Post discharge credit building question

[justbroke]

I agree on the 15-year mortgage! It's not that much more monthly and you can pay a lot less in interest (could be $100K or more saved).

I wish debt wasn't normal (with the exception of major purchases, like a vehicle and certainly a home).

I like a lot of what Dave Ramsey says, but also don't agree with other things.

Credit card points are just an additional tool for those that don't carry a balance anyway. Remember that the banks get swipe fees from the merchant, so it's not simply at the expense of other card holders.

Good luck to use all... definitely. And to you on your journey.

[shipo]

Yeah it shows all over this site how smart debt is lol. There must be creditors and bankrupt lawyers sponsoring this site. Enjoy blocking me and my post , epic failure.

Clearly you don't understand how to use the tool called credit. You have mentioned several times not paying interest; you do understand if you charge something on a credit card and them pay it before the due date, there is no interest to be paid; don't you? Do you also understand if you use a "Rewards" credit card you will be typically earning between 1% and 3% cash back, with some as high as 5%, on every purchase?

Thinking about how rewards work, look at the following data points:

• September 2013 through June 2020:
  • I purchased roughly $250,000 worth of goods and services with my debit card
  • I paid $0.00 in interest
  • I earned $0.00 in cash rewards
• July 2020 through April 2022:
  • I've purchased roughly $82,000 worth of goods and services with one of my Rewards credit cards
  • I've paid $0.00 in interest
  • I've earned over $1,200 in rewards

A few of your points:

• "Okay, you’re right debt is normal and most can’t handle it." Based upon what research? The fact is the vast majority of folks handle credit perfectly well and never get into financial trouble.
• "We all can do anything financially without consumer debt." It seems you don't understand the concept of credit; as you can see by my example, one can charge hundreds of thousands of dollars on credit cards and never once be in debt.
• "Buying your primary residence means a mortgage for the majority of us and that’s the only debt tool one should use. 30 year mortgages aren’t good however they promote over spending, 15 year max." Spoken like someone who follows the bad advice of Dave Ramsey.
• "Those credit card points earnings are coming at the expense of someone that failed the credit card points game." Once again, you show you don't understand how credit works; the rewards dollars come from the fees charged to the vendors by the credit card processors. Like it or don't, believe it or not, we are paying for our own rewards; use a debit card and you paid for rewards you didn't get, use a credit card and get the rewards you paid for.
• "You all just try to think about getting your monthly salary (your largest wealth building tool) without a payment to make to any creditor, no that’s leveraging." I have absolutely zero idea what that statement is supposed to mean.

[5yrplan]

I do understand and the data shows almost all those that try to earn cash back end up with a big balance when Murphy calls. Having open credit is playing with fire. Why rush making a $1K in cash back by charging up to $10K then paying it off? The majority people can’t pay a $1K emergency. Financing automobiles really kills your chances to get ahead. The payment and depreciation are huge set backs. Put that $500 a month in a Roth IRA instead. I’m done we’ll never agree. I choose to keep my money instead of giving to the banks.

[shipo]

Point by point:

• "I do understand and the data shows almost all those that try to earn cash back end up with a big balance when Murphy calls."
  • Similar to the old adage "Pictures or it didn't happen", I have to say, post references to the "data" or it doesn't exist. As for you "understanding", sorry, no.
• "Having open credit is playing with fire."
  • Absolute unadulterated fiction; just because one individual cannot control their urges to spend does not in any way apply to everyone else.
• "Why rush making a $1K in cash back by charging up to $10K then paying it off?"
  • I don't understand your point; folks spend money, fact of life. Why not earn some money back? In the example I posted above, I would have spent the exact same $85,000 over the last couple of years regardless, rewards or no rewards; because I happened to use a credit card I've got an extra $1,200 to show for it.
• "The majority people can’t pay a $1K emergency."
  • And your point? This discussion is about using credit wisely; don't make the charge if you cannot pay it off, simple as that.
• "Financing automobiles really kills your chances to get ahead."
  • This qualifies as the absolute worst @5yrplan/Dave Ramsey advice possible. The fact is, if you need to buy a vehicle, regardless of whether said vehicle is $5,000 or $90,000, financing it at a low interest rate will put you ahead of where you'd otherwise be by paying cash for it.
• "The payment and depreciation are huge set backs."
  • The point you missed here is you need to get the money to buy the vehicle from some place, it will either come from investments or money which could otherwise be invested. Regardless of where the money comes from, you'd be better off financing the vehicle.
• "Put that $500 a month in a Roth IRA instead."
  • What did you do, take the money out of your Roth IRA in the first place and then start paying it back; bad idea.
• "I'm done we'll never agree. I choose to keep my money instead of giving to the banks."
  • Sorry, by not leveraging your money wisely, you're preventing yourself from earning money from the banks.
  • I tend to agree, we'll never agree; that said, I'm responding to you so a person trying to learn about credit doesn't stumble across your advice and make bad decisions for him or her self.

