“What is so Special about the 30 Year Mortgage” by Peter Williams in today’s [Feb 1, 2011] Wall Street Journal dispels some myths and raises interesting questions. The United States has for a long time encouraged people to buy their homes. This is a good idea: rule by the middle class, ‘those who possess the goods of fortune in moderation’ (Aristotle) requires that there be a middle class, and that they have property. Alas, the implementation did not leave them much of a property stake. People who owe more than the property is worth not only do not own property, but have a strong motive to shed themselves of the very idea that they ever owned it. The long time mortgages with low down payments do not build property ownerships.
Now, our home is paid for. Was a fifteen year mortgage to begin with, and we had EVERY intention of making it wholly ours from the beginning. Paid it off early. And when we bought, we bought a home that was less than we could have gotten, deliberately. Indeed, we’ve mostly, for quite some time now, made it a practice, in general, to live under our means, providing a greater cushion for emergencies and potential income losses or other changes of circumstances.
Major purchases, other than this house–cars, appliances, electronics, whatever: saved for and paid for in cash or cash equivalent (check or debit card).
“[T]he goods of fortune in moderation” is key to a solid middle class, and a solid middle class is even key to long-term wealth for the putative upper class, for without such a middle class, the means to assure long-term wealth become shaky in a republic. Of course, our republic is trending toward an oligarchy (rule by an elite) with a veneer of democracy (rule by mob), and the oligarchs seem to have little interest in even their own grandchildren’s future, “planning” ahead only so far as their next short-term “killing”.
Well, as usual I’ve wandered off the reservation a bit. *heh* Pournelle’s original comment, and his recommended reading material (I fixed his link to point to a non-registration reproduction of the article) are worth reading.
My wife and i ditched our last “credit” card long ago. Every car we’ve bought for the last 15 years we paid for in cash.
I look forward to the day when my mortgage is paid off. That
day WILL come.
After years of credit misuse, I never want to fall into the traps it lays for the unwary again.
Amen, Perri. You may be preaching to the choir here, but it’s always worth hearing testimony from another who’s discovered financial sanity.
BTW, there is one legitimate use for credit cards. IF three conditions apply, then I feel it’s OK to use a credit card:
1. The credit card company offers (preferably generous, extensive) extra protection on purchases that are a good “investment” including extended warranties, etc.
2. The purchase under consideration is relatively large–electronics, etc.
3. You already have the money IN THE BANK, set aside for the purchase and can–and WILL, and DO–pay the purchase off before ANY interest is charged on the purchase.
Otherwise, using a credit card is strictly for losers.
I’ve used nothing but a debit card for years now. Before them it was handy to carry plastic when on vacation for places that did not honor travelers checks, or simply emergency’s, but since debit is recognized the same as those usury ‘loans’ not a damnable reason to make someone else rich.
Exactly, Fits. Of course, credit cards are almost exclusively used by folks to “buy” stuff they cannot afford to actually buy. It’s a sign of greed and immaturity. (Hmmm, note to self: why not shorten “greed and immaturity” to “stupidity”?)
My husband and I only have one credit card through USAA, and we pay it off, IN FULL, at the end of the month. (I think we’ve only paid interest on it once or twice. Credit card company hates us…)
The only reason we have one is because we’re in our mid-twenties and we figured that we needed to establish a credit history; otherwise we’d continue our habit of buying things with cash/cash equivilents.
We did take out a loan to pay for our car, but the loan was half of what the car was worth. (Yes, our down payment was half the cost of the car.) We bought that car just over a year ago, and we have less than $1000 until the loan is paid off.
Your thoughts on this, TWC?
Good on you, MiniMedic, for immediately paying for whatever you charge on the card.
OK, that’s one more valid reason, assuming y’all will one day go for a 15-year home mortgage (which you will accelerate payoff on, right? :-)).
Paying off ANY loan (such as for your car–and good on you for at least putting half down on it!) as quickly as possible is a Very Good Thing, IMO, especially when asshats are playing weird games with the money supply, actively preventing obtaining the energy we need to fuel our economy and selling the country off to foreigners who do not have our best interests at heart (heck, I sometimes think the asshats in D.C. are foreigners with interests at odds with what is good for America… ).