Pay Cash or Finance?

Discussion in 'Business, Investing & Finance' started by bradgator2, Jul 30, 2020.

  1. Gator By Marriage

    Gator By Marriage A convert to Gatorism
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    My dad used to always refer to his car as a depreciating asset.
     
    • BMF

      BMF Bad Mother....
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      I like Robert Kyasaki (from Rich Dad, Poor Dad) - he says basically anything you own that doesn't bring in an income is a liability. So technically, even your primary home - no matter how much equity or it's value - is a liability.

      A car is definitely a liability, even if it's paid off. Sure, it has value (like a primary home), but you are certainly not getting an income from your car unless you're a delivery driver or an Uber.
       
      • FireFoley

        FireFoley Senior Member
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        LOL. I always called my car a liability and my primary home a money pit, :lmao2: But I will say this. The best free advice I give youngsters, especially during times of inflated house prices, is this: Your primary home is a LIFESTYLE investment, NOT a FINANCIAL investment. Any financial good that comes from it is a bonus.
         
        • FireFoley

          FireFoley Senior Member
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          Millions of Americans are worried they won’t be able to make even the minimum payments on their credit cards

          Amid one of the worst downturns in U.S. history, nearly 80% of credit card holders say they’re worried they won’t be able to continue making even the minimum payments on their debt.

          The figure comes from a survey by CreditCards.com, which found millennial card holders (91%) are most at risk of missing payments. Meanwhile, 1 in 4 people say the pandemic has pushed them to take on more credit card debt.

          Most of the relief measures delivered to Americans in the first stimulus package have dried up, even as the coronavirus pandemic shows no sign of abating. The unemployment rate is still above 10%, higher than at any point during the Great Recession.

          More than 60% of the survey respondents said they may not be able to make their minimum payments if they can’t return to work.

          The average U.S. household has around $5,700 in credit card debt, with a minimum payment of around $133, Rossman said.



          There was a bit more to the article but I placed it here as these people are not paying cash, obviously.

           
        • bradgator2

          bradgator2 Rioting
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          Alright, I looked at your fancy number charts and couldnt decipher them.

          So let's make some assumptions:
          $40,000 loan,
          2% interest,
          60 month term.
          Monthly payment would be $701 (and total interest paid would be $2067).

          I have to put that $40,000 into an account and invest it. I have to withdraw $701 each month from this account to pay for the car note. Obviously, the entire equation hinges on the interest I can earn on this account.
          If I can get a 3% return, I would have $1031 left in the account when the last payment is made.
          If I can get a 5% return, I would have $3450 left in the account when the last payment....
          If I can get a 7% return, I would have $6190 left in the account....
          If I can get a 9% return, I would have $9289....

          It is interesting to think about it that way.

          Can you setup investment accounts to automatically make a monthly payment to pay a revolving loan bill?
           
          #45 bradgator2, Aug 10, 2020
          Last edited: Aug 10, 2020
        • Detroitgator

          Detroitgator Well-Known Member
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          you can DEFINITELY pay bills from a regular investment account with a lot of brokers. I don't do it so much to pay bills, but i move funds in and out of one account fairly regularly (the one i use to generate cash for other things).

          PS I know that times are not "normal," but in the account I'm talking about, since mid-May, my unrealized gain in that account would now pay cash in full in your car scenario, and I wouldn't call any of my positions "risky" or even "sophisticated."
           
          #46 Detroitgator, Aug 10, 2020
          Last edited: Aug 10, 2020
        • bradgator2

          bradgator2 Rioting
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          It this a manual process?

          With my accounts, I cant find a way to setup an automatic withdrawal. I can easily find automatic deposit. Therefore, I envision me having to manually move out $701 each month to a checking account (or something) where the loan can be setup to automatically debit from.
           
        • Detroitgator

          Detroitgator Well-Known Member
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          I think that's the norm... making money work for you, oddly enough, takes some work. ;)
           
        • bradgator2

          bradgator2 Rioting
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          I dont know if I should give you a "like" or the middle finger :lol:
           
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          • TLB

            TLB Just chillin'
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            Translation = I have a sht-ton of money in there to build interest ;)

            = = = = ==

            The term i struggled to recall earlier is 'money-market' account...I think? Is that kinda what we're talking about here? Question of ignorance, not trolling.

            EDIT: Probably not when @Detroitgator specifically said "investment accounts", which I'm not familiar with using to pay thing...only as 'investments'
             
          • bradgator2

            bradgator2 Rioting
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            I can see "it" now. I kinda wish I would have ran that kind of analysis last week. Owell. Now I have better picture if the same situation presents itself in the future.

