Let's Talk Money

Things that don't belong anywhere else. (Check first).

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Tyndmyr
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Re: Let's Talk Money

Postby Tyndmyr » Tue Feb 16, 2016 4:53 pm UTC

I agree with the latter. Diversification is of value, but...long term, value is value. Long as you've got the constitution to not twitch because prices are bouncing, take the better long term gains, after accounting for expenses. Expense minimization is one of the cheapest things you can do to improve your overall take.

I suppose there are deltas where the added risk from not diversifying is worth a slight cost increase, but given historical trends and current rates, I'd eat the risk(and practically speaking, do, since my investment spread is aggressive as hell, and aimed to minimize fees).

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sardia
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Re: Let's Talk Money

Postby sardia » Wed Feb 17, 2016 11:48 pm UTC

Tyndmyr wrote:I agree with the latter. Diversification is of value, but...long term, value is value. Long as you've got the constitution to not twitch because prices are bouncing, take the better long term gains, after accounting for expenses. Expense minimization is one of the cheapest things you can do to improve your overall take.

I suppose there are deltas where the added risk from not diversifying is worth a slight cost increase, but given historical trends and current rates, I'd eat the risk(and practically speaking, do, since my investment spread is aggressive as hell, and aimed to minimize fees).

You're self employed though, right? Doesn't that mean 401k options for you are very different from say, a typical company like mine. Aka, I have to go sp500 index or pay out the nose for the default ("active management funds") with high expense ratios. Or do you have more choices?

Yea, I better change my 401k settings from the default to the s&p 500 only fund.
Last edited by sardia on Sat Feb 20, 2016 5:12 am UTC, edited 1 time in total.

Tyndmyr
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Re: Let's Talk Money

Postby Tyndmyr » Fri Feb 19, 2016 5:50 pm UTC

sardia wrote:
Tyndmyr wrote:I agree with the latter. Diversification is of value, but...long term, value is value. Long as you've got the constitution to not twitch because prices are bouncing, take the better long term gains, after accounting for expenses. Expense minimization is one of the cheapest things you can do to improve your overall take.

I suppose there are deltas where the added risk from not diversifying is worth a slight cost increase, but given historical trends and current rates, I'd eat the risk(and practically speaking, do, since my investment spread is aggressive as hell, and aimed to minimize fees).

You're self employed though, right? Doesn't that mean 401k options for you are very different from say, my a typical company like mine. Aka, I have to go sp500 index or pay out the nose for the default ("active management funds") with high expense ratios. Or do you have more choices?

Yea, I better change my 401k settings from the default to the s&p 500 only fund.


I'm both. Traditional job and a business. This grants a number of interesting options, but in my case, company provided 401k options are still best. Particularly because a degree of matching is provided. Not maxing that would just be leaving money on the table, but even after hitting that bar, I've got a decent selection of funds(maybe a dozen or so) through the company 401k. And there's the convenience factor of not splitting management through multiple interfaces, though when I engage in active trading outside of retirement planning, that happens anyways. I only dabble in that, though, so it's not a big deal. More educational, hobby than a substantial moneymaker.

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sardia
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Re: Let's Talk Money

Postby sardia » Sat Feb 20, 2016 5:23 am UTC

What's your expense ratios? Also the sector of the economy or world it covers? For example, my corporate options are
sp500 expense ratio .2%
Small cap index 1.14% (total ripoff considering it's a index fund, even if it is a small cap)
mid cap 1.23% (wtf, a mid cap fund that cost more than a small cap fund? doesn't even make sense)
Developing countries .98% (I don't understand who chose these options, but they're all overpriced in expenses)
Money market .51% (this is a joke, why would you put 401k into a money market fund, and then charge more than a equivalent T-bill AND gets lower returns?!!)
PS combining these crappy options together nets you the target date fund,(which is the default choice) 1% expense ratio.

Tyndmyr
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Re: Let's Talk Money

Postby Tyndmyr » Wed Feb 24, 2016 6:39 pm UTC

Went to check, didn't recall password, and apparently those are handled via snail mail, soo...aaaany minute now. *sigh*

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Isaac Hill
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Re: Let's Talk Money

Postby Isaac Hill » Sun Apr 03, 2016 9:08 pm UTC

Did this thread peter out because Tyndmyr's still waiting for their snail-mail password?

slinches wrote:Now I'm in a position to pay off my house before I turn 40 and still have more than enough savings to be able to start a small investment portfolio on top of my retirement funds.
Congratulations. I assume you didn't buy your house before age 10, so you'll save quite a bit in interest compared to a typical 30 year mortgage. I paid off my house in under 10 years, and saved just over $200k in mortgage interest. Now, I'm trying to figure out what to do about that investment.

I'm making the max contribution to my TSP (401k equivalent), and have some left over. I don't have the time or expertise to research enough individual stocks to be diversifed. I'm wary of stock index funds, (to the extent that my TSP is all government bonds), because I'm uncomfortable with the idea that people don't know what companies they own. That prevents business owners from making informed decisions about the morality of their companies' business practices.

