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  #21  
Old 04-04-2010, 12:31 PM
mbrew mbrew is offline
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Join Date: Mar 2010
Location: Ft. Worth TX
Posts: 493
I really don't have time for this, but it is an instructive exercise so I'll address a few comments made here and address what I believe are misconceptions

My ability to depreciate equipment on my taxes (federal) has nothing to do with whether its financed or not. I can run the same depreciation schedule on it financed or not and even if it is used. Don't take my word for it or for that matter anyone's word on this matter. Get out a pencil and paper and your tax book and work through it for yourself.

Now "If I get hurt I still have to make my mortgage, electric bill etc, so I may as well finance my equipment."

If you don't have money in the bank to cover those expenses for at least a few months, you are running really, really tight and are in trouble. Yes, you could put money in the bank to cover the loans also, and in fact that brings up another couple of good discussions about debt:

"Instead of paying cash, I'll finance @ 6% and put my money in the market where it averages 10%." Yep. That can be a good plan, provided the market doesn't tank just before you need the money. I have lots of money in the market and will have for years to come, but my 10 year returns aren't looking real great right now. Using a bank account is the same argument. "I'll take 0% financing and buy a CD @ 2.75% and I'll make money". I agree, although the amount you will make won't do more than buy a nice dinner. In either of these two situations the individual financing in this way has taken step to mitigate his risk, particularly in the case where the money to cover the loan is in an insured account. Most people that borrow money aren't in this category though and certainly not our OP. I still like paying cash. When I do, I have less accounting to do and accounting is a money and time waster.

The next common thing I hear is that "the interest is tax deductible and doesn't cost anything." Like a lot of things, that's partially true. The interest is an expense that comes directly off my bottom line, so if I made 50K and had $500 in interest deductions I now will only pay taxes on 49.5K. Now assuming I'm in the 25% tax bracket, spending that $500 in interest just saved me $125 in taxes. That's better than a stick in the eye but I'm still out $375 in interest expense. Although there are several here that are in higher brackets, most are in a much lower one, so the savings isn't quite so good. Despite a lot of that conventional "wisdom" that's out there, there is no way to make money on taxes by buying something. The tax savings can mitigate the purchase price to an extent, but it will never alleviate it. That include the ever popular home mortgage deduction. Don't take my word for it and don't take your accountants, do the math for yourself and see how it comes up.

There are a lot of companies use debt to grow, but there are many that crater because of it too. US Steel, Bethlehem Steel, Braniff, World COM, GM, Chrysler, Enron and countless others had debt, cratered and left massive trails of devastation in their wakes. I know lots of people that not only lost their jobs, but their retirements too when these companies failed. Bringing it down to a more personal level, there are restaurants, LCO's and other business on every street corner that went under and left their owners with huge debt loads. There are a lot of misconceptions about the amount of help available through bankruptcy. If you stop operating for any reason and you don't have debt, you have assets. Your equipment and and maybe your accounts are yours to sell and use the money for whatever purpose that you desire.

I know a young man around here that has his own lawn company. He has 3 crews, no debt, replaces most of his equipment every year,(mostly 21" stuff) and takes a one month vacation overseas somewhere every year. He has motorcycles and other toys - all paid for and NO worries. Sounds like a pretty good place to be to me.

About me: I'm 50 years old and semi retired. I haven't worked regularly since August of last year although I have picked up a few odd jobs since the first of the year. I have a substantial net worth, but I will still need to earn a little money for a few more years. I should be financially independent within the next 5 years. I was given this advice when I was young but instead I listened to the majority and I used credit "wisely". Had I followed this advice more closely, I would be fully retired now and traveling. Instead I'm thinking about starting a property maintenance service. One of the things I do is help people avoid debt. I know other that help people get out of debt, but I have a hard time doing that. Helping people get out when they're in over their heads is a heartbreaking gut wrenching proposition.

Got to go clean my trailer now.

Good luck,
Mike

P.S. I did lawn service when I was young and I didn't think there was anything better than an ice cold DR. Pepper on a hot Texas afternoon, but we drank it out of glass bottles. I still have good memories of that.
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  #22  
Old 04-04-2010, 12:43 PM
Richard Martin's Avatar
Richard Martin Richard Martin is offline
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Quote:
Originally Posted by mbrew View Post
Now "If I get hurt I still have to make my mortgage, electric bill etc, so I may as well finance my equipment."
Since I'm the only person to mention this scenario I can safely assume you were talking about my statement.

