I’ve been keeping something from you. I was either not going to tell you at all or wait until it is a non-issue, but why have a personal finance blog and not be completely honest about personal finance, right?
We spent $6000 in April 2009 on a really nice bedroom set of furniture and a Tempurpedic mattress. I’ve mentioned this before, but I did not mention that we financed the whole thing for 15 months at 0% interest.
Normally, that would not matter to me since we would already have had the cash, put it aside, and made interest off of it for 14 months before paying the bill in full. BUT we didn’t have the cash except for in our emergency fund, so we’ve been putting $350 a month aside while paying $50 a month to the bill. The bill is due in August and the money is ready to go for July, but it’s been slightly nerve-wracking knowing I owe big money for something I’ve been sleeping on for more than a year.
I knew we would never have to pay any interest since our emergency fund would have had us covered, but I still feel a bit sheepish about the whole thing. If I had lost my job or if hubby had become disabled, we would have been in trouble. We wouldn’t have needed to do anything drastic, but it would have been severely uncomfortable.
The upside to this confession is that I can now tell you that as of next month, that $350 a month is open to play with. Our tax account for the year is also polished off since I highly overestimated our property taxes last year, so that’s an extra $400 a month till the end of the year as well. Hubby’s final $2000 grad school payment is also ready to go, so we no longer need to funnel that $625 a month into a grad school account.
In short, an extra $1375 a month has opened itself up from now until December, so it looks like our $9500 car loan will definitely be paid off by the end of this year. We will also be able to open a second 2010 Roth IRA, but it will be funded from November 2010 to March 2011. After that, we are discussing what to do with the extra. We will continue to fund a second Roth IRA, but that will still leave us about $1000 extra a month to put towards the house or the emergency fund or whatever.
Let’s just say that I’m pretty happy and you may want to be in the room towards the end of November when we make that final Prius payment. :-)
What do you think? Were we nuts for taking on such a huge payment plan for bedroom furniture and a mattress? Should we be doing something different with the excess cash we have now?
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2 days ago
Well, this isn't really that much of a confession since it has a happy ending. I am leery of those no-interest deals; I've read that often the last one is due on a different (earlier)date than all previous payments. Often people are late on the last payment and then have to pay all the interest.
ReplyDeleteAnyway, you seem to be in a good place financially at the moment. Congratulations.
This doesn't seem too risky since you have the EF to fall back on. However, I know that anxious feeling since I used to take advantage of the 0% interest deals on things like furniture and our 50" lcd hdtv that we purchased for a Super Bowl game (stupid!). We were very careful to send $ each month and to have it paid in full before the rate expired.
ReplyDeleteI am now trying hard to pay off a $1400 0% cc balance (ends in Sept.). This will be the LAST TIME I do this for consumer goods! Pay-as-you-go is the way to go.
In the future, the only exception where I would make use of a deal like this is as leverage for an investment opportunity.
Great idea to focus the new-found income/expenses gap toward the Prius payoff...that will be a great day!!!
I don't think you were crazy simply because it wasn't THAT big of a gamble. When I started my personal finance journey, I promised myself that I wouldn't beat myself up or make myself feel guilty.
ReplyDeleteI feel you are allowed some allowances as long as you are not jeopardizing your financial security or future.
BFS - I agree that pay as you go is the way to go. I'm not into consumer debt.
ReplyDeleteThat said, from reading your posts, you seem like a very practical, sensible, disciplined spender. Its ok to spend on things you like once in a while. We have to enjoy the journey as well!
I remember taking a European trip about 10 years ago that by most accounts I shouldn't have taken, but I wouldn't trade it for anything. The life experience at the time was priceless.
BFS- I don't think you are crazy at all. You spend money on good sleep- sleep is the best! If you unloaded 6k on a pretty necklace, that may be questionable. But, you need furniture sometimes.
ReplyDeleteI buy on 0 percent credit all the time. I have always paid it off, so I don't worry about it much. As a matter of fact, I have a payment due on June 11th for the washer and dryer I bought with 6 months no interest/credit. I love that washer and dryer, and it was totally worth it to me. I could have paid it on the spot, but I liked the idea of having the extra money around.
I am excited for your extra thousand dollars you will have around each month. You could pay down your house, save for vacation, save for retirement, etc. The Roth idea is a good one. I also try to save some money in non-retirement vehicles because we want to be done before 59 1/2. (Dreams!)
