It's been over a year...update and feedback time

[snafu]

Sorry but we are all seeing red flags that have potential to make a further mess of last year's financial plan. What are you charging on CCs? Are you financing a lifestyle you can't afford? Are there items you no longer use or need that can be sold?

Is the KBB value of you car keeping up with what you owe? Sorry, I don't buy into the theory that you needed that particular depreciating item when a two year old car, researched and cared for would have transported you just as efficiently. The rule of thumb is no more than 36 month loan for auto or you can't afford it.

I don't believe you understand how a mortgage works. Most of what you pay each month goes for condo fees, municipal taxes, mortgage insurance and interest on the mortgage. Only a few dollars go to principal. You need to pay for utilities and perhaps a security deposit if you haven't had electric, heat, water, garbage in your name. You also need regular insurance for your belongings and you get to pay and fix anything and everything that goes awry. You need an Emergency Fund [suggest 1% of value] just for the condo. When you close, I suggest asking the lender for a print out of how your payments are disbursed for the length of your mortgage. It would be cheaper, less hassle, to get a new roommate.

I'm sure you've bought a cool place and now you propose to charge nice furniture you can't afford to match your new status. If you're smart you'll make do until everything sorts out and you can research what is best bought new and what is a better buy gently used. Window coverings are expensive and a good salesman could likely persuade you that custom is a wonderful enhancement.

I'm guessing you boost your income via tips but aren't you supposed to include that in taxable income? [sorry different country, different tax laws]. If it's income used to qualify for a mortgage is it income to be taxed? The tax reduction on mortgage interest is small and there has been discussion about removing it altogether.

Wishing you luck and an increase in salary

[Vpxggmr17]

I don't believe you understand how a mortgage works. Most of what you pay each month goes for condo fees, municipal taxes, mortgage insurance and interest on the mortgage. Only a few dollars go to principal. You need to pay for utilities and perhaps a security deposit if you haven't had electric, heat, water, garbage in your name. You also need regular insurance for your belongings and you get to pay and fix anything and everything that goes awry. You need an Emergency Fund [suggest 1% of value] just for the condo. When you close, I suggest asking the lender for a print out of how your payments are disbursed for the length of your mortgage. It would be cheaper, less hassle, to get a new roommate.

I'm guessing you boost your income via tips but aren't you supposed to include that in taxable income? [sorry different country, different tax laws]. If it's income used to qualify for a mortgage is it income to be taxed? The tax reduction on mortgage interest is small and there has been discussion about removing it altogether.

Wishing you luck and an increase in salary

1.) Having lived with roommates, never again.
2.) My cash income IS taxed. Pretty much everyone who has commented on that aspect has missed that somehow. My hourly wage goes entirely to taxes AND come tax season, I usually owe thousands reflecting the amounted needed on the cash tips. Yes I plan for that, yes it's covered every year.
3.) I understand fully when it comes to my mortgage. The $1760 includes EVERYTHING you listed. Principal, interest, insurance, taxes, electric, water, gas, trash removal, parking, HOA and Condo fees! It's $1050 for my mortgage, $170 in taxes, $40 for insurance and $450 for the condo fee. That condo fee covers ALL utilities.

[riverwed070707]

I'm really curious, and this honestly goes for anyone on here to answer. Explain to me the difference between spending $2000 cash for something or $55/month interest free.

I never said anything about ANY of my credit card "debt" or the potential of this third card have ANY interest associated with it. So I'm just curious, why is there such a stigma against paying for something on a monthly basis versus a lump sum up front when the total amount is not a cent different.

The difference is you're financing things you can't afford to pay cash for while already sitting on an insufficient amount of savings (efund should be 3-6 months of expenses) and borrowing the down payment for your home. If you had a reasonable amount of debt, your own money for the downpayment, 3 months of expenses in savings and could still cover the 0% borrowed money from your cash reserves, I'd say that was a fine plan. But you don't, you're tricking yourself into believing you're getting ahead and paying down debt when all you're doing is paying off one debt while adding to another. I'd also be willing to bet, given you said you live in one of the most expensive housing areas, that $17k you're borrowing isn't 20% of your home purchase price so even your borrowed dp isn't even enough. Just feels like you should slow down and take one goal at a time - finish paying off the debt, build your cash savings, save 20% for a dp and THEN buy a house. Doesn't have to be all at once.