There are funds which promise to invest only in morally responsible companies, for varying definitions of morally responsible. Has anyone here looked into those? I've also been thinking about I-bonds, which guarantee a rate of return higher than inflation, but never less than 0% if there's deflation.
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sardia
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Re: Let's Talk Money

Postby sardia » Wed Apr 06, 2016 4:08 am UTC

Isaac Hill wrote:Did this thread peter out because Tyndmyr's still waiting for their snail-mail password?

slinches wrote:Now I'm in a position to pay off my house before I turn 40 and still have more than enough savings to be able to start a small investment portfolio on top of my retirement funds.
Congratulations. I assume you didn't buy your house before age 10, so you'll save quite a bit in interest compared to a typical 30 year mortgage. I paid off my house in under 10 years, and saved just over $200k in mortgage interest. Now, I'm trying to figure out what to do about that investment.

I'm making the max contribution to my TSP (401k equivalent), and have some left over. I don't have the time or expertise to research enough individual stocks to be diversifed. I'm wary of stock index funds, (to the extent that my TSP is all government bonds), because I'm uncomfortable with the idea that people don't know what companies they own. That prevents business owners from making informed decisions about the morality of their companies' business practices.

There are funds which promise to invest only in morally responsible companies, for varying definitions of morally responsible. Has anyone here looked into those? I've also been thinking about I-bonds, which guarantee a rate of return higher than inflation, but never less than 0% if there's deflation.

Would you take our advice if we told you to embrace mutual funds that buy & hold stocks? Nothing fancy, just something that tracks the s&P 500 index. Vanguard for instance is the gold standard that started index funds. Ask any paranoid investor, and they absolutely love I bonds because they provide inflation protection, returns, and tax free. The problem with them is they have low returns, you're loaning money to the safest investment in the world after all.

As for moral investing, I can't offer you any advice there, nor can I give any assurances about the moral direction of the top 500 companies in the US. The rest of the standard investing advice still applies though. Max out your TSP and max out your IRA. Since TSP are for civil servants, you probably aren't eligible for a Health Savings Account. Lastly, be mindful of the fees that you're being charged.*

*unless you're entirely in 100% in T-bills straight from the Treasury department. If so, dear god, you're playing it super safe with your investments. I assume you're ok with the low yields compared to other people?

Question regarding some fancy financial footwork.
If your parents don't fund their IRA Roth**, could their son fund the Roth IRA for them, and have them designate the son as the beneficiary after they die? The con is you have to work pretty closely with your parents and their personal information for years on end. The PRO is you get to double or triple your IRA limit(and thus tax savings) in theory.
**Roth IRAs do not require withdrawals nor have age limits but do have income limits. There's nothing illegal about each maneuver. Gifts to parents are tax free for amounts less than $14k. Creating a Roth IRA with kids as your beneficiaries upon death is also legal. The rare part is getting your parents cooperating and eating a substantial loss in income. (401k match, Your IRA 5.5k, Mom's IRA 5.5k, Dad's IRA 5.5k, HSA 3.3k) To have all these factors come into play at once should be uncommon. Probably limited to 2nd generation kids interacting with 1st financially illiterate parents.(immigrant's kids or first kid to go to college)

Tyndmyr
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Re: Let's Talk Money

Postby Tyndmyr » Thu Apr 07, 2016 7:56 pm UTC

Isaac Hill wrote:Did this thread peter out because Tyndmyr's still waiting for their snail-mail password?


It probably showed up, and is sitting in a pile of unread mail. Entirely forgot about it, and normally can't be bothered to sort through the crap. Probably should do that. Optimizing for low cost funds is a sound strategy.

Also, it's awful that things still happen via snail mail.

There are funds which promise to invest only in morally responsible companies, for varying definitions of morally responsible. Has anyone here looked into those? I've also been thinking about I-bonds, which guarantee a rate of return higher than inflation, but never less than 0% if there's deflation.


Not specifically, no. While I have some selection through my 401k program, it's not limitless, and in any case, I mostly discard non financial concerns.

I could see excitement about a given tech or whatever as a motivation to invest in a specific company, perhaps, but I can't be bothered to pursue funds to the same degree. It's unlikely that their morals will exactly match mine, and the resulting effects, through layers of indirection, seem dubious. Money being pretty fungible, it doesn't seem likely to have a terribly big effect. If a stock is undervalued, then other funds can just buy it up, and little difference happens in the end unless you can get a large chunk of the market on board with a given plan, which requires wide agreement on what ethics, and ugh.

Index funds do seem like a much surer bet from my perspective. Money in my hands can be used pretty directly to further ethical goals, if I wish.

Having home debt entirely paid off before 40 sounds delightful. I'm pretty low debt, but currently renting, so, this seems unlikely unless I move away from the east coast. Home prices here are stupid. Every now and then I cast an envious eye at midwest housing prices, but then I remember what living in the midwest is like.

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Isaac Hill
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Re: Let's Talk Money

Postby Isaac Hill » Sun Apr 10, 2016 8:18 pm UTC

Thanks for the advice, guys.

sardia wrote:*unless you're entirely in 100% in T-bills straight from the Treasury department. If so, dear god, you're playing it super safe with your investments. I assume you're ok with the low yields compared to other people?

I am actually maxxing out my TSP in the G fund, which is all U.S. government bonds, no stocks. Stocks provide a better rate of return, but I wouldn't feel comfortable if, every time I read about horrible business practices like car companies not doing recalls becuase it's cheaper to settle the wrongful death suits, or sweatshops abusing their employees so much they have to install nets to prevent suicides, I had to think, "How much money am I making off this?"