You are completely twisting my words around. My intention was not as you interpered in the slightest. My intention was as written. Period.

Whether or not someone chooses to finance an item should take into consideration their current bills and their ability to pay any new bills that they may incur. Just the same as a person would lay money aside for a mortgage, electric bill etc they should also have provisions for paying any installment plans in an emergency.
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  #23  
Old 04-04-2010, 01:08 PM
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Cboy7 Cboy7 is offline
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Join Date: Sep 2009
Location: Fl
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Quote:
Originally Posted by mbrew View Post
I really don't have time for this, but it is an instructive exercise so I'll address a few comments made here and address what I believe are misconceptions

My ability to depreciate equipment on my taxes (federal) has nothing to do with whether its financed or not. I can run the same depreciation schedule on it financed or not and even if it is used. Don't take my word for it or for that matter anyone's word on this matter. Get out a pencil and paper and your tax book and work through it for yourself.

Now "If I get hurt I still have to make my mortgage, electric bill etc, so I may as well finance my equipment."

If you don't have money in the bank to cover those expenses for at least a few months, you are running really, really tight and are in trouble. Yes, you could put money in the bank to cover the loans also, and in fact that brings up another couple of good discussions about debt:

"Instead of paying cash, I'll finance @ 6% and put my money in the market where it averages 10%." Yep. That can be a good plan, provided the market doesn't tank just before you need the money. I have lots of money in the market and will have for years to come, but my 10 year returns aren't looking real great right now. Using a bank account is the same argument. "I'll take 0% financing and buy a CD @ 2.75% and I'll make money". I agree, although the amount you will make won't do more than buy a nice dinner. In either of these two situations the individual financing in this way has taken step to mitigate his risk, particularly in the case where the money to cover the loan is in an insured account. Most people that borrow money aren't in this category though and certainly not our OP. I still like paying cash. When I do, I have less accounting to do and accounting is a money and time waster.

The next common thing I hear is that "the interest is tax deductible and doesn't cost anything." Like a lot of things, that's partially true. The interest is an expense that comes directly off my bottom line, so if I made 50K and had $500 in interest deductions I now will only pay taxes on 49.5K. Now assuming I'm in the 25% tax bracket, spending that $500 in interest just saved me $125 in taxes. That's better than a stick in the eye but I'm still out $375 in interest expense. Although there are several here that are in higher brackets, most are in a much lower one, so the savings isn't quite so good. Despite a lot of that conventional "wisdom" that's out there, there is no way to make money on taxes by buying something. The tax savings can mitigate the purchase price to an extent, but it will never alleviate it. That include the ever popular home mortgage deduction. Don't take my word for it and don't take your accountants, do the math for yourself and see how it comes up.

There are a lot of companies use debt to grow, but there are many that crater because of it too. US Steel, Bethlehem Steel, Braniff, World COM, GM, Chrysler, Enron and countless others had debt, cratered and left massive trails of devastation in their wakes. I know lots of people that not only lost their jobs, but their retirements too when these companies failed. Bringing it down to a more personal level, there are restaurants, LCO's and other business on every street corner that went under and left their owners with huge debt loads. There are a lot of misconceptions about the amount of help available through bankruptcy. If you stop operating for any reason and you don't have debt, you have assets. Your equipment and and maybe your accounts are yours to sell and use the money for whatever purpose that you desire.

I know a young man around here that has his own lawn company. He has 3 crews, no debt, replaces most of his equipment every year,(mostly 21" stuff) and takes a one month vacation overseas somewhere every year. He has motorcycles and other toys - all paid for and NO worries. Sounds like a pretty good place to be to me.

About me: I'm 50 years old and semi retired. I haven't worked regularly since August of last year although I have picked up a few odd jobs since the first of the year. I have a substantial net worth, but I will still need to earn a little money for a few more years. I should be financially independent within the next 5 years. I was given this advice when I was young but instead I listened to the majority and I used credit "wisely". Had I followed this advice more closely, I would be fully retired now and traveling. Instead I'm thinking about starting a property maintenance service. One of the things I do is help people avoid debt. I know other that help people get out of debt, but I have a hard time doing that. Helping people get out when they're in over their heads is a heartbreaking gut wrenching proposition.