I dont think it was that crazy. We've done a similar thing for our bedroom set (around $7000) plus some living room furniture (about $2000 worth). We didn't finance it (only because my husband wouldn't let me! It was 0% for 12 months, so I figured we might as well take advantage of it!) but they do a 1/3 charge when you order, and 2/3 when they deliver. Basically the time between the two ends up to be about 2-3 months, so we paid the 1/3 when we ordered, and scrimped and saved to have the 2/3 by the time it was delivered so that we wouldn't have to charge it. I hate knowing that the charges are out there just waiting to be posted to my credit card though!
ReplyDeleteI think it is great that you were able to take advantage of some 0% financing and get the furniture you wanted. Not only were you smart and put aside the necessary money WHILE making payments, you are now able to put that money elsewhere. I think you should continue build up your emergency fund while also save for a nice family vacation!
ReplyDeleteI've done the same thing, and with a mattress and box spring, believe it or not. On the one hand, it let me pay for the new bed without dipping into my savings/EF, which felt good. On the other hand, it gave me consumer debt, that I felt bad about. I'm not sure I'd do it again, since my feelings were so mixed about it.
ReplyDeleteConsidering you had the money in the bank I don't think it was a crazy gamble.
ReplyDeletefrugalscholar, I considered it a confession since I had intentionally not been mentioning it, lol. I understand the risks for paying late, so we're going to pay it off by the end of June instead of waiting for August. I'm a weenie when it comes to risk. :-)
ReplyDeleteHolly, thanks for the similar story! I think we'll take advantage of deals like this in the future, but only if we have the extra money in the appropriate account - not requiring us to rely on our EF. Leverage for an investment is a good idea too.
ReplyDeleteYoung Mogul, I agree. I try not to hold too many regrets. So far we haven't done anything to risk my peace of mind...that's for bringing that up.
ReplyDeleteI don't think it was a crazy idea at all. I purchased a rather large and expensive TV for about half the price of your bedroom set. I also received 0% interest for 18 months and have been steadily paying it down. I will be paying it off much quicker, but still, it was somewhat risky. As far as I'm concerned, you got slightly lucky( like me), and since you will be paying it off soon, there was not too much of a gable. Especially since you had an emergency fun set up.
ReplyDeleteSquirrelers, thanks for reminding me that I actually started BFS so people would stop apologizing for the fun stuff when they had everything else in order. That European trip must have been awesome!
ReplyDeleteEveryday Tips, if I ever buy a pretty necklace for $6000 (that I'm not planning to sell immediately for a big profit, lol), you have permission to slap me and find out what alien took over my body. :-)
ReplyDeleteI'm excited about the extra money too even if the first couple of months will be put towards dental work...still excited!
Lauren, yeah, it kind of hurts to see $5000 that's not really mine just laying around in my account for a year...
ReplyDeleteKate, I like the way you think! Nice vacation indeed...
ReplyDeleteCarol, I'm in that boat. The whole reason I wasn't mentioning the loan was the fact I'd be admitting to holding consumer debt - even if it is 0% consumer debt. It still feels a little icky when you read tons of personal finance blogs like I do, lol. We'll probably do it again like I said above, but I'm hoping it's not anytime soon!
ReplyDeleteJim R, thanks!
ReplyDeleteMyFinancialObjectives, yay, someone else in our boat. :-) Good luck with the rest of your tv!
ReplyDeleteI'd like to ask the most important question of all: How is the mattress??
ReplyDeleteAt some point, a new mattress might be in my future. Maybe. I think. :)
Revanche, my husband loves the Tempurpedic and the bedroom set! I like the set a lot but it is a bit overly masculine. I like the mattress except between June-August since it holds in heat too well during hot summer months (although my husband swears he can't tell). In general, I think this ended up being a bigger win for hubby than me, but it is way better than what we had!
ReplyDeleteFinancing aside I think its a GREAT IDEA!!!!!
ReplyDeleteI told people when I get married I would spend 6,000 on a bed for me and hubby. I don't want to end up being that couple that sleeps in two different rooms because we disturb eachother in bed!!!
im so happy you made the investment and I probably would do the exact same thing!! (with cash of course :)
Divine and Debt Free, thanks! I'm happy we have a better mattress too. :-)
ReplyDelete