585-Credit_Cards_Are_An_Incredible_Tool
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00:00:30.360 | Welcome to Radical Personal Finance, a show dedicated to providing you with the knowledge, skills, insight, and encouragement you need to live a rich and meaningful life now,
00:00:37.160 | while building a plan for financial freedom in 10 years or less.
00:00:39.960 | My name is Joshua. I am your host. And no, I am not dead. No, I am not sick.
00:00:44.600 | And no, we did not fall off of a mountain. So thank you for your concern.
00:00:49.340 | I have been busy the last couple of weeks putting the finishing touches on a new course that I'm launching to you on Monday.
00:00:56.020 | A course on credit cards. The title is "How to Borrow Money Safely and Never Pay Interest Using Credit Cards."
00:01:02.220 | And as with many of my projects, I find that my creativity is about five times bigger than my ability to actually implement anything.
00:01:10.360 | And everything takes about five times longer than I think it should.
00:01:13.100 | So the projects that I schedule a couple of weeks for, well, in this case, it's wound up being two months.
00:01:18.680 | And the problem's exacerbated by all kinds of various things.
00:01:22.640 | But it is almost entirely ready, and it will be fully ready by Monday.
00:01:26.940 | And so in today's show, I'm going to give you just some thoughts and some ideas that I think you'll really find interesting.
00:01:31.180 | And part of this will be to help get your mind thinking about the subject of credit cards, hopefully in some ways that are unique.
00:01:37.760 | Over the next couple of weeks, I'll be dripping out some information for you, a couple of audio excerpts from the course, etc., to incentivize you to buy it.
00:01:45.440 | There'll be a discount period, which will save you some money.
00:01:48.060 | And I hope that this course that I've prepared will really serve you effectively in something that's unique.
00:01:54.440 | And I believe that it will have a wide appeal for a number of reasons.
00:02:00.000 | First, this will help you if you are currently in debt.
00:02:03.960 | If you owe any money of any kind, this particular course will help you.
00:02:08.280 | Because I'll help you develop the strategies to borrow money safely and not pay interest with credit cards.
00:02:14.760 | Which means, and I think you should give serious thought to even refinancing some of your debt using some of the strategies that I will outline for you in the course.
00:02:23.160 | But if you're not in debt, this course will help you to make sure that if you ever are in debt in the future,
00:02:29.560 | you've set up the infrastructure to make sure that you borrow money safely and never pay interest.
00:02:34.600 | And also, if you are wealthy, you're not in debt, you're never going to be in debt,
00:02:38.760 | then I think some of the ideas that I present in this course will help you to help others who are in debt.
00:02:43.840 | Because this particular project of mine has come from a place of experience, my own personal experience, the lessons that I have learned,
00:02:51.360 | and also a place of concern, because I get sick and tired of seeing people abused by the credit card system.
00:02:56.720 | And usually, the people who can least afford to be abused are the ones who are the most frequently abused.
00:03:02.160 | And I don't like that.
00:03:03.880 | I would like to see those of us who are in a strong place help the people who are frequently and often abused by the systems that are out there.
00:03:12.960 | And many people have a very tough situation with credit cards.
00:03:16.440 | Well, I think a lot of this can be avoided.
00:03:18.160 | And I want to give you some strategies and ideas that will help you to avoid these problems for you.
00:03:25.160 | So also, real quick, as I begin today's show, I've also published an announcement.
00:03:30.680 | I'm hosting a special Q&A call specifically on the subject of credit cards.
00:03:35.440 | If you currently have credit cards, if you have credit card debt, if you have any questions about credit cards,
00:03:40.200 | if you want to discuss any aspect of credit cards, I would love for you to join me for the call-in show on Friday, October 5.
00:03:47.720 | I have published a separate audio file with the call-in details of that.
00:03:50.880 | But please join me for that call-in show.
00:03:52.760 | I would love to speak to you there.
00:03:54.400 | Now, let's talk about credit cards.
00:03:57.720 | We need to begin, of course, with the obvious discussion of debt.
00:04:01.800 | Debt is a very fraught subject.
00:04:04.720 | And there are a lot of strong feelings.
00:04:07.560 | And usually, this subject of debt and credit cards is one of the more divisive arguments in personal finance.
00:04:14.200 | And people often take a couple of extreme perspectives.
00:04:18.240 | And almost everybody agrees on the idea that you shouldn't be in credit card debt.
00:04:24.080 | Now, of course, reality, the actual data that exists on the number of people that are in credit card debt,
00:04:28.840 | shows that that argument might be common in the personal finance world.
00:04:32.720 | But in general, many people have credit card debt.
00:04:35.400 | I actually don't even hold to that position.
00:04:38.800 | My position is that credit card debt is actually some of the safest and lowest cost debt when compared to other options.
00:04:46.880 | And in a moment, I'll give you examples as to why I would say that.
00:04:51.000 | But many people would say, "Well, credit card debt is the worst form of debt. I don't buy it.
00:04:54.400 | I just don't see the evidence for that."
00:04:56.720 | I think that credit card debt is potentially very dangerous.
00:04:59.680 | It can be very risky, depending on how we measure this term "risky."
00:05:04.080 | But it also can be extremely safe, depending on how we measure the term "safe."
00:05:07.840 | If I were to ever go into debt in the future,
00:05:10.280 | one of my primary choices would be to use credit card debt as my financing source versus other forms of debt.
