Comments on: 31 Days To Fix Your Finances, Day 29: Paying Cash http://www.thesimpledollar.com/2007/01/29/31-days-to-fix-your-finances-day-29-paying-cash/ Simple, applicable personal finance advice for the modern world Sat, 21 Nov 2009 23:44:30 -0800 http://wordpress.org/?v=2.8.4 hourly 1 By: James http://www.thesimpledollar.com/2007/01/29/31-days-to-fix-your-finances-day-29-paying-cash/comment-page-1/#comment-4695 James Thu, 01 Feb 2007 05:37:26 +0000 http://www.thesimpledollar.com/2007/01/29/31-days-to-fix-your-finances-day-29-paying-cash/#comment-4695 My best friend and I had a friendly argument on the topic of car leasing and ownership. I took the same side as Trent. I told him that financing a rapidly depreciating asset such as a car is utter nonsense and that you should simply pay cash if possible. My friend, on the other hand, chooses to view a car lease as a recurring expense for a luxury item which can be budgeted into his cashflows. To him, it is the price for enjoying a nonessential thing in his life, much like the way one might pay $5/mo for HBO or $30/yr for a favorite magazine. While I still maintain my point of view (and Trent's), I think my buddy makes a valid point. I think it boils down to personal preference and priorities. He is willing to pay a (high) price to have new and expensive cars all the time while I would rather direct my money elsewhere. My best friend and I had a friendly argument on the topic of car leasing and ownership. I took the same side as Trent. I told him that financing a rapidly depreciating asset such as a car is utter nonsense and that you should simply pay cash if possible. My friend, on the other hand, chooses to view a car lease as a recurring expense for a luxury item which can be budgeted into his cashflows. To him, it is the price for enjoying a nonessential thing in his life, much like the way one might pay $5/mo for HBO or $30/yr for a favorite magazine.
While I still maintain my point of view (and Trent’s), I think my buddy makes a valid point. I think it boils down to personal preference and priorities. He is willing to pay a (high) price to have new and expensive cars all the time while I would rather direct my money elsewhere.

]]> By: Chris http://www.thesimpledollar.com/2007/01/29/31-days-to-fix-your-finances-day-29-paying-cash/comment-page-1/#comment-4439 Chris Tue, 30 Jan 2007 05:32:43 +0000 http://www.thesimpledollar.com/2007/01/29/31-days-to-fix-your-finances-day-29-paying-cash/#comment-4439 Mission, while that sounds right, assuming both accounts are exactly the same interest rates, they'll make the same amount as if they were combined. Two $10k accounts works out exactly the same as a single $20k account. It isn't the amount in a single place that makes compound interest work, it's the amount total against the interest rate. Mission, while that sounds right, assuming both accounts are exactly the same interest rates, they’ll make the same amount as if they were combined. Two $10k accounts works out exactly the same as a single $20k account. It isn’t the amount in a single place that makes compound interest work, it’s the amount total against the interest rate.

]]> By: Mission Debt Freedom http://www.thesimpledollar.com/2007/01/29/31-days-to-fix-your-finances-day-29-paying-cash/comment-page-1/#comment-4424 Mission Debt Freedom Tue, 30 Jan 2007 02:02:47 +0000 http://www.thesimpledollar.com/2007/01/29/31-days-to-fix-your-finances-day-29-paying-cash/#comment-4424 I use a sinking fund inside my emergency fund. For example if my emergency fund needs to be around $10k, but my car is on its last leg I'll add another $10k to it and use that cash to buy a new car. You could always set up a separate account as some of you have suggested, however, you will make slightly more compounding interest with the higher balance. I use a sinking fund inside my emergency fund. For example if my emergency fund needs to be around $10k, but my car is on its last leg I’ll add another $10k to it and use that cash to buy a new car. You could always set up a separate account as some of you have suggested, however, you will make slightly more compounding interest with the higher balance.

]]> By: Leo http://www.thesimpledollar.com/2007/01/29/31-days-to-fix-your-finances-day-29-paying-cash/comment-page-1/#comment-4404 Leo Mon, 29 Jan 2007 22:48:19 +0000 http://www.thesimpledollar.com/2007/01/29/31-days-to-fix-your-finances-day-29-paying-cash/#comment-4404 Great post, as always. I've blogged about this post <a href="http://zenhabits.blogspot.com/2007/01/pay-cash-instead-of-borrowing-or-using.html" rel="nofollow">here</a>. Great post, as always. I’ve blogged about this post here.

