Total Money Makeover Live

Comments

1. lulugal11 Said,

   Wow Shawn, don’t you think that is a bit harsh? I don’t agree with people getting over their heads…but how about those who can use credit responsibly?

   There are a few people who use credit cards simply to build up points for rewards. They buy something on a card and pay the card that same day…they don’t get interest charges and they get points towards a reward. What about those people?

   I know it is a very small number…but there are people like that.

2. Shawn Knight Said,

   You are right, there are people that do use cards for that purpose. Very few, but some do.

   My thing is, why? Why bother with all that hassle for such a small return? Most of the time, those rewards are a total joke. For example, Consumer reports say that 78% of airline miles are never redeemed.

   If you play with snakes, you are going to get bit. That one time something happens (say, you are in a car accident and in the hospital and can’t make your payment on time), BAMM you are charged with an insane interest rate. All that “hard work” is gone right out the window.

   If you think a few percentage points return are going to make you rich, you are kidding yourself. I’m all about saving money too, but the risk vs. reward is far too great for me to even be slightly interested.

   But if you just have to have rewards, why not get a debit card with rewards? I’ve seen commercials for Bank of America’s “Keep the Change” program, which seems pretty cool.

   BTW, here is some useful information on credit card rewards you might want to scope out. http://www.daveramsey.com/etc/cms/credit_card_rewards_9539.htmlc

3. JJP Said,

   Why bother? Security and convenience. I feel far safer using my credit card than my debit card, and it is so much simpler to give my card than to carry around cash and whatnot.

   We have a few reward CCs spread amongst ourselves, and all are paid off 100% on time, never missed a payment. Payments are scheduled automatically online in advance, so theres never really a worry about missing a payment. I guess I’m in the minority once again, but I love getting airline miles. In the past 2 years, we’ve gotten 4 new reward cards, each giving 25,000 bonus miles. Already redeemed them for free domestic airline tickets, thats HUNDREDS of dollars saved right there. And best of all, my credit score is relatively unharmed; it is in the mid 780s as of last week, not bad if I may say so myself.

   Honestly, I can’t see an issue with having and using credit cards. They’re a great resource, and if you are at all responsible, you should have zero issues with them.

4. Shawn Knight Said,

   Hi JJP, thanks for the comments.

   Security and convenience? How do you feel safer using a credit card over a debit card? You can just have the merchant run your debit card as “credit” and you are given the same protections that Visa and Mastercard offer. It just runs it through their system instead.

   How is cash inconvenient? Counting money and handling change? I just don’t follow this one.

   Congrats on the rewards. As you said, you are in the minority. Most people just aren’t responsible with cards… or money, simple as that.

   Can’t see an issue with credit and credit cards? Look in the news and at nearly every American today - many are up to their eyes in credit card debt.

5. Sabrina Said,

   You can also get rewards with debit cards. I get them from my bank and another bank also offers them. I believe Bank Of America offers a rewards debit card as well.

   The rewards don’t add up as fast as with a traditional credit card but you can still earn them.

6. JJP Said,

   Security-wise, I always read random stories of people getting charged multiple times on their debit card and have no way of getting their money back and whatnot. If that has changed as of late, great; I have not used my debit card in quite a while, and thus have not kept myself up-to-date with changes in their security practices. Sorry about that.

   By inconvenient, I meant that I would rather just keep a few spare bills in my wallet than have to carry enough cash to cover all my purchases for the day. This, of course, depends on how much one spends on an average day, so the level of ‘inconvenience’ will vary.

7. Natron Said,

   I just use the CC’s for the rewards and pay it in full every month. Make about $500/year doing that.

8. Keith Said,

   I think if your responsible, a CC is a great and convienent way to pay for everything. If you get all of your bills charged to your CC each month automatically, then you only have to cut one check a month (or however you want to pay it). That makes things a lot simpler. Not to mention the reward points.

   The reward points may not be fantastic, but its something. I used to get 50 bucks here, 50 bucks there for free, just because I used the card.

