How long should it take to have a downpayment?

[quote author="25w100k+" date=1224397131][quote author="MalibuRenter" date=1224391367]If you go from living alone to being married with no kids, it gets much easier to save. Few expenses are exactly double of living alone, and many are considerably less, especially rental housing. I am assuming both people are reasonably responsible and frugal.



In my experience, four things tend to swamp all others in savings: 1. Making more money, but not spending more. 2. Lower housing costs, e.g., roommate or spouse vs single. 3. Getting rid of all credit card debt. 4. Having a car which is paid off. There are some exceptions to that last one. If the manufacturer is really desperate and it is actually 0% financing, it's probably worth it. Skipping the coffee at Starbucks is more of a symbolic gesture.



As many of the people on this blog know, I have a crazy level of savings, and with falling prices I may buy a house for cash. I also sidestepped the market crash and have a positive portfolio return this year.</blockquote>




Glad to know I might not be dirt poor in ten years if I get a wife.... :-D



Now, what do you think about using a HELOC to buy a car? You can write off that interest...definitely saves some money...



Cash for a depreciating asset just seems like such a bad financial move.</blockquote>


Why would paying interest on a depreciating asset be a better financial move than paying cash?
 
Cash in hand is worth two in the bush? Oh wait...



In my case, I scored an auto loan for 4.25%. I'd rather have the cash in the bank and pay some interest than be debt-free and not have that cash. If the interest rate were higher, I might think otherwise.
 
[quote author="25w100k+" date=1224397131][quote author="MalibuRenter" date=1224391367]If you go from living alone to being married with no kids, it gets much easier to save. Few expenses are exactly double of living alone, and many are considerably less, especially rental housing. I am assuming both people are reasonably responsible and frugal.



In my experience, four things tend to swamp all others in savings: 1. Making more money, but not spending more. 2. Lower housing costs, e.g., roommate or spouse vs single. 3. Getting rid of all credit card debt. 4. Having a car which is paid off. There are some exceptions to that last one. If the manufacturer is really desperate and it is actually 0% financing, it's probably worth it. Skipping the coffee at Starbucks is more of a symbolic gesture.



As many of the people on this blog know, I have a crazy level of savings, and with falling prices I may buy a house for cash. I also sidestepped the market crash and have a positive portfolio return this year.</blockquote>




Glad to know I might not be dirt poor in ten years if I get a wife.... :-D



Now, what do you think about using a HELOC to buy a car? You can write off that interest...definitely saves some money...



Cash for a depreciating asset just seems like such a bad financial move.</blockquote>


You can spend your cash on all kinds of things, but let's look at the car. Assume for the moment you actually need a new car and have found what you want at a good price. If you pay cash, you reduce your liquidity some. If the price of the car is pretty close to your savings, you reduce your liquidity quite a bit. That leaves you more exposed to things like job loss.



On the other hand, you might finance the car at a really low rate. If that rate is genuine, and not a shell game of lower rate with higher price, you might find that financing it through the manufacturer is quite effective. This would especially be the case if you have good credit, are shopping in the current slow car market, and are looking at a car that there is an oversupply of.



A third option is a HELOC, assuming you can get one, or your bank hasn't cut off new lending. The situation would have been much different a year ago. Often, the interest rates were both lower and tax deductible up to $100k. The problem many people had was they used their HELOC and then took on even more debt somewhere else, like credit cards.



It doesn't matter which form of financing you use, your car will still depreciate while you own it. If you paid cash and had an emergency need to get rid of the car, it would be easier. However, in California that emergency need is probably really bad news. Like getting your license revoked, being unable to drive due to health conditions, going to jail, etc.



Some people have extra cars (more than one car per licensed driver in the house). Those people probably don't need as many cars as they have. The extra cars depreciate, cost more to insure, etc.
 
[quote author="awgee" date=1224397650][quote author="25w100k+" date=1224397131][quote author="MalibuRenter" date=1224391367]If you go from living alone to being married with no kids, it gets much easier to save. Few expenses are exactly double of living alone, and many are considerably less, especially rental housing. I am assuming both people are reasonably responsible and frugal.



In my experience, four things tend to swamp all others in savings: 1. Making more money, but not spending more. 2. Lower housing costs, e.g., roommate or spouse vs single. 3. Getting rid of all credit card debt. 4. Having a car which is paid off. There are some exceptions to that last one. If the manufacturer is really desperate and it is actually 0% financing, it's probably worth it. Skipping the coffee at Starbucks is more of a symbolic gesture.



As many of the people on this blog know, I have a crazy level of savings, and with falling prices I may buy a house for cash. I also sidestepped the market crash and have a positive portfolio return this year.</blockquote>




Glad to know I might not be dirt poor in ten years if I get a wife.... :-D



Now, what do you think about using a HELOC to buy a car? You can write off that interest...definitely saves some money...



Cash for a depreciating asset just seems like such a bad financial move.</blockquote>


Why would paying interest on a depreciating asset be a better financial move than paying cash?</blockquote>


Things like cars that depreciate in value probably shouldn't be considered as assets.
 
[quote author="25w100k+" date=1224397131][quote author="MalibuRenter" date=1224391367]If you go from living alone to being married with no kids, it gets much easier to save. Few expenses are exactly double of living alone, and many are considerably less, especially rental housing. I am assuming both people are reasonably responsible and frugal.



In my experience, four things tend to swamp all others in savings: 1. Making more money, but not spending more. 2. Lower housing costs, e.g., roommate or spouse vs single. 3. Getting rid of all credit card debt. 4. Having a car which is paid off. There are some exceptions to that last one. If the manufacturer is really desperate and it is actually 0% financing, it's probably worth it. Skipping the coffee at Starbucks is more of a symbolic gesture.



