Best Way to Pay for a Large Purchase?

SpiceWeasel

SpiceWeasel

Tre Kronor
Financial gurus... I'm looking for some advice...

If you absolutely needed to buy something between $7,000-$10,000, couldn't live without it:

Buy with a credit card?
Second Mortgage?
Withdraw 401(k)?

Doesn't look like this item is finance-able... it's 1/2 up front, half at delivery, so I have to figure out my own financing option.

If I buy with a credit card, I can fit it on there, but it'll take forever to pay it off, at 12.99%.

Does one just not buy things if one cannot cover it with cash in their bank account?

The liquidity is as follows:

I take home 62.8% of my first paycheck of the month, and 58.4% of the second paycheck.

Of that remaining cash, my mortgage + association dues (covering water) is 50%. Remainder of utilities is 9.6%. My car insurance is 6.5%. Union dues is 4%. Student loan is 4%. Cell phone is 2.1%. Gas for my car is currently 3.3%. That gets me to about 80% of my available monthly cash. The remaining cash is currently tied up in attempting to pay a credit card off (0% interest currently), because I can't afford to pay off what I spend on it in a month, so I pay chunks. Of course, I also have to buy food and stuff, so I usually put that on credit.

Anyway, this gets me to my question: what's the best method to buy something I absolutely need at this point... just not to? Seems like that's the way to go, just putting it up above. But does anyone have good ideas for clever workarounds?
 
Get a title loan with your car as collateral.

JK.

SpiceWeasel said:
Anyway, this gets me to my question: what's the best method to buy something I absolutely need at this point... just not to? Seems like that's the way to go, just putting it up above. But does anyone have good ideas for clever workarounds?
Click to expand...

So which is it? Do you absolutely need this or can you just not buy it? If "not buy it" is an option on the table, then it doesn't sound like you absolutely have to have it. If all of your finances were in order I might suggest applying for a Citi card at 0% interest but it sounds like you already have one of those and are having trouble paying it off. If you're putting food on credit you need to seriously rethink your money management.
 
If this is really something you need, then your current financial situation does not work. You have two choices, increase your income or decrease expenditure. Post a full budget of real amounts and we'll trim some fat. I can't tell you if 2% is high cell phone bill without knowing the actual amount involved. Based on the limited information, it looks to me like your housing cost is the real problem here.
 
I'm trying to think of a $7-10K item that isn't finance-able that a person can't live without.

And maybe it's just awkward wording, but you say it's an item you have to have and can't live without and then in another line say, "do you just not buy it?"

So we're talking about a thing that you don't actually need, right? Right?

I agree with ATN. If you gotta buy this thing and you can't finance it, then a 401K loan is your best bet, if for no other reason than the interest pays back to you. Note that most places will only let you borrow up to 50% of your 401K value.

If you can wait, wait. I'm betting that another thing like this thing will come up again in time.
 
0% APR balance transfer to new credit card. They will probably charge a 3% transfer fee, but very reasonable. Just make sure you can pay it off before the juice starts running, or they back charge you for it.

https://www.citi.com/credit-cards/compare-credit-cards/detail.do?ID=balance-transfer-credit-cards

SpiceWeasel said:
The remaining cash is currently tied up in attempting to pay a credit card off (0% interest currently), because I can't afford to pay off what I spend on it in a month, so I pay chunks. Of course, I also have to buy food and stuff, so I usually put that on credit.
Click to expand...

By what you posted, you are financially insolvent. You need to make more money or spend less.
 
I would go with the 401k loan, if you absolutely needed it.

And get a second job, and work that until you have the loan paid off.
 
I'm confused. You're saying you absolutely must have it, but then you say you can go without. So do you absolutely need to have it, or can you skip it?

If you have no choice and must buy it, then I'd suggest seeing if you can get a personal loan from your bank instead of doing it with a credit card.
 
Your housing (and utilities) spending is off the charts. 33% TOPS. 25% preferably. You are outliving your means.
 
thevideographer said:
Get a title loan with your car as collateral.
JK.
So which is it? Do you absolutely need this or can you just not buy it? If "not buy it" is an option on the table, then it doesn't sound like you absolutely have to have it. If all of your finances were in order I might suggest applying for a Citi card at 0% interest but it sounds like you already have one of those and are having trouble paying it off. If you're putting food on credit you need to seriously rethink your money management.
Click to expand...

Well, I am having trouble paying it off ;) every time I pay it, I don't enough money from my debit card to buy things, so I have to use it... so I pay some off, put some on.

ATN_Pilot said:
If you absolutely have to have it right now, then I'd probably go the 401k loan option. Otherwise, wait. For the love of all that is holy, don't pay anyone 12.99% to borrow money.
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Well, based on what I keep reading from all you financial gurus, I need to use OPM, not savings or anything (which I have $0 in anyway). Buddy of mine has a 401(k) loan he's struggling to pay off, seems like a bad option too. Do people seriously charge their cards 10s of thousands and pay it off month to month? Doesn't seem possible.

