- Debt:: It is something that no one should want to have, it is normal and normal is broke.
- We should never have debt .
- Debt = Slavery
- Credit cards: Use it only if you can afford what you are buying, pay off in-full each month, and get cash back
- We lie to ourselves about the difference between a want and a need.
- Borrowing money
- Businesses- Borrow money to make more and return it into the business
- People- Borrow money then spend it and have little to show for it (except debt payments)
- Loaning money to someone does not help
- Destroy friendships
- Make you the master and the borrower is the servant.
- “Do not loan money to family, give it to them as a gift and don’t expect it back”
- “If you do poor stuff you will be poor. If you do rich stuff you will be rich”
be prepared for the financial emergencies that 8/10 families face in any given 10-year period
- Playing the lottery is dumb. You should do something better with that money.
- Debt:
- Debt is Normal (most people are in debt, 70% of families live paycheck to paycheck)
- Debt is Dumb (extra costs associated with debt)
- Normal is Dumb
- Types of Debt:
- Home Mortgage: average of $147,000
- Student Loan: average is 29,000
- Car Loan: average is 27,000
- Credit Card Debt: average off those who use debt is $16,000
- Ease of getting into debt:
- 6 billion credit card offers each year
- low introductory rate offer
- active marketing on college campuses (free t-shirts, pizza, and pop if you sign up)
- hook you while you’re young
- Cost of Debt:
- interest
- stress and conflict
- 52% marriage end in divorce
- 90 % of divorces in first 7 years of marriage are money problems
- prevents you from spending $ on what you want later
- Car Payments
- New cars are dumb
- lose 20% in first day
- lose 70% in first 4 years
- Leases are most profitable for dealers $1,300 (worst deal for consumer)
- Financing makes $700 for dealer
- Buy with cash dealer only makes $82 on average
- Always going to have a car payment UNLESS:
- You save 450 every month for 10 months then buy a used car and keep saving
- Learn Delayed Gratification (resisting award now for one later)
- short-term sacrifice for long-term benefits
- Drive for free
- save monthly car payment for 1 year (+$5,000)
- buy used car with cash (-$5,000)
- keep saving for another year (+$5,000)
- upgrade to better used car (trade-in old car (-$4,000-$5,000=-$9,000)
- keep saving and invest for 5 more years (+$30,000)
- upgrade to used car that is half of your car fund(-$15,000)
- wait 7 to 8 more years for fund to double to $30,000
- buy another $15,000 used car
- Drive "free" for life
- put additional $5,000 per year in retirement account
- Myths:
- You need to buy a new house (might cost more than renting)
- You need to buy a new car (loses 20% of value when you buy it)
- You can do whatever you want in college and pay for it later (hard to get out of debt, even with more money)
- You have to build credit (can pay cash for house / car)
- Loaning money is helping people (makes them your customer, not friend)
- You can get rich playing the lottery (bad odds, many winners go broke)
- You can't rent an apartment or buy a home without a credit score
- You need a credit card to shop online or to rent a car
- You need to take out student loans to go to college
- 15 vs. 30-year mortgage
- 15 has higher monthly payments
- 15 has lower interest rate
- 30 ends up paying more total interest
- I = P x R x T
- appears like you can get more for less with a 30, but in the long-run you end up paying a lot more and being saddled with debt for a longer period of time.
- example:
- $225,000 principle at 6% rate for 30 years
- $1,400 per month, $460,000 total
- $225,000 principle at 5% rate for 15 years
- $1,800 per month, $300,000 total
- What is the major differences and similarities between a debit card and a credit card?
- you can go into debt with a credit card
- if you run your debit card as credit you can get the same fraud protection
- research shows we spend 12-18% more with credit cards than with cash, debit cards are in the middle
- it hurts to spend cash
- rewards
- credit cards may offer cash-back bonuses or air miles or points
- most airline miles earned are never redeemed
- points can only be spent a certain way
- some banks offer bonuses if you use your debit card a certain number of times each month
- Who is the #1 target for credit card companies and why?
- 18 to 22-year olds
- if they get you early they’re counting on you maintaining brand loyalty
- they even target younger kids with kiddie branding
- Barbie has a Mastercard
- The game of Life accepts Visa
- Of those who dropout, why do most college students drop out of school?
- money problems caused by credit card debt
- What is the #1 key to building wealth?
- stay out of debt
- 80% behavior, 20% knowledge
- What do you get if you have no debt and no debt payments?
- more money, more choices, more financial freedom
- You don't need to build a credit score
- FICO: Fair Isaac Corporation (Measures how well you handle debt)
- Basically a credit score
- 35% debt history
- 30% debt level
- 15% length
- 10% type of debt
- 10% new debt
- How to buy a house without a credit score
- Work steady job
- save money
- get a down payment
- budget income to determine what you can really afford
- request manual underwriting
- How to buy a car
- Pay with cash
- Credit Report
- Review once a year
- it measures every time you borrowed money and paid for it
- Creates a credit score: interaction with debt
- How to increase credit score
- go into debt
- make debt payments
- have higher credit limit
- have different types of debt
- have it for a long time
- 3 C’s of credit
- Character (history)
- Capacity (how much more you can handle)
- Capital (How much you have)
- Credit Bureau: Creates credit report, issues credit score
- 3 types of keepers of the credit score
- Transunion
- Experian
- Equifax
No comments:
Post a Comment