To finance or not to finance

[crisi]

Oh, my grandmother died of what I have 45 years ago. When she died, the family was left bankrupt. Three out of five children were still at home and had their financial security pulled out from under them. My grandfather never really recovered - thank God it was still the pension era. Forty five years and all five children have the scars - not only of the death, but of the financial hardship.

I have kids that I'd leave behind (its much more treatable now). I can't enjoy my life now but risk their ability to enjoy it later. Both my baggage and my circumstances drive me to be pretty conservative in these matters.

 

[Dean]

Oh, my grandmother died of what I have 45 years ago. When she died, the family was left bankrupt. Three out of five children were still at home and had their financial security pulled out from under them. My grandfather never really recovered - thank God it was still the pension era. Forty five years and all five children have the scars - not only of the death, but of the financial hardship.

I have kids that I'd leave behind (its much more treatable now). I can't enjoy my life now but risk their ability to enjoy it later. Both my baggage and my circumstances drive me to be pretty conservative in these matters.

I'm sorry your family had to go through this. That's the point that for many this is a situation they create, they are essentially playing Russian Roulette. Over the last 8 years or so we've seem many such scenarios repeated time and again. True there's no way to eliminate all risk but I'd estimate that 98% can be eliminated but for some it might take a few years. To quote Dave Ramsey "Children do what feels good. Adults make a plan and follow it." This was never more true than for timeshares or vacations in general.

 

[crisi]

I'm sorry your family had to go through this. That's the point that for many this is a situation they create, they are essentially playing Russian Roulette. Over the last 8 years or so we've seem many such scenarios repeated time and again. True there's no way to eliminate all risk but I'd estimate that 98% can be eliminated but for some it might take a few years. To quote Dave Ramsey "Children do what feels good. Adults make a plan and follow it." This was never more true than for timeshares or vacations in general.

Thanks, I was young when it happened, but its a legacy you get to cope with that can cross generations - and genetic diseases that kill leave their own legacy of waiting for the shoe to drop.

 

[piccolopat]

I don't believe in financing wants, only needs. Even for needs, if I have time to save up first, I'll do that.

 

[Madame]

Definitely past experiences change how you approach life & finances in general.

My DF had an extremely unstable upbringing. His DM worked non-stop while his alcoholic father collected disability, took out 2nd & 3rd mortgages behind her back and took money from his teenagers to feed the endless menagerie of animals he bought.

My DF reacted extremely. Nothing but work, rarely a vacation, even after we started getting ahead. The majority of my childhood he drove transport Toronto-Miami. 44 years old diagnosed with terminal brain tumour. Dead by 46.

Great provider. I loved him beyond measure, but I honestly have few memories of him & the most time I ever spent with him was when I quit my job & moved home to help care for him - he lost the ability to speak and move.

Then one of my twins was born with a cancerous tumour less than 5 years after my DF had died, & then I had 1/2 my thyroid removed - yup a tumour.

We are responsable. My DH is an investment advisor. My kids have almost $30 000 each in RESPs (educational funds). Our everday life is a modest one. The only place we spend significant $ is vacations. We financed our DVC.

I understand & respect those whose personal financial history/family history has taught them caution, but my history has taught me that people die young, and children get sick & life is just so painfully short.

I wouldn't mortgage away our future frivilously, but nor will I worry about a debt we will repay within 5 years at a low interest rate, for which I have a contingency payment plan in case of disaster, & which will ultimately bring us joy & memories.

 

[freediverdude]

And just to add, people like Dave Ramsey and Susie Orman have contractual associations with certain entities, which affects the advice they give out. For instance you'll never hear them advise someone who has made mistakes or had humongous health bills to get a fresh start through a bankruptcy. That's because the people they are associated with have an interest in keeping people paying even heavily in debt to the point that the rest of their lives are ruined rather than learn a lesson, get a bankruptcy, and move on and try to do better. These entities realize that in some cases a bankruptcy is literally the only way out for these people (even if some of these people got 2 and 3 jobs like they advise, they'll never get out), and they want to discourage that as much as they can for their own interests.

