Not drinking the cool aid on resale!!

[chitwndan]

You'd also have to consider what availability will be like when you are able to book after purchasing. Will you be satisfied with SSR? or would you only want to be at BLT?

I would be disapointed with SSR. I'm sorry SSR fans. It certainly wouldn't be a deal breaker for us.

Since were're going in June (not prime season for DVC,) we are buying at BLT, I'm pretty confident we'll be able to get rooms if we book before the 7 mo window opens, if not would be happy with AKL which should be available as well.

My ROFR expires June 30, so if it closes 60 days from then it puts us at August 30th, 9 months out from when we're going. I should be able to get 1BR lave view as a worst case scenario.

The tough decisions start to occur if we get ROFR'd, but I will continue to hope we do not.

 

[Dean]

You bring up an excellent point. Yes I can still pay cash to go to Disney every year, but every dollar I spend over the maintanence fees, assuming I wish wait to purchase DVC down the road, is wasted. I will run some numbers tonight to compare and contrast, but on the surface it seems to make more sense to buy now.

A lot of people bring up you shouldn't buy what you can't afford. To afford means having the ability to pay for something. I can afford this. I have the income stream to do so. I have 50-75% of the cash (depending on if the great deal I signed get's ROFR'd or if I buy "list" resale prices) in a bank to pay for it. But draining my cash surplus which allows me to weather unexpected expenses without impacting my cash flow seems to be a poorer decision to me. Having a cash cushion, as well as short and long term disability insurance provides, protection to your income stream which is our greatest asset.

The annual cost of self financing the DVC over the next 5 years is far less that the cost's of the loss in income from the two maternity leaves and 6 months without pay which we endured when my DS was doing her clinicals. We weathered this fine. We have the income stream now to do this. But I will run the numbers of paying cash for the next 5-10 vacation hotel costs and banking the difference vs taking a loan on my assets to pay for it.

IMO if one can't pay cash for it they either can't afford it or it's not important to them or both. Being able to make the payments is NOT being able to afford it. Reference congress.

I personally wouldn’t be able to sleep at night if I didn’t have cash “on hand” to handle unexpected expenses.

In reality once you finance you've already spent that money. I can understand a liquidity concern but not a true emergency fund with existing debt.

 

[chitwndan]

IMO if one can't pay cash for it they either can't afford it or it's not important to them or both. Being able to make the payments is NOT being able to afford it. Reference congress.

The government has a structural deficit. I do not. There is a big difference. By that logic people should pay rent until they have saved enough to pay for a house with cash. No thank you, I don't feel you should throw money away on rent when you can put that money toward earning equity in a house. While clearly this is different, there are similarities between renting and buying.

There are reasons why cash rich companies like Apple continue to issue bonds. Because the financial flexibility it provides them is worth the nominal cost, and it allows for faster growth of the company as long as they are careful not to over extend themselves.

In reality once you finance you've already spent that money. I can understand a liquidity concern but not a true emergency fund with existing debt.

1st, I am tapping into the assets I saved, so how is this truly debt, and how is what I'm doing any worse than if I put 1/2 the amount into the 401K that I did and the other half into a savings account? If I'd put the money into a savings account then spent it now and "paid my saving back" with interest would you still object? I have saved aggressively into my 401K with the understanding that I could pull out of it if need be. If I had put it into a saving account I would have just missed out on growth of my assets.

2nd, Having an emergency fund is the single most important thing you can do to prevent yourself from getting and/or staying out of long term debt. Financial firms provide lots of advice about how to become financially secure, but the simplest and most basic strategy is to save a portion of your income on a regular basis. A financial goal that every individual or family should have is to establish some type of emergency fund. This is savings set aside specifically to meet emergencies (e.g. medical expenses due to an accident), unanticipated bills (e.g., auto repairs) or to cover monthly living expenses if your paycheck stops (e.g., disability and unemployment).

Emergency funds have been compared to a "shock absorber" for inevitable "bumps" on the road of life. The money placed in them should be liquid. In other words, emergency savings should be put into accounts that can easily be converted to cash without loss such as checking or savings accounts, money market deposit accounts, or money market mutual funds. Liquidity allows quick access to funds, which is vital in emergency situations.

Stuff happens and, most of the time, it costs money! By setting up an emergency cash fund, you help protect yourself from the financial cost of unknowns. Without an emergency fund, people often use credit cards or payday loans or borrow money from family members in an emergency because they don't have a savings account to fall back on when unexpected things happen. This just digs them further in debt when interest is charged on unpaid balances.

