Debt/Financial Freedom

[deaner]

Great thread. I am in the same boat as a lot of you guys. No debt other than a small mortgage. (small for alberta. lol) I cant imagine how stressful that must be for people leveraged to the hilt just to keep up with the Jones's. I cant imagine HAVING to go work just to keep up with payments. I think it makes a person enjoy their job much more by not having to be there. Knowing that you could walk away, get layed off, or whatever..........is a great piece of mind to have. Im not saying im in the habit of walking off the job, but having the choice is the key.

And yes, the millionaire next door is an excellent book.

 

[xlr8r]

Just a quick thought - My wedding gift to all my acquaintances is "The Richest Man In Babylon" - sometimes its more important not to get caught up in too many words and lose sight of the meaning of simple, true financial principles.

We own businesses in the Insurance & Re-Insurance Markets and do quite a bit of hard money and bridge financing with our reserves. Asset/Debt Leveraging, when properly utilized and understood can be a wonderful business tool (example: if you have the cash and choose carry a 15-yr $300,000 mortgage at 4.5% balanced by a high-yield MMA earning 5.2%), but personal debt (the kind that keeps you up at night and in bondage) breaks up families and cause unbelievable heartache.

The fact is that most individuals lack the discipline necessary to utilize debt as a positive tool and should avoid it at all costs. My advice to friends who ask for quick financial advice is to learn the true definition of an "asset" and then of a "liability" and then base financial decisions on the ability to match "assets" with "liabilities".

 

[AdrenalineAddict]

I took the debt free approach several years ago myself, talk about a great way to live (stress free). I've never been a keep up with the Jones's kind of guy, I've never had any urge to compete with the neighbors or friends, other than on the mountain of course. As long as you have a warm comfortable place to live that's all that's ever really mattered to me. My sled is 5 years old, my vehicle is 6 years old and the kids vehicles are all 9 years old and running well. The freedom is great and will probably get me in trouble at work someday, I have a tendency to get a little lippy since I'm not married to my job anymore. By the way, the 5 year old sled still outruns anything coming off a showroom floor. Hmm!! are we moving forward with sled design or have we taken a step backwards? Why does it take a guy like Mr. Ramsey to get some back on track?

 

[Sturgis Sledder]

Ha, ha! Glad to hear it! Radio 1340AM from 5 to 6 in the evening is when I catch it in our area. I usually listen on the way home from work. It's motivating for sure.

I listen to his show on the internet.

 

[deaner]

Its funny, when I first read the title of the thread I thought it was going to be a pitch for a pyramid scheme! haha. Ive been approached by about 5 "friends" within the last year for that type of thing. Financial Freedom!! Man that ticks me off. I dont mind supporting a friend with a new business. BUT, a "network marketing company" that works by me signing up along with a few other people, and then us signing up so many people, and then with them signing up so many people................and the more people that get signed up, the more money we make. That is a pyramid scheme. And they will never admit to it! Even if you draw them, and me, and the guys below me, and so on...........and then outline it and show them the pyramid. They still wont admit to it! I can understand that everyone wants to create wealth for them and their families, but at least do it honestly. Friggin dum dums and their get rich quick schemes.

 

[JDKZRT]

Knowing that you could walk away, get layed off, or whatever..........is a great piece of mind to have. Im not saying im in the habit of walking off the job, but having the choice is the key.

Ha ha, great memories .... the only thing greater than having this piece of mind is actually DOING something with it!
My fuse was getting shorter and shorter and shorter at work (after 20 years) so I actually walked away (cut the cords, sent them to hell etc. etc.) and had a freaking spectacular rest .
6 months later they came calling ME back. There is no way, no how, anyone could do this being a slave to a bank.

 

[phatty]

A good start to being debt free

when i was a young lad, my father sat me down and said, "Son you will be starting high school next year, and i know you will have the temptation to not do your homework and just go play. I promise you that if you will put every effort into getting good grades it will give you more freedom and play time than you could ever imagine. It will also give you a great head start on financial freedom."

I had no concept of money management or real world at that age, but i trusted my father enough to work hard through high school. The end result was graduating with a 4.0 and earning full ride scholarships to any college i wanted. I didn't pay a dime for my college education, and with pell grants i was able to actually get paid to go to college. I worked hard as a semi truck driver in the summers and paid off my first truck in 2 years. As a graduation present from college my father gave me a snowmobile (money he had saved to put me through school since i was a child, which he thought was a great way to reward my hard work, in hind sight i might have used that to get a house way back then instead of a sled). I hope to teach my children the same way. It was a wonderful lesson that i learned and hope to share with who ever will listen.

Currently i am looking into purchasing my first home, and hence to avoid PMI i am selling off my current sled which should give me just enough of a down payment to avoid the insurance and save me thousands in the long run (planning on 10 plus years in the new house).