As a U.S. citizen, I'm already on the hook for whatever horrible things my government does. Plus, the government's currently running a huge deficit on those things. Eventually, they'll have to raise my taxes to pay for them, plus interest. By buying government bonds, I'm basically breaking even on the loans my government is taking on in my name.

I'm OK with a lower rate of return. I live pretty cheaply. Last year, I only spent 40% of my take home pay. The rest has been sitting in the bank, and I'm looking for a way to get a non-negligible rate of return on it. The I-bonds sound like the way to go.

The idea about investing through my parents' IRA sounds interesting, but they're already retired. Plus, my dad declared bankrupcy a few years ago due to medical bills. It might not be a good idea to have my finances tied up with his.

Tyndmyr wrote:Having home debt entirely paid off before 40 sounds delightful. I'm pretty low debt, but currently renting, so, this seems unlikely unless I move away from the east coast. Home prices here are stupid. Every now and then I cast an envious eye at midwest housing prices, but then I remember what living in the midwest is like.

At least you didn't buy your first house in early 2007. I did the responsible thing of putting 20% down on a 30-year, fixed rate mortgage to buy my house for about what the city appraised it at. A few months later, I got the new appraisal, which was about 80% of the previous value. The equity from my down payment had pretty much gone away.
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sardia
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Re: Let's Talk Money

Postby sardia » Sun Apr 10, 2016 9:50 pm UTC

For inflation protection, I bonds are probably your best bet, but please remember the $10k per year purchase limit per person. Lastly, talk to your financial advisor about your investment strategy. No stocks or moral investments only is definitely a conversation you need to have.

PS I don't suppose you would be ok with guilt payments? Go earn your higher returns at the stock market, and then every year, set aside a portion of your extra returns. Go donate it directly to charity. (Math bonus, reinvest all your returns, and ear mark it for charity in the future. The compounded nature of investing will allow you to donate more than setting aside money each year.)

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Re: Let's Talk Money

Postby Tyndmyr » Mon Apr 11, 2016 1:47 pm UTC

Isaac Hill wrote:
Tyndmyr wrote:Having home debt entirely paid off before 40 sounds delightful. I'm pretty low debt, but currently renting, so, this seems unlikely unless I move away from the east coast. Home prices here are stupid. Every now and then I cast an envious eye at midwest housing prices, but then I remember what living in the midwest is like.

At least you didn't buy your first house in early 2007. I did the responsible thing of putting 20% down on a 30-year, fixed rate mortgage to buy my house for about what the city appraised it at. A few months later, I got the new appraisal, which was about 80% of the previous value. The equity from my down payment had pretty much gone away.


Late 2006, if memory serves, which was just about equally bad. Fortunately, entirely free and clear of that now, without having to declare bankruptcy, but it WAS awfully upside down for a while there, which complicated things, and was a bit costly. I plan to go into buying a great deal more conservatively next time.

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sardia
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Re: Let's Talk Money

Postby sardia » Tue Apr 12, 2016 3:26 am UTC

Tyndmyr wrote:
Isaac Hill wrote:
Tyndmyr wrote:Having home debt entirely paid off before 40 sounds delightful. I'm pretty low debt, but currently renting, so, this seems unlikely unless I move away from the east coast. Home prices here are stupid. Every now and then I cast an envious eye at midwest housing prices, but then I remember what living in the midwest is like.

At least you didn't buy your first house in early 2007. I did the responsible thing of putting 20% down on a 30-year, fixed rate mortgage to buy my house for about what the city appraised it at. A few months later, I got the new appraisal, which was about 80% of the previous value. The equity from my down payment had pretty much gone away.


Late 2006, if memory serves, which was just about equally bad. Fortunately, entirely free and clear of that now, without having to declare bankruptcy, but it WAS awfully upside down for a while there, which complicated things, and was a bit costly. I plan to go into buying a great deal more conservatively next time.

How did you pay off a home but still rent? Did you sell your house and pay the rest of the mortgage off? Also, what's so bad about the midwest? or are you referring to the countryside?

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Re: Let's Talk Money

Postby Tyndmyr » Tue Apr 12, 2016 2:35 pm UTC

I owned then, got a divorce, she wanted the house(and attendant mortgage), so while it took a while to sort that out(refinancing a VA loan while upsidedown is apparently horrible), it ended up working out in the long run in that I'm free and clear on that score. Money punched into it until that point was all a dead loss, but no point crying over sunk costs.

The midwest, well...just a lack of stuff. Particularly the area where I grew up, visiting there is like travelling backward through time. Last time I visited home, they were enthused because they just got a local movie rental store. Mind boggling. I mean, people paying a grand an acre or less for property is amazing, but when you look at what's around, and the local job markets and stuff, it's just...ugh.

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sardia
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Re: Let's Talk Money

Postby sardia » Wed Apr 13, 2016 2:33 am UTC

Tyndmyr wrote:I owned then, got a divorce, she wanted the house(and attendant mortgage), so while it took a while to sort that out(refinancing a VA loan while upsidedown is apparently horrible), it ended up working out in the long run in that I'm free and clear on that score. Money punched into it until that point was all a dead loss, but no point crying over sunk costs.

