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I am debt free. Paid cash for my house. Don't own a credit card. I think technically my wife has one. There are a lot of ways I could make more money. I have e

I am debt free. Paid cash for my house. Don't own a credit card. I think technically my wife has one. There are a lot of ways I could make more money. I have enough money as it is, so what's the point? The rest of my money is in stocks, etc. I make enough of a return on it. Basically, being debt-free gives me peace of mind that is worth whatever marginal return I may be getting otherwise.

smabie 7y ago
With mortgage, that’s not unreasonable. After all, you will always be bearing some risk as your APR will never be below the risk-free rate. But for credit cards, if you just store the money in the risk-free rate (3 month T-notes), you will be strictly making more money without bearing any extra risk. In affect, it’s a free lunch: it is strictly superior. You could probably even program such a system and never have to think about it. Here’s an example using 1 credit card that charges interest after a month: 1. Initially, buy 3 month T-notes equal to your max credit limit. 2. At the end of the month, transfer the dollar amount of your current credit balance and pay off your card. 3. Top off your T-bills to maintain the max credit limit amount. 4. Profit! You just scammed the credit card companies out of a month of interest! The strategy looks even better with cash back or airline miles or points or whatever.
- projektfu 7y ago
  As with all things in economics, it’s not a free lunch. The cost of credit has already been priced into everything you buy. In this case, you can choose to make a small amount of money in exchange for some headache of making sure payments go on time, or leave it alone. If everyone eventually takes 2% rewards, instead of using debit cards and plain cards, the cost of credit in your purchases will rise from about 1.8% to 2.8%.
  - smabie 7y ago
    You make a really good point. What one is actually doing with my strategy is arbitraging between my behavior and everyone else’s.
    - throwaway35784 7y ago
      What is the dollar value of that behavior relative to other behavior? In other words don't neglect to consider opportunity costs.
- war1025 7y ago
  I already view the 1.8% or whatever I'm making on my emergency funds as basically inconsequential, so a percent or so on several thousand dollars doesn't really pique my interest enough to go to the bother. As I heard somewhere or another: "Get the dollars right and the pennies will take care of themselves" In case anyone is interested, the "war1025 guide to wealth accumulation": 1. Decide a reasonable checking account balance based on your pay frequency and expenses. (I get paid weekly, so I've found that $2,000 is a good number for me.) 2. Every week when you get paid, transfer any amount in excess of amount (1) into index funds. 3. The index funds are not to be added to and never withdrawn from. (I made an exception to this rule to buy our house) (Obviously have the correct emergency funds to handle unexpected events. Also you may at times choose to instead transfer the money into savings to work towards some known upcoming expense.)
  - smabie 7y ago
    Fair enough. But let me tell you a story: one of childhood friends was very well off and had a bunch of MTG cards. His decks were always very good (for a 11 year old). One time a new kid at the school came over to his house with us. The kid said: can I have some magic cards, you have so many? And my friend said: I didn’t get so many by giving them away. Anyways, maybe not that profound, but the memory has stuck. By sweating the cents, you get the dollars. And there’s another saying that is different from yours that I heard my dad say constantly: every penny counts.
    - war1025 7y ago
      Every dollar does count, but being reckless with dollar bills is going to get you in a lot less trouble than being reckless with twenties. For what it's worth, we have a family of five, my wife stays home, and I believe we currently save somewhere in the ballpark of 35% of our income. I think that counts as being pretty frugal compared to most of the people I know.

smabie 7y ago

With mortgage, that’s not unreasonable. After all, you will always be bearing some risk as your APR will never be below the risk-free rate. But for credit cards, if you just store the money in the risk-free rate (3 month T-notes), you will be strictly making more money without bearing any extra risk. In affect, it’s a free lunch: it is strictly superior. You could probably even program such a system and never have to think about it. Here’s an example using 1 credit card that charges interest after a month: 1. Initially, buy 3 month T-notes equal to your max credit limit. 2. At the end of the month, transfer the dollar amount of your current credit balance and pay off your card. 3. Top off your T-bills to maintain the max credit limit amount. 4. Profit! You just scammed the credit card companies out of a month of interest! The strategy looks even better with cash back or airline miles or points or whatever.

projektfu 7y ago
As with all things in economics, it’s not a free lunch. The cost of credit has already been priced into everything you buy. In this case, you can choose to make a small amount of money in exchange for some headache of making sure payments go on time, or leave it alone. If everyone eventually takes 2% rewards, instead of using debit cards and plain cards, the cost of credit in your purchases will rise from about 1.8% to 2.8%.
- smabie 7y ago
  You make a really good point. What one is actually doing with my strategy is arbitraging between my behavior and everyone else’s.
  - throwaway35784 7y ago
    What is the dollar value of that behavior relative to other behavior? In other words don't neglect to consider opportunity costs.
war1025 7y ago
I already view the 1.8% or whatever I'm making on my emergency funds as basically inconsequential, so a percent or so on several thousand dollars doesn't really pique my interest enough to go to the bother. As I heard somewhere or another: "Get the dollars right and the pennies will take care of themselves" In case anyone is interested, the "war1025 guide to wealth accumulation": 1. Decide a reasonable checking account balance based on your pay frequency and expenses. (I get paid weekly, so I've found that $2,000 is a good number for me.) 2. Every week when you get paid, transfer any amount in excess of amount (1) into index funds. 3. The index funds are not to be added to and never withdrawn from. (I made an exception to this rule to buy our house) (Obviously have the correct emergency funds to handle unexpected events. Also you may at times choose to instead transfer the money into savings to work towards some known upcoming expense.)
- smabie 7y ago
  Fair enough. But let me tell you a story: one of childhood friends was very well off and had a bunch of MTG cards. His decks were always very good (for a 11 year old). One time a new kid at the school came over to his house with us. The kid said: can I have some magic cards, you have so many? And my friend said: I didn’t get so many by giving them away. Anyways, maybe not that profound, but the memory has stuck. By sweating the cents, you get the dollars. And there’s another saying that is different from yours that I heard my dad say constantly: every penny counts.
  - war1025 7y ago
    Every dollar does count, but being reckless with dollar bills is going to get you in a lot less trouble than being reckless with twenties. For what it's worth, we have a family of five, my wife stays home, and I believe we currently save somewhere in the ballpark of 35% of our income. I think that counts as being pretty frugal compared to most of the people I know.