When is it OK to take on debt?

He that goes a borrowin', goes a'sorrowin'. Ben Franklin.  So the entire world is sorrowing about now and releived currency still flows let alone credit. Listen to the Dave Ramsey show there is a ton of great advice there. Read his book, there are about 80 good pages in 200. Still not many of us will ever save up cash for a car and surely not a house. But you can surely buy the 3 bedroom 1 3/4 bath 1800 square foot place rather than the 5 and 5 in 3000 sq ft! It wasn't buying the modest home that broke the bank by the way it was all the upgrades and the extra rooms for storing junk.  Buy what you need not what you want. The same with a car - buy a 2 year old reasonable sedan, forget the sports coupe, even if it comes in red.  Buy a 2- 3 year old small block V6 that gets mpg in the 20s and don't spend up for the  35 mpg  hybred that won't power uphill with the AC on. Be sensible.  A 38 mpg hybred costing $28,000. is not a better deaql tha na use care that gets  25 mpg.  Cars are transportation, nothing more.

The work on the car shouldn't cost over 200.00 tops if you do it yourself.  The brake pads and replacement of the rotors is work a 10 year old could do.  The rotors probably don't even need replaced, just refaced.  New tires aren't much, unless you are talking truck tires.  The alignment should not be over 30-40 dollars.  Buy some cheap tools, or borrow some, and get to work.  If you haven't done the work before and don't have a buddy to help you that knows what he is doing, spend 15 bucks for the repair book for your model car. 

Crazy to talk about a new car unless you are looking at an engine or transmission, and probably not worth it then.  Especially if you are serious about building that emergency fund.

Sounds like to me like just looking for an excuse to buy a new car, it being spring and all.  I can understand, been looking at convertibles myself, just dreaming but it's cheap fun.

As far as the sunroom, you can probably do the minimum needed know to protect the structure for a thousand or so.

Both projects should be easily funded out of monthly cash flow.

And how could it cost 3,000.00 to repair the chimney if you are doing the labor yourself?

My answer...save and invest.  This is a very bad time to spend money.  I agree with your real estate agent.  If someone loses their job in July, that $10,000 loan will hurt...a lot.  It can happen.  Loans are for unplanned-for emergencies.

 

No, really.  Put together all the cash you don't need right now, and put it in a good mid-cap growth fund.  Add to it every month, roughly the same amount of money you would have made in loan payments.

 

Next year, if it appreciated, strip off the appreciation and apply it to your home repairs as far as it will go.  If there is no appreciation, then the economy is in too bad a shape to risk spending money anyway.  Keep growing it.  Watch the markets (listen close to Jim Jubak) and move some of it to cash equivelents any time the market starts to look a little shaky (Jubak is 50-50 cash right now).

 

Either way, you make the interest instead of paying it, and end up with more money to spend, and some rainy day cash.

 

Also, start putting some regular money aside in a bank savings account or money market account, say $100 a month, for a running cash account to repair (or replace) that car.  That way, when things break, it doesn't hurt that week's cash flow so bad.

 

Oh, and if you need a computer--maybe yours is too slow--stop playing games on it and then start a savings account of $50 a month for it too.  Never use instant credit to buy a computer.  After you've ended your game habit, you can buy all the new computer you need for $500 or so in saved up cash within a year.  Keep the fund going ($10 or so a month) so that you'll be able to buy another computer (or printer or something) later.

If repairs are needed on the house - I'd do it.  Regardless of whether you plan to sell soon - deferred maintenance is a bd thing.  I just repaired water damage on my house that should have been done a year ago.  We were lucky.  It could have been much worse.  Try to find a more reasonable price.  Barter for the work!

People need to get real with their perceived standard of living.  Everywhere I look people are driving nice cars and living in houses larger than their needs dictate.  Why does the older couple drive the large SUV and live in the 3000SF home?  Why do high school kids have brand new cars?  The middle aged generation is just perpetuating the abuse of credit and money mismanagement by passing those values onto their children.

 

Not to toot my own horn, but I am a recent college grad in my mid-twenties.  I own my car (paid $2700, has 90k miles and gets almost 35 mpg), have paid off half of my school loans in a year, live on my own in a very decent apartment, and have several investments.  I put 20% of my base pay into ISP's and more into ETF's.  I put myself in this position by living frugally and being smart.  I have never bought anything on credit that I didn't have the cash to back it up (except my undergrad education).  I have spent many hours learning investment strategies and have managed to grow my investments even through this entire recession.  I have learned how to fix my own cars (never ever took a car to a shop), learned to shop discount stores, buy groceries only when they are on sale, buy things second-hand, etc.  I may not have the best of the best or the most of of anything, but I have everything I want and need, very very little debt, and peace of mind.  I do not know any people my age that think like this.  Most of my friends that are my age thrive on instant gratification and believe they deserve the nice house and car even though it means being in debt for most of their life.

 

People just need to get real.  Physical objects do not always give you happiness.  If you make $50k/year, you do not make enough to drive a BMW or to live in a $200k home.  Of course, you CAN if you want to, but you will be throwing money away that you could be saving and growing.  Taking out that loan for a new $20k car instead of investing those car payments could cost you tens of thousands in retirement income.  Its just simple math!

 

Going to bed every night knowing that you are in good financial shape is worth many hours of peaceful sleep. Long story short, don't put yourself in a position that will set you up to have to take on unwanted debt.  Live well within your means and you may never have to feel the pain of interest payments.