Got to go clean my trailer now.

Good luck,
Mike

P.S. I did lawn service when I was young and I didn't think there was anything better than an ice cold DR. Pepper on a hot Texas afternoon, but we drank it out of glass bottles. I still have good memories of that.
Great post , thanks for taking the time . I appreciate wise advice from older people
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  #24  
Old 04-04-2010, 04:50 PM
rain man rain man is offline
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Join Date: Aug 2009
Location: If you sweat you die
Posts: 2,796
Yikes. I don't like to finiance but when I do its one thing at a time and not always the most expensive choice. Everything is paid off now so life has less stress these days.
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  #25  
Old 04-04-2010, 06:18 PM
brucec32's Avatar
brucec32 brucec32 is offline
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Join Date: Jul 2001
Location: Atlanta, GA
Posts: 4,405
Do any Americans go out and get a JOB anymore?

No pot to whizz in broke, minimal experience, minimal education, but ready for entrepreneurship? I think not.
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  #26  
Old 04-04-2010, 06:52 PM
topsites topsites is offline
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Join Date: Mar 2005
Location: Richmond Virginia
Posts: 21,677
Get a load of this...

You are short on work.
And, the payments are due.

Mr. and Ms. Mother of PITA call you, and doesn't it suck they are the ONLY ones who have called!
Sure enough, a boat load of hard labor that you don't really want to do, and on
top of that they want the absolute CHEAPEST price they can squeeze out of you,
after much back and forth you reluctantly agree and just when you thought it was over?

They want all the frills and thrills that would come along with the most
expensive service, and they don't just want it but they EXPECT it!
Just to make sure you understand, they call you like FIVE times in two days over this $125 job.

Then you finally show up to do the work bright and early like y'all agreed, and wow look they're home!!!
And they come outside and work "with" you the entire time, sure enough a 4 hour job now takes about the whole day.

And you...
Don't have a choice in the matter.
Because you ain't got no money.

You HAVE to man up and do it, but the kicker of it all is they know it too.

Has this ever happened to you?
Because it's happened to me!
Better still MY equipment was paid for and still it happened, I can't imagine
what it would have been like had I been in debt, nor do I want to.

So don't let this happen to you lol

Last edited by topsites; 04-04-2010 at 07:01 PM.
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  #27  
Old 04-04-2010, 07:04 PM
rain man rain man is offline
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Join Date: Aug 2009
Location: If you sweat you die
Posts: 2,796
Quote:
Originally Posted by brucec32 View Post
Do any Americans go out and get a JOB anymore?

No pot to whizz in broke, minimal experience, minimal education, but ready for entrepreneurship? I think not.
Not related to the original discussion but I see people every day who sell used household items which they put on the dirt because they can't afford a table to put it on. Perhaps I just don't understand but it would seem that a regular paying job would be a better idea.
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  #28  
Old 04-04-2010, 08:02 PM
nepatsfan nepatsfan is offline
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Join Date: Sep 2004
Location: Franklin MA
Posts: 3,156
Quote:
Originally Posted by rain man View Post
Yikes. I don't like to finiance but when I do its one thing at a time and not always the most expensive choice. Everything is paid off now so life has less stress these days.
It doesn't stress me out. I would only finance what I could afford to pay for. To each his own. If I get 0% it is absolutely stupid to pay in full for something you can finance. I really don't even finance that much but to use a blanket statement saying that there is no benefit is kind of silly.
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  #29  
Old 04-04-2010, 08:13 PM
nepatsfan nepatsfan is offline
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Join Date: Sep 2004
Location: Franklin MA
Posts: 3,156
Quote:
Originally Posted by mbrew View Post
I really don't have time for this, but it is an instructive exercise so I'll address a few comments made here and address what I believe are misconceptions

My ability to depreciate equipment on my taxes (federal) has nothing to do with whether its financed or not. I can run the same depreciation schedule on it financed or not and even if it is used. Don't take my word for it or for that matter anyone's word on this matter. Get out a pencil and paper and your tax book and work through it for yourself.

Now "If I get hurt I still have to make my mortgage, electric bill etc, so I may as well finance my equipment."

