How much debt is safe to carry?

Discussion in 'Business Operations' started by 32vld, Jul 5, 2013.

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  1. RSK Property Maintenance

    RSK Property Maintenance LawnSite Bronze Member
    Posts: 1,486

    here's a question for you guys, is it a good idea to have money saved up for an emergency while in debt, or would it be better to take that money saved up and pay a credit card completely off and use that if an emergency occurs before that original money lets say its 2000 dollars is saved back up which would take about 30 days for me to save. then take the money i was paying on that credit and snow ball it with the money i'm paying on my last credit card and pay that one off, then work on the two trailers and be debt free by winter or just keep "saving money" even though with the interest i would be paying i'm not really saving much probably.
     
  2. PerfectEarth

    PerfectEarth LawnSite Bronze Member
    Posts: 1,734

    As usual, an entire thread about debt/no debt and NO talk of tax savings when expensing 100% of a major equipment purchase, saving on your tax bill.

    (makes me wonder how few guys in our industry actually pay taxes....)

    I have debt, but it's saved a ton on taxes over the past few years and smart money-making purchases at 0% or very low rates help you grow.

    This - http://www.westernfinanceandlease.com/taxsavings.html
     
  3. RSK Property Maintenance

    RSK Property Maintenance LawnSite Bronze Member
    Posts: 1,486

    i save a lot of taxes, i expense everything and anything i buy for my business. I also have a separate account that my sales tax goes into every time i make a deposit.
     
  4. seabee24

    seabee24 LawnSite Senior Member
    Posts: 619

    Here's another thing to consider. If I had 10k cash and had to buy mower. Next year business goes bad and you have to file bankrupt. Your going to loose that investment.

    Of your business is an inc. if you purchased that mower on credit, and the 10k cash was already paid out to you or a family member in payroll, and you file bankrupt, you still keep your 10 k
    Posted via Mobile Device
     
  5. 32vld

    32vld LawnSite Gold Member
    Posts: 3,984

    Better to not be in debt. Though say your mower died better to take that cash and buy the new mower. Then pay interest. So you should not have a balance on the Credit Card.

    There is no interest charge for having a credit card in your wallet. And it represents "Cash" if you have a true emergency.

    Hence the CC gives you time to build up your cash savings for your next emergency.

    Emergency's do not happen every week.
     
  6. Efficiency

    Efficiency LawnSite Bronze Member
    from zone 6
    Posts: 1,544

    how you pay for something has ABSOLUTELY no bearing on how you choose to depreciate/expense/amortize that purchase, hence the reason no one brought it up.
    Posted via Mobile Device
     
  7. RSK Property Maintenance

    RSK Property Maintenance LawnSite Bronze Member
    Posts: 1,486

    ok thanks. all my my equipment is my mower is a 2012 that i bought brand new last june, i replaced my two 7 year old back pack blowers recently, one was replaced in november with a br600 and the other this spring, with another br600 my string trimmers are about anywhere from 4-10 years old all of them work fine, no issues, i just recently picked up a stihl km130r kombi unit last week. so all my equipment is pretty new and has been upgraded with money from my profits. the credit card helped me out in the winter when my transmission went, i paid half cash, half with my card. and i just landed 3 more shrub pruning jobs, and a tree job so that credit card will be paid off before the end of the month, maybe even the other one. then its on to my trailers, i'm starting with the smallest debts first, like dave ramsey suggests. my truck is the thing i would like to upgrade next, but really upgrading that won't do very much for me. my truck while having 281,000 miles is a 7.3 powerstroke diesel and is very reliable, i do the oil and grease the front end every 3000 miles. but its next on my list of things to buy. my little wonder leaf blower was bought new in 2011 with cash from a retaining wall and walkway and rock garden my brother and i did so i'm not expecting any break downs but they do happen. my trailer needs 3 tires as i did one last week so it will get those this week
     
  8. 32vld

    32vld LawnSite Gold Member
    Posts: 3,984

    I do not see the purpose for you to post this.

    You asked if better hold onto cash for emergency and use credit card and pay interest.

    I stated better to pay cash, avoid interest, because you would still have a credit card to use for an emergency. No emergency, no interest paid.

    You come back listing equipment you have. Not to be rude but I did not see the point of that.

    As to buying a new truck now. How many more miles are left in it. Is the truck's condition worth a major repair as engine or transmission. Maybe better to keep and fix.

    Another point in deciding to buy a new truck is the truck's condition not worth the cost of a major repair. Say a truck's useful life is over at 300,000 miles and you have 290,000 better to replace before it dies if one can get a 0% loan.

    Cause waiting for it to die first there may not be any 0% finance offers at that moment.
     
  9. ralph02813

    ralph02813 LawnSite Bronze Member
    Male, from Charlestown, RI
    Posts: 1,041

    You can carry as much debt as you want as long as it is coming out of one pocket and going into another:):):)
     
  10. RSK Property Maintenance

    RSK Property Maintenance LawnSite Bronze Member
    Posts: 1,486

    your right, not sure why i listed equipment there was no need for that. but the truck is very little rust and paint still shines very well. i already have done a transmission in the truck, two of them actually and it was absolutely worth it. truck will help make me around 6000 a month on a slow month, from april to november. my problem is I like blow money fast. being 24 with lots of disposable income is hasn't been the easiest for me, but i am getting on track now. it is getting old but still starts every day and treats me better then it should considering what i make it do. towing 16,000lbs with a f350 is not a good idea, but i get it done and stop it safely, and only do it a few times a month.
     
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