The midwest, well...just a lack of stuff. Particularly the area where I grew up, visiting there is like travelling backward through time. Last time I visited home, they were enthused because they just got a local movie rental store. Mind boggling. I mean, people paying a grand an acre or less for property is amazing, but when you look at what's around, and the local job markets and stuff, it's just...ugh.

That sounds more like stereotypical "fly over country", aka rural america and not the bigger cities in the Midwest. I do understand the feeling, I remember my college days in the middle of Carbondale. The city limits had exactly 1 authentic-ish Asian restaurant, and it wasn't even that good. Finding any sort of culture that wasn't guns or nature was a dead end. Though I wouldn't go back for more, it was still a lot of fun though.
Back on topic of Inflation since Isaac brought it up. Have you tried I-bonds for inflation protection? Or are you not worried about inflation? Personally, I'm pretty light in inflation protection beyond what the stock market naturally provides.

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Re: Let's Talk Money

Postby Tyndmyr » Wed Apr 13, 2016 2:11 pm UTC

Yeah, guns and nature are fine, but...I like other stuff too. So, the search continues for a good compromise option.

No real inflation protection as such. My logic is that inflation is likely to bounce around a bit, but optimizing for growth should, in most scenarios, be the best way to handle inflation. It wouldn't protect against hyperinflation, but...feh. I'm not overly worried about the US economy going down that rabbithole. Lost earnings to hedge further against that seems like a poor bet.

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sardia
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Re: Let's Talk Money

Postby sardia » Thu Jun 09, 2016 8:39 pm UTC

Does anybody put any thought into the kinds of credit cards and how many they need? I was looking to lowering my utilisation ratio and get more rewards. Part of me thinks this is a waste of time and that I should just stick with the starter credit card I've used for a decade.

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Re: Let's Talk Money

Postby ucim » Thu Jun 09, 2016 10:57 pm UTC

I have a card for business and a card for personal stuff, to help keep them separate. I don't pay annual fees for any credit cards. I have a card in the AmEx family and a card in the MC/Visa family. In the AmEx family there are cards that give cash back; they are the best deal. That's what I pick from. Much better than points.

And that's it.

I got a few other cards for various reasons ($100 off if you apply for the {whatever} card; stuff like that) but I pretty much never use them.

Having more cards than you need works against you, credit-wise. In general, the full credit limit is counted as if you actually owed that money (because you could, without warning to the one examining your credit, owe that money). It's nice however to have a few alternatives if a card "doesn't work" in some given circumstance, especially when traveling.

The key to credit card use is to always pay the bill in full, every month, right away. Always.

sardia wrote:I was looking to lowering my utilisation ratio and get more rewards.
What is a "utilization ratio" and how does it give you more rewards?

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Re: Let's Talk Money

Postby sardia » Fri Jun 10, 2016 1:15 am UTC

I'm not a fan (aka I don't make/spend enough) of an annual fee either. How much cash back do you get per dollar? Like I currently get 1% cash back or 5% on specific things.

PS Your explanation on how credit cards affect your credit limit is flawed. For the Credit Card portion of your score, it is as follows.
Credit limit among all cards - (spent/total credit limit) = utilization %. Lower percentage is better.
# of credit cards( or number of accounts) more is better. Older is better.*
Opening a credit card will temporarily lower your score.

Utilization ratio - Percentage of credit limit used. Affects your credit score.
Rewards - Fancy version of cash back or other stuff like miles for airlines.

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Re: Let's Talk Money

Postby ucim » Fri Jun 10, 2016 2:28 am UTC

sardia wrote:How much cash back do you get per dollar?
Minimum 1%. 3% on some things, 5% on some other things. But mostly, it's 1%. I don't spend enough.

For cards that give points, it's usually a point per dollar, and then redeeming them the points are worth half a cent. A full cent under certain (hard to find) conditions. And it's a pain. (For example, to use points for flights, sometimes you have to exchange points for a voucher, and once you have the voucher, you can use the voucher towards flights. But by that time, you have already needed to make the reservation, so the voucher is useless, and nonreturnable. I had a shitton of points some time ago and gave them all away (to my sister in law) for flights she was taking, because otherwise they'd've gone to waste.

Cash back is cash. 'nuff said.

sardia wrote:Your explanation on how credit cards affect your credit limit is flawed.
Yeah... total credit limit and number of cards are different things. But in the end, each rating service has its own formula, and I don't see why they'd use "utilization %" as a useful metric. A CC company will simply extend you more credit as your utilization % rises, and will also raise your limit on request if you are in good standing. But it does make sense to me that the entire credit limit is seen as a liability.

That said, I am not actually privvy to their software.

The days of lots of credit cards being good, or even necessary, dates from when they were store credit cards good only at a certain store. You needed one for each store. But bank cards, good anywhere, pretty much scotched that.

