Most people have a car payment. Sometimes it just makes more sense to sell the car you own and get a used one. Even if the used car is a clunker! From a financial perspective the minute you drive off the car lot your vehicle drops in value a minimum of 30%.
If you spent $20,000 on a car and now it’s worth $14,000 you just lost $6,000 dollars. Add in interest over the course of five years (if you own the car that long) and you’ll pay another $4333.
In five years you’ll be lucky to get $10,000 selling it, seven years maybe $6,000. Trade the car in and get $3,000. Bottom line is you’ll have nearly $25,000 into the car by the time you pay it off not counting normal maintenance.
If you purchase a five year old car you’ll get it for a heck-of-a-lot less and it’s still pretty new.
The point is you’ll eliminate quite a bit of debt on a loser investment. You’ll also save on your monthly payment.
Take a look at your situation now and determine the true value of your car (Kelly blue book) and what you owe to make a determination.
Hey, there’s no harm in owning an older car even if its ten years old. Make yourself a goal of purchasing a new car with cash) after you’re out of debt. Driving an old car will give you incentive to finish your debt plan.
To Debt Free Living!
David…
Friday, February 15, 2008
Tuesday, February 12, 2008
Good debt vs. Bad debt
There’s a misconception about debt in the U.S. Some will tell you there’s good debt and bad debt. There are various opinions but most would tell you never to borrow money to purchase something with the potential to decrease in value over time.
Good debt such as a home, with the potential to go up in value. A car wouldn’t fit the bill as they normally drop in value 30% after you drive off the lot.
Credit card debt would be another loser. You’ll still have the credit card bills long after you’ve forgotten what you purchased.
Of course, the above is the conventional wisdom.
Now for the truth:
All debt is bad! Sure you can make an argument your home is going up in value and will be worth way more than the loan amount. But, the point is you’re still in debt. And being in debt is bad.
Being in debt is bad because you are in bondage to someone else. When you’re debt free you don’t have a problem of what if I miss a payment on my car or home? You don’t owe any money on anything.
Good debt verse bad debt is kind of like being “ALMOST PREGNANT”. You’re either pregnant or not pregnant. Never in between. It’s one or the other.
It’s the same for good debt or bad debt. You’re either in debt or you’re not in debt. Ask yourself a simple question. If you had a choice of being debt free on everything you own or owing debt which would you choose?
I’ll bet you’d take no debt over debt period. If that’s the case get out of debt and relax. You’ll naturally and easily discover a whole new freedom once you become the 20% of the folks’ debt free.
Take care
David…
Good debt such as a home, with the potential to go up in value. A car wouldn’t fit the bill as they normally drop in value 30% after you drive off the lot.
Credit card debt would be another loser. You’ll still have the credit card bills long after you’ve forgotten what you purchased.
Of course, the above is the conventional wisdom.
Now for the truth:
All debt is bad! Sure you can make an argument your home is going up in value and will be worth way more than the loan amount. But, the point is you’re still in debt. And being in debt is bad.
Being in debt is bad because you are in bondage to someone else. When you’re debt free you don’t have a problem of what if I miss a payment on my car or home? You don’t owe any money on anything.
Good debt verse bad debt is kind of like being “ALMOST PREGNANT”. You’re either pregnant or not pregnant. Never in between. It’s one or the other.
It’s the same for good debt or bad debt. You’re either in debt or you’re not in debt. Ask yourself a simple question. If you had a choice of being debt free on everything you own or owing debt which would you choose?
I’ll bet you’d take no debt over debt period. If that’s the case get out of debt and relax. You’ll naturally and easily discover a whole new freedom once you become the 20% of the folks’ debt free.
Take care
David…
Monday, February 11, 2008
The purpose of Debt Free Living
Every now and then we need to review the purpose of Debt Free Living. Here goes: we live in a world of credit cards. These credit cards are how we live, how we spend, how we make some 95% of our purchases.
When we use credit cards we tend to spend 28% more per purchase. I’m not talking about the interest on the credit card. I’m talking about each purchase. Each time we use credit cards we tend to spend more money per transaction.
If you have to dig out your wallet and actually pay cash you tend to spend less, think about it more, and really feel it as those dollars leave your wallet.
When you spend with credit you tend to think you are richer then you really are, you tend to feel like there’s way more money than there really is.
Debt Free Living is a way of life. Debt free living is living the way 20% of the population lives, not the 80% in debt up to their eyeballs.
On top of it all when you use credit cards you get a bill each month. Your credit card bill includes interest payments. For many the minimum payments translate into a life time of bondage and thousands and thousands of dollars in lost money (unless you’re the bank who gets the money).
Debt free living is a mindset that is counter to the majority of Americans, the eighty percent(ers). Living debt free puts you into the twenty percent(ers). Whatever the majority is doing do the opposite, it will serve you well
A toast to Debt Free Living
David…
When we use credit cards we tend to spend 28% more per purchase. I’m not talking about the interest on the credit card. I’m talking about each purchase. Each time we use credit cards we tend to spend more money per transaction.
If you have to dig out your wallet and actually pay cash you tend to spend less, think about it more, and really feel it as those dollars leave your wallet.
When you spend with credit you tend to think you are richer then you really are, you tend to feel like there’s way more money than there really is.
