Ramit Sethi explains when to pay cash and when to save a down payment. For phones, save the full amount first. For houses, aim for 20% down, minimum 10%. Ask friends how they saved for big purchases.
For a phone, you absolutely want to save up the entire amount and pay for it with, quote, cash. In other words, you want to have that much cash in your checking to be able to pay off your credit card. When you buy your phone, obviously for a house, you can't save up 100% for it. So you're going to want to save a minimum of 10% and ideally 20%. And then in between, I show you exactly what percentage, and that is, I think, tip number six in the Scrooge strategy called making a big ticket purchase Scrooge style. So certainly you want to be saving up for things, and there's different techniques for actually saving up effectively, but being goal oriented is definitely what you want to do for the big purchases. Don't bother. You know, if you save up money for your 350 latte, then you are retarded. But if you save up money for your $3,000 vacation, then you are brilliant. And by the way, the trick is ask your friends. Well, if you kind of want to be a jackass, but you want to enjoy yourself, something I enjoy. Next time your friends buy an iPhone or go skiing or something nice, don't be mean about it. But politely you can say, man, that's amazing. How did you save up for that beforehand? And watch their face. It's quite entertaining.