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Re: Let's Talk Money

Postby Zohar » Fri Jun 10, 2016 12:48 pm UTC

As a newcomer to the convoluted, warped, and disturbing field of credit cards, I've learned the following:
1. NEVER close down a credit card, that lowers your score significantly. Therefor, don't open too many of them. Also, opening a new card lowers your score as well, so don't do it for just a limited time or a 1-time thing - if you're opening a card, commit to it.
2. Never spend more than a 1/3 of your limit on each card.
3. Obviously you should always pay all of your credit bills on time. That may be easier said than done.
4. When applying for a mortgage to buy a house or apartment (one of the main reasons to even have credit), one of the things the banks look for is how many lines of credit you have open. Every line of credit you have had open for over a year counts, and banks want to see you have three of them. The definition of lines of credit is flexible, and you can use multiple things:
a. Any credit cards you have.
b. Any student loans or car loans you have.
c. Rent that you're paying on a regular basis.
d. Weirdest of all - you can get signed on to other people's credit cards. There's a way to do this so you don't actually have control over their card, but you inherit their credit history for that specific card, including the length of time they've had it. And, it doesn't negatively impact them. So if you know someone who has good credit, you can do that as well to count as one of the lines of credit, and it can be a family member or just a friend (I've even heard of people helping out their babysitter in this way). This very clearly seems like a way for the system to discriminate against people who don't have wealthy friends, which is kind of terrible, but it's also how the system is set up and you should take advantage of it.

As for me and my husband (we're looking to buy a place), we both share one credit card, we have our monthly rent, and his parents signed us on their credit cards. I started with basically zero credit since I was new in the US, and now I have good credit, with long history, because I was lucky enough and the system is fucked up enough.
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Re: Let's Talk Money

Postby Zamfir » Fri Jun 10, 2016 8:33 pm UTC

Yesterday we signed the final papers for our new house... we're deeply in debt now!

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Re: Let's Talk Money

Postby sardia » Fri Jun 10, 2016 10:20 pm UTC

Zamfir wrote:Yesterday we signed the final papers for our new house... we're deeply in debt now!
congratulations.
How did you resolve the "how big is big enough?"question?

Zohar wrote:As a newcomer to the convoluted, warped, and disturbing field of credit cards, I've learned the following:
1. NEVER close down a credit card, that lowers your score significantly. Therefor, don't open too many of them. Also, opening a new card lowers your score as well, so don't do it for just a limited time or a 1-time thing - if you're opening a card, commit to it.
2. Never spend more than a 1/3 of your limit on each card.
3. Obviously you should always pay all of your credit bills on time. That may be easier said than done.
4. When applying for a mortgage to buy a house or apartment (one of the main reasons to even have credit), one of the things the banks look for is how many lines of credit you have open. Every line of credit you have had open for over a year counts, and banks want to see you have three of them. The definition of lines of credit is flexible, and you can use multiple things:
a. Any credit cards you have.
b. Any student loans or car loans you have.
c. Rent that you're paying on a regular basis.
d. Weirdest of all - you can get signed on to other people's credit cards. There's a way to do this so you don't actually have control over their card, but you inherit their credit history for that specific card, including the length of time they've had it. And, it doesn't negatively impact them. So if you know someone who has good credit, you can do that as well to count as one of the lines of credit, and it can be a family member or just a friend (I've even heard of people helping out their babysitter in this way). This very clearly seems like a way for the system to discriminate against people who don't have wealthy friends, which is kind of terrible, but it's also how the system is set up and you should take advantage of it.

As for me and my husband (we're looking to buy a place), we both share one credit card, we have our monthly rent, and his parents signed us on their credit cards. I started with basically zero credit since I was new in the US, and now I have good credit, with long history, because I was lucky enough and the system is fucked up enough.

Since I have regular access to credit reports, I'm actually a good source on what affects your credit score. You mentioned a lot, so we'll have to go through it step by step.
1. That's wrong, but a good rule of thumb. The actual rule is the age of your line of credit (can be anything from a credit card to a car loan etc etc). See attached picture Age1. See how you're wrong about closing accounts? You can close accounts (especially if they charge you annual fees) so long as you have a different line of credit that's over 9 years old. Say you have a crappy credit card that charges you $100 a year, and it's your oldest account. If you don't want it to hurt your score, check the age of your second oldest account. If the other accounts are over 9 years old, then you can save yourself money and close your crappy account.

2. The penalty for spending on your credit card is a sliding scale. 10% is what you're looking for. See attached CC Utilization. Note the sliding scale, and how detrimental your advice is. A perfect score is achieved by keeping your limits below 9% or less. There's an interesting implication here that the formula doesn't factor how much you spend on each card. Like if you maxed out a credit card with a $500 limit, but had another card with 1$ and $5000 limit, your credit score isn't degraded at all since they combine the two cards into one overall limit.

4. It's actually much higher than 3, and again a sliding scale.
21+ Excellent
11-20 Good
6-10 Poor
0-5 Very Poor

All screen shots courtesy of Credit Karma.
Attachments
CC Utilization.jpg
Credit Card Utilization
Age1.jpg
Age of Credit History

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Re: Let's Talk Money

Postby Tyndmyr » Tue Jun 14, 2016 9:00 pm UTC

sardia wrote:Does anybody put any thought into the kinds of credit cards and how many they need? I was looking to lowering my utilisation ratio and get more rewards. Part of me thinks this is a waste of time and that I should just stick with the starter credit card I've used for a decade.


My goal is...none. I have done some optimization in the past, and with manipulation and gaming systems, you can indeed make money off cash back guarantees, etc. However, it does take time to manage, and really good deals are usually subject to the terms being changed after a period of time, and they slowly become less good. So, I'm going for just zero debt overall. So far, doing quite well, and while it's not completely ideal for credit rating, minor manipulation of cards should suffice to make that good enough.