   I don’t really carry cash on me because if that gets stolen your SOL. If your CC or debit card get stolen, you can fill out an affidavit to get your money back. It is a lot safer. Unless you never check your account and 1 month later you have 10,000 charged to your account.

9. Shawn Knight Said,

   Eh, still not worth the risk IMO. Can you name a single person that you know that has “won” using a credit card? Who uses them responsibly and pays it off EVERY month? Sure, lots of people chime in here and say that, but seriously, who in real life do you know that does that?

   Now, how many people do you know that have totally screwed up with credit cards, overcharge and carry a hefty debt?

   Also, knowing you personally, how many times have the CC companies screwed you over? I can think of at least like two off the top of my head. And remember how ticked you got? How you moved your balance over and closed the card? Why bother?

   Yeah sure the rewards are nice, but that one time you slip up or hey, even if it isn’t a fault of yours at all… say someone at the CC company screws up, BAMM interest through the roof and you can kiss those rewards goodbye.

   True, if cash gets stolen, you are SOL. But, how often have you been robbed? lol… Notice I didn’t say how often have you LOST your own stuff.

10. Keith Said,

    I never said I was one of the responsible ones

    If you don’t have a balance to carry over, then if they F you, just leave them and move on. I’ve known plenty of people with banks, myself included, that have had issues. It’s not just CC or Loans that you get screwed on.

    I haven’t personally been robbed, but I’ve known several people who have. One lady I know got robbed outside of a bank carrying $2,000 she was going to deposit.

11. Shawn Knight Said,

    lol why defend something you don’t even follow yourself?

    What if they don’t receive your payment that month? What if it gets lost in the mail? Neither you or the CC company are at fault, but you are still penalized. If you weren’t dealing with them to begin with, it would never be an issue.

12. Keith Said,

    Because if i was responsible, I would be using my CC like that.

    If my payment is lost in the mail or they didn’t recieve it then I call them and clear it up. Meanwhile, they don’t charge me anything because you have a 30 day grace period on your CC bills. So you wouldn’t get charged till 2 months out. As long as you get it cleared up before then, no worries.

    Even if you do get charged because of an error like that, it would be pennys on the dollar. Unless you have bad credit you would have a 9% APR. The CC company would hit you up for some daily periodic rate which is like .09% or something. That might cost you 1-2 bucks.

    Also, with banks, your just as likely to have an error happen as a CC company, so unless you use 100% cash, you will run into problems regardless of how you do it.

13. josh zehtabchi Said,

    he is a great speaker. i too am on his progam. he was here in Atlanta not too long ago - I hope to see him again soon

14. FunkZ Said,

    Credit is a necessary evil. I don’t know how you could ever buy a car, or a house, or put your kids through college without credit. Unless you are independently wealthy or so miserly with your money that you never get to enjoy spending it. I don’t know anyone (who isn’t retired) who is not in debt. Nobody likes to pay interest, just like nobody likes to pay taxes, and nobody likes having to work for a living, but unfortunately the majority of middle-class Americans have to live with all three.

15. Shawn Knight Said,

    See, that’s what they want you to think. Its entirely possible to do all three of those things without credit. Save up a couple grand and buy a reliable, cheap used car. Then, just pay yourself a car payment each month, save up another couple grand… then sell your current car, take the money you saved and move up in car. Do this a few times and before you know it, you are driving a 15k quality used car. Nobody should buy a brand new car unless you are a millionaire. New cars lose 60% of their value in the first 4 years - not an investment I would be willing to take. If you are “too good” to drive a used car (and there are many of those people out there), well you have issues besides money.

    A house is a bit tougher and its at least advisable to have a 25% down payment and do a 15 year fixed with your monthly payment no more than 25% of your monthly income. With most 30 year home loans, you end up paying double for the house after all the interest is tacked on. I’d rather not pay 300k for a 150k house!

    For kids college, open an ESA (education savings account) when the child is young and fund that slowly until college rolls around. It’s not like college sneaks up on you. You know its coming what, 18 years in advance?

    Middle class Americans remain middle class for this exact reason - using credit. Imagine how much wealth you could build if you didn’t have any loan or credit payments.

