Current Events > Anyone else terrified of debt because of family history?

(+) Yeah! (+)

My parents basically blew the chance of a very easy life by being really fucking stupid with money. Dad could have been a multi millionaire by now but is sitting on literally nothing.

And my older brother figured out that if he maxed out as many credit cards as possible by the age of 25 then he could just act like money is monopoly money. What even is debt anyway? 5 figures, 6 figures - who cares? It's just several hundred dollars in minimum payments per month foe the rest of your life...

So now I'm basically allergic to debt. Even good debt. I can barely justify a mortgage or a car. Instead I live out of a suitcase at net zero. The most debt I've ever been in was 4k and that wasn't even for me. I'm only just now at the age of 36 learning how to invest and grow wealth.

pinky0926 posted...

My parents basically blew the chance of a very easy life by being really fucking stupid with money. Dad could have been a multi millionaire by now but is sitting on literally nothing.

And my older brother figured out that if he maxed out as many credit cards as possible by the age of 25 then he could just act like money is monopoly money. What even is debt anyway? 5 figures, 6 figures - who cares? It's just several hundred dollars in minimum payments per month foe the rest of your life...

So now I'm basically allergic to debt. Even good debt. I can barely justify a mortgage or a car. Instead I live out of a suitcase at net zero. The most debt I've ever been in was 4k and that wasn't even for me. I'm only just now at the age of 36 learning how to invest and grow wealth.

sad, any of them filed for bankruptcy?

pinky0926 posted...

It's just several hundred dollars in minimum payments per month foe the rest of your life...

Just declare bankruptcy. Especially if he's 25.

I'm not sure what my brother did tbh. He started to get on top of his debt in his mid 30s, or at least put together a plan to start paying it off. His wife nearly divorced him when she found out, I credit her for sorting him out.

My parents just took a golden goose and decided to eat all the eggs. I try not to be bitter about it because its not like I was anything but a little bludger, but I still idly wonder how different life would be if dad made smart investment decisions.

On the one hand I'm thankful that I didn't have the same mindset. On the other hand, I wish I had someone around to teach me about money from a young age.

Tyranthraxus posted...

Just declare bankruptcy. Especially if he's 25.

Hes over 40 now, runs his own business. The problem with my brother is he's a salesman right down to his soul. He will always spend 5 dollars he doesn't have if he thinks he can make 20 dollars from it.

Kinda. My parents have an adversarial attitude towards sellers where if someone got more money out of you, you lost the interaction. They came from a place where you bargain the price of every purchase.

So for me, if I paid interest on something, I feel like I got bamboozled. Like this guy tricked me into paying $23k instead of $20k.

Nope. While I understand what you are saying and I go out of my way to avoid debt I never hesitated when buying a house to take on a mortgage. But I have pretty much paid for everything in cash in life just because my dad taught me to be responsible with money and not live off credit except for mortgages and vehicle. But he actually had me take out a loan on my first vehicle rather than but in cash to establish credit.

i was raised very smartly when it came to financial decisions. Identifying needs vs wants, prioritizing responsibilities and bills. How to build wealth. Learned this from a young age.

Now Im 48 and sitting damn good. Own my home outright and have for years. No mortgage, no vehicle payment, legitimately about as perfect as you can get credit rating if I need it.

But I am really frugal. Its not a fear of debt, just I hate wasting money. Outside of required monthly bills I legitimately have spent less than $100 out of pocket in the last 12 months. Last spring I bought a video game and last November I bought 4 books. Thats it. Seriously.

I go months and months and months and never spend a penny outside of my required monthly bills. Im an extreme saver. But not out of fear.

archizzy posted...

Nope. While I understand what you are saying and I go out of my way to avoid debt I never hesitated when buying a house to take on a mortgage. But I have pretty much paid for everything in cash in life just because my dad taught me to be responsible with money and not live off credit. But he actually had me take out a loan on my first vehicle rather than but in cash to establish credit.

i was raised very smartly when it came to financial decisions. Identifying needs vs wants, prioritizing responsibilities and bills. How to build wealth. Learned this from a young age.

Now Im 48 and sitting damn good. Own my home outright and have for years. No mortgage, no vehicle payment, legitimately about as perfect as you can get credit rating if I need it.

