Debt Elimination Question

[grizzly_]

Actually, studies show that artificial "denial" doesn't work for long-term weight loss - there is a huge rebound effect. I would guess the same is true for stark financial approaches.

Is your theory that cutting up credit cards and closing the accounts would make people get more credit card debt than if they kept the cards active and in their wallet?

 

[TN2shot07]

Actually, studies show that artificial "denial" doesn't work for long-term weight loss - there is a huge rebound effect. I would guess the same is true for stark financial approaches.

That’s true! There’s a difference in the strategy and implementation tho (in my head anyway). I’m aiming to make lifestyle changes, not crash diet to look better for the beach.

 

[VikingsGuy]

Is your theory that cutting up credit cards and closing the accounts would make people get more credit card debt than if they kept the cards active and in their wallet?

It's that a stark approach today rarely lasts long term. I know several folks that did the "consolidate all credit card debt into one lower interest loan with 24mo payoff plan, cut up the cards, no spending on any extra and no credit use" thing and then 3 years later had extended their initial consolidation loan several times because the payments were "too high" and in the meantime got new credit cards and ran them up too. One of them asked me to co-sign for a second consolidation loan to consolidate the first one and all the new CC debts. That was an unhappy discussion.

So yes - folks who make grand gestures after attending a "get out of debt" seminary but who do not do the personal behavioral work to address the underlying lack of self-control issues and propensity to spend get little to no benefit from the initial "debt reduction theater".

 

[ignorethefringes]

Is your theory that cutting up credit cards and closing the accounts would make people get more credit card debt than if they kept the cards active and in their wallet?

Spitballing the best approach, for average person, to me would be to have a couple active credit cards in a drawer/safe/under @wllm1313 's mattress at home. Cutting up might lead to regret/rebound while in your wallet is too easy for access. Sometimes a little hindrance is enough to make one behave lol

 

[Wind Gypsy]

I usually like about everything you say @wllm13, but I think you are the one who has gone bat shit crazy on this. Never once have I heard Dave Ramsey say to keep piles of money under your mattress. And he doesn't say to not use debit cards.

What is wrong with using a debit card instead of a credit card. And don't tell me reward points on your credit card.

A credit card is safer when it is compromised. Nobody is wiping out your checking account. When I went to buy a house, the only reason I had credit was because I used credit cards frequently. I also have a nice seekins 300wm, a 48 gun liberty safe, $1000 pair of binos, and many more things that were purchased with credit card points.

Also what is wrong with paying 20% down on a house?

I'm all for it if you have it. But if someone avoided buying a house 3 years ago to save for the 20% down payment they likely missed out on more than 20% equity growth over that period while throwing $ away on rent.

edit: There's a good chance they spent in the neighborhood of a 20% down payment on rent in those 3 years. I get it that it doesn't always work that way and hindsight is 20/20. They could have put 5% down 3 years ago and had real estate values tank only to end up under water and worse yet, risk defaulting if they dont have a secure income stream. Even if they were under water, odds are things recover and and they are better off than having spent that $ on rent in the long term.

 

[ignorethefringes]

It's that a stark approach today rarely lasts long term. I know several folks that did the "consolidate all credit card debt into one lower interest loan with 24mo payoff plan, cut up the cards, no spending on any extra and no credit use" thing and then 3 years later had extended their initial consolidation loan several times because the payments were "too high" and in the meantime got new credit cards and ran them up too. One of them asked me to co-sign for a second consolidation loan to consolidate the first one and all the new CC debts. That was an unhappy discussion.

So yes - folks who make grand gestures after attending a "get out of debt" seminary but who do not do the personal behavioral work to address the underlying lack of self-control issues and propensity to spend get little to no benefit from the initial "debt reduction theater".

Man, I had to tell two of my three sisters that I wouldn't co-sign a car loan for them when I was in my early 20's. That was tough, but the right call. It probably would have been just fine with both of them, but I didn't want to take the risk of a significantly harder conversation down the road.