[autoxer]

I'm really curious, and this honestly goes for anyone on here to answer. Explain to me the difference between spending $2000 cash for something or $55/month interest free.

I never said anything about ANY of my credit card "debt" or the potential of this third card have ANY interest associated with it. So I'm just curious, why is there such a stigma against paying for something on a monthly basis versus a lump sum up front when the total amount is not a cent different.

The stigma against using debt for lifestyle choices, is because it enables people to overextend themselves financially. Even if the interest rate is low, you are still committing future income to service this debt, so you are still a slave to the bank.

And here's another bit of advice... If the furniture store is willing to loan you money at 0%, then they have probably marked up the furniture enough to cover the cost of that loan. It's not a free loan, they just shift the numbers around so that you don't see it. You would be better off negotiating them down to a cash price.

Have you seen the SNL skit, Don't buy stuff you can't afford. http://vimeo.com/50044167

[Vpxggmr17]

And here's another bit of advice... If the furniture store is willing to loan you money at 0%, then they have probably marked up the furniture enough to cover the cost of that loan. It's not a free loan, they just shift the numbers around so that you don't see it. You would be better off negotiating them down to a cash price.

Can you do that at a retail store such as VCF? If that's the case of course I would do that.

[JoeP]

I'm really curious, and this honestly goes for anyone on here to answer. Explain to me the difference between spending $2000 cash for something or $55/month interest free.

When you pay with installments, you are obligated to be on the hook for payments until the terms are met. Things happen that can make you miss a payment due date: an emergency, you forgot, bank screw-up, mail got lost, etc. Plus, if you ever fall on hard times, you still need to make the payments. Some loans are structured in such a way that no monthly payments are due every month, but interest is retroactive if you don't pay in full before the term end. Some have harsh penalties if you are late. All these are irrelevant when you pay for something up front in full.

The optimal solution is to pay for everything up front in full, either using cash, or using a credit card (with the full cash ON HAND already earmarked for the expense) where you pay the full amount every month so you never carry a balance. If an emergency comes up, your emergency fund can kick in. Worst case, you can always sell the thing you bought and get 100% of the proceeds.

[JoeP]

Can you do that at a retail store such as VCF? If that's the case of course I would do that.

Do some research on VCF. Here's a place to start. You're probably much better off buying from a more reputable furniture store, maybe something locally owned, even if paying cash.

[Vpxggmr17]

When you pay with installments, you are obligated to be on the hook for payments until the terms are met. Things happen that can make you miss a payment due date: an emergency, you forgot, bank screw-up, mail got lost, etc. Plus, if you ever fall on hard times, you still need to make the payments. Some loans are structured in such a way that no monthly payments are due every month, but interest is retroactive if you don't pay in full before the term end. Some have harsh penalties if you are late. All these are irrelevant when you pay for something up front in full.

The optimal solution is to pay for everything up front in full, either using cash, or using a credit card (with the full cash ON HAND already earmarked for the expense) where you pay the full amount every month so you never carry a balance. If an emergency comes up, your emergency fund can kick in. Worst case, you can always sell the thing you bought and get 100% of the proceeds.

Or you do what I do which is act responsible and stay on top of things. I purchase something at 0% for 36 months? I'm going to pay it off in 24 or less. I don't let someone else set the terms of what I buy, I do. The "debts" you see listed on my budget are the prices I PAY, not the prices I HAVE TO PAY. I think there is a real difference there. I'm not budgeting items I pay monthly based on maxing myself out, I base it on, can I afford to pay 2-3x the amount it "should" be so that in case something does end up happening, I can cut those down, and still be paid off in under 36 months or whatever it is.

[JoeP]

You asked, "Explain to me the difference between spending $2000 cash for something or $55/month interest free." And I responded with my opinion. Being responsible is a good thing to pride one's self on, but the reality of the situation is that some people fail when it comes to payment discipline.

So I'll ask: Why not just save up the $2000 in cash first, and buy it? Then you never have to worry about payments, or the fact that you are servicing a debt.