[flashoflight]

Financing automobiles really kills your chances to get ahead. The payment and depreciation are huge set backs. Put that $500 a month in a Roth IRA instead. I’m done we’ll never agree. I choose to keep my money instead of giving to the banks.

I totally agree with you on financing cars. My eventual retirement would be more difficult with a $600 car payment siphoning my monthly income even if it is 0%. The car payment also removes $600/month of buying power for a house. Prices are California crazy even in Dave Ramsey's Nashville so buying power is important. For example, $600/month increases the eligibility for a mortgage by about $110k if 30 year rates are at 5%. Also, the $600 payment could have funded the full annual contribution to a Roth. As you mentioned, there is the issue of depreciation on new cars vs. a 10+ year old car.

[5yrplan]

Good thinking!!!!! btw I never said the D word.

[shipo]

I totally agree with you on financing cars. My eventual retirement would be more difficult with a $600 car payment siphoning my monthly income even if it is 0%. The car payment also removes $600/month of buying power for a house. Prices are California crazy even in Dave Ramsey's Nashville so buying power is important. For example, $600/month increases the eligibility for a mortgage by about $110k if 30 year rates are at 5%. Also, the $600 payment could have funded the full annual contribution to a Roth. As you mentioned, there is the issue of depreciation on new cars vs. a 10+ year old car.

Still a bad idea to pay cash for a car; slice it and dice it any way you want, the money for the vehicle will either come out of investments earning more than the interest for the vehicle, or will prevent you from investing until later.

[Zombie13]

hm interesting.
Soooo... Barbisi i and I were discussing options, when, how, to replace her increasingly rusted 2005 Sentra - we discovered another rust spot... this time, on the driver door. It's just a matter of time man LOL. Before we get in, slam the door and... wait for it... Crash! The whole thing falls apart. We considered awhile back, the possibility of researching and buying a car (either as a cash payment, or finance) before leaving CO: ie, sell the house, buy a car/suv, drive it to WA. And then, reality checked in. Not. Gonna. Happen. Sincerely, Absolutely, No Time Available.
So, the "Agua Diablo del Muerte " will get transported to WA (not on our dime), and at some point, we will either trade it in, or just, get another car.
Anyway, maybe we should finance a car/suv once we get up there, but either pay it off or refinance when possible. Also, my 2013 Sentra disappoints me, just sayin. The 2005 is a champ in the snow; the 2013, is a non-performer on a snow-laden road. Granted, in WA that won't be much of an issue.

[flashoflight]

Still a bad idea to pay cash for a car; slice it and dice it any way you want, the money for the vehicle will either come out of investments earning more than the interest for the vehicle, or will prevent you from investing until later.

The bottom line is that I can't afford a new loan without sacrificing my Roth contributions. I don't have enough cash to buy new without withdrawing from Roth which is only for dire emergencies.

So I'm back to the junk car dealer paying cash even though used car prices are through the moon if a car breaks down. Unfortunately, new cars are not any better with MSRP + market adjustment. I've heard about recent rebuilt transmissions and engines breaking down around 100 miles after the fix due to Chinesium materials, so if a car dies I am probably replacing it despite the high prices.

[justbroke]

I just ran into someone that paid $20K over MSRP. Yep, it's the "market adjustment premium" and they paid $20K over the sticker on the window. It's just crazy out there right now.

