Yep, but I might as well pull out a points card and get something back for my purchase as a consumer instead of using a debit card where I get no points at all.
Dave Ramsey-Financial Peace University
- Thread starter HardcoreClone
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Yep, but I might as well pull out a points card and get something back for my purchase as a consumer instead of using a debit card where I get no points at all.
You're right that they do make some money on the fees to merchants and I agree they are not taking a loss on most of those cash backs or other perks (though I suspect they do take a loss on most of the one time sign-up perks to lure you in). I looked up a bit more information about how interest is calculated for credit cards - it is compounded daily.
So going back to the $10K credit limit example:
$10K*0.02=$200*12=$2400/year
$10K*(0.16/365)*30=$131*12=$1578/year
So, I'll take a step back and admit you are correct probably in most cases, depending on how much profit the credit card company makes on transaction fees for a particular card. I would guess they make 1-2% of what each person spends as profit. I was actually calculating it wrong originally, because I was treating it like a mortgage loan and treating the pay off each month as a total spend of $10K, while it is actually a total spend of $120K, so essentially the interest rate has to be 12X the per fee profit to make it even with the fees.
Never went through FPU but did read "Total Money Makeover" and they follow the same philosophy. Been doing it for 4 years now and am incredibly glad I started when I did. I know for certain I am in a much better financial situation because of it.
We just finished Baby Step #5 (or in process of saving for college for kids) and are looking at Step #6, which is the biggest I struggle with. I have a 3.25% mortgage that I am paying down at 15 year rate with extra payments, but I can't bring myself to putting all of our financial power into paying off a 3.25% loan when we could be contributing to other investments that are more liquid (not locked up in equity). It is an extremely low rate in historical terms which makes me think about holding on to it.
The biggest struggle is due to him being correct on the first 5 steps, perhaps I should just trust his 6th as well...
Sounds like you are doing pretty well. Dave has great advice for getting people out of debt and down the right road, but I feel there is good and bad debt. A mortgage with that low of rate isn't bad debt in my mind. I would rather max out my 401K or other Roth IRA than put extra on the mortgage. If I already maxed out my retirement account, then I would look into putting more on the mortgage.
Been there!
Here are the two events that finally put me over the hump in paying off our mortgage (int. rate was very similar to yours….and also on 15 yr schedule. We probably had 8 or 9 yrs left when paid off )
- I continue to worry about the long-term or maybe even near term health of the US economy. Everyone talks about the $20T national debt (and nothing is done about it) but the reality is when you calculate the obligations going forward to entitlement programs ( Medicaid, Medicare, SS) we are nowhere near able to generate the type of tax dollars to meet these obligation. I’ve seen numbers like $200+ trillion. The hard truth is we can’t cut spending, tax or grow our way out of this. Add to this fact, we have essentially gotten to the point where we have potentially recreated another housing bubble. Add to this is the reality that our nation’s infrastructure is so massively overbuilt (and very unproductive in many areas) and aging , we have no way to generate the revenue needed to repair and maintain all we’ve built to date. Politicians can’t win telling the truth about these issues, so they don’t address them. Bottom-line: Invest in something tangible. Yes, paying off your mortgage in investing! I’m become more and more convinced (unfortunately) that we won’t fixed these huge national issues by choice. It is going to take an implosion and that is going to hurt….badly. People that are highly…or maybe even mildly leverage with debt, won’t come out well. We’ll all be hurting for that matter. While I haven’t abandoned investing in equities, I am a lot more conservative and diversified then I might normally be if I didn’t see such a troubling future ahead. I have a friend who is much smarter and well-read then me, that told me he only invests in things that he knows he has some control over. He knows he needs a house, so throwing money at paying down the mortgage is win-win because if (when?) things go bad, there will be no downside to having invested in his house and eliminated any debt obligation should the market for everything else go in the dumpster. i.e…my cheap mortgage interest rate will mean squat if the financial markets crash.
- Take your mortgage payment and project what you’d do with that money if you no longer sent it to a bank each month. This is what I did and it put me over the edge. I was sitting in a coffee shop scratching out ideas and about jumped out of my chair when I started this exercise. I couldn’t wait to discuss with my wife. (Not real #’s, but for illustration) $1400 formerly going to X bank for house payment, I’ll now have each month to spend however I’d like. Let’s see…$200 save to travel budget, $300 to join country club, $150 set aside for upgrade to ISU season tickets, $100 to favorite charity/church, $50 toward Christmas gift budget, $100 so I can pay cash for next auto purchase, $75 play money….etc…etc. etc….and these are MONTLY totals! If that doesn’t fire you up, I’m not sure what will. This is why it is so shortsighted when people post that you have to live like a hermit if you follow Ramsey’s advice. The problem is, our culture doesn’t encourage people to look beyond today to see what is possible in a few years. It is all about what is happening TODAY. ).
