Somewhat Z related...

kannibul

You're WAY better off paying as much as you can, as soon as you can, rather than "saving up to pay it off later".

Especially with credit cards. Those things cost you money daily depending on your balance from the previous day * (APR/days in year) = daily interest amount added to your balance...per day!

Rinse and repeat each day.

For example, if you have a 10K debt, 10% APR, tacks on $2.73 on day 1 of your billing cycle for an end of day balance of $10,002.73, the next day it costs you, $2.74, for an end of day balance of $10,005.47...rinse/repeat...

That's also why, if you pay off a credit card and have a zero balance, you end up with a balance the following month...because the accumulated interest isn't "shown" until the next billing cycle, however, it is calculated and added on DAILY.

It's also better to pay NOW rather than save up, because then you can't be drawn into buying something and delaying the payoff of debt.

polarity

For the record I'm not knocking the debt free life, I think it's an awesome thing to be, but I do have a question. How does one buy a house like this?

Personally, I dont think credit is the devil if used properly by responsible people. As a kid (18) I did some dumb things with credit that ended up taking me years to fix, now it's fixed and I learned my lesson I have things on credit (house, car) even have a credit card (but I dont actually use it anymore, it just happens to be my oldest line of credit so I refuse to close it). I think buying things in cash is awesome, but what about buying a $150,000 house for you and your wife(or husband, depending on the person).

-William

kannibul

Well, in a nutshell, you can't unless you have a pile of money laying around that happens to be the same as the house you plan to buy (or more).

My point is to get rid of the debt. Then I'll have enough money coming in that I won't need a credit card - I could either buy it outright, or, save easily and get it within a reasonable amount of time.

IF I can manage to stick with it, I'll have my house paid off by the time I'm 39, in addition to any/all other debt, and I'm 31 now. Bought the house in 2005 for 30yr term...

polarity

Holy crap batman on having the house paid off that fast, that is awesome. I wish you luck with it and if you have any secret tips on how you managed to pull it off, pass them on to your fellow Zers.

-William

kannibul

2 incomes, no kids.

Use Microsoft Money, input all your incomes and your bills.

I have 3 checking accounts. One for income deposits and electronic payments, one for expenses / purchases (gas, groceries, starbucks, eating out, movies, etc), and one for unbudgeted expenses (ie, starbucks, eating out, movies) - weekly, we transfer $XYZ that covers our budgeted amount for groceries and gas. What we don't spend on groceries and gas, goes into unbudgeted. Unbudgeted covers anything "extra".

It sounds like a pain, and in a way it is, but, it also forces you to realize what you have and what you DON'T have...and makes you a lot more stingy on buying something.

Using Microsoft Money, you can project out future income and bills - I have mine currently clocked out to the end of next year, which helps in knowing where those extra checks will hit, and keeping everything above $0. We also have a "Buffer" line item (for us, $600 in income/deposits, $100 in expenses, $0 in unbudgeted) - to help cover anything that we "oops" on.

In addition:

Bought a house that was literally 1/2 what they approved us for.

Last December, I refinanced our Civic for as much as we could get, was originally set up on a balloon payment after 48 months, and it had higher than a 10% APR, refinanced it, got a lower APR (around 6%), did it for 5 years for the most I could get from the bank - used the "overage" to pay off my motorcycle (which also had an APR over 10%). This reduced our expenses immediately, which I started rolling to my Credit Card (APR over 10%), which after that, will go to her card which had a higher balance, but lower APR (and higher min. payment)

I also have (and will) use this years tax return. I also found out I misfiled my previous 2 years taxes, and refiled them, getting a lot more back - enough to pay for my credit card, then allow me to fill it back up, and now it's half paid off again (due to payments, not tax returns)

Lastly, I CLOSED our credit card accounts - this locked the interest rates. I still have to respond to the credit card company when they send a notice of change, and declare that I'm not interested in raising my interest rate (duh?)

Not a lot of people know they can close a credit card account while it has a balance and it DOES NOT hurt your credit score.

Even though I bought the Z, I'm still chucking a good amoutn of money to the credit cards - more than my Z payment and civic payment combined...but, I also don't have cable tv at home, or a phone at home (cell phone is a pay as you go as well - it's cheaper if you don't talk/text ($10/mo vs $??/mo!)), and my wife and I car pool, which saves quite a bit, when you think about it (we work close to eachother, and drive the civic which gets decent mileage)

Anyhow...I'll spill more if anyone's interested...

polarity

I'm always interested. I'll give you some back story aswell since you were so polite as to share. My wife and I started out with me doing IT and her working in a physical therapy clinic, she was doing office work/pt tech (therapist assistant type stuff), between the 2 of us we made maybe $40,000 a year.

