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Credit, "Status", to have and to have not...
Old 08-25-2003, 09:43 AM   #1
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Credit, "Status", to have and to have not...

Every once in a while, I think of an awakening I had long ago. You all will laugh at me... but let me set the stage for it first...

My parents never lived in a new house. Waste not, want not. Their first new car, I can remember going with them to pick it up. It was a bare-bones model 2dr. Options? I can't think of a single one that it had. Basic transportation. And it was run till it had rust holes all over, which wasn't really all that long back then. But longer than most people we knew.

Fast forward some years, after working to put myself through school, getting married to a wonderful (and frugal!) woman from a "poor" family (like Ronald Reagan said "we didn't know that we were poor").

We had been living in an apartment, and my wife and I were just starting on existing-house hunting. We were in a bank, and the loan officer went to get something. He was gone a while, and we couldn't help but overhear a conversation from another desk.

The customer there was an average schmuck working in a relatively low-level job in a can manufacturing plant. The loan officer said " what did you want this money for?"
The man replied "to buy a new Cadillac".
We just about gagged! You mean, someone would be driving around in a new Cadillac, that they really didn't OWN IT?
They borrowed money to buy something like that? (OK, I said you'd laugh at me :P)

This was totally foreign to us. You bought something ONLY if you could afford it (reasonable mortgage excluded, as that was shelter). And "afford" did NOT mean borrowing money to buy it! If you can't afford it, don't buy it! What's with this borrowing from the future to spend it today? It sounds like the road to ruin!

Are there people who just think that they "deserve" everything NOW? With this awakening, I then looked askew at most new car purchases that people made. And fancy houses. I now saw the chasing status that was creeping up everywhere. Its show. The people with the actual money are probably NOT most of them that look like they have it (hey, The Millionaire Next Door concept, but years earlier!)

And the words "revolving credit" that was often heard back then, now had new meaning. I basically ignored those words and the concept before, as it seemed like insanity to me.

Although I viewed things differently after that, I certainly never let go of the economic programming I received growing up. As a self-taught DIY guy, I quietly snicker at many objects I see people value. They buy them with big loans, and don't have a clue how they operate. They are unable to maintain, diagnose, or repair them, whether its a car, washing machine, or you name it. Just more $$$. Hey, big $$ repair bills even have become a status item!

I remember a common everyday phrase from my youth. Relatives were always saying it - "Make do, or do without".

I wonder when was the last time I heard someone say that, other than myself! It's been many years.

To me, this status "bought" with borrowed money is total foolishness, and I stopped being impressed.

Maybe this is why I'm ER'd, while many others...
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Re: Credit, "Status", to have and to have not...
Old 08-25-2003, 03:05 PM   #2
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Re: Credit, "Status", to have and to have not...

Hi Telly! I don't dispute your point of view, but things
are very different today. Even though we are relatively debt free, I could live "high on the hog" until my demise
if I wanted to access my excellent credit. I choose not to do so. My former spouse needs the prestige associated with big spending/high consumption. It's fine with me as I no longer have to pay for it. Another thing. If everyone adopted the no-debt ER lifestyle,
the economy would grind to a halt. This would hurt everyone, including us debt-free early retirees.
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Re: Credit, "Status", to have and to have not...
Old 08-26-2003, 07:30 AM   #3
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Re: Credit, "Status", to have and to have not...

Hi john!

As Granny of The Beverly Hillbillys used to say, "$40 Million will be gone in no time at all usin' store-bought soap"!
No, I haven't started cooking up lye soap out by the ce-ment pond (at least not yet ).

I HAVE had a horrible thought... what if a large portion of the US economic expansion of the last 30 years or so was caused by moving from a low-credit utilization to a high-credit utilization society? Fueled mostly by the baby boom generation, and those that followed? Only can go so far out on a limb before it starts to bend and just won't take anymore.

Maybe growth will now be low for many years, as some are predicting.

But even worse would be the major recessionary (depressionary?) effects if everyone woke up, and wondered "what the h*ll am I doing?" and decided to start suddenly living within their today's means. What a bad jolt that would be. Even if only 10% of them started to do that.

So maybe its best for us ER'd folks, and those who are younger and want to ER, to be the ones living within their means. That should be such a small slivver of society, the economic impact should be slight!
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Re: Credit, "Status", to have and to have not...
Old 08-26-2003, 07:48 AM   #4
 
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Re: Credit, "Status", to have and to have not...

Telly,

If you have not already, read my thread I posted in SWR regarding losing jobs. Obviously, if we lose enough jobs, people 'will wake rather quickly' and even if they don't wake up they will quickly run out of money to spend. - I think deflation is a real threat and may be inevitable.
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Re: Credit, "Status", to have and to have not...
Old 09-06-2003, 08:59 PM   #5
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Re: Credit, "Status", to have and to have not...

Quote:

The customer there was an average schmuck working in a relatively low-level job in a can manufacturing plant. The loan officer said " what did you want this money for?" The man replied "to buy a new Cadillac". We just about gagged! You mean, someone would be driving around in a new Cadillac, that they really didn't OWN IT? They borrowed money to buy something like that? (OK, I said you'd laugh at me )

End Quote:


OK, Telly, I'm not laughing at you but... I just bought a Cadillac and no, I didn't have to borrow a cent to do it. It isn't new but it looks and drives as if it was. I sold some mutual fund shares and used a little cash from my checking account. Did I NEED this car? No. Did I WANT it? YOU BET! It's been a life-long dream of mine to own and drive a really nice car at least once in my life. I've driven econo-boxes all my life and usually keep them for at least 10 years. This car is part of my long-term financial plan and is a special treat that I have worked hard and saved a long time to buy. I don't know how long I will have this car... maybe only for a year or three. I shopped long and hard to find just the right one and got a great deal on it.

