Here in Texas, a pool will add to the value of your home. You won't get it all back, but you will recoup some of it.

I sell real estate where I live and know my development like the back of my hand. I knew what my house would sell for when I put a pool in, and I stayed well within that range - and the value should only rise. (We've been lucky here, and haven't seen the huge property increases and the bubble that other areas have seen)

Anyway, I made sure to stay within a budget where I would still have plenty of equity left over, and we took out a home equity loan. We financed it for as short amount time as possible, and plan to pay it off ASAP. We won't move until it's paid off totally.

As much as I would have loved to have paid cash, and I know people do it all the time, like you, it scared me. I'd rather pay off the loan and suck it up and pay some interest in the meantime, than get anywhere near close to having to dip into savings. That's just me though...

The main problem with financing as I see it is that it is so much easier to go over budget. That $10,000 extra item is so much easier for most people to justify in their minds if they're financing than writing a check out of savings.

Ultimately though, everyone's circumstances are different. If you are in a business with variable income such as independent consulting or sales then I think you'd want to preserve liquidity. If you are in a profession with rock solid guaranteed income until you retire with no chance of being laid off or transferred (such as teaching or nursing for example) then paying out of savings seems less risky.

Teppy -

I agree w/ your philosophy. My husband is the responsible one w/ our money and he's always said if we can't pay cash for luxury items then we have to wait until we have enough. We've been discussing our concerns w/ using all of our savings to build a pool and it's a little scary. This will be bigger than buying a car and I don't know too many people who pay cash out right for a car. So I guess that's when I had the thought to pay half in cash and finance the other half. There is always uncertainity of something happening but we don't have any control over the unknown. I guess what would be wiser for us to do is to wait until we've saved more than we need and not go over budget. Probably easier said than done, huh???

We debated the same question. We had recently paid off our house and had saved up a comfortable nest egg. I thought that we should just pay cash, but my husband pointed out that our investments are making more than what we will pay in interest on a loan. So, we got a Home Equity Line of Credit at a very low interest rate. Also, that interest can be deducted from taxes, much like a mortgage. With the HELOC, you can use it for anything from home improvement, to purchasing a car, etc. No matter what your credit limit is, you only pay interest on what your outstanding balance is. If you live in Texas, there is no penalties for paying it off early if interest rates begin to rise.

I don't know if this helps, it was just our considerations when we made our decision. It's such a personal one that will depend on your own factors.

You've twice mentioned "using up all our savings" so I guess you really do mean using ALL your savings.

I'm no financial planner but I believe that most money gurus recommend that you build, and then keep, an emergency fund of 3-6 months' living expenses.

No one can know the future, but if you have no savings and an emergency occurs, you might be in a bad situation.

Have you considered a much less expensive above ground pool as an interim solution? Just some food for thought.

When I say "savings" I mean what's in our savings account. Not depleting all of our investments to build a pool. We do have a cushion if anything did happen financially. I was just curious if other people had similar thoughts and how you came to a comfortable financial decision.

I think it would depend on what your savings makes and what interest amout you would pay. If it was me I would probably do 1/2 and 1/2 because I like the security of money in the bank.

If you do finance some or all, make sure that you get the PB to sign off on lien waivers before you advance any more money.

You have to do whatever you feel comfortable with. If you get a loan chances are you will have some additional fees, doc, origination etc. You may also have to have an appraisal which is more money again. If this costs $500-$1000 just to get the loan plus the interest, is it really worth it? Take a loan out with yourself. Figure out what your payments would have been if you had taken out a loan. Pay the pool with cash and repay your savings to yourself just as you would the loan including interest. By the time your loan is paid off you will be in the same position only you would not have gave the bank the interest. I would save and pay everything in cash if I could. The only thing I carry paper on is my house but am paying it off as fast as possible while still maintaining my savings. The tax return I receive on the interest paid is far far less than the amount I pay the bank in interest. Paying $12000 a year in interest to get $4000 back on taxes makes no sense whatsoever. The realtors have sold the public on this notion.

If anyone finds a savings account that pays more than bank's interest rate for a home equity loan, can you please let me know?

We locked in some CDs about 4 months ago at 6%, but it was a special rate for new customers and I haven't found any that good recently. Our home equity line of credit loan is 4.25% with no closing cost or any fees. We got enough to cover several projects (outdoor kitchen, landscaping, new fence, etc). We only plan to take about 3-5 years to pay it off. That will allow us to keep our existing savings and still have the ability to add to it monthly as well.

Again, it's just a personal decision, with so many individual factors.