00:05:18.120 | And I'll explain in the audio today and in forthcoming episodes, little excerpts from the course that I'll share with you,
00:05:24.520 | I'll explain to you why.
00:05:26.240 | And I'll stand behind that.
00:05:27.600 | Not in an absolute sense, not that credit card debt is always the first form of debt.
00:05:32.080 | But when considering all the different forms of financing that are available,
00:05:36.480 | I think credit card financing is a really compelling form of financing,
00:05:40.640 | if you have the right infrastructure in place and if you know what you are doing.
00:05:46.120 | So let's begin.
00:05:47.000 | So I don't take that extreme position, even though that's the normally agreed upon discussion of credit cards.
00:05:51.760 | Now, there are other discussions on credit cards.
00:05:54.320 | For example, many people say, "I'm never going to borrow money,
00:05:57.400 | and I'm not going to have any credit cards because credit cards are very dangerous."
00:06:02.040 | I respect that argument, and I entirely fine with people who take that position and follow through on that position.
00:06:12.120 | That's a position that I have held in the past.
00:06:14.600 | I have been an absolutist in the past.
00:06:17.400 | Earlier I said that I had gone and I had all this massive amounts of credit card limit available to me, $100,000 when I was in college.
00:06:24.880 | Well, after college, when I got out of debt, I canceled every credit card I had, and I went from $100,000 credit limit to zero.
00:06:30.960 | So I have been through that particular...
00:06:34.960 | I've held to that particular position as well.
00:06:38.000 | And I think that is probably the safest position.
00:06:40.760 | I have no problem whatsoever with somebody who says, "I don't borrow money.
00:06:45.840 | I'm not in debt.
00:06:46.840 | I'm never going to borrow money, and I'm going to forestall and preclude the possibility of borrowing money by even having credit cards available to me."
00:06:54.920 | I think that's a very safe position.
00:06:56.640 | And if somebody is fully committed to that position, then I think then I respect that.
00:07:02.480 | I love that position, as I'll talk about in a moment.
00:07:04.480 | I want to talk about my own personal antipathy towards debt.
00:07:07.440 | But what I have learned is many people who state that subsequently change their position.
00:07:14.800 | I have heard again and again and again from people in my own personal life, clients, et cetera, people who say, "I don't borrow money."
00:07:22.080 | And I take them at their word, and I believe them, except then a few years later, I find out that they did borrow money.
00:07:28.800 | Now, each of us has to navigate this particular road.
00:07:34.080 | I have no problem with somebody engaging in the borrowing of money if that's a decision that they choose.
00:07:40.400 | I believe that it is morally wrong to default on debt.
00:07:44.400 | So thus, if you pledge your hand and you make an agreement to borrow money, I don't think it's morally wrong to make that agreement.
00:07:51.600 | But it is morally wrong for you to not follow through on that.
00:07:55.600 | And you wind up putting yourself in a hazardous position where by making a pledge that you will do something, especially if it's to borrow money, you open yourself up for a moral hazard of not being able to do it through circumstances that are outside of your own hand.
00:08:12.720 | That opens you up to the possibility of sin if you don't follow through on that.
00:08:17.520 | So that's, of course, a significant problem.
00:08:20.400 | But what I've learned is many people borrow money, even though they said they wouldn't.
00:08:25.520 | Now, of course, there are other circles and people who say, "Well, yes, I don't carry a balance, but I use credit cards for everything because it gives me good consumer protection.
00:08:33.920 | It gives me good airline miles, bonus points."
00:08:36.560 | Those are, in my mind, strong arguments.
00:08:38.480 | Many of those things are strong arguments, and there are good counterarguments as well.
00:08:41.680 | But my focus is different because I want to talk to you about credit cards as a safe form of financing and as a cheap form of financing.
00:08:51.680 | Because in the times that I have been in credit card debt in the past, I've learned that I've gotten out of that world much cheaper than many other people.
00:08:59.280 | So let's talk just for a moment more on debt and then also on credit cards specifically.
00:09:05.040 | So first on debt.
00:09:06.480 | For clarity, I don't like debt.
00:09:10.800 | I don't like debt for me.
00:09:13.520 | I don't like that for any person.
00:09:14.800 | I don't owe anybody a dime, and I intend to never owe anybody a dime for the rest of my life.
00:09:21.760 | That's what I want to happen.
00:09:23.440 | I've learned not to make absolute statements.
00:09:25.680 | You'll notice I didn't say I never will because in the past, my absolute statements, I've often found that life decisions change certain things, and then I have to rethink some of those things.
00:09:35.360 | But I don't like being in debt.
00:09:36.960 | I don't ever want to be in debt.
00:09:38.640 | And I can't imagine the circumstances that would ever cause me to want to be in debt in the future.
00:09:44.080 | And there are two reasons for that for me personally.
00:09:46.800 | Number one, my highest financial priority is freedom.
00:09:50.880 | Freedom.
00:09:52.180 | I want to always be financially free.
00:09:56.720 | And every form of being in debt will diminish my financial freedom, including credit cards.
00:10:07.360 | If you are ever in debt, you will lose some of your financial freedom.
00:10:13.600 | Now, you might have compelling reasons why you're willing to give up that freedom.
00:10:19.120 | This is normal in life.
00:10:21.600 | We often find compelling reasons to give up freedom.
00:10:25.520 | I'm married.
00:10:27.280 | Entering into marriage lowered my personal freedom, but I gained a whole other swath of benefits that made it worth it.
