Best Life Plan

JasonWx wrote

My Dad had a healthy appetite for Debt..It didn't serve him well..
If i learned anything from him, it was if you can't pay cash ya don't buy it. except for a home...

I just heard something today. Now, I know this is about as extreme of an example of something like this, but, it can work on a smaller scale . Jeff Bezos never sells his stock, the value of which makes him possibly the richest man in the world. He borrows against it. If he sold the stock, he'd be subject to a lot of taxes, but, he borrows at a paltry 1.5-2% from top banks who trip over each other for the pleasure. He also retains all the voting rights of the stock, therefore, control. Zuckerberg, also, and many silicon valley rich guys carry mortgages on their homes. Money is cheap. I can still make more money in markets than the 3.5 percent loan I just took out on a car. Now, credit card debt, furgetaboutit, but, cheap money can be a way to save money.

This is so true. I don’t view borrowing at rates less than your making in the market as borrowing as long as you have the money to back it up

also why would you borrow money to buy a depreciating asset?

We’ve entered the “two Americas” thing again.

People borrow to buy a depreciating asset because they need to drive that asset from their home to their job to make the “earned income”.  

JasonWx wrote

also why would you borrow money to buy a depreciating asset?

If the depreciating asset fulfills a need then borrowing is fine, particularly if you can earn more than the interest. In my case, Say for a car I will look at the best price first, look at loan rates for that price with an 18 month payment period or ballon and if the rates are favorable I’ll go for the loan. More than 18 months is too risky unless your getting next to 0% and unless there is enough incentive payments may not be worth the hassle.

I have never leased a car but am considering it this time so I can write the whole thing off as a business expense and not have to worry about mileage or depreciation deductions. I have not done that math yet to see if it makes sense. Right now I just take the mileage deduction.

JasonWx wrote

also why would you borrow money to buy a depreciating asset?

Yes car is the primary offender.  What else falls into that category?  I can't think of it.

I've been playing all kinds of (some would argue stupid) games with this one for years, to avoid a true car loan. Two of our cars are wrapped into our loan. (We have a "second mortgage" but no first).  I did this when I was able to refi at a lower rate than the one I had.

Our current loan is comprised of two cars, the last little bit of our first house loan, a kitchen and a bathroom in the flatlands, our land in the mountains and our septic and well in the mountains.  I'm sure that opens me to lots of criticism but the rate on it is low and the monthly cost is very reasonable about the cost of a two bedroom apt around here. While I have 15 years left on it, we'll pay it all off when I retire in 5 years.

But back to the cars.  The cars are the only part of that loan that are a truly depreciating asset.  We still have one of the cars (wife's Toyota - 7 years old) but my Honda has been replaced. My car is used primarily for long distance (skiing) and I insist on the reliability of a relatively new Japanese car.

That last car... there was no cheap way to finance it and we can't really afford another monthly bill, and I wasn't willing to refi the whole nut at a higher rate, so we paid cash for it. First time ever. I guess since all cars after this will come in retirement, so they will all be cash. Hoping they will last a long time as we'll be in the mountains and not driving to them.

One could argue you should never buy a new car, from a financial POV.  It's something I do for my own piece of mind.

I actually think buying a new car makes sense in today’s market. Initial 1 year depreciation is not nearly as high as it once was because reliability has gone up and the market for 1 or 2 YO cars is good. But if you do this you lose the history of the beginning of service and knowing that the car has been properly serviced and lightly used and is not a defect is important in the long run. So I am totally with you on this.

PeeTex wrote

But if you do this you lose the history of the beginning of service and knowing that the car has been properly serviced

My thinking exactly.

PeeTex wrote

 

I have never leased a car but am considering it this time so I can write the whole thing off as a business expense and not have to worry about mileage or depreciation deductions. I have not done that math yet to see if it makes sense. Right now I just take the mileage deduction.

It will.

 It's comes out to six of one and a half dozen of the other.

If I had to buy a truck there are no if's and's or but's about it, I'd lease one. At least in this day and age. Nearly all lease money factors are near 2% or lower. As long as you can fit into the mileage/year (if your over 15K/yr I'd advise against leasing) I feel it's the way to go.

