The Frugal (AKA poor) Sailor

[Mike OReilly]

Originally Posted by Kenomac

Things have changed over the years. I would have agreed with this 10-20 years ago when I dealt on a cash basis, but today I now run all my expenses through credit cards with point systems, cash back or travel points attached. We pay them off every month, pay zero interest, zero fees and usually end up with 4-6 airfares and a couple thousand dollars of free travel money each year. In addition, the cards have no foreign exchange or transaction fees unlike exchanging cash in foreign countries.

It's easy to become "penny wise, pound foolish" in the fugality biz. IMHO

So true, but the point of these "point" cards is to seduce people into spending more and more using these cards. Most people do not pay off their cc each month. In fact the average cc debt is (astonishingly ) at about $5,700.

Your approach is perfect Ken, and one the financial institutions hate. You use them, instead of letting them use you. But unfortunately you are not typical.

It's virtually impossible to live in this world without some plastic money card, so I carry a few different ones. Like you, I pay them off every month. I've stuck with the zero-fee cards (and zero rewards) b/c I don't want the seduction of chasing points, but I know my weaknesses. Your way is best ... as long as you're abnormal

[brownoarsman]

Originally Posted by Mike OReilly

It's virtually impossible to live in this world without some plastic money card, so I carry a few different ones. Like you, I pay them off every month. I've stuck with the zero-fee cards (and zero rewards) b/c I don't want the seduction of chasing points, but I know my weaknesses.:

I follow Ken's approach as well-but I have enough corporate reimbursed spend to make it very worthwhile to earn, churn, and burn on the cards (eg sign up for multiple cards, earn the signing bonus, and close them). I set them up to pay automatically from my checking account and review everything every month for expense reports, so very safe.

However, for those without that benefit, even a card like citi's double cash card should be in your wallet as frugal sailors. 2% cash back on everything you buy (a percent when you buy it and a percent when you pay for it). It's cash back, not points, so very simple to redeem, and there's no need to track which categories you should use the card on. There is also no annual fee, this is basically free money (as long as you pay every month). It's not the 20% raise you may have used to have gotten paying cash, but it may be the best you can do in an era of stagnating wages, and most of you lot out of the workforce anyways


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[boatman61]

LOL... seem to remember when CC's first came out in the UK.. shopkeepers were not at all keen on them as they had to pay (if I remember rightly) 12.5% to the CC company for the use.. however.. in no time prices were raised to bring this into the price paid by the customer and today folks think they're getting a good deal.. when in fact they're still getting stiffed.. but with a feel good factor..

[brownoarsman]

Originally Posted by boatman61

LOL... seem to remember when CC's first came out in the UK.. shopkeepers were not at all keen on them as they had to pay (if I remember rightly) 12.5% to the CC company for the use.. however.. in no time prices were raised to bring this into the price paid by the customer and today folks think they're getting a good deal.. when in fact they're still getting stiffed.. but with a feel good factor..

Luckily, the interchange rates have come down since then Your point is valid, but today emphasizes that paying with cash these days can be a suckers' game. Most (all) credit card-merchant agreements come with the proviso that you cannot charge different cash vs credit rates, with exceptions for gas stations. So, all those paying cash are basically subsidizing the CC users. The system is rigged, so come in and feed at the trough, my friend

Sent from my Nexus 5X using Cruisers Sailing Forum mobile app

[thinwater]

Originally Posted by Dockhead

Using debt to buy an asset magnifies both profits and losses (why they call it "leverage"), and real estate can go down, as well as up, in value. You can make a lot of money by buying the right piece of real estate using as much debt as the bank will give you, and holding it long enough to get through several cycles.... But if you buy property with a 90% mortgage, it only has to go down in value by 10% in order for you to lose all of your investment.

So you have to be careful with real estate, which is a fairly tricky asset class.

All true. I am in near Wsahington DC, which because of the US Gov, has been a reliable market for a very long time. But it has been up and down as well.

But it was just an example. The point is that frugal sailor borrows when it is an investment, not when he "needs" something. For example, I would be very careful about buying a house that I "need," if I did not have good reasons to believe it would gain value. Knowing the difference is at the heart of being frugal.

[Kenomac]

Originally Posted by Mike OReilly

So true, but the point of these "point" cards is to seduce people into spending more and more using these cards. Most people do not pay off their cc each month. In fact the average cc debt is (astonishingly ) at about $5,700.

Your approach is perfect Ken, and one the financial institutions hate. You use them, instead of letting them use you. But unfortunately you are not typical.

It's virtually impossible to live in this world without some plastic money card, so I carry a few different ones. Like you, I pay them off every month. I've stuck with the zero-fee cards (and zero rewards) b/c I don't want the seduction of chasing points, but I know my weaknesses. Your way is best ... as long as you're abnormal

We've haven't missed a full credit card payment in over 8 years. LOL This upcoming year, I expect the credit cards points back to pay all my off season mooring fees in Italy along with the travel to and from in 2017. Paying cash today is a suckers deal. I always ask if there's a cash discount and take it when there is one, otherwise I take out the credit card. We rarely have more than €50 on us at any time. Just enough to buy a tee shirt or gelato from a vender.