We were planning on building a workshop in addition to our pool. We were going to pay for one project out of savings and the other would be financed. We decided to finance the pool because it was easier to get a loan on it. We have immaculate credit and I was shocked at how much that loan was going to cost us anyway! The closing fees were outrageous and the percentage rate was lousy. Even though the Fed has been lowering the funds rate, the loan interest rates have been going UP because of the mortgage market mess. So we ended up paying for the pool out of savings and postponing the workshop project. I suggest you see what kind of terms you can get on a loan, you might be surprised to see how much it is and that may make it an easy choice for you as it did for us!

I listen to Dave Ramsey all the time. What someone calls in regarding similar type questions...he will flip the question around..ex. Would you borrow money to put in your savings account? The answer for most people would be NO! Should I sell stock? Would you buy that stock today? If not, then sell it now! Should I pull money out of my 401K to buy a house?..would you borrow money to put in your 401K? NO!

I hope I am restating his philosophy correctly! LOL:) You can always catch him on his radio/tv show.:) to get it straight from the horses mouth.

What I would do if I were you... pay with cash, and then get a line of credit/equity that is no closing costs ect., This way if something happens BEFORE you get your savings built back up, you have access to money.

Good Luck!

Being a Loan Officer I would recommend doing a secured loan against your savings. Its usually at an extremely cheap interest rate, very little paperwork, and in the end you get the pool and you still have the money. The lender would simply freeze the portion of your savings that you wish to borrow and as you make the payments the corresponding funds become available to you. You are correct most people will not save the money once they have spent it, something always comes up. Good luck with your decision.

To everyone who responded today, thank you!! Every response has some validity and will help making our financial decision easier.

I will warn you now, you got me on my soapbox....
Pay in cash.
I was raised, if you can't buy it, you can't afford it.
Luxuries are to be bought, not finanaced.
In this day and age, that is hard to live by and is not always fun.

Not that you are in this situation, but as a society, we live in a "I want it now" world and finance ourselves to our eyeballs. We have friends who make good money, have pools, cars, elementary kids with cell phones, kids closets full of Abercrombie/Limited Too, dirt bikes, boats, etc and they own nothing and make payments on everything.

Lending institutions and commissioned sales people (sorry to those of you who are not like this) do not have your financial interest at heart. The more you spend, the more you borrow, it's better for their pocket, not yours. When you are encourage to spend more...run/turn the other cheek. Don't give power to others over your wallet!

On our pool build this year (shot-crete on Tuesday), we lacked 15k for paying in cash. All we wanted was 15k loan and based on our FICO (over 800 each) and our home equity, the lending institution ignored the request for the amount at a locked in rate but instead, wanted to give us a 90K credit line with a variable rate. Of coarse, you only pay on what you use but come on! Variable rates go up. And steep sometimes. All these home forclosures all over the country-the majority were variable rates, not fixed rates.
I'm sorry, but that is encouraging someone to get into dept. That really chapped our hide. The loan guy was not selling us so his manager came over to hard sell us. It felt so cheasy and slimy.

Getting in dept is a huge epidemic these days anyway. Lending institutions are not looking out for you. Don't fool yourself that they are.

I say, figure out on paper your absolute monthly expenses with no luxuries and make an emergency fund. That should be your untouchable savings. Do not use up the majority of your liquidity for a luxury.

Then, find the money to pay for the pool. If you have to save for another year, so be it. Rice and beans, beans and rice (as Dave Ramsy says)

Discipline yourselves to pay a monthly payment to yourself, instead of a bank, to rebuild that account.

We ended up cancelling the loan application and cashed in part of an investment. While at first we were tentative to do this, we now feel soooooo good about writing the checks for our build and know that we own it NOW, not in 10-15 years with variable interest rates.

My pool will go without pretty lawn furniture this year. I found $5 foldable strap lounges at WalMart. It'll have to do. What I want I need to buy at the same time so it all matches, so I am saving for next year.

Ok, I'm off my soapbox.

We were in the same situation and took cash out of our savings to pay for our pool. For us it was a no brainer because the interest we would be paying was more than the interest earned. We still were left with emergency reserves in savings after paying for the pool. I don't like HELOCs or any type of second mortgages on my house because I like to keep my equity in my house just in case. Now that the market has dropped in our area, I'm glad we paid cash because if we had taken out an equity loan or a HELOC to pay for it, we would have been slightly upside down right now.

zookeeper,
While I agree with you in the main - we do not believe in taking out loans for luxuries & we pay off all of our credit cards at the end of each month - a swimming pool is not necessarily a luxury item in the typical sense (as one could argue giving a cell phone to a teen is not necessarily one either - depends on its purpose & what you allow them to do with it).

Our oldest is 16yrs old. He has some problems that I won't get into, but he likes to swim & it is good for helping with his problems.

It would take us 3-4 yrs to save up for the pool & screenroom that we are planning. By that time, (hopefully) our young man will be in college & will only get the benefits on his occasional returns to home.

