General loan against TSP

[ChemEng]

Get your 5% match but contribute no more to TSP untill you're out of debt.

Cut spending to the bone. Ramen noodles. Mac-N-Cheese. Don't see the inside of a restaurant unless you work there. Deliver pizzas. Have a yard sale. Sell stuff. Make the dog, cat and kids nervous because they think they're going to be next. Make your friends think you've lost your mind. If my truck wasn't so close to being paid off I'd sell it and buy a beater. Do you have a car payment?

What ever budgeting method you use...make sure you know where EVERY penny goes and why. It's the only way.

My vote is for you to NOT make a TSP loan. Grow a set and pay for the crap you've already bought.

You forgot to mention gazelles. Dave Ramsey loves them for some reason. Everything is "like a gazelle this" or "with a gazelle-like intensity that".

 

[McDuck]

You forgot to mention gazelles. Dave Ramsey loves them for some reason.

"Give no sleep to your eyes, nor slumber to your eyelids. Deliver yourself like a gazelle from the hand of the hunter, and like a bird from the hand of the fowler." Proverbs 6:4-5

 

[McDuck]

Ummm, NO. My form is not from Dave Ramsey. Nice try, though.

Budgeting Form

I believe these are.

 

[KevinD]

Say what you want...it's working for me.

 

[alevin]

Say what you want...it's working for me.

It worked for me too, the past several years, paid off 3-year loan on vehicle in 1 year by dropping back to 5% tsp, then paid off the mortgage over the next few years-didn't know Dave Ramsey's name at the time, but I went to Debt Free and Prosperous Living Class (3-hours, 1 night-best 3 hours I ever spent for $25) and "bought the T-shirt". That other 5% is now going into saving for next vehicle and new roof coming up next 3 years so I can stay out of debt.

 

[KevinD]

Where ever the message comes from it...needs to be heard.

I don't know if this is another depression or just a real bad recession but I think it will have the same effect on consumers. The majority won't go out and spend on credit ever again. Some will but I don't believe that we will see an economy where people live with debt for a long time.

False prosperity equals a false economy and IMO no amount of government stimulus is going to bring it back.

Good luck luv2surf.

 

[ChemEng]

I will never understand the preoccupation with being debt free instead of having a positive net worth. Any day of the week and twice on Sundays, I would glady be $100,000 in debt with $101,000 in the bank than only have $1,000 in the bank just for the privledge of being debt free.

The part missed by the advocates of being debt free is that there is a cost associated with that for those already with debt. Its called the opportunity cost of capital of which time is a HUGE component. By strictly having the goal of being debt free, you are paying a time cost that can not ever be regained.

 

[wv-girl]

I will never understand the preoccupation with being debt free instead of having a positive net worth. Any day of the week and twice on Sundays, I would glady be $100,000 in debt with $101,000 in the bank than only have $1,000 in the bank just for the privledge of being debt free.

The part missed by the advocates of being debt free is that there is a cost associated with that for those already with debt. Its called the opportunity cost of capital of which time is a HUGE component. By strictly having the goal of being debt free, you are paying a time cost that can not ever be regained.

Which is exactly why you should start young. And the cost of being debt free is freedom. Doesn't it bother you to pay for the priviledge of owing money to someone else? And letting that someone else dictate how to spend your hard earned money?

 

[alevin]

I will never understand the preoccupation with being debt free instead of having a positive net worth. Any day of the week and twice on Sundays, I would glady be $100,000 in debt with $101,000 in the bank than only have $1,000 in the bank just for the privledge of being debt free.

The part missed by the advocates of being debt free is that there is a cost associated with that for those already with debt. Its called the opportunity cost of capital of which time is a HUGE component. By strictly having the goal of being debt free, you are paying a time cost that can not ever be regained.

ChemEng, I'm a scientist like you. What can I say, the longterm math demonstrated in the class worked for me. I was sold based on math and facts. There is a time cost to being in debt too. Compounded interest. I now have greater net worth than I would have had otherwise if hadn't paid off the mortgage early-I now have full equity in my home and a truck that isn't costing me more than it is worth.

My good work buddy manages a family million-dollar trust and thought I was making a big mistake at first paying off my mortgage early. Four years later, listening to Dave Ramsey on the radion commuting to work 2 hours a day, he changed his mind. He just retired and made the passing remark that he was glad he managed to pay off his house early last year. His next career he's thinking of becoming a financial advisor. People around us respect his financial skills and knowledge.

I neither can/nor want to convince anyone what is right or wrong for them, I only encourage people to consider taking a class similar to what I did (very very small life investment, for potentially huge payoff). Find out what the logic is that convinced people like me and my friend. Expose yourself to heretical ideas and the math behind them.

 

[ChemEng]

Which is exactly why you should start young. And the cost of being debt free is freedom.

