Tuesday, December 20, 2016

10 Reasons to Never Have Debt

I was going to keep this list to 5, but the reasons just kept piling up.  So here they are:

  1. You pay more for everything when you buy with debt.  Paying interest means buying that $10,000 car is actually $11,500 on a 6-year loan.  Think this doesn’t apply because you have a 0% interest card?  Keep reading.
  2. With debt, you never own anything new.  Until it’s paid off, you don’t own it.  By the time you’ve paid it off, it’s 3 or 6 or 30 years old.
  3. You can get a discount paying cash.  If you ask for a cash discount and they say no, say, “Alright, I’ll go to your competitor,” and see if they let you get to the door before changing their minds.  Dental offices, auto sellers, and even big box stores will agree to a cash discount, if you talk to the right person the right way.
  4. This isn't me, but this is what it feels like not owing anyone any money.
  5. You don’t worry about paying your bills.  Unless you’re house-poor or unemployed, it is almost impossible to live outside your means if you don’t borrow money.
  6. You keep control of your biggest wealth-building tool: your income.  The average American household pays $2351.25 per in credit card interest.  If you invest that amount between the ages of 20 and 60, you will have over $1 million.
  7. The credit card industry is not a service industry.  I lost my job in 2009 and immediately called all my creditors to ask them if they could lower my payments until I found a new job.  Every one of them told me to call back when I was 90 days past due.  After my first delinquency, my interest rates would have been raised to 30%.  Credit card companies don’t care about you, they just want your money.
  8. You don’t need a credit card for emergencies.  A $10,000 emergency fund is enough to cover almost any one-time emergency.  Most medical insurance plans have a maximum annual payment amount of less than $10,000, and your auto insurance deductible is likely $500-$1,000.
  9. Employers don’t look at your credit score.  This was an argument between Lizard Boy and myself for a long time.  I finally looked it up and it turns out that your prospective employer is prohibited by law from seeing your credit score.  All they can see is whether you have negative marks (missed payments) on your soft report.
  10. Cash talks.  You might think you can’t get a mortgage or rent an apartment without a credit score, and while some zombie companies use a FICO score because they don’t understand what it is, you can rent a home or buy a house with some up-front down payment.  If you can show steady employment history and provide a security deposit, apartments will rent to you with a credit score of 0.  (To make sure, I called some expensive ones to find out.)   If you save up a reasonable down payment and show consistent work history over 2 years, you can buy a home.  I did before I was married.
  11. There’s no better feeling than owing nothing to anyone.  I’ve borrowed from family, credit cards, banks, and the government.  Every one of those entities creates a weight of emotional and mental burden.  When your life belongs to you, the freedom of opportunity is infinite.

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