Price increases


 
So glad we bought our garage freezer and refrigerator just before the covid hit. Was thinking of getting a larger freezer until I priced them, to pick up about six more cubic feet it would cost us almost twice what we paid for the frig and freezer combined. Along with a 4-6 month wait to get it.
 
There might not be too many that remember the double-digit inflation of the 70s and 80s...Nixon's Wage and Price controls, people that signed up for variable interest rate mortgages that lost their homes during the Carter administration when credit cards became a bad word, and who can forget Reaganomics and the Trickle Down policy? Anyway, we've had about 30 years of low inflation, and now things are heading in the other direction. Get out of debt, stay out of debt, is the best course of action for the days ahead, especially if you have any variable rate loans or a credit card balance.
 
Ed P said:
Get out of debt, stay out of debt, is the best course of action for the days ahead, especially if you have any variable rate loans or a credit card balance.
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There are no truer words than those. Consumer debt is the worst debt you can carry. Real estate debt, primary home, is some of the lowest risk debt one can carry.

Some people are about to learn some serious lessons in the coming years, unfortunately.
 
Ed P said:
There might not be too many that remember the double-digit inflation of the 70s and 80s...Nixon's Wage and Price controls, people that signed up for variable interest rate mortgages that lost their homes during the Carter administration when credit cards became a bad word, and who can forget Reaganomics and the Trickle Down policy? Anyway, we've had about 30 years of low inflation, and now things are heading in the other direction. Get out of debt, stay out of debt, is the best course of action for the days ahead, especially if you have any variable rate loans or a credit card balance.
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I lived through it. I remember my pay increases being capped a few percent below price caps and therefore below inflation. I had a 7% loan and that was less than half the going rate at that time. The bank kept wanting me to buy a new house and they would "blend" my loan into a new, higher rate. It was as if you were just sliding backwards and we are headed there again. I remember the gas hikes, lines and rationing. Been there, done that, do not want it again.
 
Rich Dahl said:
We own our home, cars and everything else. If I can't pay cash for it, I don't need it.
Zippo debt and I love it.
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Us too. You really don't appreciate the buying power of your dollar when you owe everybody in town. I can't understand why, if I have $50k in the bank, I get less than 1% interest, but if I borrow $50k I will have to pay anywhere from 5% to 20% or more just for the privilege of using someone else's money. More people are borrowing than saving, I guess, but it sure is lopsided.

You are literally dancing on a string when you have a variable interest rate loan such as credit card debt. One of the ways the Fed tries to get inflation under control is raising the interest rate that you pay. That takes away your purchasing power. Pay down or pay off those high interest loans before things get worse.
 
I am with Rich before I retired paid off my mortgage, had bought my cars for years usually certified 2 year old cars paid cash. I feel lucky our lifestyle has not changed at all but my wife is still working but I pay all the house bills so still contributing using the soc checks and a small consulting business which does not pay much but it pays for vacations and eating out 2 or 3 times a week.
 
I agree with Rich on everything besides a mortgage, I have a mortgage at fixed 3.275 interest its like free money. I don't think I will ever pay off my house.
 
Ross W said:
I agree with Rich on everything besides a mortgage, I have a mortgage at fixed 3.275 interest its like free money. I don't think I will ever pay off my house.
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Except that the S&P return so far this year is -4.62%, but historically much higher than your mortgage rate.
 
Ross W said:
I agree with Rich on everything besides a mortgage, I have a mortgage at fixed 3.275 interest its like free money. I don't think I will ever pay off my house.
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not necessarily true. at your rate you're possibly spending 1.6x for the total cost of your home. Example, if you borrowed $300,000, over 30 years, the cost of paying pack the total $300,000 would be $480,000 over the 30 years.

making 1 extra principal payment per year can take a 30 year mortgage down to a 26 year mortgage and you'll save tens of thousands on interest paid.
 
I have always looked at money as both a commodity and a resource. If you spend it, it is a commodity...if you save it, it is a resource. Think about owning a tree lot...if you harvest the trees and sell them, you get the current rate for lumber which goes up and down. If you keep those trees, and you have enough of them, they will make more trees. You can't make more trees if you chop them all down. Many people will not be able to save enough money to generate an income from the amount of money they have saved.
 
Simply put, you throw your money at the highest interest rate. If you can get a guaranteed higher return than your mortgage rate-invest it. If your mortgage rate is higher-pay it down with that excess money.
 
Also, there are three types of savings...short-term, mid-term, and long-term. Short term might be monthly expenses, like gasoline or food and housing. Mid-term might be property taxes paid yearly or college tuition for teenaged children. Long term will be retirement, money put aside for the days when you become too old to work. Different stages of life dictate where the money needs to be allocated, but too many people go into debt at the early stage trying to have it all on a limited budget and there is not enough money to go around when the time comes.
 
JSaus said:
Simply put, you throw your money at the highest interest rate. If you can get a guaranteed higher return than your mortgage rate-invest it. If your mortgage rate is higher-pay it down with that excess money.
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But what about when your mortgage rate is lower than the average rate of inflation so even doing absolutely nothing at all has a higher rate of return? A low interest loan is the very best inflation hedge. Literally just borrow money from the bank and pay them back later with dollars that are worth less then the ones they gave me? I am all with you guys on not paying interest, but when the bank gives me free money I take it. Looking at the historical interest rates I think it was a once in a lifetime opportunity.
 
Ross W said:
But what about when your mortgage rate is lower than the average rate of inflation so even doing absolutely nothing at all has a higher rate of return? A low interest loan is the very best inflation hedge. Literally just borrow money from the bank and pay them back later with dollars that are worth less then the ones they gave me? I am all with you guys on not paying interest, but when the bank gives me free money I take it. Looking at the historical interest rates I think it was a once in a lifetime opportunity.
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The big problem with that is that you are spending future dollars, dollars that you haven't earned yet. You are literally spending your future.
 
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