Could Use Some Advice

[RetiredGypsy]

I have about $25,000 in cash, and a few expenses coming up:

- Interest Free Credit Card:

• 
  - $5,000 debt on $8,300 limit.

• 
  - Interest free until 2/2018

- New Vehicle (At 2.5% for 60 months):

• 
  - Down payment: $3,000 (10%)

• 
  - Taxes and fees: $3,000 (I don't know if it makes sense to roll these into the loan.)

- Getting A New Apartment:
The question is how much I'd be able to put on a card versus needing to write a check, but expenses I'm figuring are:

• 
  - Application fees: $150

• 
  - This month's rent: $900

• 
  - Last month's rent: $900

• 
  - Deposit: $500

• 
  - Pet deposit: $300

• 
  - Utilities fees: $250

- Saving For A House:

• The plan is to own a house before the end of next year. Looking at under $250,000.

• With the ability to use a VA Home Loan, I'm not really sure where I'd really need to sit on having cash on hand, but I figure odds are there will be some kinds of fees and taxes and setting up utilities and getting furniture and I can't even guess at what all else.

I don't know what the best course of action is, with the overall goal being that I want to hold onto as much cash as possible, as early as possible in case I'm able to jump on a house a lot sooner than I anticipate. At the same time, I'd hate to lose money on higher interest rates due to a higher debt/income ratio and high balance percentage on that particular card.

Does it make more sense to pay off the credit card at 0% interest, or make monthly payments of ~$555 until February 2018?

Does it make more sense to hold off on paying a larger down payment for a vehicle, and roll the taxes and fees into the loan, and then pay it all off quicker after I know what's left over after whatever's needed for the house?

 

[Sunset]

Some info is missing, is the $25K the only cash you have that is not in retirement funds ?

The tone of your post infers a great deal of spending on credit cards, instead of simply paying for something outright, why do you do that ?

 

[RetiredGypsy]

I have $100,000 invested, in addition to this $25,000 in cash.

I spend a lot on credit cards because I make 1.5-5% back on purchases, and occasionally much more in bonuses. In 2017 I've made about $1,000 back from using credit cards over cash. It's also easier to track the expenses for my budget since I can see all my purchases online.

Unless I have a special 0% rate when first opening a card (typically 12-18 months), I pay everything off at the beginning of the month.

 

[Amethyst]

Just some thoughts.

Your "interest-free credit card" is simply a short-term loan that comes due in a few months. So if I were in your place, I'd pay it off as fast as I can - equal installments is fine, just don't go past that final date! Then quit using credit cards, unless you totally, utterly commit to paying them off every month. Edit: I see you already do this - good. It's great earning "free" money on credit cards, as long as it doesn't lead to chasing those rewards, which can lead to excess spending. But you knew that.

I don't know anything about VA loans. I've always gotten home loans on the open market. Does VA require any down payment? Also, you will probably pay at least some closing costs - perhaps split with the seller, perhaps rolled into your loan. You probably already know that asking the seller to pay the buyer's closing costs is the same as asking the seller to lower the price. You can ask...

Research your state's and county's typical closing cost requirements. You can find this info on line, ask a real estate agent or call a title company and ask for the typical buyer's closing costs on $250K.

You'll get your utility deposit back at the end of your rental lease, and then you will get to put down the same deposit when you open a new utility account at your new home. In our case, the electric company waived the deposit because our credit rating is over 800. You might want to ask about that.

 

[Bamaman]

I take it that you're retired already--by your name?

It would be very difficult for most people to start purchasing homes in retirement and taking out large mortgages to pay for them at 100% of the value of the home--like most VA loans are.

In addition to saving until it hurt for retirement, we carefully planned to have our homes and cars paid for about the time we were expecting to ER. Thankfully our plan worked.

 

[Argus]

Without any indication of income (assuming it's from investments) it's hard to suggest any use for the $25k. And with what you've indicated a $100k portfolio, investment income probably isn't enough to cover your planned rent.


With that, I'm trying to grasp the intent of financing a $30k automobile with the additional $3k taxes and fees. At that price, keep in mind that insurance costs will impact your monthly expenses.


And as Amethyset commented, the credit debt will come due.


Something doesn't add up here with the information you've offered.

 

[FIREmenow]

*I* would be driving a $10,000 Kia, for one.....

 

[Amethyst]

I'd be looking at houses on bus routes and also at bicycles. Edit: Not being sarcastic. Owning a car is a big money suck (so is owning a home, but there is more to be said for that than for a car). You can always get a Zipcar or Uber if you really need a car, and if you are retired, you don't need a car to commute.

*I* would be driving a $10,000 Kia, for one.....

 

[RetiredGypsy]

Without any indication of income (assuming it's from investments) it's hard to suggest any use for the $25k.

Something doesn't add up here with the information you've offered.

I didn't think the income mattered, I was just keeping everything coming up that's potentially cash-related within the bubble of the cash I have on hand. I get a check from the VA every month that covers living expenses. I'm frugal enough to even manage to save a good portion of that.

*I* would be driving a $10,000 Kia, for one.....

I have a Civic right now that's been paid off for years. I had planned on keeping it for 15-20 years, but with a new knee and a deteriorating everything else, getting in and out of anything low is becoming a nightmare. Same with being able to manage manually manipulating a lot of folding and storage features in cheaper SUVs I've tested.

