Author Topic: question on paying for a large purchase...  (Read 4053 times)

cavalier

  • 5 O'Clock Shadow
  • *
  • Posts: 11
question on paying for a large purchase...
« on: December 02, 2013, 02:19:56 PM »
Trying to figure out what would be best.

I am planning on buying an engagement ring and I have it picked out.   It is about $8000 and I will be getting a 7.7% rebate via my credit card.

I have about $12000 in cash right now. 

I am debating buying the ring on my credit card and paying it off and then just contributing in 2014 $458/month to my Roth IRA or buying the ring, opening up a 0% balance transfer/0% APR for a year, transferring the balance, and making monthly payments and maxing out my Roth IRA on January 1 so I can get max gains for the year.

What do you all suggest?  I've never carried CC debt (even if its 0% interest) and with my car loan it puts me at about $1100/month in loan repayments which I'm not quite comfortable with.  But I also feel like its more prudent to keep cash rather than spend it all and build back up.  Suggestions/thoughts?
« Last Edit: December 02, 2013, 02:21:48 PM by cavalier »

KingCoin

  • Pencil Stache
  • ****
  • Posts: 783
  • Location: Manhattan
  • Achieved FI @ 30
Re: question on paying for a large purchase...
« Reply #1 on: December 02, 2013, 02:30:29 PM »
Does the seller offer cheap or free financing? Not uncommon for engagement rings.

Also, you might want to specify that you don't want this to turn into a debate about purchasing an $8,000 ring when your cash savings are $12,000, which many mustachians will consider foolish (unless you're open to being pesruaded :) ).
« Last Edit: December 02, 2013, 02:33:18 PM by KingCoin »

AlanStache

  • Handlebar Stache
  • *****
  • Posts: 1890
  • Age: 40
  • Location: South East Virginia
Re: question on paying for a large purchase...
« Reply #2 on: December 02, 2013, 02:32:58 PM »
Best check Wikipedia but I think you can contribute to this tax years Roth up to April 15th.  I have never played the 0% transfer game myself.

cavalier

  • 5 O'Clock Shadow
  • *
  • Posts: 11
Re: question on paying for a large purchase...
« Reply #3 on: December 02, 2013, 02:36:45 PM »
haha okay let me clarify.

1)  This isn't a debate on whether or not I should be buying the ring
2)  I only have $12,000 cash but about $30,000 in a taxable investment account, $30,000 in my Roth IRA, and $110,000 in my 401k.  I am 27 years old.
3)  The Roth IRA contribution would be for tax year 2014, not tax year 2013 (thats already been made).

I prefer the credit card as I will get between 7-10% cash back by paying on my credit card from the points I will get vs. financing via the jeweler.  Otherwise I can pay cash about get a 1.5% rebate.

Thanks
« Last Edit: December 02, 2013, 02:45:49 PM by cavalier »

Greg

  • Handlebar Stache
  • *****
  • Posts: 1449
  • Location: Olympia, WA, USA
Re: question on paying for a large purchase...
« Reply #4 on: December 02, 2013, 02:40:26 PM »
I don't care how much you make, or have saved. 

An $8K engagement ring deserves a mighty facepunch.

KingCoin

  • Pencil Stache
  • ****
  • Posts: 783
  • Location: Manhattan
  • Achieved FI @ 30
Re: question on paying for a large purchase...
« Reply #5 on: December 02, 2013, 02:42:24 PM »
I prefer the credit card as I will get between 7-10% cash back by paying on my credit card from the points I will get vs. financing via the jeweler.  Otherwise I can pay cash about get a 1.5% rebate.

Can you buy with jeweler financing and then pay off the financing with the credit card to get the best of both worlds?

If you have $30,000 in taxable investments, that should be enough liquidity to draw on if you need it, especially if your expenses are low and your job reasonably secure.

cavalier

  • 5 O'Clock Shadow
  • *
  • Posts: 11
Re: question on paying for a large purchase...
« Reply #6 on: December 02, 2013, 02:49:59 PM »
Can you buy with jeweler financing and then pay off the financing with the credit card to get the best of both worlds?

If you have $30,000 in taxable investments, that should be enough liquidity to draw on if you need it, especially if your expenses are low and your job reasonably secure.

Doesn't stack...

Just trying to figure the pros/cons of paying for it upfront and not maxing the Roth IRA on day 1 vs having a monthly payment.  I guess this is really more of is it better to invest $5500 on January 1 or DCA $458/month for 2014.

AlanStache

  • Handlebar Stache
  • *****
  • Posts: 1890
  • Age: 40
  • Location: South East Virginia
Re: question on paying for a large purchase...
« Reply #7 on: December 02, 2013, 02:57:04 PM »
You are dropping 8k on a small shiny rock and are worried about financial efficiency?  :-)

Sorry dude but those trees are right in front of you as part of the forest.

KingCoin

  • Pencil Stache
  • ****
  • Posts: 783
  • Location: Manhattan
  • Achieved FI @ 30
Re: question on paying for a large purchase...
« Reply #8 on: December 02, 2013, 02:58:14 PM »
If the expected return on equities is around 7%, you're talking about $190 less in expected earnings by DCA. Not too bad if it gives you peace of mind.

cbr shadow

  • Bristles
  • ***
  • Posts: 470
Re: question on paying for a large purchase...
« Reply #9 on: December 02, 2013, 03:14:16 PM »
You're doing really well for 27.  I say if you want to slurge on an $8000 ring then go for it.  Just get back to your normal saving routine as soon as you can afterwards.
I realize this doesn't answer your question and that you're already set on buying it, but I wanted to reinforce that since several above have given you a facepunch for this amount of spending.