[Gailete]

I saw in living color what happens when someone charges furniture on a zero down interest free for a year. One of the nurses I worked with one day was looking a bit down in the face and I asked her what was wrong. She had bought a couch the year before, but apparently sent in only the minimum payment. Her bill had now past the 1 year mark and even though she had been making payments all along she now owed MORE than the original price of the couch by several hundred dollars. Those kinds of loans take dedication to pay them off so that you come out the winner not the store or credit card company who loves giving out those kinds of loans because they make so much money on them! that is the stigma of charging things. You think you can pay them back and then something happens and instead of going down, the bill goes up and soon find themselve deep in cc debt.

By the way, another word for used furniture is antique! Not that I'm encouraging investing in expensive antiques either at this point. I have moved at least 30 times in my lifetime. 13 of them as an adult and am finally settled (at least hubby says my next move will be to the cemetary) but what my age and history has taught me that moving and living in a new home can take some time to settle in and see just how you will use your home. You may find where you thought a nice easy chair should go is drafty or stuffy. The way the sun shines in the window is special at each place. Where you thought you would put a TV is way too sunny for afternoon football games, etc. So using your old stuff temporarily will give you a chance to really see what you need and how it will work in your new home (which seems as if it is a given thus I'm not telling you not to do it). If your bed has wheels that you don't want damaged the rug, you can get coasters for under the wheels just like you can get for a piano so it too doesn't cut into rugs so if the furniture store won't sell you some, check with a piano/music store or on line.

You posted your numbers and asked for advice, but unfortunately you seem to be rejecting all of it. That is your right. But what you think your wrote isn't what we seem to be reading. I had someone get upset with me on another forum because I hand't answered his questions and instead brought up something else. Well looking again at his post, I couldn't find a single question mark. He might have thought he was asking a question or two but he hadn't. So I'm just saying that if there is something in particular you want advice or suggestions about, then ask them but also give the full background so they can be answered appropriately. I do realize that is hard to do on line.

[autoxer]

Can you do that at a retail store such as VCF? If that's the case of course I would do that.

I'm not familiar with VCF, but most furniture stores seem to operate just like used car dealers. You have nothing to lose by trying, so when they give you a price, offer them some lower amount and be prepared to walk out. If they can negotiate, they will do everything they can to stop you from walking out the door.

Or you do what I do which is act responsible and stay on top of things. I purchase something at 0% for 36 months? I'm going to pay it off in 24 or less. I don't let someone else set the terms of what I buy, I do. The "debts" you see listed on my budget are the prices I PAY, not the prices I HAVE TO PAY. I think there is a real difference there. I'm not budgeting items I pay monthly based on maxing myself out, I base it on, can I afford to pay 2-3x the amount it "should" be so that in case something does end up happening, I can cut those down, and still be paid off in under 36 months or whatever it is.

You have some funny views on debt. I believe that a responsible use of debt would be to only use it to buy something that appreciates in value. Leveraging yourself for something that depreciates will only hold you back from becoming rich.

I hate the term 'afford it', because it is really just a personal choice. I choose to afford a new car and I choose not to afford cable. There's no magic forumla to say whether or not you can afford any particular item, because there is always some bank willing to lend you the money. Sure I could service a 7 year loan for a new mercedes, but just because I can afford the monthly payment doesn't mean it is a good idea.

I'm not budgeting items I pay monthly based on maxing myself out, I base it on, can I afford to pay 2-3x the amount it "should" be so that in case something does end up happening, I can cut those down, and still be paid off in under 36 months or whatever it is.

And see if you can apply this strategy to your mortgage also. Suppose the restaurant goes out of business and you lose that extra income... Would you still be able to afford the mortgage payment?

[scfr]

On the notion of the furniture, I have a very minuscule amount due to previously having little space. Also, now that I'll care a little more about the upkeep of the place since I own it I don't want things like my awful bed on wheels tearing up my new flooring, etc. I have no bed set and have pretty much nothing for a living room, so getting a sofa/bed set was the only thing on my list to buy.

If you are willing to put in some time looking around, you can find really good deals on used furniture. Lots of people sell their perfectly good furniture when they move.

[JasonSimms]

No, it doesn’t make sense to pay tax on already-taxed money! Although it is clear that a lot has changed about your financial condition, still it’s too complicated to understand.