    But really, it all starts with budgeting and having a plan for your money. Most people are wreckless, don’t budget their money and end up blowing it all before the end of the month and thus, turn to credit cards for the answer. The same for car loans. No 16 year old should be driving around in a brand new $30,000 car. It’s just totally foolish and such a waste of money.

16. Kattikawn Said,

    For those of us not privileged enough to be packed off to college with a hefty account attached to us, yes, credit is a necessary evil if you want to go to school. How do you think you got those loans to attend Ole Miss? They ran your credit. I almost was unable to get a loan for my final year because my credit was somehow not good enough to qualify, even going through everyone I knew as a cosigner. And I do not have bad credit. I’ve never had a credit card. I have no credit at all, and it counted against me. Should everyone who wants to advance themselves work at McDonald’s until they’re 35 just to afford an education?

    Without that credit history, you wouldn’t have gone to school and neither would I. Unfortunately, yes, it can be a necessary evil. It follows you through life whether you would like it to or not.

17. Shawn Knight Said,

    That is true, I did use loans to go to school. Had I known what I know now, however, I wouldn’t have ever done it. I was the foolish college kid that thought it would be easy to pay off and wouldn’t amount to much money. Not an excuse - I owe it and I know it, but it wasn’t a wise decision.

    Education is a great thing, but it isn’t always necessary to obtain a good job. Similarly, I could have just as easily went to Northwest Community College for a fraction of the price of Ole Miss. Just look at Keith - he has a good job with an associates degree, or Josh who didn’t even go to college. Pedigree isn’t what it use to be. Having a degree from a fancy pants college doesn’t “get” you as far as it use to. Today, it’s all about who you know. IMO, I’d rather know a lot of people in my “industry” than have a fancy degree and not have any connections.

    Taking the latter approach (community college), one could easily work and pay cash for their tuition each semester. I don’t know the rates, but I’m almost positive its well under 1k per semester? Work some extra hours, or a weekend job, or just quit overspending and one could have that knocked out in a month or two at most.

    Another thing to consider is how much you spend for an education vs. what return it will give you and if you even use it in your profession. I’ve heard a lot of stories of people spending 100k + for their masters in psychology only to earn 30k a year doing counseling. In instances like that, there really is no way to justify spending that much and making that little. The ROI is terrible.

    As for the credit thing, yep, not having credit is “just as bad” as having bad credit to lenders. The only way to generate credit is to borrow money and pay it back early and often.

    Just curious, if you could turn back the hands of time, would you still have went to the same school, majored in the same thing and amassed the same amount of debt?

    Also one last thing, I meant to include it in my previous post to FunkZ. Both of you mentioned it is a necessary evil that follows you. What do you have to say to people that prove every day that you don’t need credit? People that have 50-60-70k worth of debt, get fed up, get focused, pay it off and live debt / credit free? It’s not impossible or necessary for them or for anyone. Even someone like Dave who went bankrupt, started from scratch (broke, not a penny to his name) and STILL made it without credit for the past 20 years?

18. Kattikawn Said,

    Northwest is much more than 1K a semester to attend. It was about that when I attended, and has increased by quite a bit since then, judging from the articles I read in the paper every year about tuition increases. Having attended Northwest and then transferred to a four year school, I wholly support the idea of getting the bulk of your academics out of the way through a cheaper community college. However, emphasizing the fact that I have done both, I can honestly say that outside of my basic academics, I did not receive the same quality of education at Northwest that I got at the College of Art.

    I would be ashamed to try to freelance or sign on with a design firm riding on just the knowledge I gained in community college. It’s not adequate. Where it came in handy was building an amateur portfolio to submit with my application to the art school. I had an edge over the kids straight from high school. Keith was fortunate because he’d been working on computers since he was a kid, but I’m fairly sure that he said he learned very little in his time at Northwest that he didn’t already know.

    So yes, community college is great for your academics: your English, math, humanities, etc. But for a career focused curriculum, I wouldn’t recommend it outside of the nursing program.

