'm wondering why are you using the credit card in the first place? Just asking - it may have to do with booking hotels abroad, or paying for public transport etc.
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  3. #13
    Lay the coin on my tongue SilkRoad's Avatar
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    Quote Originally Posted by FDG View Post
    Mm I'm wondering why are you using the credit card in the first place? Just asking - it may have to do with booking hotels abroad, or paying for public transport etc.
    Do you mean, why have a credit card at all?

    I think it's really hard to get by without a credit card in this day and age. Well, that's been my experience. I've had one since I was 18 or so. Especially with booking travel online, and...anything online really, and so on, it's just so useful. But fortunately my parents taught me well, so it would be very rare for me to not pay it off in full. I've done that a handful of times, but I've usually only carried a balance for a month or two, and a small one. The interest rates get annoying pretty fast.
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  4. #14
    Senior Member ceecee's Avatar
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    Quote Originally Posted by SilkRoad View Post
    Wasn't sure where to put this thread but this seemed appropriate enough. If it's the wrong forum, feel free to move it, mods!

    Which of the following two scenarios would you prefer?

    -Paying off your credit card bill in full every month, but being able to put little or no money aside in savings

    OR

    -Carrying a balance on your credit card but being able to put savings aside


    Obviously the ideal is to not carry a balance on your card, and also put money aside on your savings, but let's say you're not currently finding this possible... (not that this has anything to do with my own financial situation... )

    Anyone who wants to share about how you manage this sort of thing, and why, I'd be interested
    Depends on the interest rate but I'd get rid of the CC debt first.
    I like to rock n' roll all night and *part* of every day. I usually have errands... I can only rock from like 1-3.

  5. #15
    Senior Member durentu's Avatar
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    It's interesting to note that historically, debt is synonymous with guilt and sin. And some respects, debt is considered as slavery. But there is good and bad debt. Borrowing to consume is considered bad debt. This is for food, cars, etc. and makes you a slave. Good debt is borrowing money now, to realize a future earning. For instance, if you start a super market, you must borrow capital to stock the shelves in order to provide for the community. This is good debt.


    There is a debate between snowball vs high interest first method. If you need motivation to pay off bills, then choose snowball method. Otherwise, do high interest method.

    0a. make an accurate balance sheet that lists ALL income, expenses, assets and liabilities. And know your cash flow (income - expenses) and your net worth (assets - liabilities). It's a MAJOR pain in the ass, but your financial success is magnified when you know exactly where you are. But if you cannot stomach this, you can skip this.

    0b. Consider adjusting your W4 tax contributions to take home more pay. The idea here is that your income tax returns should be $0. And not a big lottery check.

    0c. set up automatic payments wherever possible. Automatic payments makes debt go away like magic without all the emotional frustrations.

    1. 6 month's expenses saved. If you have a consumption compulsion, put this is a completely different LIQUID, easily accessible account. You still need to pay bill regardless of your health, sobriety or stupidity.
    2. Focus on credit cards. call up and say "I cannot continue to do business with you unless the interest is x% or lower." while having a better offer in your hands now. Nobody wants to loose a customer these days. Use business competition to your favor.
    3. Pick snowball or high interest method, and pay off the credit cards
    4. Refinance your mortgage. while the federal reserve is continuing their zero interest rate policy until 2014 (ZIRP), rates are at bottom. Refinance and work with loan officer.
    5. setup automatic payments to mortgage that actually applies the payment to the principal every 2 weeks. The bank may charge for this, but you save nearly 30% of the payback period. It's worth it.
    6. consider investments for retirement. Contribute more towards company matching 401k or IRA accounts and choose a solid mutual fund with true* diversification and not just one with 31 flavors of stocks. One that has a mix of cash, stocks, bonds and metals. PRPFX is a good example. Or you can build this portfolio yourself.
    7. continue to pay off the debts until net worth = 0 (financially free).
    8. continue to invest until asset income (passive/portfolio income) = expenses. (financially independent). Asset income is money comign in when you sit on your ass, which is different from labor income where you have to work.
    9. At some point, when your net worth is a nice pile, seek out a good tax attorney (not to evade them).
    10. If you reach $1,000,000, consider seeking an estate planner
    11. If you reach an income of $200k, consider being an accredited investor
    12. write your memoirs and check out.
    "People often say that this or that person has not yet found himself. But the self is not something one finds; it is something one creates." - Thomas Szasz

  6. #16
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    Quote Originally Posted by SilkRoad View Post
    I tend to agree. My parents taught me well about this sort of thing... They think I should save if/where I can. But they REALLY drummed it to me that unless it's really really really not possible, I should pay off my CC balance every single month in full. Those interest rates are nasty.

    But I know people come at this stuff a lot of different ways and many people have what I would consider pretty frightful CC debt levels.

    So yeah...at the moment I'm more in the position of paying off my CC in full (almost) every month, but not much happening savings-wise.


    EDIT: I do think a lot of people view CC spending, and debt, as not "real money" - which is dangerous and how you can get into a really bad financial situation.
    East Asians tend to be really good about this stuff (personal fiscal management) and abhor debt. In cultures that dont run on credit and houses are bought in cash having debt is a big no no (you did something wrong) and there is a premium on saving and insurance.

    The US though is a credit dependent/cash poor nation and relies heavily on loans and credit to make a small group of people very wealthy on interest and you need loans for basic things such as buying a house, a car, and going to school. If you were able to pay off your credit card bill in full every month you prolly don't need a credit card to start with. :P

    Yr question reminded me of this blog about the guy who paid off his student 90k debt in 6 months. Considering he was pulling down 6 figures and owns a house (?) this doesn't seem as amazing to me but in a debt laden culture where people live on credit it is an anomaly. http://nomoreharvarddebt.com/

    I would take either option, the one that nets me the most cash money in the long run.
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  7. #17
    RETIRED CzeCze's Avatar
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    Btw in terms of credit you need to rotate a balance and make timely payments on at least 5 credit cards to get the vest credit rating, not having any credit cards or making no payments (from not having a balance) can actually hurt your credit score. <-- debt dependent nation
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  8. #18
    Lay the coin on my tongue SilkRoad's Avatar
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    Quote Originally Posted by CzeCze View Post
    Btw in terms of credit you need to rotate a balance and make timely payments on at least 5 credit cards to get the vest credit rating, not having any credit cards or making no payments (from not having a balance) can actually hurt your credit score. <-- debt dependent nation
    Yeah, good point. That might have been another reason why my parents suggested I get my own credit card at a relatively young age. Also for the responsibility, I think. But there are situations where no credit rating could be a problem.

    About the culture in East Asia, I've only been to Japan, but it did surprise me that they use credit cards relatively little (or certainly less than the West.) I think I was surprised because they're such a high-tech nation you'd expect some kind of singing dancing credit card...but I guess it is more about cultural norms and perceptions.
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  9. #19
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    ^^ yeah high tech and money mix more in terms of how easy it is to spend "cash" through your phone, etc. you can swipe your phone to pay for the subway or lattes. :P. I'm not sure if that's the same as RF technology which is just being introduced now in the states for credit cards but I think it will just make it easier to go into debt and get hacked.
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  10. #20
    Strongly Ambivalent Ivy's Avatar
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    Seriously? Five cards? I'd feel funny about having two.

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