00:10:35.120 | Some people go and they join, go to a university.
00:10:38.160 | Well, in going to the university, you're going to give up some of your personal freedom,
00:10:42.560 | but yet you're gaining benefits from that.
00:10:45.360 | Some people go and join military organizations.
00:10:47.840 | Well, in so doing, you're giving up a significant amount of freedom, but some people still believe
00:10:52.320 | that that's worth it for them to do it.
00:10:54.480 | Some jobs that you take, if you go and take a job, you are giving up a measure of personal freedom,
00:10:59.680 | but yet you're also getting certain benefits.
00:11:04.160 | The unemployed person on Monday morning can do whatever they want to do,
00:11:07.760 | but they also have no money.
00:11:10.000 | Whereas the employed person needs to report for work at 9 a.m. on Monday morning,
00:11:13.840 | but they get other benefits such as a paycheck.
00:11:16.080 | So, the appeal to freedom is not an absolute appeal.
00:11:19.920 | And many times people go into debt and they give up a measure of freedom because of the other things that they gain.
00:11:26.560 | Rather, obviously, many people will borrow money to buy a house,
00:11:33.040 | thus giving up some of their personal freedom.
00:11:35.040 | They give up the freedom to move.
00:11:36.480 | They give up the freedom to change their residence without cost.
00:11:39.920 | They give up their personal freedom in terms of the amount of things that they have to go along
00:11:43.360 | with the ownership of that physical property, but they gain the benefit of living in a nice house.
00:11:47.600 | And I respect those decisions.
00:11:48.960 | But I think you should always acknowledge that if you ever go into debt, you give up freedom.
00:11:53.440 | And for me, because freedom is a higher priority to me than almost anything else,
00:11:58.160 | including lifestyle, including almost anything else, then I don't ever want to go into debt.
00:12:03.200 | The other major concern I have about debt is always that debt brings the potential for moral hazard.
00:12:08.160 | A moment ago, I talked about the fact that you wind up putting yourself in a hazardous position
00:12:12.640 | if you pledge your – you give your word, "I will pay you according to these terms,"
00:12:16.880 | and then something happens outside of your control that causes you to fall through on that.
00:12:22.240 | And now you have compromised yourself and you have not paid as agreed, which is morally wrong.
00:12:28.480 | That's a moral hazard.
00:12:30.640 | Another moral hazard is simply if you wind up deep in debt,
00:12:33.680 | then it can cause you to make decisions where you're prioritizing money over something else.
00:12:38.240 | You're deeply in debt and you know you should take a stand for what's right and what's true
00:12:42.160 | and what's righteous, but yet, "Oh, I can't do that because then all of a sudden my affairs
00:12:46.080 | will be exposed and I'll lose my house or I'll lose my car or something, so I have to just keep
00:12:50.880 | the job and I have to keep doing something that's unethical. I have to keep doing something that's
00:12:54.560 | morally wrong." Or you might expose yourself to the potential for blackmail or some other form of
00:13:00.240 | of that type of situation. So being in debt can bring a significant form of moral hazard.
00:13:08.640 | So I don't like being in debt, but I also recognize that debt can be useful and debt
00:13:14.400 | can also be used in different ways. People have different understandings of what it means to be
00:13:19.760 | in debt. So some people when they say, "I'm in debt," let's say you have no money and you have
00:13:24.160 | no money, no assets, and you owe $10,000 on student loans, are you in debt?
00:13:29.280 | Or are you not in debt? Well, it should be obvious that you're in debt. Now, let's say that you have
00:13:33.920 | $20,000 in the bank and you owe $10,000 on student loans and you're choosing, because of the low
00:13:39.360 | financing terms, to simply keep those payments as they are and not to take money from your bank
00:13:45.760 | account to pay off student loans. Are you still in debt? Well, there are, of course, obviously yes,
00:13:51.520 | and in some ways, no. Many people say, "Well, I'm not in debt," but yet they have a mortgage.
00:13:57.200 | Well, what if you're using these different tools and they're useful as financing tools,
00:14:01.120 | but you're not behind? Some people use the term being in debt to mean not making a payment as
00:14:07.760 | agreed, not making a time payment as agreed, and I think that's a fair argument. So these terms
00:14:13.920 | have different meanings. So my point about all of this is to try to appeal to you. If you have
00:14:18.880 | uniquely strong opinions or uniquely strong convictions, to appeal to you to consider them
00:14:26.640 | and to consider what's right for you, filter everything through your own personal convictions,
00:14:30.320 | but to think about how you can set things up to help you and to help others. Now, credit card debt,
00:14:34.720 | back to the specifics of credit card debt. Credit card debt is unique because for most people,
00:14:40.160 | credit card debt is a major curse in their life because most people have no plan as it relates
00:14:46.640 | to credit card debt. In the course content, the actual specific course content, I make it very
00:14:52.080 | clear that the only way to win at the credit card game is to make sure that you have a plan for
00:14:57.360 | eliminating your credit card debt balances completely and getting out of debt. And that
00:15:03.200 | is true. The only way to win at the credit card game is to have a plan for completely eliminating
00:15:08.000 | your balances. But most people have no plan whatsoever, not even a plan for getting out of
00:15:12.400 | debt, but not even a plan for how they're using credit card debt. The way that people assemble
00:15:16.320 | their credit card portfolio is fairly thoughtless. They usually just bumble into it. The mailboxes
00:15:21.760 | shows up with a credit card offer from the bank and they say, "Oh, this sounds good." They sent
00:15:24.800 | me a check and they sign up for the credit card. They're at their local retail store and local
00:15:28.720 | retail clerk says, "Hey, would you like to sign up for our credit card and save 5%?" "Well, sure.
