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Old 08-31-2010, 02:44 PM   #106
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Quote:
Originally Posted by sameyeyam View Post
For me "affording it" means:

1. We have no debt other than mortgage.
2. Our mortgage debt is less than 10% of our take home pay.
3. 15% of our gross income is going into retirement.
4. We have at least 6 months of expenses in savings.
5. We could easily pay our bills on 1 income, even though we have 2.
6. We have well funded college accounts for the kids.
6. After all of that, if we have enough money in savings to pay cash for "it" then we can "afford it".

If I had credit card debt, consumer debt or car payments, well that's my definition of "not affording it".
The OP was clear she wasn't asking about a Disney vacation. She asked about any non-essentials.

In my book that would include dinner out on our anniversary, any new clothing unless you've dramatically changed sizes, all entertainment, house fix ups, etc.

If you didn't buy of that until you get to where you could easily live on one income, have college accounts, etc. Most of us would never buy anything except for beans, rice, and water.
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Old 08-31-2010, 03:32 PM   #107
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Quote:
Originally Posted by sameyeyam View Post
For me "affording it" means:

1. We have no debt other than mortgage.
2. Our mortgage debt is less than 10% of our take home pay.
3. 15% of our gross income is going into retirement.
4. We have at least 6 months of expenses in savings.
5. We could easily pay our bills on 1 income, even though we have 2.
6. We have well funded college accounts for the kids.
6. After all of that, if we have enough money in savings to pay cash for "it" then we can "afford it".

If I had credit card debt, consumer debt or car payments, well that's my definition of "not affording it".
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Originally Posted by padawans View Post
I really don't see how having a car payment means you can't take a vacation. Not everyone has the ability to pay cash for high ticket items. You are very fortunate.
That was obviously a very personal definition of affordable. I'm pretty sure Sameyeam isn't saying that people who have a mortgage that is affordable but more than 10% of their income, or who have car payments, or who have only one income can't afford to vacation. The question was how each of us defines affording it, and obviously that's going to be a very subjective, personal decision.
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Old 08-31-2010, 04:37 PM   #108
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Originally Posted by rockundergirl View Post
its all very confusing! Like for example, I have savings and such ( 911 fund, 529 for son,and i just started a new car fund) .
But lets say I want to plan a trip to disney right now for 2000.00, I have that in my checking account and my bills are paid for the month.. however, I drive a 2005 car with 110,000 miles on it. I prob should replace it.. But i haven't saved enough to buy a new one yet ( I don't do car payments) based on that info I really can't afford anything till i have a newer car.. right? wrong? maybe.. I really don't get it either.. lol

also i have friends who never have money for anything .. aka ' want to do lunch.. no I'm broke" yet they drive 60,000 dollar suv's and live in 400,000 dollar houses.. clearly when they say afford they mean " want to spend money on "
yes I agree its what you choose to spend money on. I could think of a lot of things I should spend money on rather then a trip to disney such as paying off my car. Actually I will make my final car payment next week it took me five years at 3% interest. During those 5 years I have made 4 trips to disney plus other vacations. Some people choose to buy 400,00 homes and 60,000 cars and have no disposable income to each their own.
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Old 08-31-2010, 04:53 PM   #109
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Originally Posted by padawans View Post
I really don't see how having a car payment means you can't take a vacation. Not everyone has the ability to pay cash for high ticket items. You are very fortunate.
I don't think I'm fortunate at all. I think I made a decision about 20 years ago to save money and not give it to the banks in the form of interest. Oh that and I worked my rear off. It's very easy to do, just have to get used to delaying purchases until you have the money.

Personally, I would never have a car payment. But if I did, I most likely would not take an expensive vacation. I would make our vacation be a trip to grandma's house at the beach, a cheap tent camping trip, etc. I would use the money I saved to pay down the car loan. But that's just me.

If you have never been debt free as an adult you should try it. It's the most awesome feeling in the world and the freedom it gives you is unbelievable. The freedom to take awesome vacations, pay cash for big ticket items, send your kids to college and save money for retirement.

I am 45 years young and I plan on being a millionaire when I retire. It's actually very easy to do. Don't believe me, listen to Dave Ramsey (he's on the web and you can listen to his archived shows for free). I started making wise decision 20 years ago and only recently started listening to him. Finally, someone else that thinks like I do!