And having less to manage is nice. In a perfect world, I'd get to a point where I could just utterly stop caring about credit rating, because I no longer need credit. I can swing that for a car, now. Not a house, yet. Not out east, anyway.

My business uses exactly zero credit cards as such, though I do utilize terms for paying invoices where available. This is often outright cheaper, because cashiers checks have fees, and UPS call tags have fees, and paying with a card has fees. So, even without factoring in the benefit of paying later, it's just nice. Gotta be sure to never, ever screw up, though.

I despise annual fees.

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Congrats! Well, about the house, at any rate. Getting through that giant pile of papers to sign is always a relief!

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Re: Let's Talk Money

Postby sardia » Tue Jun 14, 2016 9:12 pm UTC

Are you living life credit free right now? Because economics tells us it's inefficient to not use credit ever. Like it feels nice, but it slows down how fast you get to a goal, (new house, car, business etc etc etc). I do the same thing, but I do realize it's inefficient.
If you're looking for no fuss credit cards, why not a basic no fee cash back card? The card I'm getting is simple enough . I was tempted to get the discover card. Heard it's 2%cash back.

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Re: Let's Talk Money

Postby ucim » Tue Jun 14, 2016 10:14 pm UTC

Tyndmyr wrote:My goal [for number of credit cards to hold] is...none.
I don't think that's a good goal (unless plastic prevents you from resisting spending).

For one thing, plastic is convenient, and generally free if you pay your bills on time and have no-fee cards. With cash back, you can even get something back. AmEx Blue Cash card, for example has no fee, 1% (or more) back. Just be sure to pay your bills right away.

For another thing, you are protected from merchant mustard to a much greater extent when you pay with plastic. If you pay with cash, the cash is gone and it's up to you to sue the merchant. If you pay with plastic, you can have the charge reversed, and then it's up to the merchant to come after you. Meanwhile, you have use of your money.

Also, you can never tell when you will need credit. At that point, it's too late to try to build a credit rating. All it takes is one unfortunate event. Better to be in debt than broke, bleeding, and on the street. And even if you disagree, having credit gives you the choice.

Downsides of using plastic include the fact that transaction information is recorded and shared, and can be used to profile you. Many smaller transactions that are completed in cash are completely anonymous. And using a credit card (especially for large transactions and/or in business) may either cost more or limit your bargaining power. But again, as long as you have the plastic, you can choose to not use it.

Jose
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Re: Let's Talk Money

Postby sardia » Tue Jun 14, 2016 10:59 pm UTC

ucim wrote:
Tyndmyr wrote:My goal [for number of credit cards to hold] is...none.
I don't think that's a good goal (unless plastic prevents you from resisting spending).

For one thing, plastic is convenient, and generally free if you pay your bills on time and have no-fee cards. With cash back, you can even get something back. AmEx Blue Cash card, for example has no fee, 1% (or more) back. Just be sure to pay your bills right away.

For another thing, you are protected from merchant mustard to a much greater extent when you pay with plastic. If you pay with cash, the cash is gone and it's up to you to sue the merchant. If you pay with plastic, you can have the charge reversed, and then it's up to the merchant to come after you. Meanwhile, you have use of your money.

Also, you can never tell when you will need credit. At that point, it's too late to try to build a credit rating. All it takes is one unfortunate event. Better to be in debt than broke, bleeding, and on the street. And even if you disagree, having credit gives you the choice.

Downsides of using plastic include the fact that transaction information is recorded and shared, and can be used to profile you. Many smaller transactions that are completed in cash are completely anonymous. And using a credit card (especially for large transactions and/or in business) may either cost more or limit your bargaining power. But again, as long as you have the plastic, you can choose to not use it.

Jose

You can get around that by getting a credit card, and not using it. By the time they build a profile around you, it'll be out of date. His credit rating should be fine considering he previously owned cards, and probably has loans of various sorts before.

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Re: Let's Talk Money

Postby ucim » Tue Jun 14, 2016 11:25 pm UTC

sardia wrote:You can get around that by getting a credit card, and not using it.
What, exactly, would he be "getting around"? Of course you don't have to use a credit card that you have. But you don't get the benefits of using the card for that purchase if you don't either. But having the card gives you the option.

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Re: Let's Talk Money

Postby sardia » Wed Jun 15, 2016 12:13 am UTC

You were the one who mentioned building a profile based on your purchases, but also needing credit for emergencies. Hence, getting a high limit credit card, that is stashed away.

Btw, I'm surprised nobody else commented as to how credit cards affect your credit score. Is it different in other countries?

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Re: Let's Talk Money

Postby ucim » Wed Jun 15, 2016 12:19 am UTC

sardia wrote:You were the one who mentioned building a profile based on your purchases, but also needing credit for emergencies. Hence, getting a high limit credit card, that is stashed away.
Gotcha.

Discretion in CC use is the ticket. You need to use credit (though not necessarily a CC) to build it.

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Re: Let's Talk Money

Postby Tyndmyr » Wed Jun 15, 2016 3:32 pm UTC

ucim wrote:
sardia wrote:You can get around that by getting a credit card, and not using it.
What, exactly, would he be "getting around"? Of course you don't have to use a credit card that you have. But you don't get the benefits of using the card for that purchase if you don't either. But having the card gives you the option.

