Should You Finance Purchases At 0%?
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Kind of surprised me Graham saying this. I would ve assumed you approve and encourage that
But did Caleb use opportunity cost in this decision making that’s probably the rule tgat graham is thinking of
he advocated exactly this with his $33* Tesla video he made years ago lol
@beachbum4805yes that is literally what Caleb did is used opportunity cost to make this decision. Do you know what opportunity cost means ?
The main thing is Caleb ended up with essentially a free couch, and “Pennies” from the higher % in savings
“Free couch” wasn’t in this video lol
Seriously though, I think it’s more so about doing that kind of thing as a habit rather than free pennies not being worth it.
“Pennies” of mental capacity invested in worthwhile persuits, compounded over even just a year can be genuinely life-changing, versus compounding the saved interest on a $1,500 sofa over the likely 6 months payment period,
Tell me you’re stupid without saying you’re stupid
Yes it’s worth his time. That’s why he did it.
In a comparison to a normal person, that’s like financing something for $15. Hardly worth it
@bbs5400Caleb didn’t have crazy money at that time. So it was a smart investment then
Yes because people always make objectively correct decisions
Except it explicitly says why its not in the video. If you finance small, with a small interest rate, and at the same time invest small, then at the VERY MOST that investment will simply pay for that interest rate. Which for small sum purchases is just stupid…
If you’re paying less on interest than what you gain in interest, it is worth your time. Graham of all people should know that but…
Yes but investing isn’t 0 risk. So for the most part you would have to gain a very small amour for it to be stable enough to cover the loan. But honestly since he has the extra to pay it off at any time it’s fine.
Exactly .. this works when your investment goes up and to the right.
So if you spent 100 hours making said investstments and make a return of 1000 dollars is that worth is absolutely not graham understanding is much greater then yours
No… hes talking about the mental headspace of offsetting the cost with 15k additional investing and then always worrying that you may forget to pay a debt. Thats the time that may not be worth it, not the obvious financial comparison.
He is just saying that the difference in gains on taking out a 0% loan vs paying cash on such a small amount … for caleb (who is worth millions) is not worth the paperwork headache. I would agree. Those loans are pretty annoying. A lot of them have pitfalls that could cause you to go back and pay full interest for any number of reasons.
Explain this Graham, why it’s bad ?
He is talking to caleb hammer. He is worth millions. Financing $15k to take advantage of the difference between 0% and whatever hed get on his investment is like picking up pennies. It is simply not worth his time.
should clarify that it isnt bad but at a certain level of wealth there are more productive uses of your time.
@wisconsincheez2307 oh thanks
Every penny counts
$15k is $100 a month with even a half way decent investment.
This guy is probably making 6 figures a month. So is 100 dollars worth managing small debts manually? And worrying that you might forget a payment?
@phrakture1 Two words:
Auto pay. Its no more hassle to finance the furniture than to buy it outright, you basically just check a different box. You dont get to making 6 figures a month making less lucrative choices for no good reason. If the term is one year he will make $1200 in interest minimum, passive income, for less than 5 minutes worth of extra work(very generous, more like 10 seconds). $1200 for 5min is $14,400 per hour, $2,496,000 a month, or about 25 times what you think he makes a month.
For you and me that would make sense, but for a multimillionare it would be like picking up a penny every 4 weeks.
@azn2xcbbjai See my post above in response to a similar point. This is why most people won’t become millionaires and I’m no more than a couple years away. Its more like someone asking you if they can give you $100 a month and all you have to do is say yes and it magically appears in your account and you sit there silent because saying “yes” isn’t worth $1200 to you. The extra effort to finance the furniture is he literally signs his name twice and checks the autopay box. The investments are automatic or the same as he would do anyway and the payments are automatic.
Sounds like he was pitched by me. 😂
If it’s a 4% return on invesent then he made 600$ that year. If he took longer to pay it off and made more than 5% then be probably gained 1000$+
Wrong wrong wrong wrong
@MasonRantsnGamesRC🤡
Said the guy that only drink 10 cents coffee from home
Never thought of that .. thats funny af cuz its true
Everyone defending this, like they’re talking about an average person like you or me. Caleb is a multimillionaire, this is the equivalent of an average person going out of their way to find a penny once every 3 weeks.
Nah grahams wrong here why not make payments on a big purchase if there’s no fees and interest?
New loan damages your credit, there is a promo fee. Investing money you owe on something can be equivalent to borrowing money to invest. Not worth the risk with furniture.
@TheOnlyMrEhe’s probs had the card for a minute. And it doesn’t hurt your credit tbh long term. Mine went down maybe a month and went right back up
@Eclipse-lw4vfI mean even still, if you got the money why not just pay it for something relatively small like furniture and not worry about it. He mention the same story about how he doesnt repay student loans either, just weird
So rather than paying $15000 up front he put that in an index fund averaging 12% a year. $15,000 zero interest loan for 60 months is $250 a month. But his investment over the same time period of just $15k made $26,433 in the same damn time period. So he made more than his money back. Had he paid the $15k for furniture upfront and invested the $250 a month for the next 5 years (same time as the loan would’ve been) he would only net $20,418. So he made about $6,018 more by financing the furniture (0% loan) and investing the $15,000 upfront instead of paying full cash and investing the would be monthly payment. He did the right thing graham.
Income from investment is not guaranteed. His $15k could have turned into $10k too and then he would still owe the $15k. That is how people go underwater. And, then there are the even dumber ones who act like they are smart Wall Streeters who say they will take loans because they can invest the rest and make more money like you seem to think. But, in reality, they never actually do the investing part and spend that money as well. LOL!.
@krisrap3828that’s true if he were hurting for liquidity, which obviously he isn’t, and no one who’s even close to that should think about buying any kind of expensive furniture, let alone taking any kinds of loans out for them.
Investments generally will grow over a long enough period, so if you can just ride it out, it’s never a bad thing.
The rate on his “0%” financing is probably a credit card rate
Caleb is a millionaire. Tacking the time to map that all out only to make $6,000 over the course of 5 years is not worth it according to Graham.
Graham did not say it wasn’t profitable, but just seems like a lot of work for the profit when Caleb has a lot more viable options at his disposal to spend his time on.
The account balance that’s shown implies like a 6 month loan.
It is worth the time. Takes 20 minutes to do a credit app. Then it takes a couple minutes to invest the money. Then a day or two to get the money out of the investment and pay off the balance.
This is coming from the liar that claims he drinks coffee at home because it’s literally pennies cheaper
What he is doing is fine, since he is doing it with 0% interest loans. But in reality all he is doing is using the interest gained from something like snp 500 and buying the stuff with it now.
They also will ship free. You can use rent a center to get Ashley shipped free one month free then pay off immediately and score. Obv if you dont pay off immediately u blow it. No loan no credit check.
There’s no such thing as 0% financing… He paid more for the furniture Then he should have. He probably could have saved 10% if you would have just paid cash.
I’ll always take 0% financing. Keep or invest my cash. No brainer
I worked at Ashley and we could give up to 40 percent off if people didn’t wanna do financing.