We don't have huge 6 figure incomes, we live in a fairly simple 3 bedroom house, my DH's truck is 10 years old, mine is 8 years old. We just bought our DD a new car last year that is fully paid for and we are cash flowing $17,000 per year for her college (yep, no student loans!). Last weekend we bought a brand new travel trailer that we are paying cash for. Instead of paying interest to banks we delayed our purchases. We use the money we save on interest to pay cash for our next big purchase. We always live below our means and we take awesome vacations...cruises, carribean, wdw, dl. And to think it all started because I decided I didn't want to have car payments!
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Old 08-31-2010, 05:06 PM   #110
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Originally Posted by rockundergirl View Post
its all very confusing! Like for example, I have savings and such ( 911 fund, 529 for son,and i just started a new car fund) .
But lets say I want to plan a trip to disney right now for 2000.00, I have that in my checking account and my bills are paid for the month.. however, I drive a 2005 car with 110,000 miles on it. I prob should replace it.. But i haven't saved enough to buy a new one yet ( I don't do car payments) based on that info I really can't afford anything till i have a newer car.. right? wrong? maybe.. I really don't get it either.. lol

also i have friends who never have money for anything .. aka ' want to do lunch.. no I'm broke" yet they drive 60,000 dollar suv's and live in 400,000 dollar houses.. clearly when they say afford they mean " want to spend money on "
Well, I think you can afford to do other things than just saving for a new car. The way we worked this back when we got out of the car payment trap years ago was to create a "new car fund" sinking fund. That fund also functioned to pay for repairs to the old car along the way until we had money for the new car.

So, I'd just start putting a set amount aside for your next car, a 3-4 year old used car is usually the best deal all around. Even if the old car needs an occasional repair, your car fund will grow and eventually you'll have enough.

As for your friends with the new SUVs and the expensive houses....they sound like a lot of other Americans these days...waking up to the fact that their house poor/car poor and are in the process of paying down debt and repairing their tattered personal balance sheets.
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Old 08-31-2010, 08:57 PM   #111
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Originally Posted by ICF View Post
putting something on plastic doesnt necessarily mean you are going into debt.
No, but it turns out very few people have the willpower to not start going mad with the plastic either. I'm not saying you personally..but this country got a wake up call a couple of years ago. People living way beyond their means and just whipping out the plastic at the drop of a hat. I think it's because it's delayed..you don't part with actual money at the time of purchase. Very easy to spend today and worry about the fallout later.

Oh and OT but what the heck are tithes? Does this mean people fork over a certain amount of income to their churches? Genuinely curious, not trying to be rude.
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Old 08-31-2010, 09:28 PM   #112
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Originally Posted by luvthemouse71 View Post
No, but it turns out very few people have the willpower to not start going mad with the plastic either. I'm not saying you personally..but this country got a wake up call a couple of years ago. People living way beyond their means and just whipping out the plastic at the drop of a hat. I think it's because it's delayed..you don't part with actual money at the time of purchase. Very easy to spend today and worry about the fallout later.

Oh and OT but what the heck are tithes? Does this mean people fork over a certain amount of income to their churches? Genuinely curious, not trying to be rude.
Yes, when you belong to a church it is highly encouraged to give what you can give. It's different from person to person, and decided on the family themselves. Your tithe goes toward paying the pastor, the secretary, any other paying positions, as well as everything else the church needs in order to run. The church relies on it's members to survive.
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Old 08-31-2010, 10:42 PM   #113
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For us, it means that unless we have the cash in the bank, we don't buy things. This of course doesn't include vehicles or the house, but everything else is included in this. DH wanted a new computer, so he waited until he could pay cash for it. Turned out, things went on sale and he paid 1500 instead of closer to 2000. Even our WDW trips aren't booked unless we have the money in the bank.
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Old 08-31-2010, 11:01 PM   #114
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Old 08-31-2010, 11:18 PM   #115
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Originally Posted by sameyeyam View Post
I don't think I'm fortunate at all. I think I made a decision about 20 years ago to save money and not give it to the banks in the form of interest. Oh that and I worked my rear off. It's very easy to do, just have to get used to delaying purchases until you have the money.

Personally, I would never have a car payment. But if I did, I most likely would not take an expensive vacation. I would make our vacation be a trip to grandma's house at the beach, a cheap tent camping trip, etc. I would use the money I saved to pay down the car loan. But that's just me.

If you have never been debt free as an adult you should try it. It's the most awesome feeling in the world and the freedom it gives you is unbelievable. The freedom to take awesome vacations, pay cash for big ticket items, send your kids to college and save money for retirement.

I am 45 years young and I plan on being a millionaire when I retire. It's actually very easy to do. Don't believe me, listen to Dave Ramsey (he's on the web and you can listen to his archived shows for free). I started making wise decision 20 years ago and only recently started listening to him. Finally, someone else that thinks like I do!