 

[Dean]

And just to add, people like Dave Ramsey and Susie Orman have contractual associations with certain entities, which affects the advice they give out. For instance you'll never hear them advise someone who has made mistakes or had humongous health bills to get a fresh start through a bankruptcy. That's because the people they are associated with have an interest in keeping people paying even heavily in debt to the point that the rest of their lives are ruined rather than learn a lesson, get a bankruptcy, and move on and try to do better. These entities realize that in some cases a bankruptcy is literally the only way out for these people (even if some of these people got 2 and 3 jobs like they advise, they'll never get out), and they want to discourage that as much as they can for their own interests.

I can't speak for Suze Orman but I don't believe that Dave Ramsey's advise is swayed by his associations or advertisers. Certainly we're all affected by our situation but I believe his is far less than most and likely far less than any of us here. I have heard him recommend bankruptcy when there was no other option but I've never heard him recommend it as a financial planning tool or easy way out as some do. I believe it's because he sees it as unethical in many cases and not helpful in many as well. Clearly you don't know his recommendations if you're saying he wants to keep you in debt.

I understand & respect those whose personal financial history/family history has taught them caution, but my history has taught me that people die young, and children get sick & life is just so painfully short.

A large part of my point is that not only can you do both, you can have more and better in a fairly short term if you make enough/work enough to justify doing X at all. Whether X is a car, vacation, etc. Generally we're only talking a 1-2 year window for most situations where DVC would be on the table anyway.

 

[crisi]

A large part of my point is that not only can you do both, you can have more and better in a fairly short term if you make enough/work enough to justify doing X at all. Whether X is a car, vacation, etc. Generally we're only talking a 1-2 year window for most situations where DVC would be on the table anyway.

Yep. I've traveled the world - Asia, Europe. My husband drives a very nice car (I don't care about cars and the kids drive a beater). I have some fairly nice collections of jewelry and art. We dine out often and have a liquor cabinet with expensive alcohol in it. I see a lot of theatre.

But I also have saved enough money that my net worth is enough that I'm not panicked about not working. I still buy expensive bourbon .

Its a matter of balance.

 

[Madame]

A large part of my point is that not only can you do both, you can have more and better in a fairly short term if you make enough/work enough to justify doing X at all. Whether X is a car, vacation, etc. Generally we're only talking a 1-2 year window for most situations where DVC would be on the table anyway.

I respect that opinion, truly I do & we, for the most part balance our spending & savings. But 1-2 years can be the difference between living and dying. For us this was only the 2nd non-necessity we financed (I consider transportation a necessity and we do *not* drive extravagant vehicles). We have no consumer debt. No student debt.

Should I have pulled $ from university or retirement savings? Should we have foregone vacations for 1-2 years - bearing in mind that our first vacation was when my daughter was 7 & we got married at city hall & had no honeymoon in order to save for impending daycare bills. In short I was becoming my father.

Disclaimer: I should perhaps mention that I'm funding my DVC with money that would have been spent on cigarettes. I quit smoking & put ~$200/mth towards my loan payment. This is actually the first time since my pregnancies that I've been able to quit with success. Could I have quit, saved up, then bought? Sure, but sometimes you need some immediate motivation

 

[Dean]

I respect that opinion, truly I do & we, for the most part balance our spending & savings. But 1-2 years can be the difference between living and dying. For us this was only the 2nd non-necessity we financed (I consider transportation a necessity and we do *not* drive extravagant vehicles). We have no consumer debt. No student debt.

Should I have pulled $ from university or retirement savings? Should we have foregone vacations for 1-2 years - bearing in mind that our first vacation was when my daughter was 7 & we got married at city hall & had no honeymoon in order to save for impending daycare bills. In short I was becoming my father.