]]> By: Trent http://www.thesimpledollar.com/2007/01/29/31-days-to-fix-your-finances-day-29-paying-cash/comment-page-1/#comment-4380 Trent Mon, 29 Jan 2007 20:41:03 +0000 http://www.thesimpledollar.com/2007/01/29/31-days-to-fix-your-finances-day-29-paying-cash/#comment-4380 Mukesh: you are correct. In this case, I am encouraging people to "pay ahead" into their emergency fund and then use that as their payment. As Dana pointed out, you're better off using a separate account for paying ahead for an auto purchase. Mukesh: you are correct. In this case, I am encouraging people to “pay ahead” into their emergency fund and then use that as their payment. As Dana pointed out, you’re better off using a separate account for paying ahead for an auto purchase.

]]> By: Trent http://www.thesimpledollar.com/2007/01/29/31-days-to-fix-your-finances-day-29-paying-cash/comment-page-1/#comment-4379 Trent Mon, 29 Jan 2007 20:33:05 +0000 http://www.thesimpledollar.com/2007/01/29/31-days-to-fix-your-finances-day-29-paying-cash/#comment-4379 Rebecca: you're correct, but in that situation a credit card is essentially the same as paying cash, except you're racking up some free bonus points. Dana: I agree, but some people are really really averse to having a bunch of savings accounts for various situations, simply because it adds to account management time. Rebecca: you’re correct, but in that situation a credit card is essentially the same as paying cash, except you’re racking up some free bonus points.

Dana: I agree, but some people are really really averse to having a bunch of savings accounts for various situations, simply because it adds to account management time.

]]> By: Dana http://www.thesimpledollar.com/2007/01/29/31-days-to-fix-your-finances-day-29-paying-cash/comment-page-1/#comment-4370 Dana Mon, 29 Jan 2007 20:12:29 +0000 http://www.thesimpledollar.com/2007/01/29/31-days-to-fix-your-finances-day-29-paying-cash/#comment-4370 We set up an automobile replacement fund that is separate from our emergency fund. This replacement fund is where we save money until it is time to replace the current vehicle. It's important to not completely deplete that emergency fund. Emergencies seem to happen when you least expect them and when you are least prepared to handle them. We set up an automobile replacement fund that is separate from our emergency fund. This replacement fund is where we save money until it is time to replace the current vehicle. It’s important to not completely deplete that emergency fund. Emergencies seem to happen when you least expect them and when you are least prepared to handle them.

]]> By: rebecca http://www.thesimpledollar.com/2007/01/29/31-days-to-fix-your-finances-day-29-paying-cash/comment-page-1/#comment-4366 rebecca Mon, 29 Jan 2007 19:47:48 +0000 http://www.thesimpledollar.com/2007/01/29/31-days-to-fix-your-finances-day-29-paying-cash/#comment-4366 Quick comment: it might be better to talk about this pattern of paying in full rather than taking out a loan of some sort as "paying upfront" - because in essentially all of these examples, you're actually better off if you don't literally pay cash, but instead pay on a credit card for which you don't ever carry a balance but for which you eg get cash or points back, and which lets you keep that actual cash in your high-interest-bearing account an extra month.... Quick comment: it might be better to talk about this pattern of paying in full rather than taking out a loan of some sort as “paying upfront” – because in essentially all of these examples, you’re actually better off if you don’t literally pay cash, but instead pay on a credit card for which you don’t ever carry a balance but for which you eg get cash or points back, and which lets you keep that actual cash in your high-interest-bearing account an extra month….

]]> By: phil http://www.thesimpledollar.com/2007/01/29/31-days-to-fix-your-finances-day-29-paying-cash/comment-page-1/#comment-4362 phil Mon, 29 Jan 2007 19:36:34 +0000 http://www.thesimpledollar.com/2007/01/29/31-days-to-fix-your-finances-day-29-paying-cash/#comment-4362 Shouldn't your emergency fund remain for emergencies? It seems like it's better to set up a completely different account (at ING or HSBC or some other high-interest-paying bank) for car savings. I don't think I'd want to raid the emergeny fund to do this unless you really, really need to replace a dead car right away. Shouldn’t your emergency fund remain for emergencies? It seems like it’s better to set up a completely different account (at ING or HSBC or some other high-interest-paying bank) for car savings. I don’t think I’d want to raid the emergeny fund to do this unless you really, really need to replace a dead car right away.

]]> By: Mukesh http://www.thesimpledollar.com/2007/01/29/31-days-to-fix-your-finances-day-29-paying-cash/comment-page-1/#comment-4355 Mukesh Mon, 29 Jan 2007 19:08:03 +0000 http://www.thesimpledollar.com/2007/01/29/31-days-to-fix-your-finances-day-29-paying-cash/#comment-4355 Hi Trent, your suggestion to use the emergency fund for purchasing a car contradicts the earlier article (day 15) where you say do not use the emergency fund for big-ticket items, but save it for things like college for son. -Mukesh Hi Trent, your suggestion to use the emergency fund for purchasing a car contradicts the earlier article (day 15) where you say do not use the emergency fund for big-ticket items, but save it for things like college for son.

-Mukesh

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