[flashoflight]

hm interesting.
Soooo... Barbisi i and I were discussing options, when, how, to replace her increasingly rusted 2005 Sentra - we discovered another rust spot... this time, on the driver door. It's just a matter of time man LOL. Before we get in, slam the door and... wait for it... Crash! The whole thing falls apart. We considered awhile back, the possibility of researching and buying a car (either as a cash payment, or finance) before leaving CO: ie, sell the house, buy a car/suv, drive it to WA. And then, reality checked in. Not. Gonna. Happen. Sincerely, Absolutely, No Time Available.
So, the "Agua Diablo del Muerte " will get transported to WA (not on our dime), and at some point, we will either trade it in, or just, get another car.
Anyway, maybe we should finance a car/suv once we get up there, but either pay it off or refinance when possible. Also, my 2013 Sentra disappoints me, just sayin. The 2005 is a champ in the snow; the 2013, is a non-performer on a snow-laden road. Granted, in WA that won't be much of an issue.

Just a hint if your credit is clean besides the BK and you *have* to finance is to look at personal loans. Especially popular PL lenders like Upstart and Figure as well as PenFed. Sometimes the PLs are much cheaper than a secured car loan. For example, PenFed goes down to 5% for a personal loan to someone with perfect credit and a BK person could get 8% under this scenario even to 60 months. A lot of car lenders surcharge way too much for a BK so it's possible that unsecured loans are cheaper. Getting your foot into Penfed in general if you didn't burn them is a good idea. They are very BK friendly even compared to Navy.

[shipo]

I recently put money down on a new Tacoma TRD Sport 6MT with all of the goodies; if/when it ever gets built I'll be probably be financing through PenFed, which, as of today, is offering financing as low as 2.29% for a new vehicle (it was 1.79% a week or two ago). My son is a member of Navy Federal and they are still offering 1.79% (probably not for long); it will be interesting to see which way I go if I ever get the new truck.

[flashoflight]

I recently put money down on a new Tacoma TRD Sport 6MT with all of the goodies; if/when it ever gets built I'll be probably be financing through PenFed, which, as of today, is offering financing as low as 2.29% for a new vehicle (it was 1.79% a week or two ago). My son is a member of Navy Federal and they are still offering 1.79% (probably not for long); it will be interesting to see which way I go if I ever get the new truck.

I would love a new truck if I had infinite cash. I use an old Toyota Sienna to haul stuff from home improvement stores and small furniture. I've had stuff sticking out the window with a red flag and have had to rent a Uhaul so sometimes it's not enough. I would love the ability to tow someday too. As a joke, I tried the prequal new car for Penfed and got 4.59% with a non-discharged BK. Carvana has a prequal as well and I got 9% there. Both are different from Capital One Auto Navigator who turned me down without even offering predatory rates. I get a lot of lenders with predatory rates so I got to be picky and shop around a lot if I ever choose to take out a loan. I think it's good to pre-shop for car financing while in a 13 in case I end up one vehicle short with lack of cash although right now looking at my cash, it's very unlikely I will go back to the trustee for a motion to incur debt. I don't have much room in my plan for more than one set of legal fees due to the 1% plan, so I don't want to blow it on a car.

[Carmella]

I do understand and the data shows almost all those that try to earn cash back end up with a big balance when Murphy calls. Having open credit is playing with fire. Why rush making a $1K in cash back by charging up to $10K then paying it off? The majority people can’t pay a $1K emergency. Financing automobiles really kills your chances to get ahead. The payment and depreciation are huge set backs. Put that $500 a month in a Roth IRA instead. I’m done we’ll never agree. I choose to keep my money instead of giving to the banks.

This is kind of what started our debt problems, but ours was 0% interest for a year. We always used those promotions and paid them off . But that last time I had a cut of pay and work hours that brought my income down by 25% and we had around $8,000 that if my pay never changed would have been paid off in a year. That was back over 20 yrs ago, but that was the FIRST mistake we made financially. We had some major home repairs done on credit with a plan to pay it back timely. We had done it before and when we had the income it worked when circumstances changed we got in trouble.

[Zombie13]

flashoflight , that is an interesting idea indeed. Once the dust settles, and we are thinking about a replacement vehicle, we will consider this option.

[5yrplan]

Consider cash option?