Dammit Paul! You've gone and said something I 100% agree with...
paulsol wrote:
I believe the secret to financial happiness is to spend less than you earn. Sounds obvious, but how many people do you know who have no money owing to someone else at all? Its a good feeling.
I'd go further and suggest that this is the difference between wealth and poverty in general. It also should be obvious, but everyone who is "wealthy" (has more money than they owe) achieved this by spending less than they earn. And while it's certainly easier to do this if you earn more money, it's surprising how many people earn 6 figure salaries, but aren't really "wealthy" in this sense.
Quote:
Credit sucks. It allows you to think you are doing well. For a while. And then it drains you of any spare cash you might have had, and lets you know how close to fucked you really are. And it does it repeatedly, month in, month out.
And now you're two for two...
Credit is the fastest way to lose your money IMO. If you can't actually afford something today, why assume you'll magically be able to tomorrow if you just borrow the money for it? What's so incredibly obnoxious about this is that the credit hole is a one-time thing. You get yourself into it, and you're constantly behind the eight ball.
The key to understanding finances is to understand that no matter what other machinations you use, at the end of the day, you have a set flow of money coming in, and can't spend more than that over time. You can either plan ahead and save up money you've earned to spend on things you need, or buy them ahead of time and end up still paying for them over time, but also incurring interest payments on top of it.
A classic example is car buying. Imagine two people who make the exact same amount of money over their lifetimes. Person one goes out as soon as he gets his first job and gets a car by taking out a loan. Person two obtains a cheap beater instead and sets aside the difference in cash he's not paying for a car loan into an account. 5 years later, they each go to obtain a new car. The first guy trades in his old car (for almost nothing), takes out a new loan and continues paying for the cost of the car plus interest. The second guy has his cash already there. He's paid the same money, but he's gaining interest instead. Thus, he can afford a better car, or buy the exact same car and still have money left over (and earning yet more interest). He "pays" for this one time in his life by suffering with a cheap car for 5 years. However, for the entire rest of his life, he will pay less over time for every car he owns. Instead of paying interest on a loan, he's earning interest.
Same deal with credit cards. You could either save up X amount of cash each month to pay for that TV or whatever and then buy it when you've saved enough, or you can get the TV now, but pay *more* each month for the same thing. And once you get into that habit, everything starts to cost more. Because you're paying more each month for the TV, you don't have enough for food, or car maintenance, or to fix the washing machine. So you put those expenses on the credit card. Pretty soon, you're spending most of your month pay simply paying off last months credit charges, and buying everything for this month by charging again. Once you're in that situation, you'd likely give anything to have one month back in order to not always be paying after the fact. But you can't...
It's a pretty ugly trap, and a ridiculous number of people fall into it.
) but I buy clothes from end of line when they are half to a third of their normal price.