Dave, you are correct. I disagree. I am against making any kind of unsecured debt, secured by whatever means or terms. I also don't like 2nd mortgages. Anything that takes equity out of my home and that I will have to eventually pay back (whether in a monthly payment or upon my death) just isn't worth it to me. For some it works, for me it doesn't. Dani
Racer: thanks for responding but my long term experience made me Question what you posted. BACKGROUND: 5*Business Owner-Housing Company. 29 Years L B _ 59 In 29 years this is a new one on me. Somthing just don't look rite about it.
I'm with Dani on this. You can't borrow your way to a brighter financial future. Converting unsecured debt to secured debt is not too smart a way to approach life. My financial planning approach is pulled directly from the pages of Dave Ramsey (author of Financial Peace, see DaveRamsey.com): 1) Step One: pay the minimum payments on all of your debts until you can save $1000 for emergencies. 2) Step Two: Implement the "debt snowball" by paying off all personal debt, except your home, starting with the smallest debt first. 3) Step Three: Increase your emergency fund to equal three to six months of your expenses. 4) Step Four: Fully fund all pretax retirement savings you can, and review your insurance programs to ensure adequate coverage. 5) Step Five: Start your college funds if you have children. 6) Step Six: Pay your house off early. 7) Step Seven: Now that you are debt-free, focus on building wealth rather than borrowing additional money for anything. The object is to own your house and erase all debt. Others may disagree, but they're wrong, LOL. ::wink:: Doc
Doc, I disagree, but I value all opinions. Paying interest at 19% while saving a 1000 is not my idea of a sound strategy. Pay all your debt and use your credit for that emergency that may never come. Be afraid of the market crash that may never come. We all have different views on what life is all about. I enjoy mine. I hope you are all enjoying yours. Save by paying less interest or no interest, there is no better return than that 20% your paying the CCs. www.creditsense.com
1*Yes ! ? is are they reporting right or wrong? 2*If it's not reported as a mortgage then it is inaccurate incomplete information. 3*What Dani doesn't deem to realize is there is a vast difference between borrowing when it cost you money and when it makes you money. LB 59s Experience 1*Assett Management 18Years 2*Financial Services 18 Years 4*Stock Market 18 Years
A*Yes you can-What you can't do is spend your way there. 4*Get rid of the wrong life insurance if you have it. 6*Unless you are making a good return on the money. 7*Except borrowed funds making you money. B*Nope the object is to build enough wealth so that you have more than enough funds in reserve to wipe out debt any time you wish. At this point it maters not if you own the home.
Okay, lb tell me what I "don't deem to realize". How does a home equity loan help make you money? Dani
Doc...great info. I like Ramsey he is a pretty practical guy. I am using his financial steps, except I chose to pay off the CC debt first. Actually, I just skipped over #1 completely. I probably should have put some money aside for an emergency, especially since my interest rates are low, but I wanted to get out of CC debt so bad. One card to go and I am home free. Yea! And then I work on the car payments. Dani
Anytime you can borrow at less than what you can earn with the borrwoed funds, you can make money. It does not matter if it is a CC or HELOC or whatever vehicle you choose to borrow with. How do you think Banks make money? www.creditsense.com
I agree with your advice (and I do this), creditworks, but how does borrowing from a home equity loan (unless they use it to invest) help the homeowner make money? Most people take out home equity loans to pay for a debt (eg. credit card) or a debt they are creating (eg. home renovation). I know of no one who pulls money out of their home to put in a CD, mutual fund, or another investment property. But, the problem still is the individual is using their house as collateral. If the investment fails...the house is foreclosed on. This is the main reason people don't pull out all their home equity to play the stock market or to go to Vegas.