I have found a glitch in the credit card system. A lot of credit cards offer things like free tvs or xboxs or cash if you sign up and spend x amount of dollars in the first month. They can do this because of absurd rates 18-30%. Those of us with financial freedom can sign up buy x amount of fuel or groceries or things we buy anyways, pay it off in the first month get the sign on reward and close the account the next month. Its my little way of sticking it to the companies that ruin so many peoples lives.

 

[SnowAddiction2]

have found a glitch in the credit card system. A lot of credit cards offer things like free tvs or xboxs or cash if you sign up and spend x amount of dollars in the first month. They can do this because of absurd rates 18-30%. Those of us with financial freedom can sign up buy x amount of fuel or groceries or things we buy anyways, pay it off in the first month get the sign on reward and close the account the next month. Its my little way of sticking it to the companies that ruin so many peoples lives.

Phatty,

Beware of the credit card companies. They have very sneaky ways to mess with you so they can get they're fees. We thought we were being clever by doing the same thing. They ended up holding one of the checks we mailed in so that it went passed the due date. They're word against ours. We screamed, ranted and raved, but in the end, we just cancelled the card. It was Bank of America Visa. Total scam!!!!!!

 

[Ollie]

The fact is that most individuals lack the discipline necessary to utilize debt as a positive tool and should avoid it at all costs. My advice to friends who ask for quick financial advice is to learn the true definition of an "asset" and then of a "liability" and then base financial decisions on the ability to match "assets" with "liabilities".

That is true statment. It doesn't suprise me though.

Look at all the games for little kids that gives them pretend credit cards and lets them go to the "mall" and spend money.
There are all kinds of games that teach kids that credit cards are good and being in debt up to your eyeballs is good.

Look at all the credit card companies that target college students. They offer no interest, no payments for 6 months kind of things.
People never learn to save money or stay out of bad debt because people have been programmed to spend. Commercials tell you that you have to have the best, the biggest. Same thing we get with sleds, just we have the financial responcibility to say no once in a while.

Look at the stimulus package that the government is putting forward. They are giving people money.
Why??
Because people are programmed to spend.

 

[Yeti]

The response to this thread has been great! I wasn't quite sure what it would be. I think I half expected to get either no response or some ridicule.

The Financial Freedom part came from one of the 1st books that I read when I was delving into this: "The Average Family's Guide to Financial Freedom" by Bill & Mary Toohey. A great book, really lit a fire under me. In it they give their definition of financial freedom. I wrote it down because I liked it so much: "A family has achieved financial freedom when they are able to pay for all of their living expenses, for the rest of their lives, utilizing their assets and 16 or less hours of work per week, per spouse, until Social Security, Medicare, pension, and IRA eligibility". Thats what I'm talkin' bout! These people did it, with kids, and neither one of them ever making more than like $35,000 a year.

On a different note, I often wonder why they don't require a course dealing with this in school. I never had one in highschool or college. Aren't they supposed to prepare you for the world and teach you to be "well rounded". Talk about a tool to give kids, this would be it in my view...

I have read "The Millionare Next Door", great book!

 

[BowSheet]

Has anyone read "Becoming your own Banker"? the idea is that you fund an insurance policy with the idea that when needed, you essentially borrow money from the value of the policy and pay your self back with the going interest rate at the time of purchase. It is an interesting concept.

 

[Mad Max Performance]

Excellent topic guys! I used to subscribe to this idea, and still do. One problem. I went farming. That is a debt business. One way I look back at, and realized I could have done it better, was to start smaller, and grow with little to no debt. I paid cash for all my machinery, and try to do that still, by buying older, cleaner equipment, but the input costs are crazy!

I am already teaching my kids this kind of mindset, and will order some of the books that guys have recommended here. My kids first purchase that I help them with will be revenue properties. Ones that create positive cash flow, and I can help them manage.

Still, to this day, the best investment I ever made were my rental properties.

Getting to a minimum debt situation is something I really miss, and Im in a worse position now than I ever have been, and hate it. The farm really makes me question whether its what I want. I sure hope that Im glad I did this some day. The simple life is something that I yearn for, and hope that it comes back soon. I hate being a slave to the banks. Thats what they want. The whole free world monetary system is designed to keep you broke.

Also, understanding "Good debt" and "Bad Debt" are really important in business and in life.

 

[Skogen]

Agriculture is a high equity, low cash business. Always has been and will probably always will be. More then likely, if you are a good farmer, you will always need a operating loan (a good banker can provide that), your land on a term note, ect. And starting smaller is not always the answer. You cannot make a living and provide for your family farming just a thousand acres and 300 cows. It does not work, the numbers dont add up. Your costs will be way up compared to what you make.

