Hi! Middle-class family of five, two incomes, three school aged kids. We're privileged in that we got into the housing market 15 years ago and thus our mortgage is quite low, and we live well within our means - we work from home and have only ever needed one car, as an example.
Our kids are getting older and in more activities, and we've decided we need a second vehicle - to tote kids about and to tow a small trailer for camping. An investment into our kids' "golden years" before they're jerk teenagers who don't want to go camping with Ma and Pa anymore. Anyways. All this to say...
We bought a used second vehicle, and are picking it up in a few days. I paid a $500 deposit and the remaining balance is about $9000. I have an open line of credit with an 8% interest rate that I was planning on putting the purchase on. However, I also have a "rainy day fund" with about $20K liquid cash.
I'm torn - I COULD and maybe should just pay for the damned thing in cash, but giving up half of my emotional support nest egg seems... risky. My LOC is insured, and if something happened, it would be covered, and in less crisis-situations, I can pay the minimum to get through a tight few months if needed. If I put it on the LOC, I'd be paying it off aggressively - our tax returns this spring and next would pay for half of it, and I'd be throwing $500 or so a month on it on top of that - goal being that it would be paid off in full within 18 months.
To be clear - In addition to this $20K rainy day fund, we don't have a ton of other savings or investments - maybe $10K more that's less liquid. We don't have a ton of other debt aside from our mortgage (no credit card debt, only an existing car payment of $180 bi-weekly and a $19K balance on a line of credit that is attached to our mortgage - septic system blew up last year - which we're paying down relatively aggressively as a choice, but the minimum payment, if we needed to default to that, is $200 a month).
Is it worth my perceived risk to pay the several hundred dollars in interest on the LOC vs paying the whole shebang in cash? That $20K is "all I have" in my brain, and handing half of it over at once is scary. Am I being silly? This is SUCH a middle-class privileged problem to have
Our kids are getting older and in more activities, and we've decided we need a second vehicle - to tote kids about and to tow a small trailer for camping. An investment into our kids' "golden years" before they're jerk teenagers who don't want to go camping with Ma and Pa anymore. Anyways. All this to say...
We bought a used second vehicle, and are picking it up in a few days. I paid a $500 deposit and the remaining balance is about $9000. I have an open line of credit with an 8% interest rate that I was planning on putting the purchase on. However, I also have a "rainy day fund" with about $20K liquid cash.
I'm torn - I COULD and maybe should just pay for the damned thing in cash, but giving up half of my emotional support nest egg seems... risky. My LOC is insured, and if something happened, it would be covered, and in less crisis-situations, I can pay the minimum to get through a tight few months if needed. If I put it on the LOC, I'd be paying it off aggressively - our tax returns this spring and next would pay for half of it, and I'd be throwing $500 or so a month on it on top of that - goal being that it would be paid off in full within 18 months.
To be clear - In addition to this $20K rainy day fund, we don't have a ton of other savings or investments - maybe $10K more that's less liquid. We don't have a ton of other debt aside from our mortgage (no credit card debt, only an existing car payment of $180 bi-weekly and a $19K balance on a line of credit that is attached to our mortgage - septic system blew up last year - which we're paying down relatively aggressively as a choice, but the minimum payment, if we needed to default to that, is $200 a month).
Is it worth my perceived risk to pay the several hundred dollars in interest on the LOC vs paying the whole shebang in cash? That $20K is "all I have" in my brain, and handing half of it over at once is scary. Am I being silly? This is SUCH a middle-class privileged problem to have
