3 ms·

Good advice. Even better is to save 40-60% of every check with no intention of ever spending it. I always thought it seemed too aggressive a policy until I hi

by bmelton 14y ago

Good advice. Even better is to save 40-60% of every check with no intention of ever spending it. I always thought it seemed too aggressive a policy until I hit my first round of financial hardship, and then it seemed so stupid that I hadn't abided it before. Meanwhile, a friend of mine who does abide this rule just paid for his wedding and first home entirely as a cash transaction and hasn't incurred any debt beyond the credit cards he pays off every month. Especially in today's day and age, stability is more and more precious.

hkmurakami 14y ago
I save about 60% of my paycheck with no intent of spending it, and I've found that it has the added benefit of keeping my life simple and helping me keep a distance from material possessions that I don't actually need (but would certainly be gravitated to if I had all this cash just lying around). For me at least, I've been enjoying my relatively simple life of hiking/cycling with friends on the weekends and reading/learning from online resources and books from the library after work :).
larrys 14y ago
"and first home entirely as a cash transaction" Separately, and depending on when one buys a home that might not be the best strategy. I have the cash to pay off my home but I choose to take advantage of a low 3.25% mortgage rate to keep the money available for something else. Mortgage rates are very low now (once again I don't know when your friend did this) so it makes sense to take advantage of that.
- bmelton 14y ago
  Ironically that's the same advice I gave him. He bought shortly after 9/11 originally, and the rate was a ridiculously low 2.75% (which I think he paid down points to get). I should probably clarify that he originally financed the home, just so that when he paid it off it would look great on his credit (though he already had near perfect credit at the time) -- he put 30% down, another small percentage in buying down points, then made the first few payments and then just paid it off because he preferred to just own it outright. It's also worth noting that he could have, on paper, afforded to pay cash for a house that cost three times as much as the one he bought (which means he could have bought three of his same house and paid cash for each), so having the money available wasn't a big factor, though optimizing its dollar performance could definitely have been a factor.
  - georgemcbay 14y ago
    Getting way off topic here, but paying off a loan early (especially that early) will often hurt your credit score more than help it, particularly if it it the only active personal loan you have on record.
    - bmelton 14y ago
      I hadn't thought of that, but I doubt he cared terribly much, as he pretty much hates credit as a practice. I learned from that though, but I'm not exactly money-savvy, as I tend to care very little about it.
      - georgemcbay 14y ago
        Yeah for the guy you're talking about it makes no real-world difference if he takes a minor credit score hit. But people who need to optimize their credit score for whatever reason should keep in mind that there are all sorts of events that may impact your credit score in ways that seem odd at first but make sense when you consider the scores aren't just about how likely you are to pay off debts, but a combination of how likely you are to pay off debts while also giving the credit issuers a enough profit off interest to make it worth their while to loan to you.

by bmelton 14y ago

hkmurakami 14y ago

I save about 60% of my paycheck with no intent of spending it, and I've found that it has the added benefit of keeping my life simple and helping me keep a distance from material possessions that I don't actually need (but would certainly be gravitated to if I had all this cash just lying around). For me at least, I've been enjoying my relatively simple life of hiking/cycling with friends on the weekends and reading/learning from online resources and books from the library after work :).

larrys 14y ago

"and first home entirely as a cash transaction" Separately, and depending on when one buys a home that might not be the best strategy. I have the cash to pay off my home but I choose to take advantage of a low 3.25% mortgage rate to keep the money available for something else. Mortgage rates are very low now (once again I don't know when your friend did this) so it makes sense to take advantage of that.

bmelton 14y ago
Ironically that's the same advice I gave him. He bought shortly after 9/11 originally, and the rate was a ridiculously low 2.75% (which I think he paid down points to get). I should probably clarify that he originally financed the home, just so that when he paid it off it would look great on his credit (though he already had near perfect credit at the time) -- he put 30% down, another small percentage in buying down points, then made the first few payments and then just paid it off because he preferred to just own it outright. It's also worth noting that he could have, on paper, afforded to pay cash for a house that cost three times as much as the one he bought (which means he could have bought three of his same house and paid cash for each), so having the money available wasn't a big factor, though optimizing its dollar performance could definitely have been a factor.
- georgemcbay 14y ago
  Getting way off topic here, but paying off a loan early (especially that early) will often hurt your credit score more than help it, particularly if it it the only active personal loan you have on record.
  - bmelton 14y ago
    I hadn't thought of that, but I doubt he cared terribly much, as he pretty much hates credit as a practice. I learned from that though, but I'm not exactly money-savvy, as I tend to care very little about it.
    - georgemcbay 14y ago
      Yeah for the guy you're talking about it makes no real-world difference if he takes a minor credit score hit. But people who need to optimize their credit score for whatever reason should keep in mind that there are all sorts of events that may impact your credit score in ways that seem odd at first but make sense when you consider the scores aren't just about how likely you are to pay off debts, but a combination of how likely you are to pay off debts while also giving the credit issuers a enough profit off interest to make it worth their while to loan to you.