I love my Civic and its 40MPG and the complete lack of monthly payments, but it's come to the point where I can barely get in it anymore.

I'd be looking at houses on bus routes and also at bicycles.

I'm looking at options with one of the best back specialists I could find to maybe get to the point where I can get back on a bicycle again. Or even a motorcycle. I used to love mountain and road biking, with or without an engine.

 

[Amethyst]

I didn't, either. Was only considering your savings and debt that you told us about.

Best of luck with your back, knees, etc. Hope it's something that PT, yoga, strength training etc. can help.

I didn't think the income mattered,.

 

[W2R]

Personally I'd save up to buy the car in cash, pay off the credit card before the deadline, and then with no debt I'd start saving up for whatever costs are associated with buying that house and moving, other than payments on the VA loan.

But then, I'm awfully debt averse compared with most people. That's the way I live. During the accumulation phase I LBYM'd and saved for what seemed like a long, long time to have a paid off house and car in retirement. I pay off my CC in full every month.


This was all part of my long term personal financial plan that I devised back in 2000 after a divorce that was a financial nightmare. Never, never again will I have so much crushing debt, and I am determined to never owe anybody a penny ever again.

 

[Texas Proud]

Lets go with what you say as gospel....

You say you pay off the CC each month, so you putting anything on a CC is irrelevant since you will need to pay it off the next month anyhow....

So this is easy.... of the expenses you listed, some are a must...

You have to pay off the interest free CC debt...
You have to pay all the expenses for your new apt. (I am assuming you have to get a new one, either way you will have expenses)...


Everything else is an option.... you do not have to buy a new car even if you are having trouble with your current one... also, you can buy a used one for less... OR, buy a cheaper model... if you can afford the payments that is different, but either way it is not a must....


Also, buying the house is not a must... but, you can roll a number of closing costs into your loan... but it does cost money to start a new home that you do not have with apt... usually utilities, window treatments, gardening stuff, etc.... but, that can be purchased over time....

 

[Teacher Terry]

Why bother to rent a new apartment and move if you want to buy a house within a year? I think it makes more sense to stay where you are if you can.

 

[RetiredGypsy]

Personally I'd save up to buy the car in cash

It's funny, that's what I did with my Civic. Paid for it just about outright, even over a 0.9% APR loan, but I regret not just making the payments and putting the rest in investments. I could have bought this new car with what that money would have made!

Why bother to rent a new apartment and move if you want to buy a house within a year? I think it makes more sense to stay where you are if you can.

I'm moving out of state back to where I had planned on buying a home about a year ago, but medical issues brought me temporarily back here. I'm looking at renting options that may be a bit more ideal for what I'm hoping is a very temporary renting situation - furnished month-to-month apartments if they exist -- otherwise I'll just have to suck it up and pay whatever fee to break a lease.

You couldn't pay me to stay here in Florida forever. A lot to be said for the things that can be done here for fun, and maybe the medical care, but it's not my home.

 

[W2R]

It's funny, that's what I did with my Civic. Paid for it just about outright, even over a 0.9% APR loan, but I regret not just making the payments and putting the rest in investments. I could have bought this new car with what that money would have made!

Or, you could have taken it to the casino and put it all on black and done even better! It's all a matter of risk vs reward. Don't ever forget 2008.

 

[Blue Collar Guy]

I have $100,000 invested, in addition to this $25,000 in cash.

I spend a lot on credit cards because I make 1.5-5% back on purchases, and occasionally much more in bonuses. In 2017 I've made about $1,000 back from using credit cards over cash. It's also easier to track the expenses for my budget since I can see all my purchases online.

Unless I have a special 0% rate when first opening a card (typically 12-18 months), I pay everything off at the beginning of the month.

I used to listen to a guy who said that using crdit cards make you spend something like 18 % more than you would spend if you used cash, so the 1.5 % cash back is usually a money loser vs using cash.

 

[Texas Proud]

I used to listen to a guy who said that using crdit cards make you spend something like 18 % more than you would spend if you used cash, so the 1.5 % cash back is usually a money loser vs using cash.

I would agree on the general public, but not this board...

For me, I buy nothing more using a card than not using a card... now, I am sure DW does, but I cannot do anything about that...

 

[Walt34]

I used to listen to a guy who said that using crdit cards make you spend something like 18 % more than you would spend if you used cash, so the 1.5 % cash back is usually a money loser vs using cash.

That would be my ex-wife. She went out shopping one time (all on cc of course) and came home proudly exclaiming "Everything was on sale so I saved 30%!"

Me: "How much would you have saved if you'd stayed home?"

That did not go over well....

 

[Mulligan]

I dont know what terms you get with your CC, but these can be rolled over indefinitely. I have owed between $5k -$25k on no interest CC debt (2%-3% upfront fee for 15 to 18 months usually) for probably 20 years. But if you cannot get those terms it is a whole different story.

 

[OldShooter]

I agree with others that buying a new car is a poor plan. From reading lately, apparently the market is awash with cars that are recently off leases. That probably means it will be easy to buy a two or three year old car where some sucker (err .. customer) has eaten a lot of depreciation for you.

IMO buying a new car is a poor financial decision for almost anyone. As is borrowing money to buy a car. As is leasing a car. Leasing is a particularly complex and expensive way to borrow money, which is why the car salesmen often get a bonus when they sell one.