5 ms·

> Theoretically, credit should be used for one thing: to make more money. I disagree. You use credit to buy a car or buy a house when you don't have the cash

> Theoretically, credit should be used for one thing: to make more money. I disagree. You use credit to buy a car or buy a house when you don't have the cash to buy them up-front. It's not so you can use them to make money, it's so you can use them to enjoy life. > At some point, you run out of hours available and the house of cards collapses. Only if you go too far. The point is to buy things knowing what they'll cost monthly and for how long, and to budget those as part of your monthly expenses. As long as you can always handle those, you will never run out of hours available and it's not a house of cards. Nothing collapses. You pay off your car; you pay off your mortgage. You seem to be treating this as something black-and-white when it's not. It's an incredibly useful tool when used with budgeting. Not "to make more money" but to have a better life for you and your family for when it matters the most. Nobody wants to wait until the kids have graduated from college to be able to buy their first house. And even with credit cards -- yes you generally want to be paying them off in full monthly. But if you want to take a vacation a couple months before you could otherwise fully pay for it, it's really nice to have that convenience too. Not to mention covering some expenses for a few months if you lose your job. They're a tool to be used responsibly.

deleted 1y ago
[deleted]
gottorf 1y ago
> They're a tool to be used responsibly. I used to hate to take the position that government should save people from themselves, but I've moderated a lot on it. Some people clearly cannot use credit responsibly.
- bonoboTP 1y ago
  Societies used to understand this and put lots of limits around exploiting people, such as banning interest rates. But there is no unalloyed good. That ban also blocked rapid economic development as seen in the 19th century, where credit was absolutely critical for railroad construction and other infrastructure like electric or plumbing. It's a real dilemma with tradeoffs, where slogans and soundbites don't work. Having opportunity means you may squander it. Too many guardrails on life paths and behavior blocks meritocratic social mobility as well as opportunities and motivation. Since conditions are changing too fast there is no appropriate crystallized wisdom about it. There is no wealth of myths that would define how to live. The best we are able to say is the non-instruction to "be free" and to tap into your authentic self and author your life path with freedom and agency. In biology one can distinguish evolved traits and behaviors (instincts) from learned ones. The latter can adapt much faster to the situation. Even better than learning from environmental feedback over one's lifetime is planning and simulating possible futures and deciding based on that. Somewhere between the individual lifetime and the genetic evolution levels, there is also the level of culture that used to reshape much slower than a single lifetime, taking lessons and condensing them over generations into templates. But more amd more as we diverge from the ancestral environmental conditions of the savannah and hunting-gathering in tight knit tribes and clans, we can less and less rely on biological instinct, cultural bedrock, wisdom from the parents' generation, what you learned a decade ago, and so on. We are forced to adapt and outmaneuver the shifting landscape faster than ever. More and more things pulling in entirely opposite directions. A vortex of stimuli to cut through with a machete-like mental strength. But most people are not built for this, and even those who are, constantly have to gamble and guess and rely on luck and hindsight.
  - bombcar 1y ago
    Ban personal liability on loans (full recourse). If the lender can only take the thing (like repossession of the car or foreclosure of the house) and can’t go after the borrower for the difference, lots of problems solve themselves. Credit can still exist in various secured ways, business credit is barely impacted for real businesses, and people stop being able to go way below zero.
    - gottorf 1y ago
      How do you apply this to loans for things that cannot be repossessed, like college degrees or medical treatment?
  - anajskkdbf 1y ago
    > Societies used to understand this and put lots of limits around exploiting They still do (at least in the US). Jewish people have access to Heter Iska loans according to their religion. They do not extend this to gentiles. Humans have known for a long time usury is inherently predatory. Nobody should profit off simply having money.
    - BenjiWiebe 1y ago
      And yet, the banker truly gives me value if I wish to start a business, or upgrade an existing one, and I don't have the capital to do so. I need money to make money, and am willing to pay for the privilege of using someone else's money.
      - deleted 1y ago
        [deleted]
    - gottorf 1y ago
      > usury is inherently predatory. Nobody should profit off simply having money. Well, the time value of money is a real thing.
  - parpfish 1y ago
hotstickyballs 1y ago