So even for a person who is 30K in credit card debit, I would recommend they build an emergency fund while making their minimum payments to prevent them from charging the next bump in the road.

 

[Msmithmd]

"Compound interest is the eighth wonder of the world...he who understands it, earns it...he who doesn't, pays it..."

-Albert Einstein


I would submit someone who thinks it wise to build up an emergency fund earning maybe 1-2% a year, while paying on a 30k credit card (or DVC loan) at 10-20% is likely in the second category.

 

[chitwndan]

"Compound interest is the eighth wonder of the world...he who understands it, earns it...he who doesn't, pays it..."

-Albert Einstein


I would submit someone who thinks it wise to build up an emergency fund earning maybe 1-2% a year, while paying on a 30k credit card (or DVC loan) at 10-20% is likely in the second category.

Wow talk about insulting?!?

I have a firm and practiced knowledge of how compounding interest works. Have you ever worked with people in perpetual credit card debit? I have. The constant overriding theme is that something always comes up and they need to use their credit card again.

So the 1st step to them getting out of debt, is teaching them how to not use the credit card, and break the cycle. This is done by simultaneously continuing to pay the credit card bill while building up a small cash cushion, so the next time then need a set of new tires, they are not charging it and repeating the cycle.

 

[chitwndan]

I think draining your surplus is the smarter decision, only if the cash surplus is solely there for unexpected expenses. What are your chances of an unexpected expense? And couldn't you pull out the 401k loan if the need arises? It would reduce the amount of interest you pay. But you'd have to be diligent about paying back into your savings that you would have if it was a loan.

And if you're 75% there, why not just wait a few months until you have the full amount? Or buy half what you need now with cash, and another one later. Or even consider skipping a vacation to put the money towards the resale purchase.

FYI I ran the numbers and in 5 years, assuming I only rent points and not rent hotels resale, when this will have been paid off, by saving the interest at a 2% growth rate (which is generous for banks today) I end up with 6995.6. Every year after that I'd be losing money. so paying cash and banking the rest does not appear to be the best option unless I'm missing something. It is late and that's entirely possible. But that's the outcome, so buying "today" verses renting seems to be the way to go.

 

[Msmithmd]

Wow talk about insulting?!? I have a firm and practiced knowledge of how compounding interest works. Have you ever worked with people in perpetual credit card debit? I have. The constant overriding theme is that something always comes up and they need to use their credit card again. So the 1st step to them getting out of debt, is teaching them how to not use the credit card, and break the cycle. This is done by simultaneously continuing to pay the credit card bill while building up a small cash cushion, so the next time then need a set of new tires, they are not charging it and repeating the cycle.

No insult intended. But I stand by my premise. It is a great idea to have an emergency fund. But not while paying very high rate revolving debts. In that situation, a small fund of no more than 1 month's expenses is reasonable, but a solid fund (six months expenses) would be unreasonable.

I feel that someone who carries a credit card balance month to month shouldn't even consider purchasing DVC. I've been poor in my life. I'm not now, due to lots of education plus a conservative financial approach. I didn't purchase DVC until I could do so with cash, while not threatening other objectives (home, retirement, kids' future school, etc).

Could I have "saved money" by buying DVC ten years before I did, instead of paying for cash vacations- probably so. The difference is that I could cancel (or not book) a cash vacation when I couldn't afford it. IMO buying DVC when one cannot afford it isn't a wise choice.

What you do with your money is your business, but if you want to discuss it in an open Internet forum, then be prepared for answers that differ from yours.

Again, no personal insult was meant. But if you are suggesting that it is ever reasonable for someone to purchase an interest in DVC by assuming debt- especially if they have other high interest revolving debt- then we will have to agree to disagree. Strongly.

 

[chitwndan]

No insult intended. But I stand by my premise. It is a great idea to have an emergency fund. But not while paying very high rate revolving debts. In that situation, a small fund of no more than 1 month's expenses is reasonable, but a solid fund (six months expenses) would be unreasonable.

I feel that someone who carries a credit card balance month to month shouldn't even consider purchasing DVC. I've been poor in my life. I'm not now, due to lots of education plus a conservative financial approach. I didn't purchase DVC until I could do so with cash, while not threatening other objectives (home, retirement, kids' future school, etc).