We look at it in similar terms to when we bought our house (which is now paid for) - what would it cost us to wait till we have enough cash to pay for it? Most people will agree that waiting till one's kids are grown is too long to wait for a house to raise them in. We actually view this in similar terms.

So I think it is important to have a healthy fear of debt, but it's also important not to be too quick to judge other people's reasons for getting into it. :-)

Well, we've decided to save our money and pay for the pool with cash. It sucks to be honest b/c I'm the "I want it right now" mentality. I know that sounds like a really spoiled brat. But THANK GOODNESS I've got a sensible and savvy financial husband who isn't anything like me when it comes to money.

We won't be able to build a pool until late fall or early winter but it will be very nice to know that we don't have a monthly payment.

Quote: "We have friends who make good money, have pools, cars, elementary kids with cell phones, kids closets full of Abercrombie/Limited Too, dirt bikes, boats, etc and they own nothing and make payments on everything."

I highly recommend the book "The Millionaire Next Door", it addresses a lot of these issues. The gist of the book is that millionaires are frequently people that walk right by you on the streets and you never know it because they wear plain clothes, drive plain cars, live in average homes. The people that drive flashy cars, live in mansions, wear the best clothing, etc. are labeled in the book as "hyper consumers". These are people that are not only NOT rich, but they will never be rich because of the lifestyle they lead. They probably make a ton of money, but they spend all of it and much, much more. There are families that make 50k a year and live comfortably, and families that make 500k that are one layoff away from financial disaster.

Personally I think the best place to be is somewhere in between. Why have millions if you drive a Delta 88 and live in a dump? The smartest financial advice I ever heard was this- "Live well beneath your means". So buy that pool if in aggregate you're still well beneath your means, but if you live paycheck to paycheck than definitely skip the pool, it's not worth the hardships it will cause you.

Well-said, tres and zoo! A while back I remember a thread on another GW forum, where people were singing the praises of owing 125% of the value of your home. One actually said, "What's the worst that can happen?" I would like to see how some of those folks are doing with what has happened to the economy. I think discipline is the key. We have a large HELOC, but rarely use it, and pay it off within a couple months of putting something on it. It offers some flexibility in making large purchases. You just have to resist temptation. Look at Ed McMahon!

Love the Delta 88 reference. We had an old one in the early 80's (peeling vinyl roof and all....) But it meant no car payment. Those lean years helped us get our footing that I am so grateful for now. I am going to get that book!

Here! here! Bobyo and tresw. I too drove a delta 88! How funny is that. My fav was my 69 Chevy pickup where I had to roll down the windows for AC and keep them up for heat! Priceless days indeed.
responsible financially and disciplined is the key. And that can be hard. It really sucks sometimes.

Grace: I am sorry I offended you on my soapbox. to isult or offend anyone was not my intention and it was not directed at anyone individually or specifically or a judgement about people. I was speaking of irresponsible debt and how folks are sold into it buy institutions/media who do not have the individuals financial best interest at heart.
I carry debt too. And most of us do in some form. I don't think responsible debt is bad at all. Untangible debt is. Chase Bank owns my house and has for 10 years. One day, it will be mine. For the majority of cases, pools are a luxury and a luxury dept.

zookeeper,
No offense taken at all! I think we are all in agreement here. I just thought that a little clarification might soothe some potentially ruffled feathers out there.

I can so sympathize with the economizing! My parents drove a beat up old Delta 88 for over a decade! (No millionaires they!)

My dad bought my sister & I an old orangey-brown Buick Opel to drive to college - actually was still fairly good looking before I creamed it. I couldn't believe that he didn't yell at me when I wrecked it, but then he turned around & bought a beat up old VW bug to replace it. Revenge was his.

I bought a portable fan for that car in hopes that it would help me survive not having A/C stuck in Houston's rush hour traffic parked on the baking, exhaust-stinking freeways, but instead it just wafted baked air over me - it felt like being in a convection oven, lol.

I try to share with my kids the importance of being willing to work & sacrifice for what you want, but it's harder for them because they have it so easy, you know what I mean? They haven't had to learn yet that discomfort is not only survivable, but can even be beneficial. Hopefully I can succeed in imparting that to them before they get to where the learning is really painful, but they might have to learn the hard way - or life may have other plans. We homeschool though so at least I get to teach them Larry Burkett & Dave Ramsey et al.'s financial insights.

CONGRADULATIONS on an intelligent decision!

THANK GOD for Dave Ramsey!

My theory is if you can't pay cash you can't afford it!

BTW my "Hubby" just got a loan for a BMW (Big Man Woose) car. Some boys never learn!

As far as I am concerned it is his loan and he can work to pay it off.