NickH said:
If this is really something you need, then your current financial situation does not work. You have two choices, increase your income or decrease expenditure. Post a full budget of real amounts and we'll trim some fat. I can't tell you if 2% is high cell phone bill without knowing the actual amount involved. Based on the limited information, it looks to me like your housing cost is the real problem here.
Click to expand...

Well, the house isn't really any option to fix haha! Basically, I would have 20% of my monthly take home available to me if it weren't for having to pay off a zero interest credit card. I'm pay $50 for my cell phone bill. The credit card payment is running almost $600 a month to pay it off before interest kicks in.

killbilly said:
I'm trying to think of a $7-10K item that isn't finance-able that a person can't live without.

And maybe it's just awkward wording, but you say it's an item you have to have and can't live without and then in another line say, "do you just not buy it?"

So we're talking about a thing that you don't actually need, right? Right?

I agree with ATN. If you gotta buy this thing and you can't finance it, then a 401K loan is your best bet, if for no other reason than the interest pays back to you. Note that most places will only let you borrow up to 50% of your 401K value.

If you can wait, wait. I'm betting that another thing like this thing will come up again in time.
Click to expand...

There's always my tax refund? :D

mojo6911 said:
0% APR balance transfer to new credit card. They will probably charge a 3% transfer fee, but very reasonable. Just make sure you can pay it off before the juice starts running, or they back charge you for it.

https://www.citi.com/credit-cards/compare-credit-cards/detail.do?ID=balance-transfer-credit-cards



By what you posted, you are financially insolvent. You need to make more money or spend less.
Click to expand...

Yay credit card! Zero interest is so enticing.

swisspilot said:
Just plain simple technique I use: if I can't afford it I don't buy it.

Probably it won't work for my first house (in most developed countries at least)..but for the rest it has worked so far, NEVER bought anything unless I had the cash to cover 100% of it.
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See, I agree with you here, @swisspilot , but I keep reading here all the ways that "letting money sit in your savings account" is bad. Using credit cards, OPM, etc...

I'm surprised I guess, with the pain in the butt $3000 credit card bill at zero interest, how hard it is to pay off. We've got some big spenders here that seem to be able to pay off enormous debts on a monthly basis, and yet as a purely W2 guy, I'm pretty much paycheck to paycheck. Frustrating.

Short of it, the item would be nice to be able to purchase soon, but if I have to wait I guess I will.

@ATN_Pilot remember that couch? Couldn't buy it... they wanted 25% down at signing and 75% on delivery. All cash, they would have charged a different price for credit card. So I couldn't pony up the $550-ish... stupid Christmas!
 
z987k said:
Your housing (and utilities) spending is off the charts. 33% TOPS. 25% preferably. You are outliving your means.
Click to expand...

You'd be surprised at how quickly housing cost adds up:

Principle + Interest < $700
Escrow (and then Condo Dues) ~$600

When they ran the numbers they did it based on gross income, not net take home. Ha.

Based on my monthly gross, the housing (without utilities) is 33% of my income.
 
I guess I'm curious @ATN_Pilot ... you are always talking about financing new cars for little interest / down payment. My credit isn't top tier, but it's DAMN close, and yet it's fudging impossible to think of a good way to make a large purchase without utilizing my only line of credit that is over $10,000 (credit card line 12.99% APR)....

What gives. If I had $500 a month I wasn't spending on paying my credit card, and I decided not to put it in savings (which I don't do anyway), is there a low to no interest loan that would only set me back $250 a month? So I could have $250 to spend on myself.
 
SpiceWeasel said:
You'd be surprised at how quickly housing cost adds up:

Principle + Interest < $700
Escrow (and then Condo Dues) ~$600

When they ran the numbers they did it based on gross income, not net take home. Ha.

Based on my monthly gross, the housing (without utilities) is 33% of my income.
Click to expand...
Doesn't matter what "they" came up with. If housing and utilities takes 59.6% of your actual income (I can't even fathom that), then it's far far too much. You have to change that. It's far beyond what you can actually afford, unless your life plan is to live paycheck to paycheck.
 
SpiceWeasel said:
Do people seriously charge their cards 10s of thousands and pay it off month to month? Doesn't seem possible
Click to expand...

Yes people do this. It's just a matter of having a good budget and sticking to it.

And I bet my W-2 is a fraction of yours for 2014.

Worse worse case I'd look at 401k loan. Take 10% more then you need and put it aside and DONT touch until the loan is paid off. It's the tax penalty you will take if you don't pay it back.
 
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