When I bought my tractor I took advantage of their 0% for 12 months. It was a no brainer for me.

Many people are fooled by that zero interest for a year thing. If you don’t pay it off before the year is up the years interest is retroactive and added to the principal then you start paying on the total at a not usually good rate.

YO BANDIT :

 , Now ..That's what im talkin' bout ! great strategy , good bennies , defined benefit pension ..... NOW YOUNG DUDE Listen up , in addition try to MAX out your 403b ( pretax supplemental retirement plan) and you're good to go !! Get that early savings miracle working for yourself

Nice!  We want pics.

trackbiker wrote

Many people are fooled by that zero interest for a year thing. If you don’t pay it off before the year is up the years interest is retroactive and added to the principal then you start paying on the total at a not usually good rate.

Fer sure -- you have to pay it off within the 12 months or you're screwed

Harvey wrote

JasonWx wrote

also why would you borrow money to buy a depreciating asset?

Yes car is the primary offender.  What else falls into that category?  I can't think of it.

I

Boats are a major offender..People finance the crap out them, and they depreciated faster then cars..

I read somewhere that the avg car payment in the US is 550/month..And some loans go out to 72 or 84 months..that's insanity..

campgottagopee wrote

PeeTex wrote

 

I have never leased a car but am considering it this time so I can write the whole thing off as a business expense and not have to worry about mileage or depreciation deductions. I have not done that math yet to see if it makes sense. Right now I just take the mileage deduction.

It will.

 It's comes out to six of one and a half dozen of the other.

If I had to buy a truck there are no if's and's or but's about it, I'd lease one. At least in this day and age. Nearly all lease money factors are near 2% or lower. As long as you can fit into the mileage/year (if your over 15K/yr I'd advise against leasing) I feel it's the way to go.

When I bought my tractor I took advantage of their 0% for 12 months. It was a no brainer for me.

Thank Camp, now that I know your a loan shark (rather than a land shark ) I’ll take a close look an sharpen the pencil. I only put about 7k/yr on my car now.

JasonWx wrote

Boats are a major offender..People finance the crap out them, and they depreciated faster then cars..

Boats are crazy. I had a boat about 30 years ago, cost me a ton in slip fees, hauling it and bottom painting it every year and then keeping the equipment up to date. But it sure was fun and relaxing, I lived on it for a month at a time. Finally sold it when I was ready to be a productive member of society again and my wife got tired of it. Got about 50 cents on the dollar and glad to get out.

I just sold my boat. Can't wait to get a newer one. Maybe next summer.

PeeTex wrote

JasonWx wrote

Boats are a major offender..People finance the crap out them, and they depreciated faster then cars..

Boats are crazy. I had a boat about 30 years ago, cost me a ton in slip fees, hauling it and bottom painting it every year and then keeping the equipment up to date. But it sure was fun and relaxing, I lived on it for a month at a time. Finally sold it when I was ready to be a productive member of society again and my wife got tired of it. Got about 50 cents on the dollar and glad to get out.

Bring On Another Thousand!  I sold mine last year.  Not having that expense anymore was just like getting a raise.

Harvey wrote

Nice!  We want pics.

I’ll post em up for sure.

RA - I totally respect you and know that it cuts both ways, but not sure it is unfortunate that money does not drive you in a way that makes life difficult.  A lot of double negatives, but hopefully you get what I am saying.

That, combined with Harvey's point about his parents stating they would withhold college $ if he ski bummed for a year makes me think - I did college in three years (state school) due to lack of funds and worked harder than normal in a hard-working profession probably because I was financially insecure as a kid, but now that I have kids of my own who will not have that particular insecurity, I think I want to prepare them to be resilient and open-minded, and if they happily choose something after being somewhat thoughtful about it, hopefully I will support that.  

Easy to say that when they are pretty young and their most important choice is how far to push it before getting a time out, or making smaller morality choices . . . .

Getting deep on a Saturday night.  The dangers of postponing some cleaning.