But I am really frugal. Its not a fear of debt, just I hate wasting money. Outside of required monthly bills I legitimately have spent less than $100 out of pocket in the last 12 months. Last spring I bought a video game and last November I bought 4 books. Thats it. Seriously.

I go months and months and months and never spend a penny outside of my required monthly bills. Im an extreme saver. But not out of fear.

This is what I never got. I love my parents, I have a wealth of so many experiences in life because of them. But I swear, I only really understood the purpose of a credit card at the age of 32.

I'm 36 now and only starting to build wealth. Its a little maddening, but I guess now is better than never.

A couple of missing posts at the beginning made this topic kind of confusing for a sec

But yeah I hate having debts.

About two years ago I had to go to the hospital and it cost me a few thousand, and I paid it off as quickly as I could because I hate having stuff like that hanging over me. I probably shouldve just said fuck em and chipped away at it little by little. And then last year my car died so I had to get a new one and now Ive got this hanging over me for like another five years and I hate it. I know that thats life but I still hate it.

Mom has SS but no 401k
Same with uncle
Uncle also has a Medicare issue that might compromise his continued dialysis care.

I have funds to maybe survive 2 months at best covering them. So there is this ridiculous scenario where we're between possibly letting someone die or go for broke, to stave that off for only a bit longer - not to embellish then situation

They weren't stupid with money necessarily. My dad just had situations where he couldn't hold a job until it also messed with his own ego to accept a low paying position at some point. They also paid up for private school for me and my brothers (that investment has its ups and downs). Parent plus college loans I believe for my brothers were pretty sizeable, and I'm not 100% sure what my mom's medical bills are. Basically outside of my dad's situation, life is expensive.

I can afford things, get into them with overhead and justify their acquisitions/benefit, but it basically takes one job loss to head downhill very, very fast.

Your stance isn't that bad. You'll probably be happier than someone up to their eyeballs in debt even if it isn't optimal. If you keep up with the investing you'll be setting yourself up for a good retirement. You still have a lot of time left to grow your money.

Unless your name is on any loan docs, do NOT accept ANY form of debt WHATSOEVER if family members pass. Never ever ever. You are safe from familial debts because we aren't in the 1700's anymore.

EDIT: I misunderstood the intent of the topic, but this is more like "my family is awful with money and will I be too?" You already understand credit now TC and the best time to start besides yesterday is today. Just never live above your means and use a budget and you're golden.

Bass posted...

Your stance isn't that bad. You'll probably be happier than someone up to their eyeballs in debt even if it isn't optimal. If you keep up with the investing you'll be setting yourself up for a good retirement. You still have a lot of time left to grow your money.

I never understood what it could be like to actually grow wealth until relatively recently. The idea that I could have money beyond what I need to pay bills for and a little bit extra "just in case" has been foreign to me.

And now I'm realising...fuck that. I can have 6 figures in cash just sitting there in less than a decade without too much hard work, if I'm smart. That was eye opening.

pinky0926 posted...

This is what I never got. I love my parents, I have a wealth of so many experiences in life because of them. But I swear, I only really understood the purpose of a credit card at the age of 32.

I'm 36 now and only starting to build wealth. Its a little maddening, but I guess now is better than never.

Yeah from elementary age on my dad did little stuff to make me aware of money. He gave me money to take to school to buy my lunch ticket and milk tickets. If there was multiple things I wanted to do he would give me enough for some of them but not all of them so I had to learn to prioritize and choose and just accept the fact you cant always do everything you want and make me ok with missing out on things.

I credit him for me not having FOMO on experiences or material items. I have great patience and just let things go. Early on he taught me about borrowing money from him but having to pay more back as a penalty for borrowing.

Plus even though this isnt finances im a Gen X kid. We were the latchkey generation. I was given a lot of responsibility at a young age and that carried over from my everyday life of making food for myself, to waking up and getting to and from school to financial decisions.

I knew how hard my dad worked for money and I never took for granted what that meant that he gave me money for things. I wanted to be responsible with his money. I didnt need the popular clothes when the cheap stuff on sale served the same purpose. I didnt need to throw money away on eating out when I could eat at home. It always made me strive to save a dollar. That has stuck with me my whole life.

pinky0926 posted...

