Tuesday, April 4, 2017

Some of the Worst Frugal Advice I've Been Given

We all know that there are many ways to save $$ or cut costs or make more money.

Frugality in my view, as part of working toward simplicity, has to do with deciding what I value, what I want out of life, and what makes me "happy."  It's also about having the money to put it where my mouth is when need be.

So, given those things, I like to keep my money life simple.  No complicated financial deals.  No high risk investments that I have to keep track of.  I don't have a natural understanding of those things and taking the time to get that understanding would cut into time doing things I enjoy...depressing foreign films and staring at bees or the creek or sledding.

All that as a disclaimer.  Perhaps for YOU (dear imaginary reader), the following would be good advice.  For me, it was the worst.

1)  Don't pay off a mortgage! 
This is based on the assumption that I would take the money I could have spent paying down the mortgage (which was at 6.75%) and invest it and earn MORE than 6.75%.  I didn't have those skills or knowledge of financial investments.  Those skills don't interest me. 

There was also the argument that I would lose the tax deduction.  About 1/3 of the mortgage interest payment did come back to me as a tax deduction, but that's chump change at my home buying level.  2/3 of the interest payment went right into the pockets at whatever company owned my mortgage at the moment.

Let's add into all this the fact that gainful employment is not a given.  If you, I, miss a mortgage payment (or a HELOC...ugh), you, I, can lose the house.  At that point, you, I, would be out all the money paid in on interest and equity, lose the deduction, AND have to find a place to live.  A job loss can mean much more than a job loss if one has a mortgage or HELOC (which is just another name for mortgage)

And then there is peace of mind.  Without a mortgage, I now have much greater peace of mind.  If I lose my job, that is all I have lost.  No worrying about finding the mortgage payment, liquidating other assets to save the house, or the like.  I still have a home.  I can decide to sell that home but I can't lose it to the bank for nonpayment.

2)  You can pay for ______ with a HELOC and SAVE MONEY!!!
OR...I could NOT put my home at risk for whatever I'm paying for.  How about that?  See #1 for how I feel about mortgages and I can't see anyway that a HELOC is not a mortgage.  The house/home is at risk over a missed payment.  That is the key element of a mortgage to me and I'd rather buy a car with a car loan (miss a payment, lose the car), than a HELOC (miss a payment, live in the car).  Or better yet, save up and pay cash for the car.

3)  Just buy it! You'll feel better!
Uh...right.  If you are buying something to feel better, perhaps solve the emotional trauma THEN go shopping.  Also, personally, I don't really make choices based on feelings.  Feelings change.  Thus, they are not a basis for choices.  Then again...I do sometimes buy things just because they are awesome but it's a mistake, hence, bad advice.

4)  You don't need to read all the paperwork, just sign here!
This was said to me by the mortgage broker.  I informed her that I would indeed be reading the ENTIRE document before I signed it.  She said I could sign it, take it home and read it, and then call her if I had questions.  Right........NOT.  She acted like I was wasting her time.  Good thing I didn't care.

5) Buy the extended warranty.
Now, there may be a case where this is a good idea, but in my view, it is rarely a good idea.  Do your research ahead of time and hope for the best.  In researching actual repair rates I've often found that I could pay for a major repair for the annual cost of the extended warranty. No gain.  In reading the fine print, the extended warranty often has so many holes in it, that it wouldn't cover the most common repairs...unless I upgrade to the gold-plated extended warranty.  Nope. 

6)  Do things for the next owner of the house/car/whatever
Not for me.  I had a car hit by hail.  LOTS of hail.  Tons of hail.  Big a$$ hail.  Every single metal panel was dinged and dented.  The glass survived.  I was advised that rather than pay off the car loan, I should get the hail damage fixed so I'd have a better trade in value.  Um...the math.  I paid about $6000 for the car.  The hail damage was for $3400 and change. And, I drive cars until the wheels are about to fall off, or in a few cases did fall off.  That is more cost effective for my lifestyle.  I have no need for a pretty car.  I took that check to the bank and paid off the car.  I drove it for many more years.

When building or fixing up a house, I also believe in doing what is right for me, not what some imaginary future owner might want.  Screw them.  They may not exist and how do I know what they would want?  I am planning a new home right now and it will be what I want.  I did that with my current lodgings and you would not believe how much other people think it is "cool" and offer me cash for it.  Had I listened to those who talk about "resale" I would have had a bland standard boring plan, not the unique interesting fun one that I do have. Stick to your own style or the place will have no style.

Six is a good number so I will stop now.

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