Debt

BodyButter

BodyButter

Vital Football Legend
I've been watching YouTube videos by an American guy called Dave Ramsey. He gives financial advice on the radio and has a few books about it too.

His big thing is that debt and payments steal your wealth and people kinda sleepwalk into debt. Credit card debt, car loans, personal loans, student loans and mortgages leave average Joes like me with less than a third of our income. By the end of the month most people are broke, regardless of their salaries.

He has a 7 point plan which he calls his baby steps to rid yourself of debt and start building wealth.

At the moment I have about £40k in debt. That's one business loan, one car loan and one loan from a family member. Around 3 years ago that was around £140k over two business loans, two car loans, 4 loans from family members. I didn't even realise I was so deep in debt 3 years ago until I calculated it back a few weeks ago.

I started watching Dave Ramsey's YouTube videos sometime last year and they really focused my attention on the problem. I was only ever making the minimum payments before that. In less than a year I've paid off 3 family members and 1 car loan (the other business loan was paid off on schedule 2 years ago). I'm hoping to be debt free by the end of this year. Then I'll have two paid for cars and a business with no loans against it.
 
Debt is a difficult balance to manage. I have some debt (in addition to my mortgage) and do have the money in the bank to pay them off however, despite losing out by making interest payments, I choose to not pay off the debt all at once at that would only leave me with no savings and therefore no security net should anything happen. Ok so I would be better off each month but I suspect that most of the money not paid on repaying debt would only be absorbed into normal living expences, with only a part of it going to build up savings again.
 
It's just too easy to borrow, these days. The Banks have to take responsibility for much of the debt that creates poverty. Not that they care.

Nice to see some progress there, BB. It seems there may be something useful on Youtube after all.
 
Debt is a nightmare. I've always said I would only consider debt if it's a mortgage now. People being sucked into consumer products that they don't need is a major issue.
 
Silhillvilla - 28/2/2017 09:31

Do people class a mortgage as debt ? Or is it other debt beyond the mortgage ?
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Technically, Mortgages are debt. However, as they are secured against property, and historically property values have escalated faster than interest rates, it is a slightly different type, in my opinion.

Any debt should be carefully considered. Buying a bigger house, and stretching yourself, is asking for trouble. Rates won;t stay this low forever.
 
This is a classic quote by J Reuben Clark on interest.

"Interest never sleeps nor sickens nor dies; it never goes to the hospital; it works on Sundays and holidays; it never takes a vacation; it never visits nor travels; it takes no pleasure; it is never laid off work nor discharged from employment; it never works on reduced hours; it never has short crops nor droughts; it never pays taxes; it buys no food; it wears no clothes; it is unhoused and without home and so has no repairs, no replacements, no shingling, plumbing, painting, or whitewashing; it has neither wife, children, father, mother, nor kinfolk to watch over and care for; it has no expense of living; it has neither weddings nor births nor deaths; it has no love, no sympathy; it is as hard and soulless as a granite cliff. Once in debt, interest is your companion every minute of the day and night; you cannot shun it or slip away from it; you cannot dismiss it; it yields neither to entreaties, demands, or orders; and whenever you get in its way or cross its course or fail to meet its demands, it crushes you."

 
Villan Of The North - 28/2/2017 18:24

Debt is a difficult balance to manage. I have some debt (in addition to my mortgage) and do have the money in the bank to pay them off however, despite losing out by making interest payments, I choose to not pay off the debt all at once at that would only leave me with no savings and therefore no security net should anything happen. Ok so I would be better off each month but I suspect that most of the money not paid on repaying debt would only be absorbed into normal living expences, with only a part of it going to build up savings again.
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A big part of the Dave Ramsey thing is getting people to think about money more carefully. Hopefully, having paid off your debt, you wouldn't waste the extra money you now have on living expenses.

I'm in the same boat as you though. I have enough saved up to pay off the second car but I've been sitting on it.

Dave Ramsey advocates paying off all of your debt first and then saving up 3-6 months of expenses as an emergency fund. With a family to feed, it's comforting to know that there is money there in case anything happens.
 
Sasquatch - 28/2/2017 18:35

Debt is a nightmare. I've always said I would only consider debt if it's a mortgage now. People being sucked into consumer products that they don't need is a major issue.
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I know people over here, especially young women, who buy handbags and iPhones on finance. They max everything out so that they can get everything they want now and then can't afford a cup of coffee because they are so broke.
 
Just for the record, Dave Ramsey's baby steps are:

Baby Step 1 – $1,000 to start an Emergency Fund
Baby Step 2 – Pay off all debt using the Debt Snowball
Baby Step 3 – 3 to 6 months of expenses in savings
Baby Step 4 – Invest 15% of household income into Roth IRAs and pre-tax retirement
Baby Step 5 – College funding for children
Baby Step 6 – Pay off home early
Baby Step 7 – Build wealth and give!

He's American so some of that doesn't apply to us normal people.
 
