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debt(15 posts)

Jun 26, 2002 5:06 AM
How many of you are in debt from biking. I just can't help myself when I get paid I need to run to the LBS or online and buy something for one of my bikes. I'm sure most of you that have real jobs and are in the real world dont have to worry about that as much but I'm just a poor college student that can't hold on to my money when it comes to biking stuff!

Is there any cure? If you were in my position would you want to be cured?
re: debtjaybird
Jun 26, 2002 5:15 AM
Get a job at your LBS. Get on your knees and beg them for a minimum wage job, it is well worth it. I have a real job but there is no way I could afford my addiction without my "parts-time" job. I don't know how I will ever pay retail again...
Get out of itmoneyman
Jun 26, 2002 6:07 AM
Got news for you - You are in the "Real World" and that debt is going to follow you when you graduate from college. It will affect pretty much every aspect of your life, limiting your choices when your choices should be unlimited. It will determine where you take a job, what kind of living quarters you can afford, and how much money you can save for and spend on things like cars, stereos, BIKES, retirement, etc. Get a handle on your debt now and stop buying bike things on impulse. Biking is very important, but you really need to exercise some restraint when it comes to your spending habits.

I know your post was looking for humorous, perhaps empathetic responses, but this is pretty important stuff.

$$ (Certified Financial Planner, Certified Investment Management Consultant, 15 year veteran of the investment / financial planning business, owner of his own firm.)
re: debthikerryank
Jun 26, 2002 6:35 AM
The cure for me was to just go all out and buy the bike I wanted. It has stopped the upgrades, as there really isn't much to upgrade any longer. When I bought the bikes, I swapped all the parts to what I considered the best. Now I just need to upgrade from Ultegra to Dura Ace and there will be nothing left. I will stop looking at magazines and only ride by myself so I don't learn what is the newest, lightest, next best thing. Now I ride a tricked out 5500, Fuel 98, and Bruiser, and have no desire to buy another bike as I would have to start keeping them in bed with me if I did. I spent a quarter of my income on bikes and bike related crap this year, and now really don't have much more I want to buy. A set of rollers and gruppo upgrade and I'm finally done. Of course it really would be nice to have a ti bike to mix in with the CF...
re: debtbrider
Jun 26, 2002 6:46 AM
Moneyman can probably back me up on this with better numbers, but I saw a video last week that went through what it actually takes to retire debt. The example used was just overspending your budget by $20 a week (easy to do on bike parts) over 3 years. At the end of 3 years, you're $3000 in debt (ignoring the compounding interest). If you were to pay off that debt over 3 years, it would take over $2700 per year to pay off $1000 per year of debt. How does that sound for a good investment.

Here's another thing to consider (and this is something most financial planners WON'T tell you) -- use the rule of 72 and investment interest to compute what you'll REALLY need to retire. The rule of 72 says to take the inflation rate and divide that into 72, and that gives the number of years for your money to lose half its buying power (it's worth half as much as today). Likewise, take an interest rate and divide that into 72 to get the number of years for your invested money to double. Any way, say you're 29 now and the inflation rate is 4%. The rule of 72 says your money loses half its buying power every 18 years. Say you want to retire at 65 (36 years from now). That means your money will be worth ONE FOURTH of what it is today! So say if you were to retire today, you'd want something like $50K income. So if you wanted the same buying power at retirement at 65, you'd need to have an income of $200K to have the same lifestyle. That money needs to come from your investments (you're fooling yourself if you think Social Security is going to be there). Decent investments will return 8% (safe investments that you need to do at that time). That means you'll need $2.5 MILLION invested by that time. Start now. Most financial planners don't tell people this information because it would be so discouraging that most people would never start, and think it's better for them to have something (even if it would never be enough) than nothing. For a lot of people beginning their retirement savings later in life, it would take more than their take-home pay to invest enough to retire on.

Don't get into the debt trap. Just don't do it.
great post-thx for succinct advice!AllisonHayes
Jun 26, 2002 7:28 AM
somewhere I recall reading the avg credit card debt is now over $8,000 with an interest rate of 17%. Money market rates are now 2%; the stock market is negative. You get hit with fees on everything.