Disclaimer: I should perhaps mention that I'm funding my DVC with money that would have been spent on cigarettes. I quit smoking & put ~$200/mth towards my loan payment. This is actually the first time since my pregnancies that I've been able to quit with success. Could I have quit, saved up, then bought? Sure, but sometimes you need some immediate motivation

Thanks for your note, it sounds like we're pretty close. Personally I'd consider any transportation you have to finance as a luxury. I see vacations as a privilege and not a right. But more importantly the stress and other issues that debt and other financial issues brings is a significant contributor to medical issues, divorce, suicide and the like. Along the lines of what I said earlier (be debt free and you can have a lot more) one can be happier, more content and have less stress without debt all else being equal. Of course we talking owning a timeshare which is only a consideration with a certain amount of means/income to start with.

 

[jodifla]

Thanks for your note, it sounds like we're pretty close. Personally I'd consider any transportation you have to finance as a luxury. I see vacations as a privilege and not a right. But more importantly the stress and other issues that debt and other financial issues brings is a significant contributor to medical issues, divorce, suicide and the like. Along the lines of what I said earlier (be debt free and you can have a lot more) one can be happier, more content and have less stress without debt all else being equal. Of course we talking owning a timeshare which is only a consideration with a certain amount of means/income to start with.

Very extreme views. Most people finance their cars so they have decent working vehicles. Most people in the U.S. aren't paid at a rate where they can come out straight into the world paying everything in cash. And buying a clunker car can be pennywise and pound foolish if you lose your job because you lack transportation, all the while slammed by huge repair bills on the car.

I don't know what you think you gain by constantly beating up people who finance. We did, and it was NO BIG DEAL! We still have our savings, and we simply switched what we were spending on Disney vacations anyway to our DVC payments. Not everyone has to handle their finances exactly like you.

 

[kapicka]

I am guessing that if you are looking for financing that you are considering buying direct from Disney. While there is some serious debate over whether you should or shouldn't finance such a depreciating asset (if an asset at all) I think your energy is best focused first on the DIRECT versus RESALE decision. You can save a lot of money buying resale - as much as 40%+. I think that is the best place to look to see what is or is not a good value. Good luck and all the best in your research!

 

[Dean]

Very extreme views. Most people finance their cars so they have decent working vehicles. Most people in the U.S. aren't paid at a rate where they can come out straight into the world paying everything in cash. And buying a clunker car can be pennywise and pound foolish if you lose your job because you lack transportation, all the while slammed by huge repair bills on the car.

I don't know what you think you gain by constantly beating up people who finance. We did, and it was NO BIG DEAL! We still have our savings, and we simply switched what we were spending on Disney vacations anyway to our DVC payments. Not everyone has to handle their finances exactly like you.

It's a principle that I hold, I don't believe I've beat up anyone. However, if I hold and post the principle (even multiple posts about the subject) and someone has made or plans to make a different choice, that is not beating them up even if they feel it is. I also don't agree that people should buy a car they can't afford. If you can't get in a position you can pay for a car then you'll never be able to afford it. It's generally not an income issue but rather choices, like buying a timeshare or going on vacations they can't afford or eating out, etc, etc. I know delayed gratification is not popular but IMO it's usually the best choice by far and the reverse often not a good choice. Certainly all of us have made choices we wished we could change and thought were good choices at the time, I know there are lots of choices I wished I'd known then what I know now.

 

[crisi]

I think you might need to finance your first car - but you should limit your financing of cars as much as possible. You might not have the cash to buy a reliable car when you are 20 years old and not everyone lives on a bus line or has parents who spring for their first car. So you buy a sweet spot - a reasonably priced car you can finance that will be reliable - probably a six year old Toyota or Honda with just over 100k miles on it - a Toyota or Honda should get you to nearly 200k before it has more troubles than its worth. Pay it off as fast as you can - and continue to put the car payments into a savings account. Your next car should be pretty much the same car, but now you should be able to buy it for cash, or with a very small loan. It doesn't take long before you can buy your cars with cash.

 

[Madame]

I'm honestly curious about this car issue. Do either of you live in a rural area? It's rural here. I've always commuted for work. Even when I was 13 and a fry cook at a truck stop my DM drove me in. There is no public transportation - none. Closest is the unreliable Windsor bus system, but that's in a city 35 minutes away and is only for the city.

