Financing Financing

[Hay Dude]

What is more risky?
1) having 100K in debt and 100K in a savings account.
2) having no debt and also no cash?

This does not have to be a binary decision in real life, of course, but if the poop hits the fan, I'd much rather let the tractor go to the repo man and I keep my cash. Alternatively, if I have enough cash to pay it off, I can make my monthly payments with that reserve and have the option of repo or pay off at my discretion. Who knows, maybe I'll find a way to make things work out and not need that $25-$30K tractor money to fund the entirety of the rest of my life...

These are my criteria to responsibly financing large capital purchases:
1) have a retirement account with a current balance appropriate for my age and retirement goals.
2) have enough money to comfortably make bills and loan payments (including for a tractor) while making monthly retirement savings deposits appropriate to current balance and goals.
3) never buy a boat, lol.

Dave Ramsey has great advice for financially illiterate folks and folks who are irresponsible by nature and need a simple path to steer away from temptation. Interestingly, Ramsey lost everything once and now he's doing fine. The simple soundbites sell better than the actual nuances of financial management, evaluating present and future value of money, etc. Dave Ramsey is rich because he knows that the simple soundbite sells, not because he doesn't take out loans.

Agree 100%
Used properly, financing made it possible to acquire bigger equipment to be able to say “ yes, I can farm that 100 acre parcel “ to potential customers. If I never used financing, I would still be farming 30 acres with 1970’s vintage equipment. Now I’m farming 400 acres.
I like Dave Ramsey, too. He’s on a mission and sometimes his mission doesn’t fit the reality of the world.
I also agree 100% I’d rather have a loaded bank account than paid off equipment. Cash is a heck of a lot more liquid than equipment.
Your results may vary.

 

[dodge man]

If your doing something better with your money no. On the other hand it is nice to be debt free.