I would percieve the situation having "$101,000 in the bank and owing $100,000" to have much more freedom than the situation of "debt free with $1,000 in the bank."

Doesn't it bother you to pay for the priviledge of owing money to someone else? And letting that someone else dictate how to spend your hard earned money?

Not at all. First, I entered all my debt agreements with sound mind. No one has dictated what I do with my money besides me. If you can't say the same, then you should hire a lawyer and go to court immediately. Second, debt doesn't necessarily cost money to use. For instance, my consumer credit card is paid in full monthly and *makes* me money through bonuses simply by leveraging revolving monthly debt. Why would I ever get rid of that for the sole benefit of saying that "Im debt free"?

 

[ChemEng]

First of all, I actually have listened to Dave Ramsey for many, many months while working on my MBA. So I am very familiar with his concepts and I am also very familiar with the math behind them.

What can I say, the longterm math demonstrated in the class worked for me.

Then I am afraid you may have been misled. There are very clear situations where you shouldnt repay debt early. For instance, any debt at 0% where you have access to investments that yield 5%. In this case, paying off the 0% actually costs you money.

I was sold based on math and facts. There is a time cost to being in debt too. Compounded interest.

Again, Im afraid you were misled. Credit card interest is simple interest and isn't compounded unless you don't pay at least the monthly minimums. Even paying the minimums cover all the interest for the given month with no compounding. (Im not recommending only paying the minimums, just making a point here.)

I now have greater net worth than I would have had otherwise if hadn't paid off the mortgage early-I now have full equity in my home and a truck that isn't costing me more than it is worth.

If you take into account the amount of money you would have had if you took all the money you used to get out of debt and had invested it instead, then the numbers should be closer than you are leading here. If you are only looking at your net worth without considering that money, then you aren't comparing apples to apples.

I neither can/nor want to convince anyone what is right or wrong for them, I only encourage people to consider taking a class similar to what I did (very very small life investment, for potentially huge payoff). Find out what the logic is that convinced people like me and my friend. Expose yourself to heretical ideas and the math behind them.

I have taken a great many Finance course already and understand the mechanics behind them. The big difference is that my classes weren't trying to recommend any product to me (outside a degree). I would offer the same challenge to you--a few graduate level finance classes to at least understand academically why the debt free option may not be prudent.

 

[wv-girl]

I would percieve the situation having "$101,000 in the bank and owing $100,000" to have much more freedom than the situation of "debt free with $1,000 in the bank."
Been there --done both. But you fail to mention that being debt free allows more money to save towards that 100,000.


Not at all. First, I entered all my debt agreements with sound mind. No one has dictated what I do with my money besides me. If you can't say the same, then you should hire a lawyer and go to court immediately.
So did I but I can't say I liked it.

Second, debt doesn't necessarily cost money to use. For instance, my consumer credit card is paid in full monthly and *makes* me money through bonuses simply by leveraging revolving monthly debt. Why would I ever get rid of that for the sole benefit of saying that "Im debt free"?

True, that is why I took advantage of the zero percent to help me get out of debt. I did use it for my gain/purposes.
I would say that age has a good deal to do with perspective on what it is you wish to accomplish and in what time frame. For me, being debt free is great, but am guilty of using the system to get there. Of course, I am closer to my 'golden years' than you are. There in lies the difference. And, btw, I only heard of Dave Ramsey last year. Never knew he existed and never took any courses on the subject of reducing debt.

 

[alevin]

Was not my intent to start a war here. I do beg pardon for imprecise terminology. What I should have said was "cumulative" interest paid on low-interest 3-year car loan and 30-year fixed rate mortgage @ >6.6% over 30 years ( was only on about year 2 of the mortgage when I took the class). The class I took cost me $25 and 3 hours, futher purchases were optional and not needed, math info from the 3hours and class material provided was sufficient to rearrange my belief system. I was sceptical when I went in, since I didn't owe any cc debt nor did I ever carry a balance thanks to good parental training before college. It took most of the class to present me with enough math to convince me of value of prepaying mortgage, but I now have that much more free cash in my pocket to put into Roths I could not previously fund with normal cash flow.

The math in the class ran the calculations out for decades and convinced me I'd have far more retirement savings at retirement by practicing the new ideas than continuing with paying off the car and home loans at same time as trying to save for retirement. All the $ previously going into mortgage payments (principal and interest) are now going into savings of one form or another-mostly retirement investments (perfect time for that, eh?). Paying off the mortgage earned me taxfree 6.6% annually (the interest I didn't spend over the next 28 years). Using 0% card is about what I do now, since I pay off cc's end of the month anyway.

Whether or not I've been misled, I have no regrets. If my position were to get downsized at this point, I have more life options than I would have otherwise. That did become an issue right after I started the paydown on principal: limited affordable relocation options related to potential job downsizing due to the housing bubble that occurred everywhere I wasn't, when I wasn't looking. Being debt-free, I could take a paycut now if I had to, to keep working here or somewhere else, and still be able to save for retirement. That wouldn't have been an option 3 years ago.

