Investing 102

[sik68]

To follow up on the topic of "financing a depreciating asset" from a few days ago, I came across this really good financial blog tailored towards medical professionals. http://whitecoatinvestor.com/

Here is an excerpt that does a good job summarizing the issue.

The problem I have with people financing depreciating assets like cars isn’t so much a math issue as a behavior issue. As you mention, financing $10K at 1% for a year is only going to cost you $100 in interest plus a few hundred dollars in fees (and perhaps a few hundred dollars that you could have knocked off the price by paying cash.) Given your salary, it’s peanuts. Even Suze Orman would agree you can afford to finance this.

The issue I have with it is the habit. First it’s the car, then the house, then some nice vacations, then private college for the kids and before you know it you’re that 65 year old doc still working 15 shifts a month because he has to who seems to detest his patients, has no tolerance for new nurses and overall seems to hate his life. Financing a depreciating asset is by definition living beyond your means. It’s a slippery slope. Knowing you, I doubt you’ll go far enough down that slope to matter, but it’s worth at least recognizing what you’re doing.

- See more at: http://whitecoatinvestor.com/may-i-p....nMh0VmCa.dpuf

Another good article. Cheap financing is just leading people to finance longer, borrowing money for the wrong reasons. 10 Year car loan anyone?


I know we already closed the loop on this, but it's more food for thought.