We don't have huge 6 figure incomes, we live in a fairly simple 3 bedroom house, my DH's truck is 10 years old, mine is 8 years old. We just bought our DD a new car last year that is fully paid for and we are cash flowing $17,000 per year for her college (yep, no student loans!). Last weekend we bought a brand new travel trailer that we are paying cash for. Instead of paying interest to banks we delayed our purchases. We use the money we save on interest to pay cash for our next big purchase. We always live below our means and we take awesome vacations...cruises, carribean, wdw, dl. And to think it all started because I decided I didn't want to have car payments!
Dave Ramsey is the last person in the world I would want investment advice from. I have no trouble making a car payment and paying for nice vacations. I choose to invest my money elsewhere. Interst rates being so low its like paying cash. I could pay off my car anytime I wanted too. I have a good idea whats coming in the future and am planning for it a little differently. I too am very blessed ,but I understand its not that easy for some people. Life can throw you some unexpected curve balls. So yes I consider you fortunate.
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Old 09-01-2010, 10:47 AM   #116
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Quote:
Originally Posted by padawans View Post
Dave Ramsey is the last person in the world I would want investment advice from. I have no trouble making a car payment and paying for nice vacations. I choose to invest my money elsewhere. Interst rates being so low its like paying cash. I could pay off my car anytime I wanted too. I have a good idea whats coming in the future and am planning for it a little differently. I too am very blessed ,but I understand its not that easy for some people. Life can throw you some unexpected curve balls. So yes I consider you fortunate.
Dave doesn't give a lot of investment advice, other then to tell people to diversify and put money in mutual funds rather than having stock in one or just a handful of companies. I totally agree with you, I wouldn't want him to give me investment advice either. He even tells people on his show to speak to investment professionals and that he doesn't give investment advice. The closest he comes to investment advice is telling widows to not make any financial decisions for 6 months to 1 year, to just park their money in the bank until they have had a chance to grieve and think clearly. To me that just makes common sense.

I'm a bit curious about why you would think paying a low interest rate would be the same as cash? Let's say you can get a car loan at 5% on a $20,000 new vehicle. You would pay about $800 - $1,000 interest the first year. All of the sudden the $20,000 car becomes a $21,000 car. Even if you could earn 2% in a savings acccount on your $20,000, that would only offset about $400 of the interest. So you are still paying $400-$600 to the bank that first year. That $400-$600 just went into my children's college account, instead of to the bank's bottom line. Even those cars that are 0% interest carry a price, ever try to negotiate a deal on a 0% interest car? Trust me cash gets the better deal every time.

Life has thrown me lots of unexpected curve balls. My husband has had several periods of unemployment as he works in manufacturing. Four years ago I went thru breast cancer (mastectomy, chemo, radiation & reconstruction). I was able to handle those unexpected curves because I didn't have consumer debt and had money in savings. My favorite saying "the only thing in life that is certain is that life is uncertain". I plan for the uncertainty and pray that it never happens. I've tried to build up a wall of curve ball repellent, because I know they will always be thrown at me!

I still do not think I am fortunate. The definition of fortunate is very closely tied to luck. I believe that luck had nothing to do with my financial situation. I believe that hard work, staying out of debt, delaying purchases and putting money into savings got me where I am today. My DH & I both started out making minimum wage and put ourselves thru community college. I ate so many PB&J sandwiches & Top Ramen while watching our friends go out for dinner at fancy restaurants. Some of those friends lost their jobs in this recession, along with their homes and fancy cars. I feel sad for them and I thank God for giving me the brains & wisdom to choose a different path. Even though there were plenty of times I felt like hopping off that path.

I do agree that it is not easy for some people. Heck, I will even say it's not easy for almost all people, myself included. But I do think that making smart decisions with your personal finances can make it much easier in the long run.

When my kids were younger, we just couldn't afford a Disney vacation. The closest they got to Disney were the videos! Finally when they were 12 and 6 we could afford a WDW vacation. It was hard not to take them earlier, but we just could not afford it as we were trying to save money for our necessities and build up a good emergency fund. I listened to my DH for many years ask how all of our friends had so much more then us. Come to find out, as we surmised, they financed most of their toys. Now their toys are getting repo'd and ours belonged to us from day 1.