            @TLB Money Market is basically a high yield checking account where you can only have 2-3 withdraws a month. Problem is... they aint high yield these days. Not even 1%. I am specifically talking about an investment brokerage account.

            (edit: the 2 best I can currently find are through Capital One and CIT group and are 1% APY)
             
          • BMF

            BMF Bad Mother....
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            I'm getting 1% at PenFed (Pentagon Federal)....it was 2% in January and has steadily dropped. I think you can make up to 6 withdrawals/month.

            I've mentioned this before - but Streetshares is paying 5%. I've got well over $100K invested.
             
          • LagoonGator68

            LagoonGator68 mostly peaceful protester
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            How, since their limit is 10k?
             
          • BMF

            BMF Bad Mother....
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            That's new, only about 3 or 4 weeks. I've been in it for two years. They'll lift that limit once things get back to normal (I imagine), but the China virus caused their business to slow down (obviously people aren't borrowing money from them when they can get it for free from the government).
             
          • Detroitgator

            Detroitgator Well-Known Member
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            Yeah, this is exactly what I was talking about when I told GGG it would have been stupid for me to buy a house in Gainesville when Son #1 first enrolled, because I had better uses for my cash with better ROIs.

            Groan away haters, but this is one of those "Kyosaki'isms" that stuck with me... you don't touch your principal unless you have to. His example was wanting fancy, very expensive "depreciating asset." Instead of paying cash or financing it (debt that does not produce income is "bad debt" in Kiyosakiland), he told his investment advisor what he wanted to buy and told him to "get aggressive" with a portion of his principal in the stock market until he had produced enough in profit to buy the fancy, very expensive "depreciating asset." Once he had built up the cash, he turned off the "aggressive" investing, did pay cash for the car, still had 100% of his principal. Now, is this a true story? I don't know and I don't give a fuk, but I do know personally that the method has worked for me several times. I have a chunk of cash in a brokerage account and the only thing I use that account for is being aggressive (within my risk tolerance, no options/futures/forex schit) to generate income for other projects. And yes, you do have to figure in ST capital gains and other costs associated with doing it.
             
          • Detroitgator

            Detroitgator Well-Known Member
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            Hi. No, we're talking using straight up brokerage accounts to buy positions, generate a return, and use those returns to pay for the car, er, "depreciating asset."

            Money Market type accounts are in the schitter because of interest rates... they don't really even keep up with inflation, but are better than nothing. For our "emergency fund" (e.g. the six months pay kind of thing, but I do a year and we NEVER touch that account for anything), we have an Ally Demand Note account that works like a regular checking account if we want (the money is not "locked") that currently pays 1.5% for deposits over $50K (less for lesser balances). Here's the thing you have to REALLY be careful of post Dodd-Frank. That Ally account (and BMF's Streetshares account) are NOT FDIC insured if the schit hits the fan again like it did in 2009-10. They weren't insured back then either, but the USG covered all kinds of things. The difference post-2010 with Dodd-Frank is that ALL the banks (and bank like institutions) now have language that states they will come after YOUR deposits now before going bust, and yes, it's totally legal/legit (I'm paraphrasing all that, but I am 100% correct). So, both BMF and I run the very real risk of every penny in my Ally or his Streetshares account going "POOF!" one day, but i'll run that educated risk right now while it's still paying 1.5%.... but man 'o man, do I miss the days 20 years ago when it was paying 5-7%, but I didn't have any money back then! :dunno: :lol:
             
            • bradgator2

              bradgator2 Rioting
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              Different situation because there is noway I will get a “normal/construction/private” loan at 2% or lower.... but I also have enough to build a detached garage/workshop. So my plan was just to pay it straight up. But your strategy has the wheels spinning. Maybe slide all those chips in on the next big correction. Which I have a sneaking suspicion is right on the horizon. Then roll with what you wrote above. It might delay the project. Or it might not.

              (Edit.... whoops, meant to quote your reply to me)
               
              • Gator By Marriage

                Gator By Marriage A convert to Gatorism
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                Most folks give him both. He pretty much expects it now.
                 
                • Detroitgator

                  Detroitgator Well-Known Member
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                  If you follow my updates in the other thread, I do expect a VERY big pull back in the markets in the next two months or so... that drop will result in the next big chance to get in on long positions for an even bigger run up. So far all my stuff has held up, we'll see if it's accurate when we get to SP500 around 3400.
                   
                  • bradgator2

                    bradgator2 Rioting
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                    Yes, I have been reading them. And will be ready.
                     

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