00:15:32.240 | Sounds good." And they don't ever put together a thoughtful portfolio that's designed to serve
00:15:36.960 | them or that's designed with safety in mind. And then what happens is people wind up in a
00:15:42.160 | situation where they desperately need access to money, need access to financing, and they wind up
00:15:46.320 | borrowing money from really unwise sources because they didn't put in place the infrastructure for
00:15:51.600 | it far in advance, especially the infrastructure related to credit cards. I want to give you a
00:15:56.720 | couple of examples because my hope, as I stated earlier, hope is that you will benefit from this
00:16:03.040 | particular educational content for your own life, whether you're in debt, out of debt, if you're in
00:16:07.520 | debt, I'll help you get out of debt faster and at lower cost. If you're out of debt, I hope you set
00:16:12.560 | up something as a good, useful reserve fund for yourself. And I hope that you'll take this and
00:16:16.960 | use this to teach to other people, because I get really frustrated with the people who are the
00:16:20.640 | most frequently abused by the systems that are out there are frequently the people who can't
00:16:25.840 | afford to be abused. They're usually not very learned and they're not very connected and they
00:16:33.440 | wind up being the most deeply abused. Let me talk for an example of what I mean with related to
00:16:37.680 | credit cards for somebody who is financially destitute. Let's say that I were financially
00:16:42.400 | destitute. I had no money, I had no job, and I desperately needed a job. But my living circumstances
00:16:50.400 | meant that I had to have some form of transportation to get to my job and I couldn't figure out a
00:16:55.040 | solution that was different from my buying a car. Well, in that circumstance, I think it makes sense
00:17:02.000 | to buy a car. If I need a car to get to work, as many poor and destitute people need,
00:17:08.560 | I need to have some way of, that's a valid decision. Now, here are some problems that
00:17:14.720 | many people face when they buy cars, especially the people who are the poorest.
00:17:17.840 | Reasonably priced cars, good quality, cheap used cars are not traditionally financeable.
00:17:26.880 | You can't go and get an auto loan for a $2,000 beater from your bank. You can't go and get an
00:17:35.440 | auto loan for a $2,000 beater from a mainstream auto financing company. The only place you can
00:17:42.640 | get an auto loan for a $2,000 beater is from a buy here pay here place.
00:17:48.080 | And I'll get to the problems of that in a moment. So what frequently people find out is they have
00:17:54.320 | to go down to Toyota financing department or Ford motor company financing department or whatever,
00:17:59.120 | and they have to borrow money for a new car or a mostly new car. Well, that's a problem because
00:18:05.920 | a poor person, a destitute person cannot afford a new car. You cannot afford when you're broke
00:18:10.880 | to be driving around on a $30,000 car that's going to cost you $4,500 in depreciation this year.
00:18:17.680 | You need a $2,000 car in that circumstance. So this financially destitute person figures that
00:18:25.600 | they have no option except to buy the new car. Years ago, I did financial counseling for this
00:18:29.760 | lady. She was a Spanish lady, immigrant, didn't speak English and did house cleaning for commercial
00:18:37.520 | cleaning. And she was driving around a very nice Honda Element, but she had to buy it mostly new
00:18:43.520 | for the same problem. Now, she was at her wits end. She had no ability to, she was completely
00:18:50.240 | financially broke. She couldn't figure out how to get out of her problems. And the problem was that
00:18:54.320 | she had this stupid expensive car with an expensive car payment. And so I pleaded with her, I said,
00:18:59.200 | "Sell the car." But she couldn't sell the car because the car was worth less than she owed,
00:19:03.680 | and she didn't have the money to get out. Sound familiar? You ever known anyone in this situation?
00:19:08.160 | So you have this stupid circumstance where a person who is totally broke is driving this
00:19:12.880 | fancy car around, but they're totally stuck because they borrowed money using the car.
00:19:18.320 | Now, here's the problem. Let's say this destitute person, they got to have a car. They don't have
00:19:22.160 | any money. They don't have anybody who can give them a car. They can't figure out a solution.
00:19:25.520 | So they got to borrow the money. So we see the problems with buying a new car because you can't
00:19:31.520 | get financing for it. So you say, "Well, let's say I go and buy a cheap car." Well, the only way you
00:19:35.440 | can buy a cheap car on credit is to go to a buy here, pay here car dealership. Well, what happens
00:19:40.480 | in that situation? Well, first, the car itself is sold at a very high retail price. And whereas this
00:19:47.760 | person, if they had $1,500 in their cash, could go on, in their pocket, they could go on Craigslist,
00:19:52.160 | pull out the $1,500 and buy a perfectly reasonable car off Craigslist or off the side of the road,
00:19:57.040 | they will pay at the buy here, pay here place $3,500 for that same vehicle. When you're broke
00:20:02.800 | and poor and destitute, you can't afford to pay $3,500 for a $1,500 car. But because the buy here,
00:20:09.280 | pay here place will finance a $3,500 car, they feel like they have no other option.
