27 Apr Be Your Own Financial Advisor and Safely Use Your Line of Credit – Part 2 Aka: Bringing Your Future to the Present
You deposit $5,025 in the bank each month, your monthly expenses total $4,025 (This includes your mortgage payment of $1,364.40) and you’ve saved $9,000. Let’s also assume that you’ll receive a 2 percent pay raise every year, you have a $15,000 line of credit that charges an interest rate of 4.5 percent and you find an investment advisor that enables you to earn 6 percent on your savings.
FIRST DECISION: You’ve decided to save 30 percent of each annual raise.
Should You Keep Your Car or Buy a New or Used Vehicle?
QUESTION: You would really like to buy a new car; Your Ford Fusion is five years old. You have the following three choices: delay purchasing a vehicle; purchase a new vehicle for approximately 24,000 or; purchase a used vehicle (I found a 2011 Ford Fusion for $15,000)
How will each of these options affect your long-term goals?
1. If you delay purchasing the vehicle, your future goals will not be affected.
2. If you purchase the used vehicle, you’ll withdraw $1,500 from savings. If you finance it at 3.5 percent over five years, your monthly payment will be $245.59. Let’s also assume auto insurance increases by $150. You now have $605 after all your bills are paid. You are continuing to save 30 percent of what’s left after all your bills are paid.
3. If you purchase the new vehicle, you’ll withdraw $2,400 from savings. If you finance it at 3.5 percent over five years, your monthly payment will be $392.94. You now have $457 after all your bills are paid.
CashMap Gives You Clear Answers
Here’s the impact.
1. Keep Your Car: Mortgage will be paid off in 11 years and your savings will total about $196,487.
2. Buy a Used Car: Your mortgage will be paid off in a little over 12 years and your savings in 15 years will total $167,348. The used car real cost is almost $30,000.
3. Buy a New Car: Your mortgage will be paid off in a little over 12 years and your savings in 15 years will total $155,384. The new car’s real cost to you is $41,103.
QUESTION TO ANSWER: Is the new car worth $41,103 to you. What priority are you going to give up? Ask yourself the same question with the used car.
Using CashMap, you now have the tools to make informed decisions. You’ve become your own financial advisor.
DECISION MADE: We’re going to assume that since your existing car is working well and you own the car, you are going to keep your current vehicle.
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