Villan Of The North - 28/2/2017 09:24

Debt is a difficult balance to manage. I have some debt (in addition to my mortgage) and do have the money in the bank to pay them off however, despite losing out by making interest payments, I choose to not pay off the debt all at once at that would only leave me with no savings and therefore no security net should anything happen. Ok so I would be better off each month but I suspect that most of the money not paid on repaying debt would only be absorbed into normal living expences, with only a part of it going to build up savings again.
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I don't get that at all. Martyn Lewis would be telling you off as well.

You clear debt, you then save.

You say you would have no savings if you paid off your debt but you effectively don't have savings if you have a debt. You aren't making your money work for you properly there at all.

IF anything happened, that's when you use a card surely?
 
Silhillvilla - 28/2/2017 09:57

As a country we are obsessed by property ownership . Other countries have much more rental approach
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Yes it is a strange phenomenon in this country, I remember studying it at university and being shocked at how our property market is so overheated compared to some European countries - for example in Germany house prices have barely risen above inflation for decades because home ownership isn't really a thing over there, whilst half of us in this country especially younger people like myself can't afford housing, either ownership or barely even renting.
 
Debt isn't always a bad thing, although unnecessary debt or too much can be.

The big problem is those people who pick it up without properly thinking about it. For example websites like wonga.com which make it seem like getting a loan with over 1000% Apr is perfectly normal, or even going well into their overdraft, people don't really what they are signing up to or the risks involved and for some people it can easily snowball from there
 
Christ I thought Wonga had been reigned in a bit by the government ?? Appears not , just seen this on their website -

Borrow: £200 for 14 days. Interest rate: 292%pa (fixed).One repayment of: £222.40. Representative 1,509% APR.
 
david-avfc - 28/2/2017 11:47

Silhillvilla - 28/2/2017 09:57

As a country we are obsessed by property ownership . Other countries have much more rental approach
Click to expand...

Yes it is a strange phenomenon in this country, I remember studying it at university and being shocked at how our property market is so overheated compared to some European countries - for example in Germany house prices have barely risen above inflation for decades because home ownership isn't really a thing over there, whilst half of us in this country especially younger people like myself can't afford housing, either ownership or barely even renting.
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German property prices catching up
https://www.ft.com/content/dc6ad2e4-c6ac-11e6-9043-7e34c07b46ef
 
BringbakMON - 28/2/2017 12:06

david-avfc - 28/2/2017 11:47

Silhillvilla - 28/2/2017 09:57

As a country we are obsessed by property ownership . Other countries have much more rental approach
Click to expand...

Yes it is a strange phenomenon in this country, I remember studying it at university and being shocked at how our property market is so overheated compared to some European countries - for example in Germany house prices have barely risen above inflation for decades because home ownership isn't really a thing over there, whilst half of us in this country especially younger people like myself can't afford housing, either ownership or barely even renting.
Click to expand...

German property prices catching up
https://www.ft.com/content/dc6ad2e4-c6ac-11e6-9043-7e34c07b46ef
Click to expand...
Behind a paywall for me unfortunately. I just googled it, looks like their prices have increased recently, still if you look at a chart dating back to the 70s the difference is quite alarming

http://infographics.economist.com/2016/globalhpi_20160331/?n=21540328&w=595
 
The Fear - 28/2/2017 12:34

Villan Of The North - 28/2/2017 09:24

Debt is a difficult balance to manage. I have some debt (in addition to my mortgage) and do have the money in the bank to pay them off however, despite losing out by making interest payments, I choose to not pay off the debt all at once at that would only leave me with no savings and therefore no security net should anything happen. Ok so I would be better off each month but I suspect that most of the money not paid on repaying debt would only be absorbed into normal living expences, with only a part of it going to build up savings again.
Click to expand...

I don't get that at all. Martyn Lewis would be telling you off as well.

You clear debt, you then save.

You say you would have no savings if you paid off your debt but you effectively don't have savings if you have a debt. You aren't making your money work for you properly there at all.

IF anything happened, that's when you use a card surely?
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It's not card debt, it's car loan plus some old debt that was acrued some time ago, before I had any savings. Financial advisors over here council saving at the same time as repaying debts so that one doesn't turn to debt again at the first time of financial need. It's as much about training the tought process to not need debt and creating good financial habbits as it is about getting out of debt.

 
Martin Lewis has the same mantras. Pay off the most expensive debt, save a contingency fund , the credit card debt shifting is a good one I moved considerable debt to 0% so everything I paid came off the total. Made a hell of a difference.
 
Villan Of The North - 28/2/2017 20:30

It's not card debt, it's car loan plus some old debt that was acrued some time ago, before I had any savings. Financial advisors over here council saving at the same time as repaying debts so that one doesn't turn to debt again at the first time of financial need. It's as much about training the tought process to not need debt and creating good financial habbits as it is about getting out of debt.
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Obviously depends on the type of debt, I think you'd be wanting the head checked out if you didnt put everything into a credit card debt at 23%.

I think thought process and habit is key. Luckily in Ireland education is reasonable so I've no debt, the only thing thats debt is my braces but its interest free. I've never had formal debt and the thought of getting dragged into it just puts me off.
 
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