Could I have "saved money" by buying DVC ten years before I did, instead of paying for cash vacations- probably so. The difference is that I could cancel (or not book) a cash vacation when I couldn't afford it. IMO buying DVC when one cannot afford it isn't a wise choice.

What you do with your money is your business, but if you want to discuss it in an open Internet forum, then be prepared for answers that differ from yours.

Again, no personal insult was meant. But if you are suggesting that it is ever reasonable for someone to purchase an interest in DVC by assuming debt- especially if they have other high interest revolving debt- then we will have to agree to disagree. Strongly.

Sorry if I misunderstood your post, I took it to mean I did not understand compound interest. And I can assure you I have a very thorough understanding of the pro's and cons of it. I am open to differing opinions. But statements that I do not understand or am not making an informed decision, I will refute. People are welcome to disagree, but I can assure you I have given it hours and hours of thought.

I was arguing related points in the post you responded to. Yes I completely agree that someone with 30K in credit card debt should NEVER be purchasing DVC. I do not have any debt besides my home and my DS's new student loan debt from completing her masters.

But my argument is that whether or not someone has 30K in credit card debt, or is financing DVC that having a cash surplus/cushion is very important. I did not suggest 6 months of savings for that person with 30K in debt, but more so to break the cycle and build a cushion, as a black and white example of why I would want to have a cash cushion while personally financing my DVC.

The exact amount is debatable for the person getting out of credit card debt, but I agree that 1 month would be a good starting point, then as the debts are paid down that money can then be used to continue to build additional wealth.

Again I agree that buying DVC if you can not afford it is a poor choice. The question comes to if you feel that afford means to pay cash out of a savings account, then we will disagree. As mentioned before, I have not built up as much of a cash savings as others, as when I had disposable income I increased my 401K contribution amount. I am tapping into the assets I saved, so how is this truly debt, and how is what I'm doing any worse than if I put 1/2 the amount into the 401K that I did and the other half into a savings account?

If I'd put the money into a savings account then spent it now and "paid my saving back" with interest would you still object? I have saved aggressively into my 401K with the understanding that I could pull out of it if need be. Which I am doing now with interest paid to me. If I had put it into a saving account I would have just missed out on growth of my assets.

Anyone is welcome to debate the pros and cons of those decisions, I welcome it and enjoy it. There have been may good points brought up that I didn't consider, that I have now considered from them. I am thankful for those differing opinions for me to consider. But just please don't insinuate that I don't understand or don't have the knowledge about personal, or corporate finance or compounding interest for that matter.

To clarify, I am suggesting that it is reasonable for someone to purchase an interest in DVC by utilizing previously saved assets in vehicles like an annuity, 401K, or life insurance.

 

[Dean]

The government has a structural deficit. I do not. There is a big difference. By that logic people should pay rent until they have saved enough to pay for a house with cash. No thank you, I don't feel you should throw money away on rent when you can put that money toward earning equity in a house. While clearly this is different, there are similarities between renting and buying.

There are reasons why cash rich companies like Apple continue to issue bonds. Because the financial flexibility it provides them is worth the nominal cost, and it allows for faster growth of the company as long as they are careful not to over extend themselves.



1st, I am tapping into the assets I saved, so how is this truly debt, and how is what I'm doing any worse than if I put 1/2 the amount into the 401K that I did and the other half into a savings account? If I'd put the money into a savings account then spent it now and "paid my saving back" with interest would you still object? I have saved aggressively into my 401K with the understanding that I could pull out of it if need be. If I had put it into a saving account I would have just missed out on growth of my assets.

2nd, Having an emergency fund is the single most important thing you can do to prevent yourself from getting and/or staying out of long term debt. Financial firms provide lots of advice about how to become financially secure, but the simplest and most basic strategy is to save a portion of your income on a regular basis. A financial goal that every individual or family should have is to establish some type of emergency fund. This is savings set aside specifically to meet emergencies (e.g. medical expenses due to an accident), unanticipated bills (e.g., auto repairs) or to cover monthly living expenses if your paycheck stops (e.g., disability and unemployment).

Emergency funds have been compared to a "shock absorber" for inevitable "bumps" on the road of life. The money placed in them should be liquid. In other words, emergency savings should be put into accounts that can easily be converted to cash without loss such as checking or savings accounts, money market deposit accounts, or money market mutual funds. Liquidity allows quick access to funds, which is vital in emergency situations.