I'd also go as far as saying money here in the US from banks at 4% or less anual interest rates is basically free money, use it to your advantange. "Don't be penny wise, pound foolish."

How do you think the rich became rich? Trust me when I tell you that it wasn't using their own money to pay cash for things or getting paid in cash.

[a64pilot]

Originally Posted by Kenomac

Things have changed over the years. I would have agreed with this 10-20 years ago when I dealt on a cash basis, but today I now run all my expenses through credit cards with point systems, cash back or travel points attached. We pay them off every month, pay zero interest, zero fees and usually end up with 4-6 airfares and a couple thousand dollars of free travel money each year. In addition, the cards have no foreign exchange or transaction fees unlike exchanging cash in foreign countries.

It's easy to become "penny wise, pound foolish" in the fugality biz. IMHO

I've been an AMEX card holder since 87, says so on the card, but it's not a credit card, you have to pay it off every month, or used to anyway, I've gotten mail telling me I can carry a balance, but if you read the fine print, it's at an insane interest rate, so only a fool would.
Especially now that I do so many purchases off the internet etc. you need plastic, just pay it off and never carry a balance, or your the fool.

But, the merchant pays a fee for you using the plastic, and I believe AMEX is the highest fee, often when buying a large purchase I'll offer to pay cash if I get a discount, often they will give me a 3% discount. Maybe they like cash cause it's not traceable by Uncle Sam? But they don't lose any money, and they have the untraceable cash in hand, without any hassle.

There is an incredible amount of money made off of what I call "float money" that is pre-paid anything etc., they get the money up front and deliver the goods or service later, but the key is they get the money first.
I don't pre-pay anything unless I get some kind of better price for it.

But the big screen TV's in my house and four or five Ipads, my diving watch and a few other things I have all gotten from AMEX rewards points, and I've noticed you can redeem them as cash on Amazon.com now. I'm letting them built until after I retire, I figure the first year will be the telling year and having a grand or two's worth of points to use on Amazon wouldn't hurt, I buy an insane amount of stuff off of Amazon, even the toilet paper for the boat

I despise flying Commercial and won't unless I have to, so I don't want airline miles.

[a64pilot]

Now this is by household, average credit card debt by person is $5,700 from what I can see

2015 American Household Credit Card Debt Study
Total owed by average U.S. household carrying this type of debt Total debt owed by U.S. consumers

Credit cards $15,675
Mortgages $172,341
Auto loans $27,865
Student loans $48,591


But if your debt free, you can live a better life style than someone who isn't.
I don't buy into the make money with other peoples money, seen too many lose that way, like the adage of it doesn't matter what you pay for a house, you will sell it for a profit later.

[weavis]

HOwever you do it.... frugal means economical in use or expenditure; prudently saving or sparing; not wasteful:

If a bonus can be made from careful management of resources then that is even better.

[Mike OReilly]

The whole big-points cards are yet another example of the way our economic system is rigged in favour of us rich people. As others have said, merchants pay a price to accept these cards, and they pay a steeper price when someone pulls out a big-rewards card vs a plain-jane card. But since merchants cannot recoup this cost in differential pricing (higher price for those who want to use their points cards, vs plain jane cards vs cash) the cost gets passed on to everyone.

You have to be relatively affluent to qualify for these higher-end points cards, so poor folk basically subsidize the rich when they pay cash, or use one of the lower-end cards that they can qualify for.

BTW, I just remembered that I do have a points card. It's a no-fee Amazon VISA, which is one of the few Canadian-issued cards that has no foreign currency exchange fees. It's also a cash-back reward card, and an Amazon points card as well.

[Cheechako]

Originally Posted by thinwater

Or if the "thing" appreciates or has investment value.

My homes have gained about 5-7% in value over the past 30 years, far exceeding inflation. Half of my net worth is my home, without which I could not retire at this age.

I've sold my boats for what I paid for them, but they certainly did not gain value. They lost, corrected for inflation, and far worse if I included costs.

But in my homes, even after including taxes and utilities, I have lived rent free for decades. Quite frugal.

Of course, this depends on location. In my case, the wooded back yard is more zen than the marina, the park a few miles away rivals any anchorage.

I guess I like dirt too. I'm good with that.

Your homes have gained 5-7% in value in 30 years? I've had homes that doubled in 2 years.

[Mike OReilly]

Originally Posted by weavis

HOwever you do it.... frugal means economical in use or expenditure; prudently saving or sparing; not wasteful:

If a bonus can be made from careful management of resources then that is even better.

[Kenomac]

Originally Posted by Mike OReilly

So does that mean I'm being frugal, or am I one of the evil rich with a points card like you?

[Blue Crab]

I read that we're all equal ... it's just that some are more equal.

[Kenomac]

Originally Posted by a64pilot

But if your debt free, you can live a better life style than someone who isn't.

I don't think so.