Debt Free Living is a way of life. Debt free living is living the way 20% of the population lives, not the 80% in debt up to their eyeballs.
On top of it all when you use credit cards you get a bill each month. Your credit card bill includes interest payments. For many the minimum payments translate into a life time of bondage and thousands and thousands of dollars in lost money (unless you’re the bank who gets the money).
Debt free living is a mindset that is counter to the majority of Americans, the eighty percent(ers). Living debt free puts you into the twenty percent(ers). Whatever the majority is doing do the opposite, it will serve you well
A toast to Debt Free Living
David…
Sunday, February 10, 2008
Credit Cards Overloaded, how to get more for less
Friday, February 8, 2008 Wall Street Journal (headline) "With Cards Overloaded, Consumers May Rein In Spending"
“Plastic has pushed into every corner of American life, making new inroads that worry some economists and card issuers.”
Make no mistake about it this article focuses on consumers’ use of credit cards and how they are being used for everything from food, gas, Starbucks, and fast food places, to the big ticket stuff.
Debt Free Living is the best way to reduce your costs of purchases. By that I mean every time you use a credit card to purchase anything (even the small items) you pay a cost for that item. The average American carries credit card debt every month. If you don’t pay it off you’ll pay interest for the item resulting in paying more not less.
A close family member of mine once had a credit card that exceeded the limit. Every month the card was being charged an extra $35 dollars a month for being over the limit. This went on for three months before it was discovered the minimum payment didn’t cover the over limit amount. Every month more debt added through a $35 dollar penalty and next month interest on the $35 dollar penalty.
“Many Americans don’t realize the direct correlation between the need to change their behavior and their income, “said Bill Druliner, a credit counselor for GreePath Inc. “The longer somebody maintains that lifestyle, the bigger the crash is when it finally comes down to earth.”
Look at the previous two posts on behavior and how to change it. Most people are not disciplined enough to make changes in their life. The changes in your mindset are easy to do. But you must CHANGE yourself. No one will do it for you.
As you read my posts you’ll begin to get the point of it all. In order to get out of the hole you’ve dug for yourself you must first stop digging. Second, do not use anymore plastic, and third, utilize my $15 dollar a day rule to get out of debt paying off the lower balances first.
Don’t be the 80% crowd. Remember if you follow what 80% are doing you’ll become a part of the hopelessly depressed folks that cannot understand why they are unhappy and stressed all of the time.
Be a part of the 20% crowd. Those are the folks that are Renegades. Those are the folks that are debt free and can spend money as they want. It’s the 20% crowd that has the freedom to find the good deals. It is the 20% crowd that can afford to pay cash and get the best deal.
“Indeed, many Americans are so dependent on their credit cards for basic needs that about 25% of the clients walking into Margo Mitchell’s credit-counseling office in Tulsa, Oklahoma, have opted to pay their monthly credit cards bills before their mortgages.”
“The credit card is a means for them to supplement their income and becomes a cushion to buy groceries.”
Don’t be like the 80%, be like the 20% and get more for less.
David…
“Plastic has pushed into every corner of American life, making new inroads that worry some economists and card issuers.”
Make no mistake about it this article focuses on consumers’ use of credit cards and how they are being used for everything from food, gas, Starbucks, and fast food places, to the big ticket stuff.
Debt Free Living is the best way to reduce your costs of purchases. By that I mean every time you use a credit card to purchase anything (even the small items) you pay a cost for that item. The average American carries credit card debt every month. If you don’t pay it off you’ll pay interest for the item resulting in paying more not less.
A close family member of mine once had a credit card that exceeded the limit. Every month the card was being charged an extra $35 dollars a month for being over the limit. This went on for three months before it was discovered the minimum payment didn’t cover the over limit amount. Every month more debt added through a $35 dollar penalty and next month interest on the $35 dollar penalty.
“Many Americans don’t realize the direct correlation between the need to change their behavior and their income, “said Bill Druliner, a credit counselor for GreePath Inc. “The longer somebody maintains that lifestyle, the bigger the crash is when it finally comes down to earth.”
Look at the previous two posts on behavior and how to change it. Most people are not disciplined enough to make changes in their life. The changes in your mindset are easy to do. But you must CHANGE yourself. No one will do it for you.
As you read my posts you’ll begin to get the point of it all. In order to get out of the hole you’ve dug for yourself you must first stop digging. Second, do not use anymore plastic, and third, utilize my $15 dollar a day rule to get out of debt paying off the lower balances first.
Don’t be the 80% crowd. Remember if you follow what 80% are doing you’ll become a part of the hopelessly depressed folks that cannot understand why they are unhappy and stressed all of the time.
Be a part of the 20% crowd. Those are the folks that are Renegades. Those are the folks that are debt free and can spend money as they want. It’s the 20% crowd that has the freedom to find the good deals. It is the 20% crowd that can afford to pay cash and get the best deal.
“Indeed, many Americans are so dependent on their credit cards for basic needs that about 25% of the clients walking into Margo Mitchell’s credit-counseling office in Tulsa, Oklahoma, have opted to pay their monthly credit cards bills before their mortgages.”
“The credit card is a means for them to supplement their income and becomes a cushion to buy groceries.”
Don’t be like the 80%, be like the 20% and get more for less.
David…
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