    If I knew at 18 what I know now, I definitely would not have chosen my same major or school. I would have chosen a much longer, more expensive career choice, but with more lucrative prospects of having a higher paying job straight out of school. Unfortunately, my career choice was made in a different economy and stronger job market than the one into which I finally graduated. Just because the both of us made a mistake in our choice of major doesn’t invalidate a quality education at a four year school.

    And if you don’t think that your credit history follows you through your life, be sure to tell that to the management at your new apartment, because I’ll bet it mattered to them when you applied to move in. That application fee was for them to run your credit and see whether you fit their minimum requirements for residency. Keith and I wouldn’t have been able to get our apartment when we first moved out because of our lack of credit as well, if it hadn’t been for my mother cosigning with us. Like it or not, your credit history combined with your income determined that you were eligible for your current living arrangements.

    I think Dave Ramsey has the right idea about getting out of debt, but turning a totally blind eye to the effects of the credit market isn’t always the right answer, even if you don’t participate in that market yourself.

19. Shawn Knight Said,

    Ah cool, yeah I forgot you went to NW. Just checked NW, they are showing $850 per semester for tuition - of course you have books and all, but you have that anywhere.

    A lot of times, places like apartments and even jobs pull a credit report, but they are seeing if you filed bankruptcy, have a repossession or if you just have bad credit in general. If any of that comes up, I agree they probably shouldn’t rent to you if it has happened in the recent past.

    Of course there is a difference between bad credit and no credit history. That’s the exact problem with the FICO score and why a lot of people can’t afford their houses now. They had a good FICO score because they are experts at borrowing money, but the mortgage company didn’t bother to see if they could actually afford the payments. They use this single score to determine everything. Dave jokes a lot that he would have trouble renting an apartment but could write a check and buy the entire complex flat out.

    There are a few things people could do, however. Get a statement from your previous landlord showing that you paid on time all the time. Get bank statements and pay stubs to prove you can afford the rent and a statement from your employer. If the apartment management has any sense and isn’t run by silly corporate rules, odds are they will approve you. If not, then you are pretty much stuck and like you guys did, have to get a co signer or find another complex.

20. FunkZ Said,

    I would agree that it is definitely easier to live without credit if you start with no debt. But it is also hard to start out and get something with nothing. You could scrimp and save and pay cash for a beater, then get nickeled and dimed on maintenance until the thing just dies. Same goes for a house, either buy a fixer-upper and live with shabby furnishings until you get all the work done 10 years later, or buy a house you like that doesn’t need any work at all. Or you can waste money renting while you try and save for a down payment. There is such a thing as being reasonable, and I do buy used cars, I live in a used house, my mortgage will be paid off in 10 years, right about the time my daughter will be starting college, and yes I have 529’s for both kids but with the way the stock market has been going I’ll be lucky if that pays for the first year. I just think it’s impossible to live without credit unless you are willing to sacrifice to the point of inconvenience.

21. despot Said,

    “Eh, still not worth the risk IMO. Can you name a single person that you know that has “won” using a credit card? Who uses them responsibly and pays it off EVERY month? Sure, lots of people chime in here and say that, but seriously, who in real life do you know that does that?”

    I’ve never missed a payment on my credit card, and neither have my parents nor my brother. I guess our family is the exception lol.

22. Shawn Knight Said,

    Well I wasn’t really asking who had not missed a payment, but who had become wealthy by using credit cards. Talk to most any millionaire and I guarantee they won’t say they got rich by using credit cards and getting rewards

23. despot Said,

    Ahh, my bad. Yeah, you won’t get rich off it, but if you’re responsible with your payments, there’s no reason not to go for the rewards. It’s basically free money (assuming you pay on time of course).

24. Natron Said,

    So I’ve been listening to Dave Ramesy’s podcast available on iTunes. It’s a very simple message that many need to hear over and over until they live by it. Spend less than you make and save the rest for the future.

    Instead of finding ways around your money problems, simply deal with the problem itself. Glad to see his message is hitting home for so many.

25. Shawn Knight Said,

    That’s the smartest thing I’ve heard all day! Exactly his message - so simple but its very difficult for people to break those bad habits they have known their whole life.

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