Stuff happens and, most of the time, it costs money! By setting up an emergency cash fund, you help protect yourself from the financial cost of unknowns. Without an emergency fund, people often use credit cards or payday loans or borrow money from family members in an emergency because they don't have a savings account to fall back on when unexpected things happen. This just digs them further in debt when interest is charged on unpaid balances.

So even for a person who is 30K in credit card debit, I would recommend they build an emergency fund while making their minimum payments to prevent them from charging the next bump in the road.

I won't go into all the nuances for a number of reasons, partly not to get to far off track and partly because I think we mostly agree other than the very endpoints. I stand by my statements you referenced. Certainly, saving and paying for a house would be best but at least it's a potentially appreciating asset though we can reference subprime mortgages and interest only mortgages as examples of people buying things they couldn't afford. I would agree that having enough on hand to weather a minor issue is appropriate, but not several months to live on. If you meant the former, which didn't seem the case in context, then we agree; otherwise I think it's unreasonable to sit on dollars having consumer debt even if it's a low interest rate. I will add that debt represents risk, apple can likely weather a storm better than you or I. Otherwise, we may as well keep everything financed to the max and invest those dollars. To reference a similar issue in your world, I'm sure you know a lot of people who recommend the asset allocation model and moving to bonds as you near retirement, poor choice though.

 

[chitwndan]

I won't go into all the nuances for a number of reasons, partly not to get to far off track and partly because I think we mostly agree other than the very endpoints. I stand by my statements you referenced. Certainly, saving and paying for a house would be best but at least it's a potentially appreciating asset though we can reference subprime mortgages and interest only mortgages as examples of people buying things they couldn't afford. I would agree that having enough on hand to weather a minor issue is appropriate, but not several months to live on. If you meant the former, which didn't seem the case in context, then we agree; otherwise I think it's unreasonable to sit on dollars having consumer debt even if it's a low interest rate. I will add that debt represents risk, apple can likely weather a storm better than you or I. Otherwise, we may as well keep everything financed to the max and invest those dollars. To reference a similar issue in your world, I'm sure you know a lot of people who recommend the asset allocation model and moving to bonds as you near retirement, poor choice though.

I agree that debt adds risk, and savings will offset that risk. It all depends on your risk tolerance. I don't have a 6 month cash cushion as I would agree it's a bit much if you are carrying debt. I like to keep mine at about two months. But again that's a personal preferance/tolerance much like your investment allocation you mentioned. You might think that is too much, where others would say at a bare minimum you need 3 and preferably 6 months. I think two months is about right. I don't want to have to put a roof on, and have nothing left. We'll agree to disagree on having to pay cash, or it's a bad decision. Paying cash certainly is the safest most conservative way to go. But so is putting your money into fixed interest investments, which it appears neither one of us would suggest.

To not derail the topic, anymore than I already have, I would love for you to PM me why you don't recommend the asset allocation model of investment? While I feel most if not all allocation models are too consetvative, I am a big proponent of broad diversification and asset allocation with frequent re-balancing.

Interest only mortagages are like a chainsaw they are a great tool used by someone who knows what they are doing, uses them in the right situation, and knows they better be careful or they could lose a limb.

Subprime mortgages? Yeah don't get me started on those or even worse, ninja loans...

 

[GOOFY D]

I personally wouldn’t be able to sleep at night if I didn’t have cash “on hand” to handle unexpected expenses.

As far as waiting a year, due to timing of multiple things, like my child being just under 3 when we plan to go so therefore free, we will be going back next year. Delaying the trip will cost us a significant amount in food and theme park costs. Plus we are taking our nieces, so again if we wait we’d have to get a 2BR which will cost a lot more than the 1BR and cost more next year than this. So we are taking the trip next year. I can afford to pay for it. The question now is how to maximize the purchase of this trip and in turn, the following trips. Is it better to buy DVC now knowing we will be traveling moving forward, or to pay for hotels and bank the difference. Again I’ll run numbers tonight, but I’m thinking the former will look best.

What benefit would it serve me to drain my cash reserves? Yes I would reduce my interest, but since my interest is going back to me there is really no interest cost, just the opportunity cost of not having it in the account for 5 years which I mentioned previously. Plus, despite people’s best efforts to save, it’s always easiest when the money is taken out of your check before you have the chance to decide what to do with it. It’s one reason why I’ve been diligently putting as much into the 401K as I can afford for years.

