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Personal Finances / Credit Cards and Consumer Debt


Subject:  Re: Yeah! Date:  8/14/2003  9:42 PM
Author:  greenmartian2 Number:  167912 of 312185

As for the additional debt with having the car, yes it is a larger loan, but it is also my "dream car" which I will keep for the next 10 years. So when I pay it off at the end of next year, it will be a good investment over the long term. And I had enough of a down payment that the car loan is not upside down (barely).

I see credit in a range of shades of grey. House loans being good debt, cars and student loans being slightly less good but not necessarily negative, the personal family loan as not good, and credit debt as downright evil. Therefore my focus was on the credit cards first. When this last one is paid off, I will then pay off my mom and then the student loan and car in that order.

No one disagrees with paying out higher rated debt first, but shouldn't you stick to using a balance sheet showing your net worth instead of manipulating figures like this? One of the enduring lessons that many seem to teach is that to have wealth you have to start with wealth - somebody getting a 10% return on 40k makes $4,000; somebody getting 10% on 400k makes $40,000. Simple point, but instructive none-the-less.

Given market returns this year, that car purchase is going to cost you a heck of a lot more than you might imagine, especially when you consider that you are using after-tax money to make that purchase. To replicate that same 30k, you'd need to make 46k in a 30% bracket. Throw in another 3 to 4k you could have made in a tax-deferred plan this year (or in a Roth, or something of this ilk).

but it is also my "dream car" which I will keep for the next 10 years.

I'll admit that owning a depreciating asset which requires continual maintenance, fuel, insurance, and a tender loving care doesn't equate with the word dream, unless you are talking about a nightmare.

Different strokes...
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