I've been moved schools 3 times. Originally because of overstaffing and getting bumped. It's been happening more recently even to teachers with 10-20 years in b/c of decling enrolment. I can be placed anywhere in the county - which can easily add an hour to commute time. I can't up and sell every time I'm moved - not to mention uprooting my children. My DH also just moved jobs - formerly a 15 min commute now a 45 minute one.

Most new teachers here have to do 5-10 years of supply work just to maybe get a 1/2 contract. They might move each semester filling mat leaves etc. Some teachers are even split between schools and drive 30-40 mins on their 'lunchbreak' to change schools.

I could change jobs I suppose, but this is a car-manufacturing area (or what's left of it). I'm not going to give up a steady income with pension so that I can find a job I can, what, walk to? Reliable transportation here is a need, not an option.

 

[Dean]

I'm honestly curious about this car issue. Do either of you live in a rural area? It's rural here. I've always commuted for work. Even when I was 13 and a fry cook at a truck stop my DM drove me in. There is no public transportation - none. Closest is the unreliable Windsor bus system, but that's in a city 35 minutes away and is only for the city.

I've been moved schools 3 times. Originally because of overstaffing and getting bumped. It's been happening more recently even to teachers with 10-20 years in b/c of decling enrolment. I can be placed anywhere in the county - which can easily add an hour to commute time. I can't up and sell every time I'm moved - not to mention uprooting my children. My DH also just moved jobs - formerly a 15 min commute now a 45 minute one.

Most new teachers here have to do 5-10 years of supply work just to maybe get a 1/2 contract. They might move each semester filling mat leaves etc. Some teachers are even split between schools and drive 30-40 mins on their 'lunchbreak' to change schools.

I could change jobs I suppose, but this is a car-manufacturing area (or what's left of it). I'm not going to give up a steady income with pension so that I can find a job I can, what, walk to? Reliable transportation here is a need, not an option.

You asked, we do live in an area where driving is required and always have. But we're not talking 60 miles for us only 8-10 depending with 2 vehicles. I'd suggest that a reliable car doesn't have to be overly expensive and certainly doesn't have to be new, esp now days. But I get that getting started or if one is trying to dig out of a mess might require some compromises in certain situations. It's a little like living in an area where housing is ridiculous like Manhattan or SF. The math of whether one can afford X house is still the same, it doesn't change just because of where you live or want to live and it might mean moving, commuting or renting instead of buying in some cases. But we're not really talking about someone who's working hard, being frugal and making good choices but who decides to finance a portion of a starter vehicle are we? What people are generally doing is simply trying to justify their financing of multiple things with the idea "you have to finance some things" or "life's too short". I also see the interest rate used to justify such choices which I also disagree with. DVC is certainly a luxury purchase, there's no way to justify having to finance such as a good choice though one might be able to stratify that some situations are worse than others. And I understand that some could truly pay but decide not to and while I don't agree that's a good choice either, it doesn't come with the risks in question we're discussing here.

 

[Madame]

You asked, we do live in an area where driving is required and always have. But we're not talking 60 miles for us only 8-10 depending with 2 vehicles. I'd suggest that a reliable car doesn't have to be overly expensive and certainly doesn't have to be new, esp now days. But I get that getting started or if one is trying to dig out of a mess might require some compromises in certain situations. It's a little like living in an area where housing is ridiculous like Manhattan or SF. The math of whether one can afford X house is still the same, it doesn't change just because of where you live or want to live and it might mean moving, commuting or renting instead of buying in some cases. But we're not really talking about someone who's working hard, being frugal and making good choices but who decides to finance a portion of a starter vehicle are we? What people are generally doing is simply trying to justify their financing of multiple things with the idea "you have to finance some things" or "life's too short". I also see the interest rate used to justify such choices which I also disagree with. DVC is certainly a luxury purchase, there's no way to justify having to finance such as a good choice though one might be able to stratify that some situations are worse than others. And I understand that some could truly pay but decide not to and while I don't agree that's a good choice either, it doesn't come with the risks in question we're discussing here.