00:20:14.800 | What else? What about the financing rate? Well, same thing. Financing rate is very,
00:20:19.920 | very high with the buy here, pay here place. And here's what's worse. Let's say that this
00:20:25.360 | person goes out and signs up for the car. They go and they get the $3,500 car that's actually
00:20:32.160 | worth $1,500, but they paid $3,500 for it. Now they have wheels. And something happens because
00:20:39.280 | they're living so close to the razor edge. Something happens and they can't make a payment.
00:20:46.480 | And then they can't make another payment. What happens? The repo man literally comes
00:20:55.200 | picks up the car from their driveway or comes to their place of work and picks up the car from the
00:21:02.000 | parking lot and hauls it away. And that person who is living on the razor edge has to sit there
00:21:08.800 | and endure the humiliation of watching their car be dragged out of the parking lot because they
00:21:15.120 | missed two months payments. Most of the times when you buy a car from a buy here, pay here place,
00:21:20.000 | they hold the financing. The car itself has a GPS chip in it. So even if you go and hide it
00:21:23.840 | in your neighbor's garage, the GPS chip reports the location. And of course, people who are in
00:21:29.520 | this situation don't read the paperwork. They don't understand it. They're not aware of the
00:21:33.200 | fact that the car has a GPS chip and the financing company can do it at any point in time.
00:21:37.920 | Now, what do you do? How do you solve that problem? Well, first, hopefully this is where
00:21:46.800 | a network comes in. Hopefully this is where somebody who has an extra car notices somebody
00:21:53.040 | who's destitute but who needs transportation and says, "I'll help you," and they give them a car.
00:21:58.080 | Hopefully this is a situation where this person can find another solution, such as riding a bus,
00:22:03.120 | so they don't go into debt. But if I were in that situation, here's what I would do.
00:22:08.800 | I would get a credit card and I would get a cash advance on my credit card.
00:22:15.440 | And I would use that cash advance on a credit card to go and buy a cheap, reasonable, used car
00:22:22.320 | off of Craigslist or wherever I found one. And I would use the cash advance from the credit card
00:22:28.320 | to pay that off. Now, what benefit do I get? Well, first of all, I finance the car,
00:22:34.240 | which allows me to get to work to earn money, to pay off the loan, and to pay the other things that
00:22:40.560 | I need to provide for my family. Secondly, because I've used a source of financing that wasn't
00:22:46.240 | connected to the specific vehicle, I can shop the used market outside of the dealership, which means
00:22:52.160 | I get the best possibility of getting a quality vehicle at a low price. So instead of paying $3,500
00:22:59.280 | for the car, I can pay the $1,500 for the car. Third, because I'm using a source of financing
00:23:05.840 | that wasn't just related to the sale of the car, I also can use additional money to fix up the car
00:23:10.880 | or fix it if it breaks down. And I don't just have to make that monthly payment and figure out how to
00:23:16.480 | also come up with the extra money. I can fix a lot of things on a $1,500 car by saving $2,000
00:23:23.440 | on the purchase price. Fourth, if I get behind on my payments, there is no legal right for the
00:23:30.800 | credit card company to send the repo man. So I've avoided the repo man. The credit card company
00:23:37.920 | doesn't even know what I used the cash advance for on my credit card. They don't even know.
00:23:44.240 | And so they can't send the repo man and they have no legal right to send the repo man.
00:23:49.200 | And now if I get two months behind because I have some unavoidable financial
00:23:53.040 | circumstance in my life, now if I'm two months behind,
00:23:56.240 | I have plenty of time as the credit card company starts sending notices and letters and such,
00:24:03.520 | I have plenty of time over the next year, two years, three years to work harder, save up the
00:24:08.720 | money and pay them off before I ever wind up in court. And I still have the car the whole time.
00:24:14.160 | So credit card financing is a much safer form of financing for somebody who's in this situation
00:24:18.800 | than the auto loan is. You get a cheaper car, a better deal, and you have a safer situation.
00:24:26.080 | Now, what about the interest on that cash advance? Because after all, what if I'm paying 18% for my
00:24:31.120 | cash advance percentage rate versus a cheaper loan, a 7% loan from the car dealer? Yeah,
00:24:40.160 | but I'm buying a car for $1,500. So if the numbers that I said are right, notice what I've done.
00:24:47.360 | First, I've avoided buying the $35,000 car or the $30,000 car, which is saving me huge amounts
00:24:52.880 | of money on the depreciation of that new vehicle. I don't have the money. I can't afford it.
00:24:56.080 | Second, I'm buying it for $1,500 instead of $3,500 at the dealership because I don't need
00:25:02.000 | this financing system that the dealership offers.
00:25:06.240 | And if I do things right, very simply, I take a card, I take a cash advance, I apply for another
00:25:12.640 | credit card because I have a good credit score and I build my credit score. I know what I'm
00:25:15.520 | doing because I took Joshua's course. And I go and I get another credit score card. I may pay 18%
00:25:21.120 | on that credit card for a month or two, but then I'll quickly do a balance transfer fee,
00:25:25.680 | balance transfer with a 3% balance transfer fee, and I've dropped my effective interest rate to 3%.