I never understood what it could be like to actually grow wealth until relatively recently. The idea that I could have money beyond what I need to pay bills for and a little bit extra "just in case" has been foreign to me.

And now I'm realising...fuck that. I can have 6 figures in cash just sitting there in less than a decade without too much hard work, if I'm smart. That was eye opening.

Yeah, it really is freeing. It's amazing how well passive investing in low fee index funds works. You don't even have to be a financial genius or anything. I'm not sure if that's what you're investing it, but that's my preferred investment vehicle. It kind of blows my mind too.

Yeah my parents hardcore fumbled the bag recently. Mom had a good career job, dad had a company that was finally taking off and they were raking in money (right after I left for college). Then my dad convinced my mom to quit her job and stay at home and then proceeded to blow money like crazy over a decade. Almost every time I visited home during undergrad and grad school, I would see that he was driving a different car or kept a car and then added another. The most pathetic instance of this was a new Mercedes coupe that got its alignment straight fucked up by one huge pothole boi in Jackson, MS so he got rid of that one. Buying a golf cart that was super rarely used. Jacuzzi on a new covered patio that remained absolutely untouched. House paid off super early and doubled in value. There's absolutely no reason they shouldn't be millionaires right now but now it's in shambles. Back in 2010 both my sister and I had separate $200k accounts that my dad was going to give us after we finished school and now both of them are rip

So from growing up not that well off and then seeing that happen as an adult, I'm pretty much terrified every time I have to take out a loan or make a big purchase. When I got my current condo, the agent showing me around thought I hated the place while in reality I loved it but was just freaking out because huge financial commitment. Got a new car last year (so that I could lend my paid off car to my mom) that I had no problem affording but the entire time I was panicking and super paranoid about the dealership ripping me off even though I did a ton of research before even contacting them.

Parents screwed up taking loans and having to file bankruptcy. I just recently got a credit card since I had no credit to my name and was pretty much always told, "don't buy it unless you can afford it."

My dad just retired early, their house isn't paid off, they have two cars leased including a Lexus, and own a boat they don't use.

Boomers are absolutely some of the stupidest around when it comes to finances.

Before my dad died he was in credit card debt he really couldn't afford. He called his BiL who is a lawyer and asked him what he should do. The advice was "don't pay anything. You're credit will go to shit but you'll never pay them."

Apparently it's too costly for debt collectors to ever sue you so you'll just get letters about it. Also most of them will just cancel your debt after a certain number of years apparently.

Not saying this is good advice but hey

Lukey_Bug posted...

Before my dad died he was in credit card debt he really couldn't afford. He called his BiL who is a lawyer and asked him what he should do. The advice was "don't pay anything. You're credit will go to shit but you'll never pay them."

Apparently it's too costly for debt collectors to ever sue you so you'll just get letters about it. Also most of them will just cancel your debt after a certain number of years apparently.

Not saying this is good advice but hey

really? sad situtation all around

GranTurismo posted...

really? sad situtation all around

I mean not really. He just went on living his life for another 10+ years pretty comfortably. Not paying his debts really didn't affect him at all actually

pinky, when I was about 20 years old, I had a friend who was roughly the same age as me, but much more worldly, and he explained to me that if you have a credit card and pay off the debt at the end of each month, that's how you build up a good credit rating.

I really don't know much about personal finance, though. Anything else about money you've learned recently, that you should've known in your 20s, or possibly earlier?

Lukey_Bug posted...

I mean not really. He just went on living his life for another 10+ years pretty comfortably. Not paying his debts really didn't affect him at all actually

How much was it though in debt? Heard of people doing that

No. Becuase me and my family all keeps their finances to themselves. Sort of maybe becoming homeless We dont ask, we dont tell, and most importantly, we dont care.

Probably about 30000g spread over three cards.

My mother is bad with money because of mental health issues. My gf is bad with money because she never learned how to manage it. I'm really good with money but fell into a really bad situation in college that set me back a decade.