If you don't have money in the bank to cover those expenses for at least a few months, you are running really, really tight and are in trouble. Yes, you could put money in the bank to cover the loans also, and in fact that brings up another couple of good discussions about debt:

"Instead of paying cash, I'll finance @ 6% and put my money in the market where it averages 10%." Yep. That can be a good plan, provided the market doesn't tank just before you need the money. I have lots of money in the market and will have for years to come, but my 10 year returns aren't looking real great right now. Using a bank account is the same argument. "I'll take 0% financing and buy a CD @ 2.75% and I'll make money". I agree, although the amount you will make won't do more than buy a nice dinner. In either of these two situations the individual financing in this way has taken step to mitigate his risk, particularly in the case where the money to cover the loan is in an insured account. Most people that borrow money aren't in this category though and certainly not our OP. I still like paying cash. When I do, I have less accounting to do and accounting is a money and time waster.

The next common thing I hear is that "the interest is tax deductible and doesn't cost anything." Like a lot of things, that's partially true. The interest is an expense that comes directly off my bottom line, so if I made 50K and had $500 in interest deductions I now will only pay taxes on 49.5K. Now assuming I'm in the 25% tax bracket, spending that $500 in interest just saved me $125 in taxes. That's better than a stick in the eye but I'm still out $375 in interest expense. Although there are several here that are in higher brackets, most are in a much lower one, so the savings isn't quite so good. Despite a lot of that conventional "wisdom" that's out there, there is no way to make money on taxes by buying something. The tax savings can mitigate the purchase price to an extent, but it will never alleviate it. That include the ever popular home mortgage deduction. Don't take my word for it and don't take your accountants, do the math for yourself and see how it comes up.

There are a lot of companies use debt to grow, but there are many that crater because of it too. US Steel, Bethlehem Steel, Braniff, World COM, GM, Chrysler, Enron and countless others had debt, cratered and left massive trails of devastation in their wakes. I know lots of people that not only lost their jobs, but their retirements too when these companies failed. Bringing it down to a more personal level, there are restaurants, LCO's and other business on every street corner that went under and left their owners with huge debt loads. There are a lot of misconceptions about the amount of help available through bankruptcy. If you stop operating for any reason and you don't have debt, you have assets. Your equipment and and maybe your accounts are yours to sell and use the money for whatever purpose that you desire.

I know a young man around here that has his own lawn company. He has 3 crews, no debt, replaces most of his equipment every year,(mostly 21" stuff) and takes a one month vacation overseas somewhere every year. He has motorcycles and other toys - all paid for and NO worries. Sounds like a pretty good place to be to me.

About me: I'm 50 years old and semi retired. I haven't worked regularly since August of last year although I have picked up a few odd jobs since the first of the year. I have a substantial net worth, but I will still need to earn a little money for a few more years. I should be financially independent within the next 5 years. I was given this advice when I was young but instead I listened to the majority and I used credit "wisely". Had I followed this advice more closely, I would be fully retired now and traveling. Instead I'm thinking about starting a property maintenance service. One of the things I do is help people avoid debt. I know other that help people get out of debt, but I have a hard time doing that. Helping people get out when they're in over their heads is a heartbreaking gut wrenching proposition.

Got to go clean my trailer now.

Good luck,
Mike

P.S. I did lawn service when I was young and I didn't think there was anything better than an ice cold DR. Pepper on a hot Texas afternoon, but we drank it out of glass bottles. I still have good memories of that.
The difference between the depriciation is that you can depreciate your 9k truck/machine for a one time benefit and the machine you finance you depreciate over the life of the loan. That was my understanding through my accountant. The idea of financing is also provided that you would have the ability to do it either way. I am not saying to finance things you can't pay for. Most of the time when I finance things I COULD pay for them outright but I choose to play with the banks money and keep my own in the bank.(only for low rates also)
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  #30  
Old 04-04-2010, 09:47 PM
Weeded! Weeded! is offline
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Join Date: Jan 2010
Location: Glen Allen, VA
Posts: 21
Quote:
Originally Posted by nepatsfan View Post
The difference between the depriciation is that you can depreciate your 9k truck/machine for a one time benefit and the machine you finance you depreciate over the life of the loan. That was my understanding through my accountant. The idea of financing is also provided that you would have the ability to do it either way. I am not saying to finance things you can't pay for. Most of the time when I finance things I COULD pay for them outright but I choose to play with the banks money and keep my own in the bank.(only for low rates also)
The rate at which you are able to depreciate equipment for tax purposes is irrelevant of how it is paid for. You may want to clarify this with your accountant.
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