 

[phatty]

Phatty,

Beware of the credit card companies. They have very sneaky ways to mess with you so they can get they're fees. We thought we were being clever by doing the same thing. They ended up holding one of the checks we mailed in so that it went passed the due date. They're word against ours. We screamed, ranted and raved, but in the end, we just cancelled the card. It was Bank of America Visa. Total scam!!!!!!

thats why you do all digital bill pays from your online banking accounts. The digital footprint cannot be argued. One time wells fargo screwed my car payment to another credit union, luckily i had the digital footprint and showed my credit union that wells fargo had screwed it up. In the end wells fargo ended up paying for the extra interest accrued during the two weeks it took to get it sorted out. But fighting the battle really sucked as big banks always give you the run around.

I hate bank of america too!!!

 

[Sturgis Sledder]

thats why you do all digital bill pays from your online banking accounts. The digital footprint cannot be argued. One time wells fargo screwed my car payment to another credit union, luckily i had the digital footprint and showed my credit union that wells fargo had screwed it up. In the end wells fargo ended up paying for the extra interest accrued during the two weeks it took to get it sorted out. But fighting the battle really sucked as big banks always give you the run around.

I hate bank of america too!!!

BOA AND Wells Fargo? Go figure, two of the worst financials out there.

 

[Yeti]

Has anyone read "Becoming your own Banker"? the idea is that you fund an insurance policy with the idea that when needed, you essentially borrow money from the value of the policy and pay your self back with the going interest rate at the time of purchase. It is an interesting concept.

I have not read the book. Are you reffering to a "cash value" life insurance policy? I don't claim to know a whole lot about insurance, but without exception, everything that I have read says DO NOT mix insurance with investments. Keep your insurance just as insurance, go with term life and stay far away from cash value policies. My parents took out a cash value policy on me when I was one year old with the idea of doing what you said, thinking that it would pay for my college. It didn't. When it came time for me to go to school, they got quite a shock, because it wasn't worth what they thought it was going to be. It did help but I'm sure they could have done much better by choosing a different investment vehicle. They must have been popular back in the 70's because both my wife's parents and mine took out policies on us and neither one of them is really worth squat when you consider we have had them for well over 30 years.

 

[AZ800]

Interest is the worst slave driver in the world. Never sleeps, takes vacation, or is sick. I read a report the other day saying that the average American that makes between $30-50K a year spends nearly $10K a year on vehicle payments. That doesn't include fuel, insurance, or repairs. Americas obsession with new vehicles is killing personal finances.

I think that credit cards are great. I put everything I can on my cards and get 2-5% back. You can also live on the credit card companies money for a month. If you pay off the enitre balance every month it doesn't cost you 1 red penny and you draw interest for a month longer. I would not recomend this for most people but if you are able to get 2% back, and not pay for things for up to a month why not?

Hey now, lets not be baggin' on the new car buyers! If more people thought like you (and me), I wouldn't be able to be drivin' around in my "$50,000 truck", that only cost $30k, and still smells new!

Same w/ all large purchases, except the house, I have had 2 brand new houses, but that don't matter, 'cause used houses typically cost the same or more than a new one 'cause someone thinks their landscaping job is worth $10k when they really only dropped $1500 on it including the "rent a truck" from Home Depot to haul the cr@p home!
I've got 2 decent sleds, enclosed alum trailer, and a Mastercraft ski/wakeboad boat, and have just shy of $30k in purchase price for all that (over the last 5 yrs). He!!, just 2 new sleds will set you back 20g.
Live within your means, whatever they may be and you'll be fine!

 

[Blue]

ever notice how the person telling everyone how much money he has is the first one to file for bankruptcy? why is that? I don't get it..and the guy who doesn't say anything is loaded?

 

[phatty]

I have not read the book. Are you reffering to a "cash value" life insurance policy? I don't claim to know a whole lot about insurance, but without exception, everything that I have read says DO NOT mix insurance with investments. Keep your insurance just as insurance, go with term life and stay far away from cash value policies. My parents took out a cash value policy on me when I was one year old with the idea of doing what you said, thinking that it would pay for my college. It didn't. When it came time for me to go to school, they got quite a shock, because it wasn't worth what they thought it was going to be. It did help but I'm sure they could have done much better by choosing a different investment vehicle. They must have been popular back in the 70's because both my wife's parents and mine took out policies on us and neither one of them is really worth squat when you consider we have had them for well over 30 years.

i have a friend who is a "wealth manager" as he terms it, financial adviser as we know it...
this is all he does for people, its a totally different ball game on term life when the 0's extend out a couple more places... they make some real big money off it... his recommendation to me was unless you have at least 1 million you will never make money off the cash value of your term life... at least he didn't charge me for the advice right

 

[Skogen]

ever notice how the person telling everyone how much money he has is the first one to file for bankruptcy? why is that? I don't get it..and the guy who doesn't say anything is loaded?

That is because they are blowing smoke and trying to keep up with the neighbors. The quiet guy dont care.