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4/6/10

Rule 2. Don't borrow trouble...

I just found out the first true credit card was introduced the year after I was born. Funny, I thought all along I was born with a minimum payment due. The Rich World runs on credit, interest is the dues you pay to play the game.
Diners Club was actually first the first "Charge Card" to allow purchase at multiple businesses (resturants) in '50, but charges were due at the end of the month. Previously, retailers (department stores gas stations) would offer their own card. AmEx and Bankamericard (now Visa) were the first to take us down the road of revolving credit cards and the Minimum Payment Devil!


My goal in living on the edge has 3 facets; first, enjoy a small country life, second, use stuff the rich world sorta dribbles out the side of it's mouth so I need less money, and third, have a personal economy and infrastructure not totally dependent on BAU. Let me tell you about me and BAU...




My first bit of credit was for a new refrigerator. We'd used hand me downs and even an old Coke ice box and block ice but I was ready to make the leap into BAU. My Dad co-signed for me, he said, "I'll sign for you, if you're sure you want me to – you'll never be out of debt again you know."

Of course he was right, I ran 'em up then paid 'em off with every house we sold. We'd swear them off and be good till the next time the car broke or school clothes time or whatever excuse seemed handy. We got in over our heads many times but I don't think we ever missed a payment.

Anyway, we're out of the interest business for good now. Long story short:

  • After the recession started our one card (that we used for cash flow - calf money isn't a regular thing) jacked my rate from 7% to 16% for no reason (except that the law was about to change preventing them for raising rates for no reason)


  • Then a few months later I got sick and wound up in the hospital, I wasn't sure how that would turn out so we skipped a payment - they jacked my rate to 29.9%


  • As soon as I saw that statement I decided I just wasn't going to pay - [expletive deleted] 'em!

    6 Months later I offered them 20% to give up and they took it.

    That makes me feel bad, not that they're crooks but that I knew they were crooks and still wound up in a place where I broke my word. It's too bad for them too. Now, just a few months later, I have 2 pretty good new clients, the calf market is up and the calves I was raising to pay off that card would have made a big dent in the balance, but they could not see past jacking me to ridiculous rates, late fees, and then over limit fees. Had they worked with me they would not only have made their their money back with interest but more in the future. Oh well, $20k is no great loss to them and in the end "they" finally broke us of our habit and now we're learning to get some cash savings built like we should have done years ago. 

  • But there are other ways to save for the future more in line with living on the edge. An unexpected offshoot of raising calves is they are as good as money in the bank, in fact, their return is much better than bank interest. Basically we put in some time and maybe $100 dollars and stick 'em out on the grass where they can gain weight. We don't need to sell them at any particular point (as long as we have grass), the bigger they are, the more they're worth (albeit with diminishing returns) and we can sell them 48 weeks of the year and have cash in a couple of days.

    The same goes for storing hay, raising a pig, keeping chickens, growing and preserving food from the garden - even cutting firewood and unless you are really lucky those are all lots more fun than your office job. After all, there is nothing magical about money, it's just a store of value. Whether it's a gold coin, FRNs or 1s and 0s on some hard drive somewhere, it's only worth what someone else will give you in trade.


    For someone trying to live in the margin, the reason to not borrow is pretty obvious; every dollar you borrow comes with a Business As Usual tax in the form of interest - if you're trying to escape BAU, why support it by paying the tax?

    2 comments:

    straker said...

    I think the term you're going for is ecological investing. When I spent the three day weekend grafting apple scions onto 20 crabapples, I thought of myself as investing in the future the way someone might play the stock market. It will take a couple years before the first apples start dropping from those trees, but when it does, it's worth something. I will surely net more long-term from doing that than having the money in the bank at almost zero percent interest.

    Pops said...

    Yep, just what I think, Straker. I also think so many of us have gotten so far down the path of "Work is over here and everything else is over there" we have a hard time grasping the idea that planting those trees will free you forever from xx numbers of hours working for someone else's profit.