Author Topic: paying for big purchases? cash or debt?  (Read 517 times)

surfer349

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paying for big purchases? cash or debt?
« on: October 13, 2021, 12:38:45 PM »
so looking for advice here. I feel like I've set up a lot of the building blocks and potential ways to pay for big purchases, but not sure what to exactly do.

Looking for advice or tips for ways to pay for big purchases ($5k-$10k+) like a used car or home reno projects that will make the most sense for frugal and fiscally-savy people like ourselves.

Should I just write cash checks or setup a margin loan and play the interest arbitrage? Any advice here?

Background:
- good paying job
- no debt except for mortgage. CC's paid in full every month.
- large cash reserve (was waiting for the ever-predicted crash)
- large 401k and IRA accounts, ROTH and regular (can take loans against for short term, right?)
- large HELOC account, available at 3.25%
- large WholeLife cash value (able to take loans, direct recognition)
- large post-tax investment accounts (can do margin loans)

Sibley

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Re: paying for big purchases? cash or debt?
« Reply #1 on: October 13, 2021, 08:18:29 PM »
I prefer to use credit cards, get rewards, then pay it off right away so I don't pay interest. Why complicate matters unnecessarily?

nereo

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Re: paying for big purchases? cash or debt?
« Reply #2 on: October 13, 2021, 08:51:16 PM »
Quote
large cash reserve (was waiting for the ever-predicted crash)

This seems an obvious, simple solution.
Hopefully $5k is something a fiscally-minded person with a “good paying job” could cash-flow over the course of just a few months. If not there are deeper questions to answer

Malcat

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Re: paying for big purchases? cash or debt?
« Reply #3 on: October 14, 2021, 07:41:45 AM »
Quote
large cash reserve (was waiting for the ever-predicted crash)

This seems an obvious, simple solution.
Hopefully $5k is something a fiscally-minded person with a “good paying job” could cash-flow over the course of just a few months. If not there are deeper questions to answer

Yeah, I don't really get the question if there's a good income.

If we're talking actual large amounts, like 40K, then I could see complicating it, but for 5-10K, that just goes on credit cards and then gets paid off. If it's a but larger and can't be paid off immediately, the remainder goes onto LOC until it's paid off.

YttriumNitrate

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Re: paying for big purchases? cash or debt?
« Reply #4 on: October 14, 2021, 07:48:01 AM »
For big purchases where credit cards are accepted, I'll often ask if there is a discount for paying cash. Most sellers will gladly give a 2% discount to avoid paying 3% in fees. I end up paying the same price as if I had used a rewards card and the sellers get more money from the deal.

Dave1442397

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Re: paying for big purchases? cash or debt?
« Reply #5 on: October 14, 2021, 07:59:31 AM »
I had a $10k purchase to make last November. I looked at credit card offers, and got an AMEX card that had a $600 bonus if you charged x amount in six months, and paid back a percentage (1%, I think) of purchases. It was also interest free for a year. I just paid $1k/month until it was done, paid zero interest, and got $700 off my purchase.

Greystache

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Re: paying for big purchases? cash or debt?
« Reply #6 on: October 14, 2021, 08:34:23 AM »
This is something I felt I had to address before I retired. I wanted to have cash or near cash on hand for things like a car or major home repair, but I also did not want large spikes in income that would come from withdrawing large sums from my IRA or 401K (because obamacare). I also was opposed to taking on debt in retirement. My solution was to set aside a large pool of money in Municipal bonds and Roth IRA that I could tap for this purpose (about $100K which is less than 10% of my portfolio). The interest on the muni bonds counts as income, but that is not huge. This is a bit of a drag on my portfolio earnings, but I was never going to be 100% equities anyway.  It's barely keeping up with inflation, but I'm ok with that. So far, I have been retired for 6 years and have not had to tap this money yet. Eventually, I will graduate to Medicare and I will have less incentive to keep my income low. I might put the muni bond money to work elsewhere if I have not spent it by then.