To finance or not to finance ...

[GirlWhoWantsTractor]

I was lucky enough to be brought up by parents that took the exact opposite approach.

As a couple of examples; my allowance in the late 80's, was $3 ... per month. Now, to get that, I had to keep a spiral bound notebook that was a ledger of (1) every penny I earned (I was working a summer job starting at 12), (2) every penny I spent (I could only spend 50% of what I earned. The other 50% went into the bank for college), and (3) my cash on hand. If the ledger didn't balance each month, I got no allowance.

I HATED this as a kid. Looking back it was probably one of the best financial lessons my parents could have taught me.

You are very lucky. Many of us got no lessons, other than "what not to do," on how to handle money.

I think it's easy to attach simplistic labels and emotions to some of these concepts, especially "debt." Sure, a lot of people are "drowning in debt". Looks like Mr. Ramsey helps people get out of it and that's great.

Emotions (no accident the #1 cause of marital arguments is money). People who have had bad experiences with debt often vow "never again." Or their parents handled money in a certain way, they resent their parents, so they vow to do the exact opposite. Or they seem to constantly need the "high" of new purchases. My point here, is that there are often a lot of emotions around money. And that is a bad thing, cuz it can lead you into irrational decisions.

Lot of good points in this thread. CC's can be a blessing or a curse. For me, between the biz and personal, the use of the cash-back cards paid in full every month means I earn around $5,000 cash back every year and pay zero interest. I almost never buy stuff I don't need. I make sure my "wants", like a nice holiday every year, or a meal out, are things I can afford and add to my quality of life. And certainly a business is a whole 'nother ball-game compared with personal finances. Different rules; different strategies.

I think a lot of the back-and-forth here is because you need different strategies depending on your specific financial situation. Certainly, all of those folks who can't handle a $400 unexpected expense should be SAVING, SAVING, SAVING. A nice plump savings account/rainy day fund is truly job one! If my bank account was empty, there would be no meals out, no new clothes, eating beans-and-rice, until that changed. I see these people all the time here, driving around in vehicles with broken tail-lights, or expired registrations. Racking up $100's of dollars in tickets, fines, and court costs. There is an obvious solution, even for them, but they either can't see it, or won't do it.

But say you've saved and managed to sock away $5k, and something big happens like a hospital bill, or a hurricane hits, and after insurance you're left with around $5k in costs. Do you gut your savings account by paying cash? Or finance it and keep your savings? Again, it DEPENDS, but I think the person would need to do a lot of figuring with pencil and paper, and my point is, the right decision might be slightly different for different people.

Anyhow, I hope everyone here is well on the way to prosperity using whatever strategy makes them feel fiscally responsible and "at peace." Can't argue with that, and I didn't mean to.

 

[Diggin It]

Do you have any proof of that interest rate? Because I don稚 believe it. That痴 $8500 nearly half the cost of the total loan. I think we can all agree the manufacturer 0 percent has a little extra factored in somewhere, but it痴 a lot closer to zero than half.

Looks like they backdated some of the interest on this first statement to the date of delivery. I got it in September, but the first payment isn't due until November 1st. That payment includes interest for October and it looks like they added some for part of September also. The next statement on their website shows a lesser amount of around $70 for the next payment due December 1st. I have a feeling it will be like a mortgage where the assessed interest drops a bit each month and the amount towards the principal goes up.

 

[kenmac]

You are very lucky. Many of us got no lessons, other than "what not to do," on how to handle money.

I think it's easy to attach simplistic labels and emotions to some of these concepts, especially "debt." Sure, a lot of people are "drowning in debt". Looks like Mr. Ramsey helps people get out of it and that's great.

Emotions (no accident the #1 cause of marital arguments is money). People who have had bad experiences with debt often vow "never again." Or their parents handled money in a certain way, they resent their parents, so they vow to do the exact opposite. Or they seem to constantly need the "high" of new purchases. My point here, is that there are often a lot of emotions around money. And that is a bad thing, cuz it can lead you into irrational decisions.

Lot of good points in this thread. CC's can be a blessing or a curse. For me, between the biz and personal, the use of the cash-back cards paid in full every month means I earn around $5,000 cash back every year and pay zero interest. I almost never buy stuff I don't need. I make sure my "wants", like a nice holiday every year, or a meal out, are things I can afford and add to my quality of life. And certainly a business is a whole 'nother ball-game compared with personal finances. Different rules; different strategies.

I think a lot of the back-and-forth here is because you need different strategies depending on your specific financial situation. Certainly, all of those folks who can't handle a $400 unexpected expense should be SAVING, SAVING, SAVING. A nice plump savings account/rainy day fund is truly job one! If my bank account was empty, there would be no meals out, no new clothes, eating beans-and-rice, until that changed. I see these people all the time here, driving around in vehicles with broken tail-lights, or expired registrations. Racking up $100's of dollars in tickets, fines, and court costs. There is an obvious solution, even for them, but they either can't see it, or won't do it.

But say you've saved and managed to sock away $5k, and something big happens like a hospital bill, or a hurricane hits, and after insurance you're left with around $5k in costs. Do you gut your savings account by paying cash? Or finance it and keep your savings? Again, it DEPENDS, but I think the person would need to do a lot of figuring with pencil and paper, and my point is, the right decision might be slightly different for different people.

Anyhow, I hope everyone here is well on the way to prosperity using whatever strategy makes them feel fiscally responsible and "at peace." Can't argue with that, and I didn't mean to.

There have been studies that prove when you pay with cash, you spend less. When you swipe that card, you don't see that cash leaving your hand.

