WWMMD big purchases given inflation/Russia/stock market

[niq]

PDQ the financial details.

<numbers deleted>

In normal times, we usually sell stock and turn around and make the big purchases with some of the cash. But with inflation high and the markets in a weird spot, I'm wondering if I should move **all** the cash into investments, finance the car over 3 or 5 years, finance the renovation with a HELOC or other loans, and then pay it the HELOC back later with future RSU vests and/or profit taking when the market goes back up. As long as I don't get fired, future RSU income won't drop to zero even if it does decline.

WDYT? I know this is way into "talk to a financial advisor" territory, and I'm sure I will, but I wonder if people here have opinions.

[jlt19]

I have similar questions right now. I don't have that much cash on hand, but do have a good $50k, mostly earmarked for my SL if/when it is owed again. It's rate is high as hell, 6.6%, but I'm still considering not paying it off ASAP. Some things I'm looking at:
I-bonds could be at over 7% if bought prior to May 1, we'll know more in April I believe.

Both Alphabet and Amazon are splitting 20-1 soon. I know that's individual stock, but I bought Apple when it last split 5-1, and it's up nearly 60% since. I'm actually thinking if I should buy now, or wait until they split.

"Luckily" for me, I have a meeting with our new fiduciary in mid April, so things I'll ask about.

I'm not sure about HELOC rates, but I've had amazing experiences with Light.stream Loans. They're probably the lowest personal rates you can get and 3 year new car loans (unsecured) are 2.99% right now. We've bought four new cars with them over the years and nary a detail of said vehicle confirmed. We've since paid everything off, with the sale of our old house, since we made so much due to it having a brand new kitchen, pool and extensive decking...

[numbers]

Do you currently use a FA? Asking because ours, and many others I think, has a solution for situations like this.

For when we need a chunk of cash for something but don't want to sell our invested assets, they offer a very low interest rate loan against invested assets.

Given the amount you mentioned, it may be appropriate to use a FA if you don't have one already.

[Poppy]

I'm conservative with leveraging but I think I'd keep cash for anything I was sure I'd buy in the next 18 months. The rest, I'd invest and evaluate the best option at the time the money is needed. I've never done a HELOC but that sounds like a pain and I tend to think it's over-optimizing at this scale. Maybe if you already have the line of credit open, it's worth it.

To PP's suggestion, I Bonds won't make much of a dent in your cash balance because you can only buy 10k/year each.

[RockNVoll]

Won't all your financing options be pretty expensive since interest rates are all expected to increase? 

I'm not a big fan of leveraging my purchases, but that's definitely more based on personal preference rather than the math.  Market is also particularly volatile right now (which could be good or bad!).  Not sure how much you think the renos + car might cost you, but I'm guessing less than the cash you have on hand.  I wouldn't love sitting on that much cash for two years.  Maybe hedge and invest 50-75% of it and leave the rest in cash.  Presumably you'll also be building up the cash balance with your salaries over the next couple of years as well.

[awkwardpenguin]

Marking timing, you're talking about market timing.

We basically use a one year time horizon for big purchases, so we'll fund this year's big purchases out of last year's RSUs. I'd probably want something big like a home reno in cash a bit sooner, maybe 18 months. You'll miss some market gains and also take a smaller risk of short term decreases before you have to sell. I'd also consider selling next year's RSUs as they vest rather than waiting for the better tax treatment on the gains and use that as part of the cash to fund the purchases. If company stock is down and/or the market is down, consider your other funding options then.

[sadlebred]

I wouldn't even know what to do with that kind of money. It's mind boggling. Short of winning the lottery, I'll never see it.

[ssmjlm]

I'm going to drop about $70k on a new truck for DH next month and while yes, we have the cash, I'm still planning to finance about $30k and pay it off early. Plus, it keeps our credit up. We haven't had anything other than our mortgage in 5+ years since we paid off my car.

I don't think there is anyway to time a market. I might do a HELOC for a home reno, just because it's a lot of cash to put out, but I also think home stuff it out of whack at the moment and completely inflated.

[simpsongal]

Are you filing the std. deduction or near the line for itemizing? Just mentioning since HELOC interest is deductible, it might makes sense to go that route if it pushes you/keeps you itemizing.

Not sure which car you're eying but once upon a time paying cash could get you a better deal (not sure if that's still the case )

[jwright]

We have more cash on the sidelines now than ever before and I'm grateful. I'd be fine holding for your time horizon since we expect interest rates to rise.

[ny96]

We borrowed money in December to do a big house renovation, but a couple months into the process realized that our scope was too to big and too expensive so we are doing a smaller project with half of the borrowed funds budgeted. The other half is mostly sitting in our investment account. We invested about a third and will likely leave the rest in cash. I like the security of having that money (a similar amount to what you have) available, rather than having to sell investments, in this volatile time. That being said, if you can get a decent interest rate on the loan I’d go that route.

[konapoppy]

As someone who cashed out investments instead of doing a heloc (honestly didn’t even cross my mind because I never think about increasing debt) and is now paying the tax bill, don’t do what I did.

I think everyone knows I am pro paying taxes. But I do feel a bit like a dummy here 🤷🏻‍♀️

[gt7301b]

I wouldn't change my overall investment philosophy because of world events or in an attempt to time the market. That being said if I was going to attempt to time the markets I wouldn't do it now. My quick math says the DOW is only down ~ 5% from highs, NASDAQ is down ~ 13. So maybe more of an opportunity there, but neither one is in bear territory.

[CloudBee]

I agree with sitting on the cash you'll need for the home renovation and car purchase. I feel like no one is saying it, but we could very well be on the verge of a world war. I would tread carefully while we ride out the next few months.

We recently threw a lot of money into the travel industry knowing it won't recover for quite sometime. You might also consider looking into the energy sector.

I think world events are always a time to be slightly more debt averse while observing the market a while, and protecting assets.

[niq]

Mar 21, 2022 9:16:59 GMT -5 simpsongal said:

Are you filing the std. deduction or near the line for itemizing? Just mentioning since HELOC interest is deductible, it might makes sense to go that route if it pushes you/keeps you itemizing.

Not sure which car you're eying but once upon a time paying cash could get you a better deal (not sure if that's still the case )

We itemize .

I think we will finance one and pay cash for the other, whichever one makes the most sense based on rates, how fast we think we want to repay, exactly what the price tag is on the renovation, etc.

[simpsongal]

niq that's our preferred approach, a mix of debt and cash so you're not just relying on debt, but you're also not entirely dependent on liquid savings to accomplish things basically within your reach.

Good luck