Can I Afford it?

[swaymonae]

I thought it would be interesting to have our own Can I Afford It? on savingadvice.com

So, if there's something you want to buy, and wonder if you should or not -- post what it is, it's cost, importance to you and show us the money!!

Other viewers, please critique each person respectfully.

Just to start things off, I will go first.. I already know I'm denied but I just wanna jump things off...

I would like to buy:

a new Laptop for at least $1,200 - I don't have one and I'm pretty sure my desktop is going to die on me any day now!!

Here's the money:

Age: 24
Monthly income: $3,000 take home
Rent: $1,000
Car payment $360, - $15,000 bal. @ 11.99 percent
CC's: $5,500 @ 3.99 percent
Roth IRA: $1,275
401k: $8,600
Savings: $7,880

How would I be paying for it?

I would save up for it! But I really need to put all that money towards CC debt. I know

[kork13]

I agree, that would be a fun set of threads--maybe it could be added as a separate section within the Personal Finance forum.

However, a couple more things you haven't told us that normally is needed.... Age, and monthly income. Without age, income, debts, savings, and retirement savings, it's hard to give a definite answer.

[swaymonae]

Added!

[noppenbd]

No, you can't afford it. Here's why. You are over $20k in debt. I am guessing you make around $45K a year gross? So this debt represents a significant percentage of your income, most of it at 12% interest. It concerns me that you have so much CC debt at your age as well. If you absolutely "need" a computer, you can get a nice laptop for much much less than $1200. Just because you "save up" for it doesn't mean you can afford it.

[swaymonae]

Agreed,..
Thanks

[project15]

I like this idea. I'll play.

I would like to buy:

A motorcycle - $3,000

Here's the money:

Age: 25, married
Monthly income: $5,800 take home

Debt:
Mortgage: $1,300 - $160k left @ 5.875% fixed
Student Loans: $225 - $30k left @ 2.25% fixed

Assets:
Roth IRAs: $15,000
401k: $10,000
Savings: $25,000

How would I be paying for it?

Save $300 per month until next spring

[kork13]

Originally Posted by project15

Save $300 per month until next spring

hahaha the people on our forum here make it far too easy. Can you afford it with your plan to save for it? Definitely. Could you afford to buy it right now? I'd probably say 'yea sure'.

[disneysteve]

Originally Posted by project15

I would like to buy:

A motorcycle - $3,000

I think there is one flaw in Suze Orman's system for evaluating affordability. She looks at what the caller has in savings but never mentions how much they are actively contributing to savings. She may ask about that off the air but doesn't mention it on air.

I'd want to know what % of gross you are contributing to your retirement plans. If you are contributing at least 10% and preferably 15%, I'd say you can certainly afford it. Sure, you could prepay your student loans, but at such a low interest rate, why bother. Save up, pay cash for the bike and have fun. Make sure you've got your helmet on, though.

[red92s]

Want to buy: Upgrades for mountain bike - $500

Income: $2900 mo take home (after HSA, 401k, EF direct deposit)
Status: 26, Single, Rent, 15% gross to retirement
Debt: $0
Savings: EF - $9k, Money Market - $3k, Roth/401k - $19k

Pay using: Probably just absorb it into the monthly budget under discretionary spending and "healthy living" categories for a 2 months.

[swaymonae]

Originally Posted by project15

I like this idea. I'll play.

I would like to buy:

A motorcycle - $3,000

Here's the money:

Age: 25, married
Monthly income: $5,800 take home

Debt:
Mortgage: $1,300 - $160k left @ 5.875% fixed
Student Loans: $225 - $30k left @ 2.25% fixed

Assets:
Roth IRAs: $15,000
401k: $10,000
Savings: $25,000

How would I be paying for it?

Save $300 per month until next spring

No CC debt? Is $25,000 8 months worth of EF? PS: Congrats on having this much saved at 25

Would saving $300 per month take away from savings contributions? How much would you still be contributing to savings monthly as your were saving $300 per month?

What is your outgoing total per month?

[swaymonae]

Originally Posted by red92s

Want to buy: Upgrades for mountain bike - $500

Income: $2900 mo take home (after HSA, 401k, EF direct deposit)
Status: 26, Single, Rent, 15% gross to retirement
Debt: $0
Savings: EF - $9k, Money Market - $3k, Roth/401k - $19k

Pay using: Probably just absorb it into the monthly budget under discretionary spending and "healthy living" categories for a 2 months.

You're in a good place financially.. she may deny you just based on your EF - but I say go for it.. Although if you can't live on $1,100 a month for 8 months you should build your EF first and when dividing it by 8 = surviving.. you're good to go!

