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Quick question for you ladies..


Forum: Financial Planning and Budgeting

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  #1  
April 5th, 2009, 09:48 AM
Amanda C's Avatar Platinum Supermommy
Join Date: Oct 2005
Location: East Texas
Posts: 17,724
We have no credit cards or bank loans. Our monthly bills consist of our house note and 2 vehicle notes plus normal expenses like electric bill and etc.

Dh has a side business that he runs out of a small shop and he's getting by like that just fine but before winter sets in next year he could really use a bigger shop.

We have a total of $8400 saved up. The slab itself for the shop will be $6000 and the sheet metal to finish it will be another $9000.
We owe $9500 on his truck at a payment of $450.40 a month.

Would you start the shop or pay off the truck? If we pay off the truck than we'll have an extra $450 month every month to put back plus what he's making at his business. We should be able to afford the slab within 6 months.

What would you do? The truck is at 10% interest if that helps.
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  #2  
April 5th, 2009, 11:16 AM
~Jess~'s Avatar Platinum Supermommy
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Location: Central California
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Will finishing the shop add additional income? If so, will that income be more than the interest on your truck during that same time period? If the additional income is more than the truck interest, then build the shop. If it won't, then pay off the truck first and save up to pay cash for the addition.
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  #3  
April 5th, 2009, 01:10 PM
~Samantha~'s Avatar Mega Super Mommy
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Location: Missouri
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i agree with jess. but generally its better to pay off bill before u add more
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  #4  
April 6th, 2009, 05:56 AM
Amanda C's Avatar Platinum Supermommy
Join Date: Oct 2005
Location: East Texas
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Quote:
Originally Posted by ~Jess~ View Post
Will finishing the shop add additional income? If so, will that income be more than the interest on your truck during that same time period? If the additional income is more than the truck interest, then build the shop. If it won't, then pay off the truck first and save up to pay cash for the addition.
Thanks a bunch! That makes sense!
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  #5  
April 6th, 2009, 07:13 PM
jentanne
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I was going to say to build the slab, but then I saw 10% interest.... girl, pay that thing off!!! Save the money and work as you get enough to do the next step.
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  #6  
April 21st, 2009, 05:06 PM
IamMom's Avatar Mega Super Mommy
Join Date: Mar 2008
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Here is a thought - build the shop and incorporate the business that he runs out of it. Then you can put the truck (and the related note) into the business and write off the interest on the truck as a business expense (as well as write off the depreciation on the truck). Now technically you should account for any personal use on the truck but if its minimal it shouldn't be a big deal.

I'm a CPA so this all makes sense to me but it might sound confusing....so depending on how much background you have with business taxes - you may want to get a CPA to help you set this up and do the tax return. (You could also just make the business a sole proprietorship and account for it on the Sch. C and not do a separate corporation and still put the truck into the business - you can take interest and depreciation on a schedule C for business expenses).

Hope that helps! Good luck.

The other thing that you could do (if you don't want to put the truck into the business) is still go ahead with the shop (a money making venture is always worth doing) and if you have equity in your home - take out an equity line and pay off the truck with that. The interest on equity lines right now is generally much less than 10% and you can write it off as home mortgage interest on your tax return - double wammy! This is what DH and I are about to do since we refinanced our mortgage and discovered we have quite a bit of equity in our home....so we're paying off our car loan with the equity line! Lower rate plus tax deductible!!!!
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