In addition, you can only have 2 loans out on your 401K at one time. So having cash on hand I can tap into as often as I want in any amount I want provides me with more financial flexibility. I just put 2K into my car. So had I drained my reserves previously, I’d already have one of my two loans used, and be on pins and needles waiting for the other shoe to drop, or be paying credit card interest rates.

I guess if I had put less into the 401K over the years in an attempt to get that money working for me, and had built up a larger chunk of money in the bank earning almost 0 interest, I could then use that cash now. I’m personally glad I put as much into there as I did and have it available to me if I want it, and it earned in the mean time.

But the final decision comes down to having a cash cushion provides peace of mind, that I am unwilling to do without. It appears for you, that you would be more comfortable with no cash cushion then you would be in having a 401K loan. That’s a personal decision that we disagree on.

Only you would know your personal financial needs and situation. You are the only one that can make the best decision for you.

Being in a finance career, I would only borrow against my 401k in a significant emergency. Once that money is deposited in the 401k, I consider it gone and earmarked for retirement.

 

[ELMC]

To clarify, I am suggesting that it is reasonable for someone to purchase an interest in DVC by utilizing previously saved assets in vehicles like an annuity, 401K, or life insurance.

This is where we disagree. These vehicles are cornerstones in a financial portfolio. While they do have cash value that is accessible, I would advocate doing so only in an emergency or other pressing scenario and certainly not for a frivolous luxury purchase such as DVC (or any timeshare for that matter).

 

[Dean]

This is where we disagree. These vehicles are cornerstones in a financial portfolio. While they do have cash value that is accessible, I would advocate doing so only in an emergency or other pressing scenario and certainly not for a frivolous luxury purchase such as DVC (or any timeshare for that matter).

Same here, I don't see a reasonable financing situation. Too much risk by using HELOC, CC, retirement funds (in any way) and too much cost for unsecured options. Plus it robs one of future savings. And as I noted, people who make bad choices in buying DVC are usually people who are making bad financial choices routinely. Holding money and financing DVC is like playing with CC for the perks/miles and that's about as good as it gets in justifying financing, it's all downhill from there.

 

[chitwndan]

This is where we disagree. These vehicles are cornerstones in a financial portfolio. While they do have cash value that is accessible, I would advocate doing so only in an emergency or other pressing scenario and certainly not for a frivolous luxury purchase such as DVC (or any timeshare for that matter).

Same here, I don't see a reasonable financing situation. Too much risk by using HELOC, CC, retirement funds (in any way) and too much cost for unsecured options. Plus it robs one of future savings. And as I noted, people who make bad choices in buying DVC are usually people who are making bad financial choices routinely. Holding money and financing DVC is like playing with CC for the perks/miles and that's about as good as it gets in justifying financing, it's all downhill from there.

1st let me say that this is a very interesting discussion and while bringing up good points it is also distracting me from the timer on my ROFR which may be the biggest benefit of these talks.

So let me counter with two points:

- 1st. While my friends and most people my age were putting 5% into their 401K, I was putting in 10-15% as I didn't need the money so best to sock it away, especially since I could have access to it if need be. So I ask both of you would you suggest to that late 20’s person many years ago to put less into the 401K over the years, and instead of attempting to get that money working for them, to build up a larger chunk of money in the bank earning almost 0 interest, so they could use later?

Seriously please address this as my financial strategy early on, which this is an extension of, was to build a small to moderate cash cushion, and dump everything else into the 401k, knowing when the time came to make a large purchase, I would either finance depending on the rate or borrow against the 401K provided I felt the expense was worth it.

- 2nd Given I am planning on traveling every year to Disney going forward, and can save and pay cash every year as I did this year; what make the most sense moving forward? From what I have learned, the best way to do this, or the most inadvantageous way to my argument , would be to rent points every year, which I am not confident of, but will take your word for it. In exchange we will assume I don’t use the boards and go through a reliable broker charging $15 a point.

If I buy my 160 points at 81.25 as i have, and self-financed with the interest being paid back to me, including the dues of 3983.88 and assuming a 3% dues growth rate, it will cost me 18,778.68 to pay this off over 5 years. If I just rent the same 160 points it will cost me 2400 a year and at the end of 5 years I will have accumulated 6,995.6 in assets putting the difference into savings earning 2%.

So at the end of 5 years, I can have the property paid for any only be responsible for dues moving forward or have just over ½ the property paid for, and still would need to come up with a little over 6K to buy the property in 5 years. This is also assuming the cost of DVC has NOT gone up in 5 years, which is unlikely. To me option 1 seems much better.