 

[VikingsGuy]

Man, I had to tell two of my three sisters that I wouldn't co-sign a car loan for them when I was in my early 20's. That was tough, but the right call. It probably would have been just fine with both of them, but I didn't want to take the risk of a significantly harder conversation down the road.

I have given folks cash to bail them out rather than co-signing. It's not that I don't want to help, it's not even that I expect them to default, but nowadays computer credit tracking mixes the co-signee's combined credit histories for some purposes - I worked hard for a top credit score - I am not sharing that.

 

[Wind Gypsy]

I see a lot of folks talking about $40k+ a yr college costs, why are people paying that? You can still go to a state school for $10k / year in tuition and do just fine in the job market. It's hard to have sympathy for people who choose to spend that and then play the victim card.

 

[Deleted member 28227]

I see a lot of folks talking about $40k+ a yr college costs, why are people paying that? You can still go to a state school for $10k / year in tuition and do just fine in the job market. It's hard to have sympathy for people who choose to spend that and then play the victim card.

Which I would argue is a nuance beef I have with Ramsey.

Private v. Public

It all depends what your end goal is and/or if you are going to actually do what it takes to achieve it.

Certainly for a large percentage of folks a public state school is the correct route, but there are some professions/routes where you also can't 'break into' the arena without a specific college on your resume.

Types of law, types of medicine, finance, etc.

Really hard to put a $ value on social connections and ability to ladder climb, but it's absolutely a thing and very much part of the equation.

If you won't want to be lower/middle class for your entire life going to an Ivy and busting ass is way more effective than CU. Just is what it is, actual education is the same.

Further, Ramsey talks about ways of funding education. He speaks like he has the all the answers. I definitely do not, but now after living the med student thing for a decade and having my 3 best friends go through it + having had conversations with numerous of my wife's coworkers I can tell you Ramsey does not know what he's talking about with regard to loans and forgiveness for MDs and DOs. (Yes, I have been give his book, I actually read the section + his website).

It's just not how the system works, public forgiveness doesn't work that way, military service doesn't work that way, etc. I know doctors at Indian health services, MDs who did the military route, Dave's just not factually accurate. He estimates are too high, and he waaay over states what can be achieved.

 

[VikingsGuy]

I see a lot of folks talking about $40k+ a yr college costs, why are people paying that? You can still go to a state school for $10k / year in tuition and do just fine in the job market. It's hard to have sympathy for people who choose to spend that and then play the victim card.

For the right student with the right career goals a "prestigious" $$$$ school can deliver a positive RIO vs a cheaper school. But that is likely a small percentage of kids. Like all of this, there is a time and a place for almost all of these scenarios (even structured life insurance products ). Unfortunately, the average American does not have the info to navigate these choices optimally. We really need to push economic literacy (not theoretical - practical) hard in middle schools - yet it is non-existent. My oldest daughter did take a "practical econ" class in high school and it drove some great discussions and helped her navigate some life choices along the way. Absent this knowledge they either wander in the dark on their own or get caught up in blindly following some pundit.

 

[VikingsGuy]

Here's the envelope Bezos uses to save for his space flight - so don't mock the strategy . . .

World's Largest Envelope & Stamp Record Attempt! - National Thank You Letter Day-- November 14

A World Record Attempt We celebrated the 2nd annual National Thank You Letter Day, on November 14th, 2019 by creating the world’s largest envelope to hold t ...

nationalthankyouletterday.com

 

[TOGIE]

financial literacy is best taught by paying your kid to mow the grass, then telling them "but you have to pay for the gas, oh and there is a tax on what i pay you cause it's my mower/cause i said so, i'll just withhold guesstimate amount and you'll have to true it up with me exactly at the end of the summer; maybe you'll owe me a tad more than the guesstimate or maybe i owe you a little, nobody knows cuz tax law "

i can't wait to have kids.