00:25:32.800 | So now I have a $1,500 car and a 3% loan instead of a $30,000 car or a $3,500 car and a very
00:25:43.200 | expensive loan. And I have safety. So if I can't pay my loan as agreed, I can still keep the car
00:25:49.040 | for long enough to give me time to fix my financial situation. That's an example of the power of
00:25:55.520 | credit cards. But I've never met somebody who was destitute that understood the system so they could
00:26:03.680 | put it in place in advance of when they need it. Unfortunately, the people who are destitute wind
00:26:08.560 | up being abused by the system because they don't know how it works. Now, what about another person,
00:26:13.920 | somebody who's getting out of debt? If you're getting out of debt and you are committed,
00:26:18.480 | you're saying, "I'm getting out of debt. I'm paying off my credit cards. I'm paying off my
00:26:21.120 | student loans. I'm paying off my car." Well, in that situation, you should lower your expenses
00:26:27.680 | to the maximum degree possible, and one of your major expenses is your interest cost.
00:26:32.480 | And you should always seek to improve your situation.
00:26:35.760 | In the course, I talk a lot about the 0% credit card game. You should borrow money at 0%
00:26:42.640 | any time that's cheaper and safer for you than borrowing money elsewhere at a higher percentage
00:26:48.240 | rate. And when you understand the safety of credit cards because of their unsecured status,
00:26:53.600 | frequently, if I were trying to get out of debt, I would frequently want to be refinancing debt
00:26:58.960 | that is less safe onto debt that is more safe. If you're paying 6% interest on your student loans,
00:27:07.040 | think about paying 0% interest on a credit card and how that's superior. The student loan debt
00:27:18.160 | is, thankfully, very stable in terms of its interest rate. Federally guaranteed student
00:27:23.200 | loan debt is great. It's very stable. But you will never, no matter what happens,
00:27:26.960 | you will never get out of paying that debt. It's not bankruptable. It only dies when you die.
00:27:35.600 | Well, credit card debt is one of the most likely debts to be discharged in any form
00:27:43.600 | of bankruptcy proceeding. And sometimes, if you have a good credit score and you put the systems
00:27:50.160 | in place, you could borrow money cheaper on a credit card than you can even at 6%.
00:27:52.720 | So if I had $20,000 of student loan debt, I would very diligently be moving that debt away
00:28:01.520 | from student loan debt onto a credit card because it's a superior, it's a safer form of financing
00:28:09.440 | as measured by the creditor's ability to collect on the debt no matter what.
00:28:15.040 | So people who are getting out of debt, you should refinance your debt as much as possible.
00:28:22.080 | Now, here's a simple example. So many times, I've worked with people who are getting out of debt.
00:28:27.520 | They got five credit cards, $30,000 of debt, and they're trying to dig out from under it.
00:28:32.240 | And so they get an offer that says, "Hey, we've got a 0% offer for introductory purchases for 18
00:28:38.320 | months." And they look at that offer and they say, "No, I'm not going to use that because I'm
00:28:42.640 | getting out of debt." Meanwhile, they're paying 17% or 23% over here on another card.
00:28:47.600 | Look at them and say, "Are you kidding me? Take that 0% offer and now put every single expense
00:28:55.200 | that you have onto that card and put every dollar that you were putting on that expense down on the
00:28:59.200 | most expensive credit card and get this thing paid off." It materially improves your situation
00:29:04.000 | because you can refinance. So if you understand how these systems work, you can use the different
00:29:12.160 | offers that you get. Finally, what about somebody who just wants to have some form of financial
00:29:16.560 | backup? See, those of us who are fairly conservative financially often face a problem
00:29:22.000 | because when you're conservative financially, you put yourself in a situation where you can't often
00:29:27.280 | always take advantage of the opportunities you'd like to take advantage of. Let's say you're
00:29:31.840 | committed to saying, "I'm not going to borrow money." Well, in that case, you need to have
00:29:36.080 | substantial cash reserves, substantial emergency funds. What's the problem with emergency funds?
00:29:41.040 | Frequently, they pay you very low rates of return, very low interest. Stacks of $100 bills in your
00:29:48.960 | closet simply don't pay any interest. Now, they're available, they're accessible, that's useful,
00:29:53.360 | but they don't pay any interest. Money sitting in your savings account or a money market account
00:29:57.760 | pays effectively no interest in today's interest rate environment. And so it's a little hard to
00:30:02.000 | look down and say, "Man, I'm going to have $100,000 just sitting there, not paying any interest." And
00:30:06.720 | yet you know you need it for some form of emergency. But yet, do you really? Does all of
00:30:13.600 | the money have to be sitting there in a savings account? Or could you do something different?
00:30:18.880 | Are there products and things that you could use? I maintain that there are. And most people,
00:30:27.920 | rely on credit cards as their primary form of defense in a financial bind.
00:30:32.720 | Now, I think that's a bad move. In the course, I have a segment called just "Why You Shouldn't
00:30:40.640 | Use Credit Cards as a Source of Financing." One of the biggest problems with using debt,
00:30:47.120 | especially credit cards, as a source of financing is simply that it's never easier to pay something
00:30:52.640 | off later than today. It's always easier to cut now than pay off later. Think about this.