I still truly believe that I can't "Afford It" if I have consumer debt, have large house payments, don't have college & retirement funds, don't have an large emergency fund, etc. I don't say that my way is right or wrong for everybody else. But I am 100% certain that what DH & I are doing is right for our family and has put us on a good path for the future.
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Old 09-01-2010, 12:58 PM   #117
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Quote:
Originally Posted by sameyeyam View Post
I'm a bit curious about why you would think paying a low interest rate would be the same as cash? Let's say you can get a car loan at 5% on a $20,000 new vehicle. You would pay about $800 - $1,000 interest the first year. All of the sudden the $20,000 car becomes a $21,000 car. Even if you could earn 2% in a savings acccount on your $20,000, that would only offset about $400 of the interest. So you are still paying $400-$600 to the bank that first year. That $400-$600 just went into my children's college account, instead of to the bank's bottom line. Even those cars that are 0% interest carry a price, ever try to negotiate a deal on a 0% interest car? Trust me cash gets the better deal every time.
If you just park the money in savings, that's true. But what padawans is likely talking about is not puting that $20k in savings but investing in something that would earn more than the interest on the loan. Besides, a low interest car loan these days is 2% or less, anyone with a really high credit score should be able to qualify for the really good loan rates. A 5% loan is what people with an average credit score would pay, and if it's that high, then taking the loan doesn't make as much sense.

Personally, I'd pay cash for the car, but I'm a conservative investor. For people that aren't as risk-adverse, taking the low interest loan and earning more in the long run on an investment is a good way to go. As always, there is no real wrong answer here, everyone should do what makes sense to them, and them alone.

As for luck, while to an extent we make our own luck (saving for a rainey day means that when it rains, you'll be more prepared than those that didn't) but there is still a lot that is outside of our personal control that can wipe even the most careful saver out. In your case, your saving up and staying debt free was enough for you to weather the challenges you faced (which is great, I'm not knocking it!). But if your challenges had been worse, it may not have been enough. People can do everything right and still get the sharp end of the stick in life.
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Old 09-01-2010, 02:23 PM   #118
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It can really vary. Paying cash for an item is always best. We do however have Disney Rewards card which we use and pay off each month. We do that so we can earn $ for our trip. Not everyone can handle doing that.

I try to see if i can afford it this month if not i will save up. I would never touch our emergency fund for something i wanted and didnt need.
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Old 09-01-2010, 04:08 PM   #119
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If you just park the money in savings, that's true. But what padawans is likely talking about is not puting that $20k in savings but investing in something that would earn more than the interest on the loan. Besides, a low interest car loan these days is 2% or less, anyone with a really high credit score should be able to qualify for the really good loan rates. A 5% loan is what people with an average credit score would pay, and if it's that high, then taking the loan doesn't make as much sense.

Personally, I'd pay cash for the car, but I'm a conservative investor. For people that aren't as risk-adverse, taking the low interest loan and earning more in the long run on an investment is a good way to go. As always, there is no real wrong answer here, everyone should do what makes sense to them, and them alone.

As for luck, while to an extent we make our own luck (saving for a rainey day means that when it rains, you'll be more prepared than those that didn't) but there is still a lot that is outside of our personal control that can wipe even the most careful saver out. In your case, your saving up and staying debt free was enough for you to weather the challenges you faced (which is great, I'm not knocking it!). But if your challenges had been worse, it may not have been enough. People can do everything right and still get the sharp end of the stick in life.
Not sure if I can think of a challenge worse then cancer. I guess maybe death? But that's what I have life insurance for.

I do see your point. However, I guess maybe I prefer to stay on the safe side. Too many things can go wrong with investments and then if something happens, there goes your money and you're stuck with a car payment. These days it's hard to find any low to moderate risk investments that have a decent payback. The stock market is back down again, bonds & treasury notes don't pay much. Probably the best investment a person could make would be picking up cheap foreclosed real estate, but even then it could take 5-7 years to see it go up, and that's after you've paid property taxes, hoa fees, etc. By far the best investment I think a person can make is to save up and pay cash and have zero risk.

I know that catastrophic "sharp end of the stick" things happen. But I believe with planning ahead you can definitely lessen the impact. If you prepare for emergencies, then amazingly enough when the do happen, they aren't emergencies anymore.
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Old 09-01-2010, 05:17 PM   #120
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Oh and OT but what the heck are tithes? Does this mean people fork over a certain amount of income to their churches? Genuinely curious, not trying to be rude.
Biblicaly speaking, the tithe is 10% of your income. Different churches define it slightly differently, but that's the basis of it. Offerings are over and above your tithe.

Personally, I have never been able to get ahead when I wasn't tithing, and have never gone without when I was, not matter how high or low my income. It gets pretty tough when you're hurting financially to give, but I've found that God honors obedience. This is why for us, tithing is an important budgetary principle, and it comes before non-essentials like vacations.
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