I agree with you. You cannot borrow from your HELOC to invest in a CD. I am merely stating that anytime you can borrow at a lower rate to pay a higher rate you are in essence making money. Yes, you may run some risk, but we take risks all the time. It is entirely a matter of risk tolerance and nothing else. I have a HELOC, I use it to pay off CCs anytime the teaser rate expires and I don't have another CC available at less than my usual threshold of less than 10%, but again that is just the way I handle my finances. I am not saying everyone should do that, heavens no. www.creditsense.com
I totally agree with your posts. I didn't mean to sound so harsh in my prior post, although it sounded that way. I was just harassing lb. Dani
Thanks for the civil, interesting exchange on this Dani, Doc, and all, and apologies for my little segue that hijacked outofdebt's main question. Dani, you write, "For some it works, for me it doesn't." May I infer you're NOT making a general recommendation for most or all circumstances? Doc, I didn't realize you were this conservative on the use of credit. Ramsey's advice makes sense to me for people who have a difficult time avoiding an addiction to credit/ living below their means. But if one has no credit problems, and is disciplined, it forgoes lots of very viable and lucrative financial options While I have problems with the book, I come closer to _Rich Dad Poor Dad_ than Ramsey when it comes to using credit in these circumstances. I think EVERY disciplined homeowner should consdier a no-fee, no-mininum draw HELOC. It can provide very low interest, very sustainable funding in the event of a sudden emergency, even SAVING the house rather than costing it.
Here is just one example. I have an HE at 6.23%. I have investments earning 10.00 to 16.50% Do you recommend I withdraw funds from the investments to pay off the H E?
OK_Dani,you've had your fun with me. Is it my turn now? How many years experience do you have in these areas? 1*Assett Management 2*Financial Services 3*Insurance 4*Stock Market 5*Business Owner-Housing Company. I have 18 years of hands on experience in items 1 -4 and 29 yers in item 5. Can you do better?
Dave, I am making a general recommendation for MOST circumstances, only because most people use their home as collateral to pay off debt. A person like, creditworks, I would view the situation differently because he is using it more for an investment tool...the same goes for credit cards. But, let's be serious (and I am going to put my foot in my mouth) most (mind you I didn't say all) have a hard time managing money. And most (again I don't state all) pull equity out of their home to pay off debt...not to invest. Why would someone choose to put their house up for a security to pay off unsecured debt? Because the interest rate is cheaper? Is your home worth that kind of risk? As far as investing, again let's be honest 75% of Americans (actually, I think it is higher) don't have a leg to stand on when it comes to saving. The debt they are carrying is killing any financial worth they can gain. When a bad time (or a slow time) hits they increase their debt load to try to make ends meet. They are now working to pay off debt, not to raise a family and increase their wealth. Do you disagree? I like Doc's steps. They are practical and really (with a few exceptions) will work for all of us. Why continue to drain ourselves in debt putting our home at risk and quite possibly are family at risk? Debt is not a requirement, but a choice. Off my soapbox at least until my next post. Dani
Okay, lb I will engage you in your play. I am 24 years of age. I am an accountant. I have been working since I was 14 and running businesses (four of them) since I was 16. I have one sheetmetal company...which is mine and I run my parents businesses on the side. One is a retail store (interior design), the other is an HVAC company, and the last one is a real estate management business. We purchase commerical property and rent it out. I have a Bachelor's in Management and Accounting and am still going to school (actually I have five classes left for the Mgmt degree..so I don't have the Bachelor's yet..this May I will graduate.) I began investing in the stock market when I was 19 years old (my first investments were Vanguard U.S. Growth and Fidelity Dividend Growth)...I only invest in mutual funds and CDs. In case you are curious I sold both funds last September to put my downpayment on my home. Fortunately, I got out in time. Since then I am only looking at real estate for investment opportunties. I am waiting for the cycle to spin downward so I make a few purchases cheaply...right now most properties are overpriced..although the interest rates are great. Do you feel better now? Dani
Don't know about that;but at least you've given me some idea about where you're coming from and what causes you to form your opinions. I don't think either one of is wrong we just have different approaches to certain issues. There are also many things we agree on.
1*I have seen misinformed accounts giving their clients incorrect advice. Please do not take this as a slam against you as it certainly is not intended that way. 2*Real Estate is good if done right, however it should a part of the overall investment mix. One draw back of real estate is the liquidation factor. I'm not knocking Real Estate: L O L : How could I do that when I have owned my own housing company for 29 years?
