Debt Myths: Debt Is (Not) a Tool
We are often told that OPM (other people's money) is the way to wealth. While there may be some truth to that statement, most of us do not understand how to use OPM. In this chapter of The Total Money Makeover, Dave begins to list some very common myths about money and then give his answer to them.Here are a couple of my favorite "myths vs. truths":
- Myth: "If I loan money to friends or relatives, I am helping them." Truth: "If I loan money to a friend or relative, the relationship will be strained or destroyed. The only relationship that would be enhanced is the kind resulting from one party's being the master and the other party a servant." I have had this happen. We borrowed some money from relatives. They never held it over our heads in any way, but I knew. I couldn't wait to get it paid off. When we wrote the check it was one of the best feelings!
- I like this one just because of the way Dave writes the "truth" part. Myth: "Cash Advance, Payday Loans, Rent-to-Own, Title Pawning, and Tote-the Note Car Lots are needed to help lower-income people get ahead." Truth: "These rip-off examples of predatory lending are designed to take advantage of lower-income people and benefit only the owners of the companies making the loans." How do you really feel, Dave? Seriously, if you ever get a chance to see how much the annual percentage of the interest is at Payday loan stores, you would be shocked. Some are as high as 900%!
- Myth: "'Ninety days same as cash' equals using other people's money for free." Truth: "Ninety days is not the same as cash." When we agree to pay for something in this way, we add a great amount of risk. Also, if we don't pay off the item in those 90 days (or one year, or whatever), the interest is staggering (usually around 30%), and is added to the original price of the item, even if you've paid off almost all the price! Finally, if you walk in with cash, you might be able to get that same item cheaper anyway.
- Myth: "Car payments are a way of life; you'll always have one." Okay, how many of you think this way? Most of us. But notice the Truth part: "Staying away from car payments by driving reliable used cars is what the average millionaire does; that is how he or she became a millionaire." To be perfectly honest, this one section is worth the price of the book if it will change your mind about car payments. I know I have one right now, but my goal is to make this my last one!
Most of the remaining part of the chapter deals with credit cards. We will have a ton to say on this site about those, so I won't list anymore "myths." This chapter continues to deal with our attitudes about money and debt, and it really gets the reader to think. When we are honest, most of us have said similar things to some of the myths listed in this chapter. When we face the truth, though, we see money working in a different way.
1 comment:
I'd have to say on the first one, it can at times depend on your family. I borrowed money from my parents to buy a car in college, and it never was a negative factor. They allowed me to pay as I could when I could, and I did. However, I try not to borrow from family or do business with family/friends because I do recognize that usually it will be a bad situation. If the loan will cause money to be tight by the lender, or if the payer won't pay as planned, it can be extremely troublesome in the relationship!
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