That being said I think I'm pretty good

Same. My dad used to make decent money when we were growing up, but things where always tight anyway. Then my parents divorced, sold the house on 2000 for some decent profit. My dad gave away all his part of the money so my mom could buy a house for us. Think she did like 65k down payment so the mortgage was only around 700 for a nice area. Then she married a year later....REFINANCED the house so she could pay for a wedding and BUY another house with my then stepfather. They divorced, sold the new house for like 20k profit, but now had to pay 1,100 from what used to be a 700 mortgage.

Eventually my dad didnt have to give her so much money so she couldnt afford to live there anymore. If she had NEVER refinanced, she could still be living there instead of federal housing and we could stand to inherit that house which is probably worth around 250k

S_A_S posted...

pinky, when I was about 20 years old, I had a friend who was roughly the same age as me, but much more worldly, and he explained to me that if you have a credit card and pay off the debt at the end of each month, that's how you build up a good credit rating.

I really don't know much about personal finance, though. Anything else about money you've learned recently, that you should've known in your 20s, or possibly earlier?

I knew that part. Here were the parts that I learned since then:

• Don't borrow money you don't have, unless it's for something you need and/or something that will reliably generate wealth or reduce costs. E.g. don't finance your furniture or a car beyond your means. Do get a mortgage, maybe.
• Never justify buying things on finance based on being able to keep up with the monthly repayments. If you have to finance something, only justify it based on how much you are prepared to lose and how quickly you can have equity.
• Don't buy things on your credit card unless you can pay off the full balance each month. Don't fall into the trap of leaving some leftover for the next month and justifying the interest. This is the slippery slope that leaves even smart and sensible people into mountains of debt.
• There is literally no cost effective way to buy a car. The least shitty way is to buy it outright with cash. A car should cost no more than 10% of your annual income, generally.
• Add another 10% for general car costs.
• If you really want something you can't afford and you're thinking about putting it on a 2-3 year finance agreement, think about how emotionally attached you are going to feel about it in 6 months time, and consequentially how bitter you're going to feel about those repayments once the novelty has worn off.
• Set aside a monthly budget for annual costs. If your car's accident and emergency costs 150 a year, then set aside 12.50 a month for it. That payment won't sting at all when it renews next year.
• Keep 3 months of salary in savings as an emergency fund. You don't touch this for holidays or toys or whatever. This is just there in case you lose your job and you need that cash there to keep you afloat.
• Finally, maybe live your life a little anyway. Certainly being financially covered is important, but no one sits on their deathbed and remembers their investment portfolio.

Definitely disagree on the car being 10% of your income thing even as a lifelong cheapass. The average salary in America is 60k. Driving a 6k used shitbox sounds like both a hassle for how uncomfortable it will be every time you're in it to/from waging it up and how likely and often something that cheap is going to need repairs. I'm on month 7 of a 4 year financing term and my only regrets are that hvac and radio controls shouldn't be touchscreen-based and I should have picked something comfortable to drive like this a long time ago since I don't feel tired after every drive

Being frugal is one thing but that just sounds like out of touch Dave "hey just take public transportation even if it's dogshit in your random city" Ramsey financial advice

MacadamianNut3 posted...

Definitely disagree on the car being 10% of your income thing even as a lifelong cheapass. The average salary in America is 60k. Driving a 6k used shitbox sounds like both a hassle for how uncomfortable it will be every time you're in it to/from waging it up and how likely and often something that cheap is going to need repairs. I'm on month 7 of a 4 year financing term and my only regrets are that hvac and radio controls shouldn't be touchscreen-based and I should have picked something comfortable to drive like this a long time ago since I don't feel tired after every drive

Being frugal is one thing but that just sounds like out of touch Dave "hey just take public transportation even if it's dogshit in your random city" Ramsey financial advice

The rule of thumb is 10-15% of your salary per year on car related payments, not the total cost of the car. So more like 6k per year in car costs. So maybe 300 per month on your car loan.

I guess some flexibility depending on your priorities and how much you drive.

The basic idea is a lot of people look at a finance agreement, think "Oh I can easily afford $600 a month" and get super excited about their new audi, without taking anything else into account. That's the trap to avoid.

I don't have too much of an issue with spending more on a car as long as you truly plan to drive it into the ground. Like 8+ years of usage. Having a constant large cat payment because you're always leasing or buying new cars seems unwise.

Issue is people will tell themselves they'll keep the car long term...but we all know most won't.