Posted on 01/01/2008 5:10:50 AM PST by Kaslin
Very good list. But he doesn’t mention two of the top financial pitfalls: credit cards and buying cars on credit.
I suggest finding Dave Ramsey on the radio & listening. He hits everything on this list & more. Sound advice.
Wow, an entire article that is torn from the pages of DAVE RAMSEY’s Book.
Beat me to the post!
Nothing wrong with using credit cards as long as you pay them off. I always pay at least 3 times the minimum payment due, plus I ad the interest charge to it
Carrying no balance month to month is a huge savings. Personally I never buy with a credit card what I cannot pay for in cash. Then when the bill shows up I pay in full taking full advantage of the 30 day, or sometimes more, float which allows me to leave my money invested for the maximum term.
I have no other choice, but whenever I can I find a store when I need something I don’t have the cash for, that has no finance charges for two years, like Lowes. A few moth ago my water heater went out. So I went to Lowes and after I found one to replace the old one. I asked if they had a no finance charge for it, and they did. I immediately started to make a payment the following month and by the time I have it paid off there will be no finance charges, so it’s just like I paid cash for it
Or, you could visit:
www.daveramsey.com
Oh, I always wait before I buy anything else on my cards, until they are paid off
my resolution is to buy low, sell high
Just recently I bought three major appliances at a 25% discount AND 18 months zero interest financing.
I buy everything on credit and pay it off every month. It is a good way to keep track of purchases but I mostly use it for the protection the card services provide. If you buy an item or service that does not deliver, the card company goes after the seller. Invaluable!!!
Also, I use only my Amazon card and love the free rewards at Amazon.com!
My one issue with David Ramsey is his focus on having people pay off their mortgages. For many people this bit of financial advice makes absolutely no sense at all, and under the right conditions is often makes a lot of sense for someone to carry the largest mortgage they can afford.
Please tell me why it makes sense to pay the bank thousands of dollars in interest on a mortgage. Dave Ramsey calls that a “stupid tax.”
We graduated from Financial Peace University five years ago and almost have the mortgage beat now. We just went through Christmas with nothing but debit cards. Now it is the beginning of a new year and we are starting it with money in the bank, no credit card debt, and no bills except the normal utility bills and occasional medical bill. At a time of my choosing I can retire and live happily ever after, laughing all the way to the bank each and every month.
“common mistakes people make when it comes to money”
Not having enough...
My one issue with David Ramsey is his focus on having people pay off their mortgages. For many people this bit of financial advice makes absolutely no sense at all, and under the right conditions is often makes a lot of sense for someone to carry the largest mortgage they can afford.Please tell me why it makes sense to pay the bank thousands of dollars in interest on a mortgage. Dave Ramsey calls that a “stupid tax.”13 posted on 01/01/2008 10:37:57 AM EST by Alberta's Child
If you are going to have debt, mortgage debt is likely to be the cheapest form of debt. But if you are choosing whether to invest in a bond or savings account, on the one hand, or to pay off your mortgage on the other hand, I would vote for the latter. Why complicate your finances?
I agree, the protection you get when buying on a credit card is invaluable. I have gotten help many times this way.
Good advice. Another, possibly related, idea:Make your large charitable contributions in the form of appreciated stock.If you bought $1000 in a stock which doubled, and another $1000 in a stock that went bust, if you sold them both you would be even for the year, before taxes or after taxes. But if you were going to donate $2000 to your church anyway, donate the appreciated stock and declare the market value at the time you donated it as an itemized charitable contribution. Notice that the price you paid for the stock, and the fact that it appreciated since you bought it, doesn't matter in the tax consequences of the donation.
So now you have the same $2000 deduction as if you had donated cash, but you have avoided any capital gain realization and therefore any capital gain tax (you could in principle use the $2000 cash you would have donated to buy more of the stock you gave away - and have a higher cost basis for the same amount of stock).
Here's a perfect case in point . . . it's based on an actual business plan that I developed for my company where the property in question is a commercial building, but many of the same considerations apply for a conventional mortgage on a home.
1. The Client owns and occupies a $400,000 building with no mortgage on it. The Client uses the building to run a successful business.
2. The Client has no real assets other than the building itself and the value of the company.
I developed a series of recommendations for them, and my #1 recommendation -- aside from other things related to their actual business -- was for them to immediately take out a $250,000 mortgage on the building. The rationale for this was actually quite simple:
A. The company was able to secure a mortgage on the building with a 25-year amortization, paying a fixed rate of 5.75% for the first five years. The payment on this loan was about $1,575 per month. Over the course of the year, this came to around $19,000 in mortgage payments, of which $14,250 was a tax-deductible interest expense. In a 35% corporate tax bracket, the $14,250 in interest effectively "cost" the company about $9,300.
B. The company's cash flow was sufficient to cover the mortgage payments without any difficulty.
C. The company could immediately turn around and invest the $250,000 in highly-rated fixed-income securities paying a return of around 4.50%. So the company earned about $11,250 on this $250,000 in cash. As long as they paid out the $11,250 to cover other business expenses, there was no corporate tax paid on it.
So you can see that even in a simple case like this a person or business can use the tax laws to their advantage by borrowing money they don't really "need." Keep in mind that if you use the $250,000 for certain types of investments (like another building, in the case of the company I was dealing with), you may even be able to take advantage of tax write-offs for asset depreciation that wouldn't be available for your primary residence.
I am from Missouri (not really), but please show me how a home owner benefits, not a business.
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