Hope that is helpful!
Only read a little bit of this thread, but in my mind, if you're not using a credit card, you are missing out on a lot of benefits.
Credit card sign-up bonuses and points earning spending can really add up. The caveat, of course, is that you use them responsibly and pay off the full statement balance each month.
In only 3 or 4 years, through points earning credit cards, I've taken two separate round-trip vacations from Cedar Rapids to Hawaii with my wife for free. And currently have enough points/miles built up for 5 or 6 more trips! Easily have gotten $10,000 worth of value for free in just a few years.
It takes a little bit of work to keep on top of everything, but I've got a spreadsheet where I track all my stuff. It just blows my mind when people primarily use cash or debit card to pay for everything -- missing out on a lot of potential benefits.
Here is a great resource:
http://www.thepointsguy.com
Credit card sign-up bonuses and points earning spending can really add up. The caveat, of course, is that you use them responsibly and pay off the full statement balance each month.
In only 3 or 4 years, through points earning credit cards, I've taken two separate round-trip vacations from Cedar Rapids to Hawaii with my wife for free. And currently have enough points/miles built up for 5 or 6 more trips! Easily have gotten $10,000 worth of value for free in just a few years.
It takes a little bit of work to keep on top of everything, but I've got a spreadsheet where I track all my stuff. It just blows my mind when people primarily use cash or debit card to pay for everything -- missing out on a lot of potential benefits.
Here is a great resource:
http://www.thepointsguy.com
Anyone have recommendations for personal budget programs? Dave Ramsey promotes his EveryDollar, which apparently you can link your bank accounts to and it will categorize expenses. Heard similar things about Mint.com.
I wouldn't mind trying a program for a bit just see if I can benefit in some way tracking cash flow and expenses.
I wouldn't mind trying a program for a bit just see if I can benefit in some way tracking cash flow and expenses.
I use www.mint.com. They link to your bank accounts for free. Ramsey's EveryDollar (last time I looked into it) charges something like $10/month per account. I don't know why they charge so much for their program when Mint is free.
Mint is a nice setup for monthly budgeting and allows you to track expenses over time. I've used it since 2014 and have really enjoyed it. I honestly do not know what else is out there since I've always used Mint.
I also am interested in something like this. I have tried Mint but it seemed to be a little more complicated to do (this was many months ago so maybe its gotten easier).
Ha, that's ironic. A guy who promotes healthy spending habits and budgeting wants you to use his website for $10/mo when there is a free site available to use.
I don't blame Ramsey for trying to make money for his businesses and his ELPs. He's doing what's best for his company which is fine; people just need to recognize it for what it is. What I don't understand is why you would create a product that costs over $100 a year when the major market share product charges nothing.
To be fair you can use EveryDollar website free. I do but its not great. A decent budgeting program that sinks with phone apps (the reason I use it). The Premium version is to link your checking account (no CC's because he hates them) and they say its to reimburse them for fees from the banks and probably make a profit.
This right here. It is basically free money when done right and it isn't hard at all to do. The last four trips I've taken my plane ticket and hotel stay have been completely free of charge and I'm going to Cancun soon completely off of points.
It takes a little time to set up, but nothing more than what you would do to build any sort of budget. Once you get a typical month set up with the categories/budgets you need, it's pretty much rinse and repeat. I usually tweak it every month to match that particular month, but that takes no more than 15 minutes. I built my own mega-budget spreadsheet that did most of this, but found Mint to do everything my spreadsheet was doing, except automatically.
What I really like about Mint is that it learns what categories your normal expenses go to. For example, after a month or so, it learn's that charges from Hy-Vee are (typically) groceries, Kum & Go is gas, etc. By now, I only have to go in every couple of weeks and move a few things around that are allocated incorrectly and identify ones it can't (like checks). That exercise usually only takes about 15 minutes, too.
I really like the trends tab where you can see how much you're spending over time in a particular category. You can also see how your cash flow is over time, which I also enjoy.
If I had to name faults with Mint: sometimes it has trouble syncing with your accounts. That can create problems if you want daily information. If you're new to budgeting, the automatic nature of Mint can make you complacent. Since you don't have to enter the numbers in yourself, it's easy to lose track of your budgets. So, if you're new to all this, you'll need to be disciplined by going in every few days and seeing how you're doing on your budgets.
Spend less than you take in, leverage low cost debt at low ratio.
No charge.
No charge.
Generally like Dave’s stuff, but hot take incoming
