Winning the Debt Game by David Powell

Nice memoir. 

I too fondly recall reading JCs columns at the WSJ.  

My first new car purchase was straightforward.  I knew what I wanted had saved sufficient cash. However, in 1969 we didn’t have the internet or the reams of readily available data.

I usually purchased slightly used cars, preferably dealer demonstrators which were frequently driven by the sales manger or a VP. As time to purchase drew near I determined a couple of desireable vehicles and perused the local dealers for one to come up. I didn’t like the negotiations but I had a price range I was willing to pay and stuck to it. I last purchased a new Roadtrek 210P in 2013 and a slightly used Chevy Cruze in 2015. Oh, and in 2022 a used golf cart for use in the resort.

The first accountant I used for my business advised me in 1978 to “Avoid mortgaging your future.” That simple phrase was probably the best financial advice I ever got. 

My first credit card was an American Express when I was 22. I was travelling and living all over the country overseeing certain aspects of large industrial projects the firm designed and built.  Rental cars, airline tickets and motels as well as meals and laundry to pay for, etc. I had an apartment in Chicago, but seldom stayed there. I was the quietest tenant that landlady ever had. I’d live in the apartment about 6 months of the year with business travel for a few weeks here, a few weeks there. But only top executives at the firm were provided with a credit card. I had vouchers for Hertz, etc. To make things more difficult getting a Visa type card at less than age 25 was impossible. But for an annual fee Amex gave me one on the condition that it must be paid off monthly. I lived off that card while travelling for projects. Once for 5 months in Hagerstown MD and in the Miami area for 11 months. Oh, and ever try to get a bank account by providing a local address that was a motel?

I avoided debt. There was the mortgage and a construction loan on my first house in 1977. After that nearly everything was cash. Now, I do realize that there are strategic reasons for debt.  Funding my business receivables is an example. In 2015 we purchased a large, expensive 5th wheel RV to live in (5-slides, 1-1/2 baths, etc.). We paid half down and half was on G’s credit worthiness. That helped her credit rating. We paid it off early. Delaying any personal or business purchases until there was sufficient accumulation had real benefits. 

However, I did once finance a portion of the children’s college with a short-term credit card. I had a very large credit line on a personal credit card. I was struggling to come up with $60,000 when MBNA (later B of A) called me with a loan offer I couldn’t refuse. Up to $90,000 for a fee of $100 and interest free for one year. This was at a time when banks were throwing money at people with excellent credit. I took it and applied it to the college expenses. This gave me a year to figure out how to pay off that debt. I recall the total fee was $120 because my payment check arrived a day after that 1-year period expired. Other than that short term loan all of the college costs were paid with cash.  

The credit rating services are really an enticement to go into debt. I agree that “FICO scores are all about keeping you hooked, playing the debt game.” My current rating is excellent – outstanding but the credit bureaus tell me it would be better if I had 22 or more credit lines open!

I once read that the average US family was paying $4,000 annually in interest on debt. That’s a lot IMHO. I’m not sure if that included the mortgage. I do know I saved a bundle by avoiding debt. I preferred to put it in my retirement accounts.

There are some benefits to credit cards. When we relocated and found it necessary to purchase a house full of furniture we were offered three years of interest free credit and took it. I do use the cash-back offers. We pay our cards off every month and use those for purchases offering the best cash back. Credit cards rotate this quarterly and currently one card is used for utilities, one for internet purchases (Amazon, etc.) and two others for dining and groceries. Another for miscellaneous and gas. If possible, I pay bills by pushing funds out of the checking account; I don’t like to allow others to claw funds out. But my bank doesn’t have such an arrangement with our ISP, etc. and credit cards do offer certain purchase protections. I also track all expenses and the cards are very helpful. Using Quicken I import the statements and for recurring suppliers and income no categorizing effort is necessary as previous categories are applied. I merely review and edit if necessary.