Had my choice been to buy this car or ER, well... I'd probably keep right on driving my little Ford Ranger pickup. Since that was not the choice, however, what the hey.


Ed_B



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Re: Credit, "Status", to have and to have not...
Old 09-06-2003, 10:21 PM   #6
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Re: Credit, "Status", to have and to have not...

You're obviously from a little different generation than I am, Ed.

A `year or three' from a used Caddy seems about right, however. Next time, consider a used Jap car (like a Lexus, Infinity or even a cheap Camry or Maxima) and you'll get MANY more years out of it.

They cost more than caddies but remember, you get what you pay for.
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Re: Credit, "Status", to have and to have not...
Old 09-07-2003, 03:48 AM   #7
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Re: Credit, "Status", to have and to have not...

Hey Jack! Man you are way off on Cadillacs. Now, I
grant you that there are other fine cars out there.
However, I am almost 60 years old and have owned
about everything with wheels, including three (3)
Sevilles (this is back in my "captain of industry" period).
No other vehicle even came close for value received
and resale value retained. Example: I bought a 1988
Seville with 3000 miles on it in 1988. When I sold it in 1998, it still looked and ran like it just rolled out of the showroom. Had almost 200,000 miles and the original
sparkplugs.
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Re: Credit, "Status", to have and to have not...
Old 09-07-2003, 11:22 AM   #8
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Re: Credit, "Status", to have and to have not...

Quote:
Next time, consider a used Jap car (like a Lexus, Infinity or even a cheap Camry or Maxima) and you'll get MANY more years out of it. They cost more than caddies but remember, you get what you pay for.
I am 62 years old and I have never owned an American car since I sold the one my dad gave me in high school. I have had some American pick-ups, all good. I had Euro-cars, and about 6 years ago switched to an Acura Integra, a pocket rocket with the GSR engine.

But recently I read a new car quality survey by one of groups that consults with fleet buyers, etc. Can't remember which one. The survey tallied problems that needed to be fixed. I think a Lexus was on top; second was the new Cadillac. The nice looking one that you see aroung a lot. Buick was also very high. Then a potpourri of Japanese cars. The only high ranking Euro car was Porsche. Mercedes and BMW were way down there.

So given higher used car prices for Japanese makes, it may be that a luxury car buyer looking for a used, quality car should look closely at Cadillac and Buick. I know I would if that were the kind of car I would like to drive.

But I think my next car is going to be that new Mazda RX-8. When the early RX-7 came out in the 70's, I really wanted one, I tried to convince my wife that there was plenty room for our baby in the area in back. She wasn't convinced, so we didn't get it. But now he and his brother are 6 feet tall, and driving there own wheels, so it isn't a factor anymore. I know those Wankel engines are problem prone, leak oil and burn gas. But they have an incredibly free-revving feeling that is very nice.

Mikey

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Re: Credit, "Status", to have and to have not...
Old 09-09-2003, 06:10 AM   #9
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Re: Credit, "Status", to have and to have not...

I have this 1973 book by J.R. Olson - Make Money Owning Your Car - the gist of which is the reappreciation of cars after 10 yrs - the trick being picking the 'right' car.

I think the RX 7 might be one of them.

My efforts over the years were less than stellar - auto wrecks, burned out on DIY repairs - but I babbled with an XKE, Olds Toranado, and a 1968 Camaro over the years.

In Seattle and Denver days drove sports cars. As a flatlander in ER - drive pickups. I count my 1999 Silerado as entertainment as well as transportation.
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Re: Credit, "Status", to have and to have not...
Old 09-09-2003, 07:29 AM   #10
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Re: Credit, "Status", to have and to have not...

I hate car problems also, and being almost completely
non-mechanical, I can't fix them. However, we mostly drive older high mileage vehicles. I can't see tying up
my scarce resources in such a rapidly depreciating asset.
I do have my standards though and have not yet been
reduced to driving "beaters". I make an exception for my motorcycle (buy new) because mechanical problems
on a bike can be significantly more dangerous than
with a car. Besides my bike, we currently have a 97
Dodge Ram pickup and a 91 Jeep Cherokee. Even adding in the bike, my total investment is around
$15,000.
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Re: Credit, "Status", to have and to have not...
Old 09-09-2003, 07:49 AM   #11
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Re: Credit, "Status", to have and to have not...

As a teenager - loved to work on cars. At age 60 - I no longer change oil. And the depreciation curve is a luxury expense - livable for now.
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Re: Credit, "Status", to have and to have not...
Old 09-09-2003, 08:11 AM   #12
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Re: Credit, "Status", to have and to have not...

I made money on my first 3-5 cars....I kept getting hit and took the settlement money instead of fixing the damage and in most cases continued driving the car.

It's not recommended as a strategy, though! It certainly wasn't my hope or intent to get hit, and I'm thankful I didn't get hurt more than sore muscles.
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Re: Credit, "Status", to have and to have not...
Old 09-09-2003, 08:31 AM   #13
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Re: Credit, "Status", to have and to have not...

I know of two intersections in New Orleans where teenagers ran stopsigns - now have traffic lights. I don't know if I made money(after depreciation) by driving dented cars and keeping the money - but (ho! ho!) I may have improved public safety!
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