All of the sudden we hit the jackpot, I landed a job making over $100k a year. I worked for 2 years then got her on, so we bumped to over $200k a year. Going from having no money to lots of money we went nuts, bought anything and everything we wanted. Took spur of the moment vacations, etc. We were independant contractors so taxes weren't even held out of our checks. So checks were coming in for just short of $20k for a month. My first couple years and her first year we went retarded and blew through cash like it was nothing. Then come tax time realized what we had done. Took us 2 years to correct that mistake (as well as other mistakes we made before the job with dumb credit decisions).

After about 3 or 4 years in we got smart, decided it would be a good time to buy ourselves a home, get the cars we wanted, plan a budget for when this work ended and we did. Another year goes by and we decide to quit the work and move back home (this was 7 days a week, 12 hours a day and constant travel, literally you didn't go home for a year at a time or so). So we move home, I go back to IT, she goes back to work at the hospital.

Now we have our house payment, and our 2 cars (she drives an 08 accord and I drive the Z). We pay our bills just fine, we have some savings and we go about our lives, but looking at the paychecks coming in getting debt free just doesn't even seem realistic at this point.

For the record I'm 26, most of the dumb things I did were years ago I've had every type of bad habit imaginable and lots of money went to those things. I don't claim to be smart these days, just smarter than I was before. People sharing experiences in my opinion is the single best way to learn. If I told you that bears and kill you, you file it in your mind and move on. If I talk to you about a friend who was eaten by a bear and give such detail that it burns in your mind, you will damn well remember forever that if you hear/see a bear it's time to hit the highway. No, I don't have such a story, it just seemed like a good way to get the point across.

kannibul

At 26, you're ahead of me. At 26, I was still racking up debt, and floating by. I'm 31 now...

Give yourself some time, use those tax returns to knock out debt...and seriously, track what you're really spending your money on outside of paying bills and debt.

The little ****, literally was like a 1" hole in a 5 gallon bucket for us.

When I bought the Z, I thought that would kill our debt payoff plans. At the time, I had figured that I could spend, including insurance, $750/mo on a "midlife crisis-mobile" - lol. At the end of the month that would leave around $250 to float us by. I was going to depend on our tax return this year to knock down debt for a bit of breathing room. Stupid, I know.

I bought the Z. My payment is 642/mo. My insurance went up $85/mo. Pretty much nailed that target.

3 months later, and a lot of discussion with the wife about how much we should really be spending for groceries and cutting out extra ********...and I'm chucking $1K/mo at credit debt - IF NOT MORE, depending on when our checks hit.

Some people think it's odd to not have cable. To be honest, I'm sort of missing it. Mostly the DVR, but the jitter bugs me sometimes. I almost signed up for AT&T U-Verse ($250 rewards, $95/mo...) - but then thought, why? I'm paying $19.99/mo for internet, and the other crap is FREEEEE - sure I don't have the channels, but when is there anything on worth watching? Not having it also does something else strange...I've been talking/spending more time with my wife and plotting and planning more. Amazing!



Basically the plan is something like this.

Cut out unnessicary expenses. Think "ramen and kool-aid" - ie, what you need to survive. Keep an inventory of what you eat for the week at home...so when you get groceries, you're only restocking, not buying.

Take your highest interest rate item. Pay it off as fast as you can, make minimum payments on everything else. Rinse and Repeat as needed.

If you can refinance something, consider it only if you can knock out another debt (or two), and get a lower rate than both of them, and have a lower payment, which frees up money NOW, to use to pay off yet another debt.

Be aggressive about it...plan it out to where you can see the end in sight for each milestone...to the point where you debate going to Subway for a $5.00 sammich, because it might throw your whole plan off track, and you'd have to recalculate everything to find out when each debt will be paid off in time...

For example, our credit cards are done, March 12, 2010. That's not including our tax refunds, which will go to her Civic (next highest interest rate). Once that's gone (approx August, again not including the tax return), the Z is next.

Once that's gone, house - though, more than likely, I may get a new vehicle around then (replace 1997 Ranger w/ new small-sized truck)


Also, my wife an I have an easier time coming up with money to pay a bill, than we do to save money. I basically created a "bill" that we have to pay. It works for us.

Lastly, you are ahead of me in one aspect - you have savings, and might have retirement stuff you're contributing to - that I am not (yet) doing - but, all things considered, you could leverage your 401K for a low interest loan that you could use to pay off a higher interest debt. I think the interest you pay on your 401K Loan is added to your 401K, not a banker's pocket...

Anyhow...

chief_Roka

I totally agree with u n I'm leaning toward that mentality. But polarity has a point as far as when it comes down to buying property n needing credit. My credit is decent. I'm 710. Tryin to get at least 720 to 750 by time of purchase. I was thinking if I take a 10k finance at 6% n pay it off in a few months I might maybe be able to boost my credit further?
N by taking the partial loan. I can do a few small mods. Springs, sways, intake, head full exhaust.?
I'm not even sure... I gotta make up my mind by dec.
Respectfully, thanks guys for your input and advice. It will be taken into careful consideration.