00:30:58.000 | If you have a credit card and you lose your job, and your first inclination is to say, "Well,
00:31:02.160 | I'm going to go and I'm going to just keep my normal lifestyle and put those normal expenses
00:31:05.600 | on my credit card." That's what most people's plan is. You've got a problem. Because two years
00:31:11.600 | from now, when you're employed again, you will have to pay double the payments. You have to pay
00:31:15.920 | for your future two-year lifestyle and today's lifestyle. So now, instead of having one set of
00:31:22.080 | monthly expenses, you have two sets of monthly expenses. It is always easier to cut now than
00:31:27.440 | to pay off later. I recommend instead of going into credit card debt, just sell your house and
00:31:31.760 | move or sell your car or move in with your family members or move into a tent in the forest or get
00:31:37.600 | food from the food pantry or dump all your bills and go work from the library. These are all better
00:31:43.040 | options, in my opinion, than going into debt. Because yes, you'll experience short-term pain,
00:31:48.880 | but now your pain only goes forward for four months. And then four months from now,
00:31:52.640 | when you're gainfully employed again, assuming you had no money, four months from now, when
00:31:55.680 | you're gainfully employed again, you put yourself in a situation where the pain stops. You have a
00:32:00.720 | normal income, you have one set of expenses instead of two sets of expenses, and life is
00:32:06.160 | better. I'd a whole lot rather suffer for four months than suffer for four years, which is what
00:32:12.000 | most people who borrow money and credit cards when they get laid off wind up facing. So back to
00:32:18.000 | somebody who's in the situation. So credit cards are useful because they give you dramatically
00:32:22.960 | huge buying power with no current carrying costs. You can have $100,000 of credit limit available
00:32:30.720 | to you on your credit cards, and it will cost you nothing. If you have cards with no annual fees,
00:32:35.200 | it costs you nothing to have access to that money. Over time, you can systematically build
00:32:40.480 | that number as high as you want to and as high as they will approve you for. Let's just say you
00:32:45.360 | have $100,000 available to you. Now in an emergency, what do you do? You always keep some forms of cash
00:32:52.000 | on hand available to you. But because you have quick access to paying ability with the credit
00:32:57.680 | cards, you can now afford to adjust your other portfolio of financial products slightly
00:33:03.040 | to give you forms of saving that are perhaps slightly less liquid, but are still pretty safe.
00:33:12.960 | It's my best example here. One of the things I really love about traditional whole life insurance,
00:33:19.280 | cash value life insurance, is the fact that it's a very, very stable asset,
00:33:23.680 | which means that you can effectively move it into your cash column on your balance sheet.
00:33:30.000 | It's equivalent to cash in many ways. Now it's not perfectly equivalent because you can't guarantee
00:33:36.480 | that the money's going to be out. As a matter of practice, the insurance companies will send it to
00:33:40.160 | you very quickly, anywhere from 24 hours and a wire transfer to a few days and a FedEx or a mail
00:33:46.640 | transfer, or they'll send you a check. But contractually, they have a right to defer that
00:33:50.880 | for many months. But as a matter of practice, they don't do that. But it gives you flexibility. And
00:33:57.360 | so if you have a situation, let's say you keep $100,000 in your cash values and your life insurance,
00:34:02.080 | I think that's a very reasonable number to put underneath your emergency fund.
00:34:08.160 | But you wouldn't necessarily want to take it all out all of a sudden in an emergency. But what if
00:34:13.440 | you also simultaneously have $100,000 available to you on a credit card? So now you wind up in
00:34:18.880 | an emergency, you lose your job, something goes wrong, you have significant expenses.
00:34:22.800 | Well, you can use the credit cards as your easy form of payment, your financing, you can then
00:34:28.320 | apply for various credit card financing systems. And you can apply for those at 0% or whatever
00:34:33.760 | you're able to get. And if you wind up in a situation where you need to pay the debt off
00:34:37.600 | right a second, then you go ahead and take the money from your emergency fund and pay it off.
00:34:41.360 | But if you're able to finance it using the credit card system with very low risk,
00:34:44.800 | now you can keep your other money productive and use the credit card system. So even if you are
00:34:49.840 | well-heeled, and you're not in debt, you still should think carefully about setting up your
00:34:55.600 | access to debt in case you ever needed it. Yesterday, I recorded an interview for Aaron
00:35:01.680 | Frankel's podcast, In the Rabbit Hole. And for that show, we talked about money and I just finished
00:35:08.160 | disaster preparedness month here on Radical Personal Finance. One of the best things you
00:35:13.040 | should always plan to do in a problem is leave. One of the best ways to avoid trouble is just
00:35:19.120 | simply leave, leave in advance. So I told Aaron in that show, I said, "If there's an economic
00:35:24.400 | collapse in the United States of America, if I can, I'm just going to leave. I'm going to buy
00:35:29.360 | plane tickets for my family and we're going to go somewhere." Well, how do you pay for that?
00:35:33.440 | Credit card. You can have backup sources of money, you can have international bank accounts,
00:35:37.440 | you can have foreign currency, et cetera. But as a matter of practice, you go to the airport or you
00:35:41.920 | go to whatever your online ticket buying service of choice is, and you buy plane tickets for your
00:35:47.920 | family, you load your backpacks and your suitcases and you leave. When I travel, one of the things
00:35:54.640 | you always should do when you travel is make sure that you have multiple credit cards available to
00:35:58.400 | you. They're extremely safe as a backup form of financing. Because if somebody takes it and they
00:36:04.240 | make fraudulent transactions, you're not liable, you're protected from that. And so when you go to
00:36:08.960 | a foreign country, you should take significant amounts of physical currency, that's useful.
00:36:14.320 | You should also take significant amounts of backup reserves. You might put a couple of gold coins in
00:36:19.600 | your money belt or something like that. But the most practical, reasonable way to have backups
00:36:25.440 | is to stash four or five different credit cards of Monavisa, Mono MasterCard, American Express,
00:36:30.400 | depending on what's going to be accepted in different situations. And you stash those
00:36:33.600 | around your luggage, you stash those around your person. So that if your luggage gets stolen or
00:36:37.360 | your car gets stolen or your clothes get stolen, then you always have a backup form of financing
00:36:43.040 | to get home. It's happened to me, I had suitcases stolen when traveling, had my car broken into.
