Quote:
Originally Posted by Cloud
Credit is great to have in an emergency, but not as your sole resource. Plus, you need to have some extra cash for periodic and expected expenses that are not emergencies; vet bills, new tires, gifts. Why pay interest on this stuff?
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One does not pay interest on those daily, weekly, and monthly expenses. Vet bills, tires, new exhaust system, etc are normal expenses also paid for in cash (or in less than 30 days on a credit card). One must meet those expenses while saving $25K for a car. Those are not emergencies. Those are normal obligations that everyone must meet while also saving money for a new car.
Emergency fund of last resort is credit cards. Other emergency funds may also exist - investments. Which is why some investments must not be locked in - must be liquid.
One who is meeting his financial obligations meets those daily obligations while also saving $25K for the next car. Anyone who cannot pay for a car is simply paying for the car twice - and will always remain a debtor. Those people need car loans due personal financial mismanagement.
Exact same problem with credit card balances. If one cannot pay for it, then one did not need it. Or it is an 'emergency of last resort' meaning that all other luxuries - a deli sandwich for lunch - are no longer permitted.
Brown bagger – the guy who does not want to spend $50K for a $25K car.