Both transportation and shelter are important to earn money
Jcampuzano2 1y ago
If you're using credit to buy a car, most people do so in order to get to and from their place of work for the majority of their driving time. In that way, using credit to buy a car still fits into their theoretical model. For example I know plenty of people who completely got rid of their cars when remote work became more common, or at the very least consolidated to smaller cars or to less cars for a family. Similar thinking for a house. A lot of people when buying a house go into it with the assumption that it is an appreciating asset that will gain value over time. Yes there are other factors of course like wanting to live closer to schools or in the suburbs/good areas, etc. But regardless this is commonly to facilitate a life that lends itself to you continuing to be able to make money comfortably. Regarding vacations, no financial expert recommends using a card without the intention of not paying for it. If your plan is to book the vacation on credit for anything other than the benefits of your credit card points systems you might as well not use it at all. And all recommend not using credit cards and instead an emergency fund if you lose your job.
- crazygringo 1y ago
  No. You can rent and you can take the bus. Or rent and buy a crazy cheap old used car. A house and a decent car are not primarily about making money. They're about your quality of life. > And all recommend not using credit cards and instead an emergency fund if you lose your job. And if you already used your emergency fund on, say, a medical emergency...?
  - scarface_74 1y ago
    Yes because American public transit is so great and now you have to get up hours earlier and come home later - not great if you have kids or you actually want to spend time with your significant other. Also what happens when that cheap old car doesn’t start in the morning when you need to get to work or pick your kids up from day care/school or need to be home when they get off the bus? Where are you going to get the money to fix that old car?
    - JKCalhoun 1y ago
bitmasher9 1y ago
Let’s say you finance $40,000 in auto debt over 5 years. With a low interest rate of 6% paying $6,300 in interest. That’s over 15% of the amount borrowed! Many people have lager rates over longer periods. Now consider what would happen if you invested that $6,300 for 30 years instead of spent it on interest. You’re losing out on tens of thousands of dollars in total lifetime wealth. When you borrow money to “enjoy life” it can quickly end up costing 2x what it would if you spent the money outright, even if you borrowed at low rates.
- scarface_74 1y ago
  Well seeing that you need a car to go to work to have money to invest in the first place… And before you say “buy an old beater”, then you have to contend with an unreliable car that may cause you to be late to work and get fired. It’s also much easier and cheaper to get a car loan for a newish car than to borrow money to fix a car.
  - bitmasher9 1y ago
    Im just encouraging people to do the math, and to consider borrowing smaller amounts of money over shorter periods of time.
    - deleted 1y ago
      [deleted]
  - allenrb 1y ago
    As a young person, I was in the “own an old beater” category for many years. That said, I knew how to maintain and repair most of what could go wrong. That stick shift 1995 Accord had over 300,000 miles when a school bus finally totaled it while parked. But for most people, maybe not the right answer. There’s a middle ground. There are some very affordable vehicles out there with good warranties. Buy one and for a few hundred a month, you get five years free of worry. Of course, who does that? What I see are mostly SUVs and other “image” vehicles that cost more to buy and more to run. Frugality just hasn’t been an American trait in recent years, though it seems to be changing in some groups.
bregma 1y ago
This ignores the fundamental equation T = kM where "T" is time, "M" is money, and k is some constant.
zajio1am 1y ago
> You use credit to buy a car or buy a house when you don't have the cash to buy them up-front. Still the same principle - you buy long-term asset that makes rent-equivalent money if you rented that otherwise. That is different than borrowing for immediate consumption.
SirMaster 1y ago
You can't deny the strong ability to make money using credit or debt though. No it's not the only way you can use it, but it's a pretty big way that a lot of people do successfully use it.
lxgr 1y ago
> > Theoretically, credit should be used for one thing: to make more money. > I disagree. > You use credit to buy a car or buy a house when you don't have the cash to buy them up-front. There's no contradiction with GP here. Financing a car or buying a house on mortgage might well save somebody money in the long term (e.g. by allowing them to take on a job to which they have to commute by car, or saving on future rent payments). If that's the case (and that highly depends on individual circumstances), this still counts as "making more money" – via spending less money. The real question is: How do you feel about borrowing money used to buy depreciating assets or consumables?