As many of the people on this blog know, I have a crazy level of savings, and with falling prices I may buy a house for cash. I also sidestepped the market crash and have a positive portfolio return this year.</blockquote>




Glad to know I might not be dirt poor in ten years if I get a wife.... :-D



Now, what do you think about using a HELOC to buy a car? You can write off that interest...definitely saves some money...



Cash for a depreciating asset just seems like such a bad financial move.</blockquote>


Acquiring a depreciating asset is a bad financial move regardless of how it is financed. Financing a depreciating asset is double trouble.
 
[quote author="IrvineRenter" date=1224621042][quote author="25w100k+" date=1224397131][quote author="MalibuRenter" date=1224391367]If you go from living alone to being married with no kids, it gets much easier to save. Few expenses are exactly double of living alone, and many are considerably less, especially rental housing. I am assuming both people are reasonably responsible and frugal.



In my experience, four things tend to swamp all others in savings: 1. Making more money, but not spending more. 2. Lower housing costs, e.g., roommate or spouse vs single. 3. Getting rid of all credit card debt. 4. Having a car which is paid off. There are some exceptions to that last one. If the manufacturer is really desperate and it is actually 0% financing, it's probably worth it. Skipping the coffee at Starbucks is more of a symbolic gesture.



As many of the people on this blog know, I have a crazy level of savings, and with falling prices I may buy a house for cash. I also sidestepped the market crash and have a positive portfolio return this year.</blockquote>




Glad to know I might not be dirt poor in ten years if I get a wife.... :-D



Now, what do you think about using a HELOC to buy a car? You can write off that interest...definitely saves some money...



Cash for a depreciating asset just seems like such a bad financial move.</blockquote>


Acquiring a depreciating asset is a bad financial move regardless of how it is financed. Financing a depreciating asset is double trouble.</blockquote>


If you have to finance an asset, it technically isn't an asset.
 
"If you have to finance an asset, it technically isn?t an asset."



Technically it is an asset, which has a corresponding liability. You may not have equity, but you do have an asset. Sorry, the CPA in me had to correct that.
 
[quote author="qwerty" date=1224640099]"If you have to finance an asset, it technically isn?t an asset."



Technically it is an asset, which has a corresponding liability. You may not have equity, but you do have an asset. Sorry, the CPA in me had to correct that.</blockquote>
While you are at it, which assets that are not depreciating? Except maybe gold/silver, precious metals.
 
[quote author="WestparkRenter" date=1224640852][quote author="qwerty" date=1224640099]"If you have to finance an asset, it technically isn?t an asset."



Technically it is an asset, which has a corresponding liability. You may not have equity, but you do have an asset. Sorry, the CPA in me had to correct that.</blockquote>
While you are at it, which assets that are not depreciating? Except maybe gold/silver, precious metals.</blockquote>


LAND! err, oh wait...







Also, theres something to be said for Opportunity Costs, no?



Having more cash liquid is a good thing sometimes even if you are paying a marginal interest rate.
 
[quote author="25w100k+" date=1224641236][quote author="WestparkRenter" date=1224640852][quote author="qwerty" date=1224640099]"If you have to finance an asset, it technically isn?t an asset."



Technically it is an asset, which has a corresponding liability. You may not have equity, but you do have an asset. Sorry, the CPA in me had to correct that.</blockquote>
While you are at it, which assets that are not depreciating? Except maybe gold/silver, precious metals.</blockquote>


LAND! err, oh wait...







Also, theres something to be said for Opportunity Costs, no?



Having more cash liquid is a good thing sometimes even if you are paying a marginal interest rate.</blockquote>


Assets grow in value, and get richer over time. You can have financial assets such as stocks, bonds, and real estate; intellectual assets such as IP, know-how, and real estate between your ears; physical asset such as your good health.
 
20percentdown!



***sorry ... off topic!***



I can't figure out if that is my down payment for my house... or how much my stocks have slipped! :lol: %-P :sick:



-bix
 
<blockquote>Acquiring a depreciating asset is a bad financial move regardless of how it is financed</blockquote>


Not getting to work is an even worse financial move. I'll keep my job and my car loan. ;-)
 
[quote author="qwerty" date=1224640099]"If you have to finance an asset, it technically isn?t an asset."



Technically it is an asset, which has a corresponding liability. You may not have equity, but you do have an asset. Sorry, the CPA in me had to correct that.</blockquote>


"technically" wasn't a good choice of word, since you are correct, it would be listed as an asset on a ledger or balance sheet. I should have said, in "reality," it is not an asset. I think that's right...
 
[quote author="JLegend" date=1224732407][quote author="qwerty" date=1224640099]"If you have to finance an asset, it technically isn?t an asset."



Technically it is an asset, which has a corresponding liability. You may not have equity, but you do have an asset. Sorry, the CPA in me had to correct that.</blockquote>


"technically" wasn't a good choice of word, since you are correct, it would be listed as an asset on a ledger or balance sheet. I should have said, in "reality," it is not an asset. I think that's right...</blockquote>


At the time of purchase it probably adds no value to a balance sheet. If it appreciates more than the interest you pay on your liabilities, it adds value, otherwise it loses value.



Do you know about goodwill? Let's not get there anyway.
 
[quote author="biscuitninja" date=1224720648]20percentdown!



***sorry ... off topic!***



I can't figure out if that is my down payment for my house... or how much my stocks have slipped! :lol: %-P :sick:



-bix</blockquote>


You can interpret it anyway you want :)



20% is an interesting percentage:

1. many define bear market as when market fell by this amount over a period of time.

2. some consider it as a requirement for a down payment.

3. few consider it as the recommended minimum percentage bonds should be in one's total investment mix.

4. To me, the most interesting rule 20% plays in is the Pareto principle.
 
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