Author Topic: How to buy a car or other big purchases  (Read 2690 times)

RedMustache

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How to buy a car or other big purchases
« on: May 27, 2013, 04:33:22 PM »
Eventually, our cars will need to be replaced.  (Biking/public transit is generally not an option, unfortunately)  How do you do this?

My thought is to raise our taxable investing and have the interest work towards the newer car.  The cars don't have to be new.

Am I on the right track?

Thanks!

nktokyo

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Re: How to buy a car or other big purchases
« Reply #1 on: May 27, 2013, 06:06:20 PM »
Biking/public transit is generally not an option, unfortunately

Define "generally".

also

Why more than one car?

RedMustache

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Re: How to buy a car or other big purchases
« Reply #2 on: May 27, 2013, 06:10:00 PM »
Because of work and young kids.

nktokyo

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Re: How to buy a car or other big purchases
« Reply #3 on: May 27, 2013, 06:25:41 PM »
So you're saying that one car to ferry the kids and the other party using public transport isn't doable?

I'm pushing you to think in this direction because a second car is a massive expense that costs even more money to use as it eventually becomes worthless.

If you're not willing/able to make it work then yes, paying for things with the profit from your investments is a lot better than using your savings or going into debt to buy a vehicle.

RedMustache

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Re: How to buy a car or other big purchases
« Reply #4 on: May 27, 2013, 06:44:46 PM »
Respectfully, I totally get the whole antiMustashian car thing.  It's just not going to happen.

Is there an idea on the board of where the money should be saved? (and perhaps I should have put this in the Investing section)  Stocks, short-term bonds, MM?  Debt is not an option; we're fine there.

I ask because stocks are so much riskier, but bonds are less favorable for taxation (per Bogleheads) in a taxable account.  A MM is "safe" for retaining principal, but pathetic on returns.  I'm curious if there's a formula that others follow here, such as invest $30k @10% return for 10 years = "free" car(s)  (that might be from Dave Ramsey??)


nktokyo

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Re: How to buy a car or other big purchases
« Reply #5 on: May 27, 2013, 06:59:58 PM »
In that case, is this is more of a question about how you should invest overall? I don't think it matters what you're going to spend the money on... maybe put something up in the investment forum about what kind of a return you're looking for and see how you do.

Another Reader

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Re: How to buy a car or other big purchases
« Reply #6 on: May 27, 2013, 08:51:15 PM »
Any saving/investing goal needs to have a time frame.  Where it makes the most sense to put your money depends on how long until you need it.  If you are thinking of replacing the car in less than two years, short term, low yield, low risk places are best.  If you arre planning on 10 years until the car gives out, then taking on more risk in the market makes sense. 

Joel

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Re: How to buy a car or other big purchases
« Reply #7 on: May 27, 2013, 09:08:09 PM »
I make a car payment to myself monthly. I budget $250 to my car replacement category in YNAB. (along with several other categories). I keep around 15-20k in my checking account and invest any excess in the stock market at vanguard with a total stock market index fund. I have enough cash to cover any stock market losses that may happen in the short term, which is why I am okay with the excess being invested.