+1

My wife and I buy everything with cash. If we want a luxury, whether it's furniture or a car, we sit down and figure out what we need to put aside to get it. Sure beats buying now, then figuring out how we're going to pay for it while it sits at 20%.

We also keep a line of credit open, capped at 15% of our combined income. That gives us room for emergencies, but capped so it never grows beyond what we could comfortably pay off in a year. When there is money sitting on it, we pay it down fast.

It's not always a whole lot of fun, but it's given us the flexibility to start saving heavily early on, and it's also allowed Mrs Notfarnow to quit her job and go back to university full time for her 2nd degree, without taking loans. If that's not a luxury, I don't know what is.

I may not always have everything I want, when I want it, but I never end up in the hole and I sure as hell appreciate what I do get.

I think there is some wisdom in that "borrow what you can afford" guidance. Generally, it's called intelligent leverage. A friend of mine finances EVERYTHING that he can get for 5% or less. This of course, only pertains to things that he would buy anyway...i.e. including consumables. He has plenty of money invested and believes that over time, his returns will exceed his debt rates and he is effectively using someone else's money while his investments continue to leverage the time value of money. He does well, but I have never had the stomach for that approach. I do however, think there is an intelligent balance somewhere between him, and cash and carry. Not saying I have found it, but I try to be cognizant of both positions when making purchases.


JA

We borrow for the house, of course. I'm not adverse to buying a newer Porsche and financing some of it so that I get the car I want earlier and more comfortably. Otherwise, we pretty much pay as we go.

Our two family cars are 98 and 2000 Toyota Camrys (Camri?) that were purchased with little debt and have been paid off completely for years. We'll keep them for years more, too. I need a C4 cab with a removable hardtop more than I need a newer commuter vehicle when the Toyotas are working so well.

We do take advantage of 0% consumer promotions, but only if we have the cash to pay for it up front. We bought some living room furniture and I splurged and bought a fancy watch for my birthday. Both shops gave 0% financing that did not affect the sales price. So we're keeping our money in the bank and using theirs for now.

Otherwise, we put all our monthly expenses on one credit card and pay it off at the end of the month. Makes it simple. We autopay the card each month, so it's good dicipline for us to stay within our budget. We're not as stingy as Pat's mom, but we both grew up close enough to that for the stories to sound familiar.

Intelligent Leverage - I like that.

The "borrow what you can afford" comment must be taken in context. That would be from a farmer who survived the depression and was a successful farmer in the 40's and 50's. He started with nothing and with a lot of hard work, retired comfortably.

We are not talking about financing a Plasma TV while sitting back on your couch collecting welfare.

There will always be "smart" financing and "stupid" financing. The trick is knowing the difference.

Re: What do you finance?
 

They're not [thinking].

It's like having sex, they do it before they consider the consequences.

I need 50 bucks to make my furniture payment!
Hard to imagine that lifestyle.

I've managed to live to the mid-50's without ever making a car payment.
Paid off current house in a year (previous house was paid off).
When you see broke people all day it gives bit of added incentive to save.

Jim

You guys are spoiled Porsche owners!

80% of the population can't afford a car (new or used) outright, especially not a Porsche. Personally, I don't have any debt and I'm not crazy about taking any on, even for a house, but I understand why people do. My GF cannot understand why she is always over budget. I do-- she has 20+ suits for work and 20+ sweaters and 20+ pairs of pants-- all bought at the mall. She has slowed down on the clothes since we've been together and started to save for a house.

I had a piece of investment property get flooded a few years back. It ran the cc up to rebuild it. We are getting out now. If you have good credit you can negotiate the interest rates with them. I use the Lowes 0% alot for the home. It does not effect the price and it lets us get things a little sooner. I sleep on a bed that should have been replaced years ago but wont do it till some other things are paid for. It is good motivation.

What do you finance?

Nothing now that my house is paid off. Luckily, I enjoy tinkering with used cars.

coldstart:

True, when starting out, buying "on time" may be necessary. However, as one gains a few years of earnings, developing discipline goes a long way in becoming free of time payments. A house, to me, is the only investment that someone in their late 30s/and up should be paying interest on. It is a financial tragedy that some people go to these "rent to own" places. I once wrote a (published) analysis in plain english of what the "actual" cost of, say, a car is. Not only are we paying with after tax money, but there is sales tax, interest and so on. Figure it on the number of hours you have to work to pay it off. A real eye opener.