Jose


Not a self control issue, I'm paying down everything now with a minimum of effort. Just a life simplification thing. Having extra accounts that need to be managed is, while small, another thing that can be trimmed with fairly minimal cost.

Getting a card is trivially easy if you have credit from past things(not using it and socking it away is essentially similar). And, as you build a larger cushion, the likelihood of needing credit for an emergency diminishes. If you can pay for a new car out of pocket, potential loan needs diminish to fairly major medical events and home purchasing.

Eventually, I'll have a home, and I *do* have medical insurance, even if it is crappier now.

The "have a credit card and pay it off regularly" is good general advice, I think, but may not apply to everyone. In particular, it doesn't apply as much if you own a business, have a large emergency fund, and low debt already. That's a goal to get to, and you'll probably need credit cards along the way, but getting to a point where they're no longer relevant is nice, I think.

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Re: Let's Talk Money

Postby ucim » Wed Jun 15, 2016 4:29 pm UTC

Tyndmyr wrote:Not a self control issue, I'm paying down everything now with a minimum of effort. Just a life simplification thing. Having extra accounts that need to be managed is, while small, another thing that can be trimmed with fairly minimal cost.
Gotcha.

I'd still go with one rather than zero for the convenience, but I'm not living in your shoes. :)

Jose
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Re: Let's Talk Money

Postby Neil_Boekend » Mon Jun 20, 2016 2:55 pm UTC

sardia wrote:You were the one who mentioned building a profile based on your purchases, but also needing credit for emergencies. Hence, getting a high limit credit card, that is stashed away.

Btw, I'm surprised nobody else commented as to how credit cards affect your credit score. Is it different in other countries?

This is very different in other countries. Credit cards are unusual here in the Netherlands, everybody uses debit cards. I have one for online purchases and travel convenience only, and it draws the due money from my account at the end of the month (that's as fast as possible).
When I bought a house the max counted as a pre-existing loan. I closed it down to remove that loan so I wouldn't risk blocking the mortgage (there was no trouble getting a new one after I bought the house).
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Re: Let's Talk Money

Postby sardia » Mon Jun 20, 2016 3:56 pm UTC

Neil_Boekend wrote:
This is very different in other countries. Credit cards are unusual here in the Netherlands, everybody uses debit cards. I have one for online purchases and travel convenience only, and it draws the due money from my account at the end of the month (that's as fast as possible).
When I bought a house the max counted as a pre-existing loan. I closed it down to remove that loan so I wouldn't risk blocking the mortgage (there was no trouble getting a new one after I bought the house).

What about a credit history or score? You are crippled if you can't pass a credit check in the US. My damn internet checked my credit score before they would connect me. How do you establish that you're a better borrower than the next guy?

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Re: Let's Talk Money

Postby Neil_Boekend » Mon Jun 20, 2016 4:14 pm UTC

sardia wrote:
Neil_Boekend wrote:
This is very different in other countries. Credit cards are unusual here in the Netherlands, everybody uses debit cards. I have one for online purchases and travel convenience only, and it draws the due money from my account at the end of the month (that's as fast as possible).
When I bought a house the max counted as a pre-existing loan. I closed it down to remove that loan so I wouldn't risk blocking the mortgage (there was no trouble getting a new one after I bought the house).

What about a credit history or score? You are crippled if you can't pass a credit check in the US. My damn internet checked my credit score before they would connect me. How do you establish that you're a better borrower than the next guy?
Mostly income and education status. There are some hard limits to how much you can borrow (based on income)in the applicable laws too. Most types of debt are registered in a national database so the bank can simply check what you have borrowed now. If you have no outstanding debts that part is good.
My education as an Electrical Engineer pretty much guarantees I will always be able to find work. So they probably consider me safe anyway.
Also there is "Nationale Hypotheek Garantie" wich is kind of an insurance for the bank. My mortgage had Nationale Hypotheek Garantie as a requirement.
Motgages are a bit different here in the Netherlands by the way. AFAIK the money is borrowed by the person, with the house as a security. Basically if I decide to leave the house I would still owe the bank the money, but they can take the house in certain circumstances if I decide not to pay them anymore. AFAIK in the USA the mortgage is tied to the house itself, right?
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Re: Let's Talk Money

Postby sardia » Mon Jun 20, 2016 5:02 pm UTC

Right, but a house as collateral is necessary but not sufficient. You have to be a good borrower before they consider the option of risking a loan with a house as collateral. That's pretty snazzy system you have for borrowers. Is getting a mortgage loan really fast then?

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Re: Let's Talk Money

Postby Tyndmyr » Mon Jun 20, 2016 7:45 pm UTC

Neil_Boekend wrote:
sardia wrote:You were the one who mentioned building a profile based on your purchases, but also needing credit for emergencies. Hence, getting a high limit credit card, that is stashed away.

Btw, I'm surprised nobody else commented as to how credit cards affect your credit score. Is it different in other countries?

This is very different in other countries. Credit cards are unusual here in the Netherlands, everybody uses debit cards. I have one for online purchases and travel convenience only, and it draws the due money from my account at the end of the month (that's as fast as possible).
When I bought a house the max counted as a pre-existing loan. I closed it down to remove that loan so I wouldn't risk blocking the mortgage (there was no trouble getting a new one after I bought the house).