[project15]

Originally Posted by swaymonae

No CC debt? Is $25,000 8 months worth of EF? PS: Congrats on having this much saved at 25

Would saving $300 per month take away from savings contributions? How much would you still be contributing to savings monthly as your were saving $300 per month?

What is your outgoing total per month?

No CC debt. All cars are paid off. For retirement, we contribute $922 per month which is roughly 11% of our gross income. The $300 per month would be taken out of the current "future car" fund that is currently getting $1200 per month - this just happens to be all of our extra money not allocated to anything else. We won't need a car for another 5-7 years as ours are relatively new (2003 and 2005) and in good condition.

[swaymonae]

I believe you are approved

[tripods68]

Originally Posted by project15

I like this idea. I'll play.

I would like to buy:

A motorcycle - $3,000

Here's the money:

Age: 25, married
Monthly income: $5,800 take home

Debt:
Mortgage: $1,300 - $160k left @ 5.875% fixed
Student Loans: $225 - $30k left @ 2.25% fixed

Assets:
Roth IRAs: $15,000
401k: $10,000
Savings: $25,000

How would I be paying for it?

Save $300 per month until next spring

YOU ARE DENIED!

Pay off your student loan first. Until then you are DENIED.

[tripods68]

Originally Posted by swaymonae

I thought it would be interesting to have our own Can I Afford It? on savingadvice.com

So, if there's something you want to buy, and wonder if you should or not -- post what it is, it's cost, importance to you and show us the money!!

Other viewers, please critique each person respectfully.

Just to start things off, I will go first.. I already know I'm denied but I just wanna jump things off...

I would like to buy:

a new Laptop for at least $1,200 - I don't have one and I'm pretty sure my desktop is going to die on me any day now!!

Here's the money:

Age: 24
Monthly income: $3,000 take home
Rent: $1,000
Car payment $360, - $15,000 bal. @ 11.99 percent
CC's: $5,500 @ 3.99 percent
Roth IRA: $1,275
401k: $8,600
Savings: $7,880

How would I be paying for it?

I would save up for it! But I really need to put all that money towards CC debt. I know

YOU ARE DENIED! You CAN'T AFFORD IT!

You still have Car payment, Credit card, small little retirement balance and savings. Use your computer until it dies. In the meantime, you are DENIED.

I really like being SUZE!!!!!

[project15]

Originally Posted by tripods68

YOU ARE DENIED!

Pay off your student loan first. Until then you are DENIED.

Ok, how about this. Same situation of mine, but we want to spend $3500 for more education which will increase a salary and give greater long term benefits. It would be paid for in cash right now out of our savings.

[kork13]

Originally Posted by project15

Ok, how about this. Same situation of mine, but we want to spend $3500 for more education which will increase a salary and give greater long term benefits. It would be paid for in cash right now out of our savings.

Approved. Money spent which leads to a higher salary is worth it, and $3500 isn't killer. Go get your education....make it so.

[tripods68]

Originally Posted by project15

Ok, how about this. Same situation of mine, but we want to spend $3500 for more education which will increase a salary and give greater long term benefits. It would be paid for in cash right now out of our savings.

Education is broad. Is this for a 4-year degree, grad school, or a certification of some kind related to your specific job?

[CanIAffordIt?]

I am a longtime lurker, so here goes:

I would like to buy:
A new-to-me (used) car = $19K

Here's the money:
Age: 30
No kids, single
Monthly income: $3,600 take home
Rent: $950
NO Car Payment, current vehicle has been payed off for 4+ yrs
NO CC debt
Roth IRA: $8K
401k: $5K
IRA (rollover from previous job): $38K
Savings: $49K

How would I be paying for it?
From savings and then selling current vehicle for $8K....so out of pocket approx $11K

Let me know if I can afford it. Thanks

[red92s]

Originally Posted by CanIAffordIt?

I am a longtime lurker, so here goes:

I would like to buy:
A new-to-me (used) car = $19K

Here's the money:
Age: 30
No kids, single
Monthly income: $3,600 take home
Rent: $950
NO Car Payment, current vehicle has been payed off for 4+ yrs
NO CC debt
Roth IRA: $8K
401k: $5K
IRA (rollover from previous job): $38K
Savings: $49K

How would I be paying for it?
From savings and then selling current vehicle for $8K....so out of pocket approx $11K

Let me know if I can afford it. Thanks

Pulling $11k from savings leaves you with $38,000 . . . almost 10 months of net INCOME, so safely what, 20 months of expenses or so? That's still a reasonable emergency fund.

I'd say you are approved unless there is some other large purchase on the horizon (real estate).