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Discussion in 'Guitars' started by Msharky67, Sep 21, 2021.
That's a problem most people have with credit cards, it's too easy for them to live outside their means. Most of them get them just to live outside their means and give them a false sense of security. I just prefer to pay for things the 1st time and avoid the double transaction from the get go. I've always just used my debit card or cash for hotel and motel stays. Never had to book anything though. When I've traveled the country multiple times over the decades it's just pull into one on rout and get a room. Nice or trashy I can be happy in both. But growing up in a non pampered life makes that a non issue for me. I've lived in nice neighborhoods and the roughest of neighborhoods. I can mold to pretymuch any element in that regards. Just more options in my book.
If you can buy something on time and not default on the payments, you can darn well just save your money up (the money you'd have put toward payments) and buy the thing in cash.
There are special cases where buying on time makes sense. Not many people can pay cash for a house, at least not their first one, unless they're trust fund babies, or inherit early, or are insanely good at business from a young age.
Jerry has substantial interest bearing financial investments, of enough value that the interest on them alone makes him an upper tier earner, if you count the yearly value gains in his portfolio as income. He's pulling between 12 and 18 percent on any given year within the last 20. So, let's say his portfolio is gaining value at 15 percent per year, averaged out.
Jerry has a dream, a specific car he wants to buy. He could buy that car with ONLY the interest earned off his portfolio in one year. But if he did that, he would draw down his investment portfolio's value by the bottom line price of the car, and let's say that that value is 200,000 dollars. By doing so, he pays no interest on the car, as he buys it in cash, but he has reduced his investment principal by 200,000 dollars (plus paying taxes on that money when he sells some of his stock) and so he has lost the 15 percent income of that 200,000 dollars. That's the loss of 30,000 dollars in interest in just one year, by deciding to buy the car and pay cash, funded from an investment.
But Jerry is smart. Instead, he buys the car with a loan He makes a large enough down payment that he gets a favorable interest rate, and he hasn't trashed his credit so his interest rate is, let's call it 3 percent. And he put down 10 percent of the car's price in cash. His loan terms are for 60 months. He has five years to pay down 180,000 dollars and that's 36,000 dollars per year. Since he's only drawn down his investment by just 20,000 dollars (to make the down payment) then it's going to cost him only an additional 6000 dollars to make the car payments in the first year. (the rest is drawn from his investments on a monthly basis. Don't forget the capital gains taxes.)
But his investment can be expected to keep growing, and at a respectable rate. In the second year he can reasonably expect that his investment growth will offset the second year's car payments. In the third, fourth, and fifth years, his investment growth will outpace the car payments. So...basically he got a car that was almost free after two years. That 200,000 dollar car really only cost him 26,000 dollars to purchase. All the rest was absorbed by his investments, and if he was playing it right, he never needed to draw down that investment for any other reason.
The point is that it makes more sense to bank your money where it earns more interest, and spend as little as you can where you have to pay interest. That 200,000 dollars making 12 percent is a better deal than spending that 200,000 dollars, and losing the interest it could have earned you.
Buying on time makes sense if it allows you to keep more money in a place where it earns you a significant interest rate.
Balance the interest rates. The one you receive, vs the one you pay.
I do Sweetwater I have like 10 grand in credit there and it's the same as cash as long as I make the minimum payments I don't pay anything extra and once in awhile I throw a couple hundred at them when I'm feeling rich. I have picked up so much killer gear, dream gear that I wouldn't have been able to get otherwise but now I've got a whole room full of shit like 20 different 100 watt heads and 14 different guitars ranging in price from $800 to $3,000. I SERIOUSLY NEED TO SELL SOME SHIT!!!!▶️
I like your spirit!
Quite festive for post #12 too!!