00:36:48.400 | And by making sure that you think ahead and secret some things away, you're in good shape.
00:36:54.240 | Your vehicle, your vehicle should have backup forms of financing in it. You should have some
00:36:59.680 | form of cash, some amount of currency tucked away. And you should have a couple of credit cards
00:37:04.560 | stashed in your vehicle. So that if you guide up in a situation, you got to figure out how to pay
00:37:08.320 | the tow bill. The credit card is the most reasonable, reliable way to do that. Now,
00:37:14.080 | most of us I think would do that just knowingly. But you also want to make sure you have the system
00:37:18.640 | in place. So if you wind up in that circumstance, you can continue to borrow the money cheaper.
00:37:24.960 | So this is just an introductory discussion. And I simply wanted to actually record a show because
00:37:29.920 | it's been about two weeks now. I wanted to record the show. I want to invite you to my Q&A show
00:37:33.600 | tomorrow. And I just wanted to, I want to get your mind thinking about this. And I hope you'll buy
00:37:38.240 | the course when I launch it on Monday. I think you'll really like it. I'm really proud of it.
00:37:42.080 | The other course, this is my second course offering to you. The other course that I did was
00:37:47.040 | a career and income planning course. Got great feedback from that. Many of my students, a bunch
00:37:52.720 | of people signed up. Many of my students were satisfied. Number of people wasn't right fit.
00:37:56.400 | That was a very high end, expensive and in-depth, exhaustive course. It was a beast. This one is
00:38:03.440 | much shorter, quicker, and it'll be much less expensive. But I think it will really serve you
00:38:08.480 | and will serve you with some ideas that I think are underrepresented in other places. And let me
00:38:16.480 | give you just one final word on kind of my business model going forward. When I started Radical
00:38:21.360 | Personal Finance, I had the idea, I had the dream, I had the idea that I was going to provide all
00:38:30.720 | this useful information for free for people. And that was my goal. I had this dream of a 15-year
00:38:38.000 | old kid in the hood finding my show and saying, "Wow, I can learn everything I need to know to
00:38:42.560 | get out of the hood." That was my dream. And what I learned after doing the show for a few years,
00:38:48.880 | and so in so doing, my goal was how can I provide everything I know for free
00:38:52.960 | so that it's accessible to the most people? What I learned is my audience,
00:38:58.960 | I have a few 15-year olds who are listening and I'm grateful for that. I'm so grateful for that.
00:39:04.480 | But the majority of my listening audience is composed of successful, wealthy, well-educated
00:39:11.600 | leaders. Now, here's the great thing about that. That means that, first of all, there's a causation
00:39:20.240 | correlation to wealthy, successful people who seek out in-depth information because they need more,
00:39:25.920 | or are they wealthy, successful because they've always sought out in-depth information? Well,
00:39:29.680 | who knows? I'm inclined to say that people are wealthy and successful because they've always
00:39:36.480 | made a habit of seeking out the best information. That's been my personal experience.
00:39:40.320 | But perhaps more importantly, one of the problems you face as you go through life
00:39:44.480 | is you develop more, you wind up with more money and less time. So in the beginning of life,
00:39:51.360 | you have lots of time and not so much money. And as you get older, more effective, more successful,
00:39:56.480 | bear more responsibility, you generally will wind up with less time and more money.
00:40:00.800 | So the business model that I took in the first couple of years of radical personal finance,
00:40:05.280 | of massively prolific verbal content that was minimally edited and just minimally edited,
00:40:14.720 | is not a good fit for somebody who's wealthy and effective and successful. It's a good fit for
00:40:19.520 | somebody who doesn't have any money, but it's not a good fit for somebody who's wealthy and
00:40:22.160 | effective and successful. And so what I'm seeking to do is to change the paradigm, to give you more
00:40:29.760 | useful, concise, carefully edited information that really serves you and to charge more for it,
00:40:36.880 | because I think that will serve you better and it will serve me better. So instead of pursuing all
00:40:40.640 | kinds of advertising, you'll notice that I've kept the show almost entirely advertising free.
00:40:45.920 | Instead of spending my time going out and recruiting advertisers so that I can do that,
00:40:50.960 | I'm going to continue to bring you good content, but I'm changing it and try to provide
00:40:55.120 | extremely valuable educational products for you. That's my goal. Unique, valuable, pithy,
00:41:02.080 | concise, useful educational products. And here's what I'm trying to do with that. I'm trying to
00:41:06.480 | provide extensive personalization. So if you buy a product, you have a specific question,
00:41:11.120 | I'll create specific answers to you in that. And then secondly, I'm seeking to, well, I always just
00:41:18.000 | stand behind my words. If you ever have a question about something that you buy and you say, well,
00:41:27.120 | I want to just try it, but I'm not sure about it. Always just try it. That's the great thing about
00:41:31.600 | digital products is it's relatively easy for me to say, try it. And if you don't like it,
00:41:35.120 | I'll give you your money back. And so try out the stuff that I'm bringing to you. I hope you like
00:41:40.080 | it. So look for that on Monday. Join me for a live Q&A call tomorrow on Friday, and I'll be back with
00:41:45.120 | you soon. Thank you for listening. With Kroger brand products from Ralph's, you can make all
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