Huh. In the US, debit cards draw from your account very rapidly, and they have somewhat less fraud protection than credit cards, so those provide at least some incentive to use a credit card and pay it down. Provides at least a minimal barrier for account access.

You can do somewhat similar things by having a bank with very good debit protection, and splitting out accounts so card compromise hits limits fast, but it's not *exactly* the same.

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Re: Let's Talk Money

Postby Neil_Boekend » Tue Jun 21, 2016 8:17 am UTC

sardia wrote:Right, but a house as collateral is necessary but not sufficient. You have to be a good borrower before they consider the option of risking a loan with a house as collateral. That's pretty snazzy system you have for borrowers. Is getting a mortgage loan really fast then?

It can be fast. I had some bad luck because my agent fucked up and told me I didn't need a structural inspection, which I did, wich costed me an adittional 2 weeks. Basically all can be arranged in a few weeks.
A house as collateral is not sufficient, indeed. But if the house is not enough I'm still on the hook for the rest of the money, because the mortgage is technically tied to me, not to the house. If I understand correctly in the USA the mortgage is tied to the house. So if the home owner fucks up and can't pay anymore and the value of the house doesn't cover the mortgage then the bank is screwed.

Tyndmyr wrote:
Neil_Boekend wrote:
sardia wrote:You were the one who mentioned building a profile based on your purchases, but also needing credit for emergencies. Hence, getting a high limit credit card, that is stashed away.

Btw, I'm surprised nobody else commented as to how credit cards affect your credit score. Is it different in other countries?

This is very different in other countries. Credit cards are unusual here in the Netherlands, everybody uses debit cards. I have one for online purchases and travel convenience only, and it draws the due money from my account at the end of the month (that's as fast as possible).
When I bought a house the max counted as a pre-existing loan. I closed it down to remove that loan so I wouldn't risk blocking the mortgage (there was no trouble getting a new one after I bought the house).


Huh. In the US, debit cards draw from your account very rapidly, and they have somewhat less fraud protection than credit cards, so those provide at least some incentive to use a credit card and pay it down. Provides at least a minimal barrier for account access.

You can do somewhat similar things by having a bank with very good debit protection, and splitting out accounts so card compromise hits limits fast, but it's not *exactly* the same.



We just have laws and such that protect us from malicious sellers. For example the "colportage wet": a law originally designed to protect against sleazy door-to-door salesmen, but now extended to internet purchases and such. If you buy an object outside of a traditional brick and mortar shop you have the right to get your money back if you return the item within 14 days. No reason required.
Some shops extend this to include shipping. When I ordered hiking gear from the Zwerfkei they included an address sticker to a Postbus address (which means they have to pay for anything send to it).

And we have the consumenten bond, which is kind of an alliance of millions of consumers. They stand up to all kinds of illegal and dishonest business practices. All in all I feel quite protected while I technically do not have a reverse charges function. Businesses seem actually scared to get their name dragged in the mud and/or sued by the Consumentenbond.

Also for online purchases we have iDeal. Practically it is a payment system that lets the bank decide the security system. If I go to a Dutch online shop I get rerouted to an iDeal provider for payment. That iDeal provider reroutes me to the bank's website, with the account number and the amount due included. Then I am in the safe environment of my bank which requires an electronic signature based on two-factor authorisation.
Or, if I am on my phone, the bank's website reroutes me to the banking app (because I have configured it that way) and there too a two factor authorisation system can be required, depending on my configuration.
I feel safe with this because I don't have to enter my credid card details in some dodgy shop. Even if they had hacked my system and taken over my banking site they would not be able to use that electronic signature to do other stuff. It is purely applicable to that transaction with that amount to that account number. Ergo: pretty damn near perfect.
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Re: Let's Talk Money

Postby Zamfir » Tue Jun 21, 2016 1:47 pm UTC

I don't think our debit card/iDeal system is perfect. As I understand it, there is still quite some fraud. The banks mostly compensate the losses and don't make too much of it - the costs are relatively small compared to the costs of a fundamentally more secure system.

From the user side, it seems to work pretty well - I am always surprised by Americans who consider fraud prevention an advantage of credit cards. Perhaps it's true, but I never feel the need for it. Same for the credit score aspect - apparently a big thing on the other side of the ocean, not even on the radar here.

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Re: Let's Talk Money

Postby Tyndmyr » Tue Jun 21, 2016 3:07 pm UTC

It isn't a huge factor. I've had it hit both credit cards and debit cards, and in all cases, it's been promptly made right by those involved. But legally, the requirements are different, and it's something to at least be aware of, I think.

The big issue is that our security is rubbish. Even now, with the chip and sig some use, that's...not really reliable, because nobody is authenticating the signature unless it's challenged after the fact. Chip and pin is alright, but we're way behind the EU on that.

And a lot of stores don't bother to use the improved readers. Shit, I don't. I have one, and I don't use it, because it's too slow. The cost of fraud is, so far, less than the cost of increased checkout time.

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Re: Let's Talk Money

Postby SecondTalon » Tue Jun 21, 2016 4:23 pm UTC

When I was in various European nations in 2011 (I think it was 2011?) we had a chip and pin debit card we were using for most things. I forget how we put money on the thing - doesn't matter. Point being that a purchase then took a quarter of the time (or less, it was pretty much no time at all) than it takes in the US today.

I have no idea why.
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