Yes I am taking on risk. If you are risk averse then this is not a good plan for you. I am not risk averse. Given the stability of my employer, no layoffs in the almost 160 year history of the company, the demand for my wife’s occupation regardless of employer, the cash cushion we have, and the disability and life insurances we own. I am comfortable with that risk. I am also all for managing the risk through insurance and cash on hand, not just avoiding it.

You may not be comfortable with the risk, but I feel it make the most fiscal sense to me in the long run.

 

[brertoad]

I considered new and resale, and for us resale made better sense financially.
We can't go back in time and purchase our home resort. If I knew about DVC in the 1990's, I would have bought direct at that time given the options at that time, I would have financed the purchase. If we were ever to consider buying at a *new* resort, then I would buy direct and get the full 50 years.

We purchased at $61 pp, at the time the new prices were $115, it's jumped several times since 2012. It would have been $10k more to buy new at that time, the expiry date would have been 8 years longer, but would have been disproportionately more expensive.

Sometimes people are only concerned with usability on the front end of the contract, rather than making sure it goes to a full 50 years.

 

[Dean]

1st let me say that this is a very interesting discussion and while bringing up good points it is also distracting me from the timer on my ROFR which may be the biggest benefit of these talks.

So let me counter with two points:

- 1st. While my friends and most people my age were putting 5% into their 401K, I was putting in 10-15% as I didn't need the money so best to sock it away, especially since I could have access to it if need be. So I ask both of you would you suggest to that late 20’s person many years ago to put less into the 401K over the years, and instead of attempting to get that money working for them, to build up a larger chunk of money in the bank earning almost 0 interest, so they could use later?

Seriously please address this as my financial strategy early on, which this is an extension of, was to build a small to moderate cash cushion, and dump everything else into the 401k, knowing when the time came to make a large purchase, I would either finance depending on the rate or borrow against the 401K provided I felt the expense was worth it.

- 2nd Given I am planning on traveling every year to Disney going forward, and can save and pay cash every year as I did this year; what make the most sense moving forward? From what I have learned, the best way to do this, or the most inadvantageous way to my argument , would be to rent points every year, which I am not confident of, but will take your word for it. In exchange we will assume I don’t use the boards and go through a reliable broker charging $15 a point.

If I buy my 160 points at 81.25 as i have, and self-financed with the interest being paid back to me, including the dues of 3983.88 and assuming a 3% dues growth rate, it will cost me 18,778.68 to pay this off over 5 years. If I just rent the same 160 points it will cost me 2400 a year and at the end of 5 years I will have accumulated 6,995.6 in assets putting the difference into savings earning 2%.

So at the end of 5 years, I can have the property paid for any only be responsible for dues moving forward or have just over ½ the property paid for, and still would need to come up with a little over 6K to buy the property in 5 years. This is also assuming the cost of DVC has NOT gone up in 5 years, which is unlikely. To me option 1 seems much better.

Yes I am taking on risk. If you are risk averse then this is not a good plan for you. I am not risk averse. Given the stability of my employer, no layoffs in the almost 160 year history of the company, the demand for my wife’s occupation regardless of employer, the cash cushion we have, and the disability and life insurances we own. I am comfortable with that risk. I am also all for managing the risk through insurance and cash on hand, not just avoiding it.

You may not be comfortable with the risk, but I feel it make the most fiscal sense to me in the long run.

My guess is you could pay cash and are choosing not to, certainly less risk in that situation. My fear is others will read this and take away that financing is a good thing and buy when they can't afford it putting themselves at great risk. Again, just like the large number of people that bought more house than they could afford using plans that were clearly a poor choice/product. The only debt I see as reasonable is one of an appreciating asset preferably money you'd have to spend anyway such as buying a house compared to renting. Even then one needs to hit a certain threshold for it to be reasonable and buy a house one can actually afford (much less than can qualify for).

 

[RobDoc]

Since this discussion has drifted from the original topic, let's move it over to the Mousecellaneous Board.

 

[davedmaine]

I realize that most dvc members on this site, and many others, think resale is the only way to go and give that advice to all that inquire about the process. I agree that resale is great option, but believe there is an important fact overlooked.

