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I am going to need to make a purchase in the next 8-10 months of about $6,000. Should I save up and pay in cash or should I invest that money, save $1,000, then get a credit card that will let give me 6-12 months at 0% APR? I only have one credit card now so I won't mind opening a new account when the time is right. |
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It's all right if you like playing with fire. ;) You didn't say what the item was. If it's anything electronic, I'd say wait, because you'll be able to get what you want for half the price. (Or, get twice the item for the same price.) I've read about people who play 0% transfer games with upwards of $10,000 or more and end up making a few hundred dollars. Credit card companies are on to these games and have made them less fun to play. There are a lot of gotchas to 0% offers, and you have to know them all. Otherwise, any savings you might have had could go out the window in jacked-up APRs or fees. Credit card companies use these offers to get you in the door. Think "First hit's free." Plus, you're assuming that you'll still be able to pay off this debt. If something catastrophic happens, you're stuck. If you don't have the debt, you're not stuck. I don't advise living beyond your means if you don't have to. That's how people get in financial trouble. 1
I would vote for this ten times if I could. I am living proof. That's how I got into financial trouble! (Well, at the beginning anyway.)
(Dec 05 '09 at 06:23)
Frugallawyer
I am not living beyond my means. I am saving over 50% of my income, and after having an emergency savings funded, my decision is whether to put it into a 1% savings account or put it in the market, knowing that I have a very secure job and that I can just put off saving that $6,000
(Dec 06 '09 at 21:55)
Daniel
If you're saving over 50% of your income, that's great. Keep doing that as long as you can! You don't indicate that you have $6,000 to buy this item now, which is why I used "living beyond your means." If you do, then what I said about that isn't true. Plus, these days, even good jobs are going on the chopping block more than they did two years ago. Bottom line is be really sure your playing defense with your finances now.
(Dec 06 '09 at 22:47)
mbhunter ♦♦
After a 6-month trial period, I was just confirmed as a full-time employee at a company that hasn't laid off anyone in 40 years. I am going to be buying a ring. I have about $5,000 in savings, but want to use excess money to pay for it. So everything I talk about is moving forward.
(Dec 06 '09 at 22:59)
Daniel
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I think that you sound like you feel very stable financially and that you have a high tolerance for risk. If that is the case, maybe the 0% transfer games mbhunter mentioned are worth a try. Have you found any short term CDs that might work for you? CD rates are very low right now and it doesn't seem like that's worth it. I have a decent tolerance for risk and I'd hate to see my money earning very little while I basically twiddle my thumbs for the next 10 months.
(Dec 08 '09 at 04:46)
Daniel
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When you mean invest, do you mean buy stocks for 12 months then sell them and pay off the balance when the 0% APY is set to expire? If so, I think that is very risky as stocks can go in any direction in such a short period of time. Yes, you could come out ahead, but you could also come out way down. If I were you I would just simply save up the cash and just pay it all when you make your purchase. That way you will have it all paid off when you actually buy the product, therefore reducing risk. Also that will eliminate any chance of you making any spontaneous purchases at 0% and finding out after the 12 months that you can’t pay it all off! Plus depending on what product you might purchase you might be able to get a discount paying with cash if you offer them $5,000 or $5,500. I'm not going to simply pay for it afterward. I am responsible and you can assume I won't make any 0% purchases just because. I am able to save a lot now so I figure I can start putting money in the market now instead of waiting 10 months to start. Stop assuming that everyone is irresponsible and start thinking about what the actual best thing to do is.
(Dec 06 '09 at 22:08)
Daniel
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