When I bought my tractor, it hurt to hand over $23,000.00 cash. Had I financed. I probably would have financed a new tractor and spent more than that, plus interest

It's much harder handing over 5K,etc in cash, than it is handing over a card


You say ''you've managed to sock away 5K and something big happens'' Well, if you happened to follow the plan. You would have saved at least 6 months of living expenses before you purchase anything on credit, or things that weren't necessary. but I'll use your 5 K figure. I would take that 5 K from savings, instead of paying interest on 5K. I would then began to re replace that 5K ASAP ! But, 5k is no where near 6 months living expenses.

Mr Ramsey does much more than teaching people how to get out of debt, he also teaches you how to remain / live debt FREE ! how to buy a home without paying PMI, etc. He teaches you how, but it's up to the individual to put their minds to do it, and live debt free daily.


FREEDOM !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! from slavery

 

[LukeDuke30]

kenmac, couldn't have said it better. It is hard for people to understand unless they go down the road of this program. It is tough, and is a big lifestyle change. In the end, it is worth it. It really is a short-term sacrifice for long-term success.

 

[kenmac]

kenmac, couldn't have said it better. It is hard for people to understand unless they go down the road of this program. It is tough, and is a big lifestyle change. In the end, it is worth it. It really is a short-term sacrifice for long-term success.

Thanks. For many, it's just too easy to sign on the dotted line.

I was on another forum this am. where they were discussing grapples. One guy brought up he had bought his grapple from the dealer because he was able to roll the new grapple into this new tractor financing.

Not that the grapple was the best grapple, or even cheaper than a grapple from some other place, but the dealer made it easy to finance into the new tractor loan.

With all this easy credit, cash advance places on every corner, It's no wonder people get in over their heads, and when some life changing event occurs, there is no money to take care of their needs.
Then, they start, or have their friends start a gofundme account to help them because of their lack of financial responsibility.

I know a guy that has spent (financed) new vehicles, every couple of yrs, new motorcycles,boats,tractors,etc,. He has told me several times ''you only go around once in this life'' He found out last week he has advanced lung cancer, and has a gofundme account for people to donate to help with his bills because of his lack of financial responsibility.

He's a great guy, but sorry, there's nothing I can do to help him.

For those that make the leap, Living debt free within and your means is a life changing event for sure.

Wouldn't it be great if the government would live within their means ?

 

[deezler]

I know a guy that has spent (financed) new vehicles, every couple of yrs, new motorcycles,boats,tractors,etc,. He has told me several times ''you only go around once in this life'' He found out last week he has advanced lung cancer, and has a gofundme account for people to donate to help with his bills because of his lack of financial responsibility.

He's a great guy, but sorry, there's nothing I can do to help him.

Um, you could help him with his bills, like he (or someone close to him) was asking? I mean, to me, this is just validation that you should enjoy your life - he is exactly right. He could have saved his money, and never enjoyed boating, motorcycling, or tractoring. And he would STILL have advanced lung cancer now. Sorry but most people do not have $100k+ saved up just in case they get a terminal illness (besides, thats what health insurance is for).

My take: Use credit when it's offered to you at good rates/terms. Don't be stupid, watch your debt to income ratio, and work hard all the while to make sure the bills get paid. I see many folks (especially many on here) that think they are doing the right thing in life by eating ramen noodles and not having much fun in life because its the fiscally responsible thing to do. Well, then you get hit by a bus anyway. Just enjoy life and don't screw over your family with debt.

 

[kenmac]

yes, I could. Problem is, he could have helped himself. I was saving, sacrificing, while he was playing and spending every dime he made.

That's the very reason people don't force themselves to do the right things financially. Because they want/ expect others to help bail them out of their bad life style / decision making.

Yes, he could have saved and still gotten cancer. But had he saved he would be in a better position to handle his financial issues had he saved some instead of spending it all

 

[Diggin It]

It amazes me how many people there are who spend every dime, have no savings account at all and then want others to give them money when they hit hard times.

I know people who fought tooth and nail against Direct Deposit because it would mean they had to open a bank account.

 

[RSR]

Apparently the moral of Aesop's fable of the Ant the Grasshopper was rarely taught/read to people as kids.

I view the gofundme website as little more than a wall of shame for individuals on it, who have to admit their poor life decisions have finally caught up with them. There are certainly some cases, where tragic events can lead to insurmountable obstacles that cannot be tackled alone, but those are in the vast minority. I would not classify someone getting cancer as a catastrophic financial event. Proper financial planning, procurement of insurance, etc. should be able to handle that. The problem is it requires personal responsibility, and that is largely what is lacking in individuals that expect to live the good life until they run into a problem, and when they do, then turn it into someone else's problem.

 

[prof fate]

Current listings on Tractorhouse.com show a $2,100 discount for cash purchases on Kioti tractors (Ck3510).

Smart investing of your money will easily get you closer to a 5% return. Even CD's are getting 3%. Also, the interest you computed on the principal neglects annual compounding.

$22,000 compounded annually at 3.0% turns into $26, 269.15 at the end of 6 years. Adding that to the extra $2,100 charge to get 0% interest on a loan, the difference between finance and cash price 6 years later turns out to be a $6,369.15 difference. Put another way, a 29% increase in the price originally paid for the tractor. That's no small amount of change.

You're right that few people save money first for a purchase, and then after saving, buy it, and start saving for the next. Instead, most people finance a purchase, and once it's paid off, finance the next purchase. Comparing those two approaches amounts to an astronomical sum of money over a lifetime.

As stated earlier, one of my favorite quotes is, "Those who understand interest earn it, those that don't, pay it."

SHOW ME those interest returns..my retirement has averaged 3% over the past decade...most banks are paying .3% - point 3..
Googling shows some CD at 2.2 to 2.7.

$2100 discount? that's huge. Wonder what the small print is...

Not sure about tractors, but on cars and motorcycles dealers make money on the financing, sometimes a little sometimes a lot. They don't want cash buyers.