Looking at the DVC resorts in Orlando and California, and looking at there opening sales prices, I really don't see how there is much, if any savings if you buy early when the resort opens. Just a few resort statistical data below:

OKW 1991 $51 pp 2014 resale around $70 pp

BWV 1996 $62.75 pp 2014 resale around $80 PP

WL 2000 $72 pp 2014 resale around $80 pp

BCV 2002 $80 pp 2014 resale around $95 pp

BLT 2009 $112-$5 (incentive) $107 pp 2014 resale around $ 95pp

VGC 2009 $112 pp 2014 resale $135 pp

Now with VGF going up to $165 a point later this month, and most likely will end up at $175 to $ 185 before it sells out (opened at $145; resale going for around $135), I think the best advise would be to buy DVC direct but early when the resort first goes on sale. You will get the full 50 years, get the full DVC benefits (I know not the best use of points, but like the option) easier process, and in many cases the value will rise. I think mainly the high demand small resorts like VGC, BCV, VGF and soon to be Poly, were and are smart plays for direct buying early.

It seems right now people are happy to be picking up 2042 to 2054 end date contracts for more or the same money then they were sold for 10 to 20 years ago, and are pounding there chest about the resale market. A little confusing.

I guess if time travel existed, you'd have a pretty solid argument

 

[skier_pete]

The only debt I see as reasonable is one of an appreciating asset preferably money you'd have to spend anyway such as buying a house compared to renting. Even then one needs to hit a certain threshold for it to be reasonable and buy a house one can actually afford (much less than can qualify for).

So, you are suggesting that I shouldn't take out a loan to buy a car? That I should only buy it when I have $20,000+ in cash available?

It seems to me chitwndan has shown that he has thought this out pretty thoroughly. While I myself wouldn't necessarily do what he did, I think his response is much more reasonable than yours - which seems to be "you should never borrow money for anything, ever, unless it's a house and it's a down market so that you know you'll be making money on the house"

Do you also suggest I do not invest my 401K in stocks or funds, only put money in the bank accounts earning 0.5 % interest? The market could crash any day and I lose 50 % of my investment. If that were to happen, wouldn't chitwndan have been better off borrowing money out of his 401K?

There's risk to everything outside of putting cash in a safe deposit box. To me, those are much larger risks than taking out a low-interest loan to pay for something that you really want, as long as you know that you can afford to pay that loan off.

 

[chitwndan]

My guess is you could pay cash and are choosing not to, certainly less risk in that situation. My fear is others will read this and take away that financing is a good thing and buy when they can't afford it putting themselves at great risk. Again, just like the large number of people that bought more house than they could afford using plans that were clearly a poor choice/product. The only debt I see as reasonable is one of an appreciating asset preferably money you'd have to spend anyway such as buying a house compared to renting. Even then one needs to hit a certain threshold for it to be reasonable and buy a house one can actually afford (much less than can qualify for).

I can't pay cash now, I wish I could but two maternity leaves and a 6 month clinical (6 months of working for no pay) for my DW have kept those reserves low. We've built them back up and then some allowing us to take our most recent trip where we learned about DVC through the presentation.

As I mentioned in my PM where we discussed asset allocation, I don't feel your position is wrong. It's a common, conservative, tried and true approach. You will never go broke doing it that way. I just have some other ideas and concepts that fly in the face of it.

As pete said, “There's risk to everything outside of putting cash in a safe deposit box. To me, those are much larger risks than taking out a low-interest loan to pay for something that you really want, as long as you know that you can afford to pay that loan off.”

I agree completely. Assuming it’s a fully informed decision, this is a decision based on their risk tolerance. Some people will not invest their money into balanced mutual funds. They would rather put their money in a CD or savings account. They are unwilling to take on the risk for the benefit.

All financial instruments have risks and benefits associated with them.

If there is no benefit to taking on additional risk one shouldn’t regardless of the financial instrument. If there is a benefit you need to weigh the cost or risk vs the benefit. Just like a chainsaw is not inherently bad; if there is a benefit to using it you need to weigh the cost or risk vs the benefit. The risk of both is greatly increased when used by someone who does not know what they are doing, are careless and/or use it inappropriately,

Where you eliminate your financial risk by having no debt, I manage my risk my protecting my income stream which allows greater utilization of my biggest asset, my income stream.

As far as if others read this and take away that financing is a good thing and buy when they can't afford it; then clearly they didn't read everything. It is a tool with associated risks, is neither good nor bad provided you can afford it.

Now if you don’t mind, I’m going to go do some options trading or margin trading and see if I can get that cash together so I don’t need to take a loan on the 401K.