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Originally Posted by Amber Lamps
I think that Ramsey needs to start a church....  Avery, not everyone is going to wreck their lives going into debt. I'm not telling the kid to buy a Porsche but if he ever plans on buying a house someday, unless you Ransey-ites don't allow credit for that anymore, he's going to have to build some credit. Buying a car is a good way to do that. You nor I know the EXACT situation he is in but the Mustang has some value for trade against the new vehicle and for all you know, he may already have some cash. Again, my 22 year old GF bought a $10,000 bike cash last year. It's amazing how much a "kid" working part time can save when Mom and Dad are paying the bills...
Anyway, here's an example of what I'm trying to say, $15,000 Murano - $4,500 trade for the Mustang - $2,500 cash = $8,000 loan with a $166/month payment @5% over 60 months. You could donate plasma to make that payment. I agree with you and the Reverend Ramsey for the most part with these two exceptions; 1. a house and 2. a vehicle. are the only reasons I'll take out a loan/go into debt ever again. |
You're right, we don't know his exact situation. And like you said, it's amazing how much someone working part time can save while Mom and Dad are paying the bills. It's also amazing how much ANY person can save when they have zero debt.
What I'm trying to get through is that debt is a very bad habit to get into. There is zero REAL reason for him to finance a vehicle at this stage of the game. Come up with all the excuses you want, but he honestly does not NEED a new car, at least not to the point of financing one. If he truly NEEDS a different car due to the image that he thinks his current one portrays, then the mustang can be traded in, along with some cash, for a more reliable car that portrays a better, more stable image. He can then save a standard car payment for 10 months, then trade in the "stable-image" car in, along with the cash he saved, for a slightly better "stable-image" car. There is no need to finance a car.
And 60 months on a car loan? That Murano will be worth less than what he owes on it in about 2 years if he finances it for 5 years, which will then leave him upside down on it, should he decide he wants to "trade up" in 2 years, which is the standard for our society. And since it seems that image is so important here, it's highly likely he'll want to trade up for a better image in two years.
As for buying a home, yeah, Ramsey's idea allows for financing a house, under specific conditions. 1. Have a 20% down payment saved up. 2. Finance ONLY at 15 years with a fixed rate mortgage. 3. Make sure the payment at that 15 year rate is no more than 25% of your NET pay (I'll add that I feel it should even be mortgage payment, plus prop taxes, plus insurance should not total more than 25% of take home pay).
How will he "build credit" to get a loan for that house? By renting at the same place for at least two years and always paying his rent on time. While that's not reported on his credit report, it still shows stability and that he can make the payments. Also, because he'll have good financial habits with no debt, he'll also be investing while saving for the down payment of his home and will have additional assets to show the bank. Combine all of that with the above criteria plus a worthwhile bank that looks at the overall picture, not just a credit score, and he can get a loan for a home, without the need to go into debt on a car, or anything else.
Quote:
Originally Posted by t-homo
No matter what, I'm not going to go into debt for a car I don't enjoy and will want to get rid of within 6 months.
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Really wish that said:
Quote:
Originally Posted by t-homo
No matter what, I'm not going to go into debt for a car, or anything other than a home that I can truly afford.
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I know I'm fighting a losing battle, because the vast majority of people think there is nothing wrong with debt and everybody has all sorts of reasons why "reasonable" debt is a good thing. The problem is, the vast majority of people fall into bad habits with debt. Rather than saving up for what we want, and truly earning it before having it, we get caught up in the "I must have it now" philosophy and we come up with a multitude of ways to rationalize it. I know, I've been there, and I'm digging myself out of it.
I also have a degree in finance and I've been taught all the reasons why debt is a good thing. Problem is, I've never met a truly wealthy person that has all this debt. Everybody I know with debt wishes they didn't have that debt. They all wish they could get out from under it. They all wish they didn't have those payments, myself included.
I rationalized financing my motorcycle. After all, it was only 1.9% interest and I didn't have a car payment, so I could afford the payment. I fell into that "must have it now" trap. I thought I would be fine, then some unexpected things came about and I ran into some financial issues that caused me to realize I would have been much better off without the debt. And guess what? That payment is less than the amount Lon came up with for your payment, t-rock. Yet, I still wish I didn't have that payment.
Luckily, I was able to get things turned around and I'm working on paying off the debt early. I know you think I'm being too conservative, and I know you think I'm foolish and that you know better than me. I know you think "that won't happen to me," because I've been in your shoes. I said all of those things, too.
So with that, I'm done. This horse is sufficiently beaten well beyond death. Good luck, and I hope to hell you never have to say, "damn, I wish I'd listened to those old fogeys when they tried to give me advice." Because I sure as hell wish I'd listened to people my age and older back when I was your age.