I definitely agree that a vehicle does not & should not be a luxury purchase, especially if it is being financed. I'm going to be honest, I'll never buy a used vehicle. Taking on someone else's problems is not something I'm willing to deal with.

Other than my first vehicle which was a hand-me-down free from my parents every vehicle I've owned has been new. Always bought at the end of the year to get a deal, but new. Before kids they were little Sunbirds or Cavaliers. One was absolutely free paid for with points about to expire on my DF's business credit card after he opened his transport business.

I don't know if a previous owner of a used car changed the oil, took care of maintenance as I would etc. My DH has had 2 used cars since I've known him & I've been in both of them, pregnant & broken down on the side of the road, one in the middle of winter. No thanks.

This is not to say new vehicles do not have problems - our 2 yr young minivan has had multiple vent recalls, temp control issues all of it covered via warranty. Helps that we got a serious deal - friends & family pricing bought at the end of the year... And 4 years of road-side assistance for free.

And yes, I agree, a timeshare & a vehicle purchase are very different. I was sincerely intrigued. Even my DF, I believe, considered a vehicle a necessity.

Thanks for indulging my curiosity. I honestly enjoy seeing things from a different perspective, especially if it helps me to better understand my own motivations & decisions

 

[Dean]

I definitely agree that a vehicle does not & should not be a luxury purchase, especially if it is being financed. I'm going to be honest, I'll never buy a used vehicle. Taking on someone else's problems is not something I'm willing to deal with.

Other than my first vehicle which was a hand-me-down free from my parents every vehicle I've owned has been new. Always bought at the end of the year to get a deal, but new. Before kids they were little Sunbirds or Cavaliers. One was absolutely free paid for with points about to expire on my DF's business credit card after he opened his transport business.

I don't know if a previous owner of a used car changed the oil, took care of maintenance as I would etc. My DH has had 2 used cars since I've known him & I've been in both of them, pregnant & broken down on the side of the road, one in the middle of winter. No thanks.

This is not to say new vehicles do not have problems - our 2 yr young minivan has had multiple vent recalls, temp control issues all of it covered via warranty. Helps that we got a serious deal - friends & family pricing bought at the end of the year... And 4 years of road-side assistance for free.

And yes, I agree, a timeshare & a vehicle purchase are very different. I was sincerely intrigued. Even my DF, I believe, considered a vehicle a necessity.

Thanks for indulging my curiosity. I honestly enjoy seeing things from a different perspective, especially if it helps me to better understand my own motivations & decisions

Thanks, I agree it's good to discuss issues. I do disagree that buying used vehicles equates to taking on someone else's problems. Generally a 2-3 yr old vehicle is the best bang for the buck. Plus we have access to so much information in todays world to evaluate for such issues whether it be the quality/reliability of the general vehicle or damage/repairs/service of a given vehicle. My wife just the other day said that it's interesting that I buy used or refurbished iPhones and never have problems and many people we know buy new ones and have lots of problems. But there is risk to all options and for cars and timeshares larger savings MAY come with increased risk but doesn't necessarily.

 

[crisi]

I have a friend who drives delivery for a living. He buys salvage title flood cars. There is a dealer of such vehicles in town with a good reputation for having done the work to get the cars into good shape. Then he drives eight hours a day in them for two or three years. If the car breaks down, he doesn't get paid, so he needs a dependable car - and he doesn't make a lot, so he needs a cheap car.

My husband drives "German performance cars" - they aren't cheap - but he buys them two years old off lease. They have their original warranty and the dealers bend over backwards if there is an issue.

I live in the 'burbs. No good bus service. But the kids car is a 13 year old Honda bought used with 160k on it. Runs great - although it has a dent or two on it from being driven by teens. My own car is a used Volvo. The last car loan I had to buy a car was when I was in my 20s.

 

[Madame]

I guess I've never really checked out used cars properly & yes, both of my DH's used cars were well, very used. I'm intrigued enough to investigate when it's time for us to trade in.

I think my main concern is that beyond the basic parts neither of us is capable of identifying potential problems with a vehicle.