And what about the regressive tax structure? Wages are taxed; property tax; sales tax; mutual fund gains are taxed (in the good old days); Medicare tax; SS tax; healthcare costs are skyrocketing & healthcare plan coverage is worse that ever and is still heading south.

I would like to avg 8% return.
real estatemr_spin
Jun 26, 2002 7:49 AM
If you want 8%, there's still real estate! Mortgage interest deduction and no tax on profits up to $250K for single, $500K for married. If you can't get 8% on real estate, you don't deserve it!
Most Financial Plannersmoneyman
Jun 26, 2002 1:34 PM
Your statement "Most financial planners don't tell people this information because it would be so discouraging that most people would never start..." is patently untrue. The Certified Financial Planner Boards Standards of Professional Conduct, to which all CFP designees must adhere, states:

"In deciding what is right and just, a CFP Board designee should rely on his or
her integrity as the appropriate touchstone. Integrity demands honesty and candor which must
not be subordinated to personal gain and advantage."

We have to tell the truth even if it means that we give up some personal gain. What you are saying may be true of someone who sells financial products but is NOT so for a Certified Financial Planner.

It is relatively easy to get licensed to sell financial products. It takes a great deal more dedication, experience and education to be a CFP.

Other than that, I think you are spot-on with the rest of your example.

You need to change that nowhrs
Jun 26, 2002 7:07 AM
It's a habit, and if you get in the habit of spending more than you're taking in, you will continue to do that no matter how much you make.

Start by assessing your budget...track everything you spend for about 3 months. Once you see where your money is going, identify the critical items (food, rent, bills). The rest is your money: save some, pay down debt with some, and have some fun with some. Develop a budget and stick to it.

This is important, if you start now you'll be in a much better position financially throughout your life. Having money doesn't guarantee happiness, but being in debt is not fun and makes being happy much harder.
re: debtGregJ
Jun 26, 2002 7:09 AM
A great read for personal money management is a book called, "Your Money or Your Life." It is written by Joe Dominguez and Vicki Robin. I will say things are a bit different than when I was in college, none of my friends had credit cards, we lived on student loans, very small paychecks and a trickle of money from our folks. I am probably lucky to not have had the problems with discipline and credit cards at that age.
This board pervades an attitude of "if it feels good, buy it." That's fine for the wealthy that frequent here, but for the rest of us it is a budget fallacy. Cycling can be enjoyed for a very modest amount of cash. The differences between equipment that is cheap or expensive is minimal and very much overstated by the free spending advocates that reside here. Tighten your belt if you need to, enjoy what you have. Look forward to the day when you have a bit more cash flow to purchase the newer stuff, even then do it modestly.
Everybody worries about money, the poor on getting it and the debt ridden on getting out of it and the wealthy on keeping it, have you seen what the markets are doing lately?
watch the debtColnagoFE
Jun 26, 2002 8:16 AM
a good rule of thumb is to only pay for stuff on credit when you can pay cash or pay the entire balance off at the end of the month. credit card debt will bury you. the only loans i have now is for one of my cars and the house mortgage. i just don't understand people who have $20k+ debt on a credit card!
This is the only way to live IMO. -nmTig
Jun 26, 2002 8:21 AM
watch the debtbrider
Jun 26, 2002 11:22 AM
Or, when you use the card for something, deduct that amount in your check register just like you'd paid by check. Then, when the credit card bill comes, you've already "paid" for it, and you can write the check for free. Avoids ANY interest payments (as long as you don't do cash advances).
re: debtAkirasho
Jun 26, 2002 11:57 AM
... $5000 worth of bike debt... or $5000 worth of $5 crack whores... I could spend the money on a worse vice...
re: debtfatguyonalittelbilke
Jun 26, 2002 9:42 PM
The way I do it is if I cant pay for it in cash
then I will just wait or not get it.Im now 28 and am doing really well for some One my age. Bought my cars that way and my first house also, The look on the loanofficers face was worth a million $$$$.