 

[TN2shot07]

Like all of this, there is a time and a place for almost all of these scenarios (even structured life insurance products ).

I hoped we had let that horse die

Couldn’t agree more about the education we need for both students and parents about college. It’s especially rough on first generation college students whose parents have never had that experience

 

[Deleted member 28227]

financial literacy is best taught by paying your kid to mow the grass, then telling them "but you have to pay for the gas, oh and there is a tax on what i pay you cause it's my mower/cause i said so, i'll just withhold guesstimate amount and you'll have to true it up with me exactly at the end of the summer; maybe you'll owe me a tad more than the guesstimate or maybe i owe you a little, nobody knows cuz tax law "

i can't wait to have kids.

I'm really excited to see how you demonstrate Arbitrage.

 

[TN2shot07]

financial literacy is best taught by paying your kid to mow the grass, then telling them "but you have to pay for the gas, oh and there is a tax on what i pay you cause it's my mower/cause i said so, i'll just withhold guesstimate amount and you'll have to true it up with me exactly at the end of the summer; maybe you'll owe me a tad more than the guesstimate or maybe i owe you a little, nobody knows cuz tax law "

i can't wait to have kids.

Same page

When I have kids I’ll send them to your house and they can all complain about how much their parents suck

 

[TOGIE]

I'm really excited to see how you demonstrate Arbitrage.

the wife would then have to come into play. that's when things would get real dicey.

 

[Gellar]

financial literacy is best taught by paying your kid to mow the grass, then telling them "but you have to pay for the gas, oh and there is a tax on what i pay you cause it's my mower/cause i said so, i'll just withhold guesstimate amount and you'll have to true it up with me exactly at the end of the summer; maybe you'll owe me a tad more than the guesstimate or maybe i owe you a little, nobody knows cuz tax law "

i can't wait to have kids.

My mom and dad told my oldest brother he had to get a job to save for a car. They lined up yards from all the old ladies in church to mow and they bought his gas and mower. But he would repay them at the end of the summer. So he”mowed” yards for all the little old ladies in the neighborhood. I use quotations because I actually mowed them and might of got paid for 1 or 2 yards a week that I mowed. he would kick my ass if I complained. That lasted until he couldn’t kick my ass anymore. Now he’s a minister, so every time I see him I remind him of that strong arm business technique he used to imploy. He denies it, but even our mom agrees I mowed more then he did.

 

[TOGIE]

My mom and dad told my oldest brother he had to get a job to save for a car. They lined up yards from all the old ladies in church to mow and they bought his gas and mower. But he would repay them at the end of the summer. So he”mowed” yards for all the little old ladies in the neighborhood. I use quotations because I actually mowed them and might of got paid for 1 or 2 yards a week that I mowed. he would kick my ass if I complained. That lasted until he couldn’t kick my ass anymore. Now he’s a minister, so every time I see him I remind him of that strong arm business technique he used to imploy. He denies it, but even our mom agrees I mowed more then he did.

sounds like you got a quality lesson in unbridled capitalism

 

[VikingsGuy]

My oldest daughter displayed a more subtle understanding of human nature and markets. When she was a teen I offered to pay her what I would pay a service if she mowed our lawn weekly. She took me up on the deal. One day I came home early to find a younger neighbor boy who had a crush on her mowing my yard and she was inside watching TV. She was giving him nothing but hope (she should have become a politician).

I pulled the plug on the situation and just hired the neighbor boy directly.

We all learned lessons that summer.

 

[Pucky Freak]

Dave Ramsey is not the best solution for anyone, but he’s a better solution for 90% of the population than whatever they’re currently doing. Y’all are missing the forest for the trees. Of course you can find things wrong with the program, but it has more going right for it than any other program. Just ask the millions of satisfied devotees.

I’ve been full Ramsey since 2014, and I’ve not regretted it. I had good finances before I started and now they’re excellent. It’s a great structure to married couple finances too.

Carry on…