deleted 1y ago

[deleted]

gottorf 1y ago

> They're a tool to be used responsibly. I used to hate to take the position that government should save people from themselves, but I've moderated a lot on it. Some people clearly cannot use credit responsibly.

bonoboTP 1y ago
Societies used to understand this and put lots of limits around exploiting people, such as banning interest rates. But there is no unalloyed good. That ban also blocked rapid economic development as seen in the 19th century, where credit was absolutely critical for railroad construction and other infrastructure like electric or plumbing. It's a real dilemma with tradeoffs, where slogans and soundbites don't work. Having opportunity means you may squander it. Too many guardrails on life paths and behavior blocks meritocratic social mobility as well as opportunities and motivation. Since conditions are changing too fast there is no appropriate crystallized wisdom about it. There is no wealth of myths that would define how to live. The best we are able to say is the non-instruction to "be free" and to tap into your authentic self and author your life path with freedom and agency. In biology one can distinguish evolved traits and behaviors (instincts) from learned ones. The latter can adapt much faster to the situation. Even better than learning from environmental feedback over one's lifetime is planning and simulating possible futures and deciding based on that. Somewhere between the individual lifetime and the genetic evolution levels, there is also the level of culture that used to reshape much slower than a single lifetime, taking lessons and condensing them over generations into templates. But more amd more as we diverge from the ancestral environmental conditions of the savannah and hunting-gathering in tight knit tribes and clans, we can less and less rely on biological instinct, cultural bedrock, wisdom from the parents' generation, what you learned a decade ago, and so on. We are forced to adapt and outmaneuver the shifting landscape faster than ever. More and more things pulling in entirely opposite directions. A vortex of stimuli to cut through with a machete-like mental strength. But most people are not built for this, and even those who are, constantly have to gamble and guess and rely on luck and hindsight.
- bombcar 1y ago
  Ban personal liability on loans (full recourse). If the lender can only take the thing (like repossession of the car or foreclosure of the house) and can’t go after the borrower for the difference, lots of problems solve themselves. Credit can still exist in various secured ways, business credit is barely impacted for real businesses, and people stop being able to go way below zero.
  - gottorf 1y ago
    How do you apply this to loans for things that cannot be repossessed, like college degrees or medical treatment?
- anajskkdbf 1y ago
  > Societies used to understand this and put lots of limits around exploiting They still do (at least in the US). Jewish people have access to Heter Iska loans according to their religion. They do not extend this to gentiles. Humans have known for a long time usury is inherently predatory. Nobody should profit off simply having money.
  - BenjiWiebe 1y ago
    And yet, the banker truly gives me value if I wish to start a business, or upgrade an existing one, and I don't have the capital to do so. I need money to make money, and am willing to pay for the privilege of using someone else's money.
    - deleted 1y ago
      [deleted]
  - gottorf 1y ago
    > usury is inherently predatory. Nobody should profit off simply having money. Well, the time value of money is a real thing.
- parpfish 1y ago