 

[momacs]

I've been paying ahead on my mortgage, trying to get it paid off as soon as possible.

Alot of people say you shouldn't because you can deduct the interest on your taxes. Even if you can, you have to figure you have actually paid all that interest and it's not a credit on your taxes, just a deduction.

I hate paying interest. I remember back in the early 80's. paying 21% interest on the loan to start a business. And 18% on a house loan. It totally freaks me out when you figure up 360 months of payments on the 30 year mortgage x how much your payment is. It more than doubles the actual cost of the house.

In my case, my mortgage interest doesn't amount to enough to qualify me to itemize deductions anyway.

About the credit cards, I use them for the points, cash back etc. And use the 0% balance transfers to sock away in high interest checking accounts. Of course that's all coming to an end now with the credit crisis and the credit card companies clamping down.

 

[wv-girl]

Was not my intent to start a war here.

No war here, alevin, at least on my part. Just a friendly discussion that have different preserved notions. I do believe that each circumstance is different, and their are many ways to achieve whatever one sets out to accomplish. Sounds like you found peace of mind(so did I) by being debt free. There is no price tag on that.

 

[budnipper1]

No war here, alevin, at least on my part. Just a friendly discussion that have different preserved notions. I do believe that each circumstance is different, and their are many ways to achieve whatever one sets out to accomplish. Sounds like you found peace of mind(so did I) by being debt free. There is no price tag on that.

My unsolicited 2 cents worth:
Anybody who believes it makes more financial sense to remain in debt than to become debt-free has taken at least one too many "finance classes", in my opinion. There is a huge difference between simply paying off credit card balances monthly and avoiding interest charges, compared to paying off a mortgage or an auto loan on which interest is owed unavoidably. Dave Ramsey preached to his listeners about paying off their credit cards because they were not even keeping up with the minimum payments and were drowning in interest charges.

I listened to Ramsey some years ago, but eventually became bored with hearing his same advice repeated over and over again. The majority of his call-in listeners were desperately in need of financial guidance because they did not have a clue about managing their money. They needed to faithfully follow his advice, step by step. Personally, I learned his principles the hard way years ago. My dad was my 'Dave Ramsey' and I should have known better, sooner. Eventually, I saw the light and my life got better. I am not by any stretch close to being rich, but I have more than I need, I'm retired with a "positive net worth", AND I am debt-free. My only regret is that I didn't get smart sooner.
​

 

[Rod]

My post wasn't a reply to your post. Not sure what made you think it was.

My bad... sorry.

Now, I do listen to DR quite regularly. I've disagreed with him on a couple occasions:

Occasion 1: When he actually told a listener, "You ought to be shot!". This listener was a mother who was financially irresponsible with her son. That comment was irresponsible of him to make. He did admit after a commercial break that he may have been a "bit harsh" on her. Perhaps some of you caught that one. It was recent.

Occasion 2 (and on occasion after that): He advocates tithing- when the conversation is prompted by a listener. In other words, if a listener is struggling financially, and they bring up the fact that they tithe, DR does not recommend ceasing from tithing in order to speed their way to becoming debt-free. But, he will recommend eating "beans and rice" instead.

It is a fact DR believes tithing is a continued old testament tradition that is to be honored and observed. He misunderstands OT tithing vs. NT giving in the framework of law and grace, IMHO. And no, I do not and will not debate theology on TSPTalk.

Everyone has their shortcomings. So, I've overlooked these in order to gain some financial wisdom... in which DR has some to offer.

Peace

 

[CountryBoy]

Age does play into how you may feel about debt, but from any POV, debt free beats debt anytime, at any age. As the younger generation, you almost can't avoid some debt such as housing, but regardless how you try to spin it, I think most folks would want to be debt free.

CB

 

[ChemEng]

There are definitely some perception differences here. Age may be a factor, but I'm sure there are others that haven't been communicated in the thread.

The bottom line is that I view of debt as a tool. And just like every other tool there are situations that receive positive results from the right application of that tool. Similarly, there are situations where applying that same tool could worsen the situation. But to arbitrarily say that a hammer is bad because it can't dig a hole wel or that we should stop using miter saws because they can't screw down a bolt just doesn't make much sense.

If the issue is a personal one when you try to use a hammer to dig a hole, then realize that the problem isn't with the hammer--it's with your choice of how you use that hammer. That's a very important point of clarification here.

 

[Rod]

Debt Alert

Haven't you heard??? Uncle Sam's intent is to keep "The People" down, out, and dependent!:nuts:

This is interesting... if you have the patience and the time-

http://www.deprogram.us/deprogram.php

I found it quite entertaining.

It just may cause you to think.