Tuesday, August 14, 2007

10 Ideas for Living a Life Without Credit or Debt

I was reading 10 Ideas for Living a Life Without Credit or Debt and thought it's a good way to live life but does it make sense to a business man/entrepreneur?

In today's world, it is very difficult to live a life without Credit or Debt. Of course this is what my parents followed and preached us to live without a debt but my father was a teacher and not the entrepreneur....

Let's look at the each point.

1. Save an emergency fund: YES, it is absolutely necessary. Particularly when you don't have good credit.

2. Save for goals: That's how you can buy what you want unless you hit the lotto.

3. Get a Debit Card: I don't agree with this. I would rather purchase using credit card and immediately pay it. There are many advantages using CC.

4. Earn Interest instead of paying it: It does make sense to earn interest but sometime it make more sense to pay interest and earn more by investing better way. That's how these businesses run. In today's world, CASH FLOW IS THE KING, NOT THE CASH.

5. Buy a car in cash: you won't be able to afford better card if you are planning to buy in cash. I would rather put this way. Buy a car less than your saving amount. E.g So far I bought two cars and both of them in cash but than immediatly took loan to improve my credit.

6. Invest for Retirement: It is common sense to invest for retirement. Ideally invest in business which can give you passive income than mutual funds or 401K.

7. Travel without Credit: Yes, you can deposit cash to rent a hotel room if you were in hotel. How about booking hotel from your home? Also do you really want to carry big amount of cash with you? what a stupidity?

8. Rent without Credit: It would be very difficult to rent without credit. Rental companies doesn't care about how much money you have in bank. They check for credit report or ask for credit card to secure the payment.

9. Buy a home without credit: Is it possible?

10: Use Paypal online: This is the only point where I agree with author. Paypal or google checkout makes more sense than giving a check or event credit card numbers to avoid fraud.


Admin Sam said...

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Joshi's Tech Blog said...

Yes, I am from India now settled in USA. English is my third language so pardon me but I am trying to improve on it.

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Anonymous said...

Regarding number 9, I'd say that most people from developing countries that do buy a house or apartment do it with cash and not on credit. Just because americans are used to the "instant gratification" society doesn't mean that they cannot do it.
Right where I live (Oklahoma) you can buy an decent house for $100k and you can rent a nice apartment for $500. If you have a high salary (e.g. college degree) and don't buy junk, you can easily save $2000/month and live on a rent. In less than 5 years (considering interest income on your savings) you buy your house, cash.
Instead of buying a house when you are 25 and pay triple for it during 20 or 30 years, why not wait 5 years and pay it cash?

Joshi Ventures said...

It's very difficult to buy a decent house in $100K in metros but if you are in silicon valley or other big metro city where decent houses starts with $300K, it's very difficult if not impossible.

As an entrepreneur, I would prefer to buy a business in $100K rather than paying fully for the house because
1. It's easy to get loan for a house than a business.
2. Interest rates for business loan is much higher than house loan.

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