hotstickyballs 1y ago

Both transportation and shelter are important to earn money

Jcampuzano2 1y ago

If you're using credit to buy a car, most people do so in order to get to and from their place of work for the majority of their driving time. In that way, using credit to buy a car still fits into their theoretical model. For example I know plenty of people who completely got rid of their cars when remote work became more common, or at the very least consolidated to smaller cars or to less cars for a family. Similar thinking for a house. A lot of people when buying a house go into it with the assumption that it is an appreciating asset that will gain value over time. Yes there are other factors of course like wanting to live closer to schools or in the suburbs/good areas, etc. But regardless this is commonly to facilitate a life that lends itself to you continuing to be able to make money comfortably. Regarding vacations, no financial expert recommends using a card without the intention of not paying for it. If your plan is to book the vacation on credit for anything other than the benefits of your credit card points systems you might as well not use it at all. And all recommend not using credit cards and instead an emergency fund if you lose your job.

crazygringo 1y ago
No. You can rent and you can take the bus. Or rent and buy a crazy cheap old used car. A house and a decent car are not primarily about making money. They're about your quality of life. > And all recommend not using credit cards and instead an emergency fund if you lose your job. And if you already used your emergency fund on, say, a medical emergency...?
- scarface_74 1y ago
  Yes because American public transit is so great and now you have to get up hours earlier and come home later - not great if you have kids or you actually want to spend time with your significant other. Also what happens when that cheap old car doesn’t start in the morning when you need to get to work or pick your kids up from day care/school or need to be home when they get off the bus? Where are you going to get the money to fix that old car?
  - JKCalhoun 1y ago

bitmasher9 1y ago

Let’s say you finance $40,000 in auto debt over 5 years. With a low interest rate of 6% paying $6,300 in interest. That’s over 15% of the amount borrowed! Many people have lager rates over longer periods. Now consider what would happen if you invested that $6,300 for 30 years instead of spent it on interest. You’re losing out on tens of thousands of dollars in total lifetime wealth. When you borrow money to “enjoy life” it can quickly end up costing 2x what it would if you spent the money outright, even if you borrowed at low rates.

scarface_74 1y ago
Well seeing that you need a car to go to work to have money to invest in the first place… And before you say “buy an old beater”, then you have to contend with an unreliable car that may cause you to be late to work and get fired. It’s also much easier and cheaper to get a car loan for a newish car than to borrow money to fix a car.
- bitmasher9 1y ago
  Im just encouraging people to do the math, and to consider borrowing smaller amounts of money over shorter periods of time.
  - deleted 1y ago
    [deleted]
- allenrb 1y ago
  As a young person, I was in the “own an old beater” category for many years. That said, I knew how to maintain and repair most of what could go wrong. That stick shift 1995 Accord had over 300,000 miles when a school bus finally totaled it while parked. But for most people, maybe not the right answer. There’s a middle ground. There are some very affordable vehicles out there with good warranties. Buy one and for a few hundred a month, you get five years free of worry. Of course, who does that? What I see are mostly SUVs and other “image” vehicles that cost more to buy and more to run. Frugality just hasn’t been an American trait in recent years, though it seems to be changing in some groups.

bregma 1y ago

This ignores the fundamental equation T = kM where "T" is time, "M" is money, and k is some constant.

zajio1am 1y ago

> You use credit to buy a car or buy a house when you don't have the cash to buy them up-front. Still the same principle - you buy long-term asset that makes rent-equivalent money if you rented that otherwise. That is different than borrowing for immediate consumption.

SirMaster 1y ago

You can't deny the strong ability to make money using credit or debt though. No it's not the only way you can use it, but it's a pretty big way that a lot of people do successfully use it.

lxgr 1y ago

> > Theoretically, credit should be used for one thing: to make more money. > I disagree. > You use credit to buy a car or buy a house when you don't have the cash to buy them up-front. There's no contradiction with GP here. Financing a car or buying a house on mortgage might well save somebody money in the long term (e.g. by allowing them to take on a job to which they have to commute by car, or saving on future rent payments). If that's the case (and that highly depends on individual circumstances), this still counts as "making more money" – via spending less money. The real question is: How do you feel about borrowing money used to buy depreciating assets or consumables?