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Personal Finances / Living Below Your Means


Subject:  Re: Greetings, Fool! Date:  10/6/2012  9:25 AM
Author:  Camito Number:  867822 of 902425

The best way to get out of debt is to never take any debt on... well, that might not be too practical, but the point is, don't take on BAD debt. Also, don't buy things that you don't need.

Where do most people get in trouble?
House, Car, optional accessories.

House: Is buying right for you? A lot of first time home buyers see what their loan will cost but then forget about HOA, taxes, and upkeep. They also forget that some of the things that they may have gotten for free in their rental (e.g., water, pest control) might now be separate. I actually have gone back to renting the house I live in even though I own multiple rentals - the places I invest in have a better rate of return, but the place I live in wouldn't meet my metrics.
BAD DEBT: More house need or than you can afford!

Car: Do you really need that Audi A4 or that Chevy Tahoe? Would a Honda Civic do just as well? If you are only going to use the "truck" part of a truck once or twice a year, you are probably better off renting one for those couple of days instead of buying a vehicle that is too big and driving it all the time. Pricier vehicles often have worst financing options, higher insurance payments, and more maintenance costs.
BAD DEBT: Paying for more car than you need or can afford!

Accessories: Do you need to replace your 42" flat screen that you bought 3 years ago with a new 72" one? Really? Do you need to upgrade all you IKEA furniture to something fancier? Do you really need to go to the Ipad3 when your Ipad2 is just fine. Those purchases start to add up quick.
BAD DEBT: Replacing things that are still in perfect working order!

When it comes to the little stuff like taking lunch to work instead of buying it, or not going to SBUX every morning I like to take a balanced approach. I'll try to avoid those money sinks, but if I'm tired of PB&J sandwiches I'll go out for lunch a time or two/week. Compared to the BIG items above these are minor. The $3500 you save by not buying that TV is more than you'll save by cutting out 230 lunches at $15 a piece.
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