Despite our government’s attempts at self sabotage , it’s looking like the recession must be on its way to being over. Because wouldn’t you know it, some folks are back to making what I would consider questionable financial decisions.
Nothing major, really. Individuals I know are just taking out small (sarcasm) loans and financing a vehicle for nothing less than forty thousand dollars. Not bad, right?
No, not bad if this loan was going to a CEO, an attorney, or a chemical engineer. You know, where that type of vehicle is affordable and not a budget stretching extravagance. But actually, this car was being purchased by an “average joe” like you and me. A member of the working middle class.
And to make matters really sound stupid, this working class dog makes a landlord rich by making rent payments, and carries large credit card balances with interest attached. The type of person that when they decide to attempt to straighten out their finances, they focus on minutiae like clipping coupons and skipping one Starbucks trip a week.
Genius. Apparently, no one read my post about the myth of our American Dream.
To give yourself a fighting chance financially, you have to focus on making smart choices concerning major money decisions. Like maybe not buying a car that you suddenly have to live in because your landlord put you on the street for non-payment. Or making your college choice that will force you to take the loan with the most zeroes at the end of it.
I’ve made my financial gaffes. They are mistakes that I will share with my kids to ensure that they don’t do the same thing and put themselves in a debt filled hole. But I can say that I’ve never laid out 40K for my commuter car.
Remember, people!! Concentrate on the big stuff!
Home Sweet Home – 18 years ago, my wife and I bought a small colonial style home on a main street in our town. Our family has grown (and grown up) in about 1200 square feet of living space. People will get a puzzled look on their faces, wondering how four people can possible co-exist in such a small area. Honestly, I could never see what the big deal is.
Have I been tempted to upgrade my house at times? You bet. But in the end, more space is not required. We have a large deck on the back of the house, which greatly expands our living area for three seasons. And we initially bought the house for the big back yard, which we knew our kids would love to play in.
Speaking of love, I mostly like my home for the miniscule tax bill, and the miniscule mortgage that goes along with it. When it comes to house loans, small is better.
Whoa, Sweet Ride – 40K? Really?? Sure, buy a $40,000 car or SUV – if you have a half million in investment accounts or cash. Or you’re a neurosurgeon. Otherwise, you can’t afford it! Didn’t your parents tell you this stuff?
And what’s with the trading in of a practically brand new vehicle for the latest model? Why don’t you just light a couple thousand greenbacks on fire before your new spirit crushing car loan comes in??
This is probably the poorest financial decision most people make. It’s a hunk of metal, for God’s sake. You’re already going to spend a boatload on commuting, gas, tires, maintenance… is a payment necessary? And if it is, does it need to be $800 a month??
Destination: Beach! – Let me tell you a story of how I was stupid, as in young and stupid. I liked credit cards. I liked the idea of using them instead of cash, enough where the honeymoon trip to Mexico for the wife and I was mostly paid for via the plastic. Among other things.
That trip was incredible. Ever been to Cancun? What a place. It’s the spot to go for super authentic tortilla soup, scorching sunlight, fancy cocktails, and learning to evade drinking water that doesn’t come in a sealed bottle.
What can I say? I was in love. Using Visa to pay for what is now memories seemed like a no-brainer!
My wife and I have been married for almost 20 years, and that card balance hung around at 12K for the longest time. Instead of being smart and paying it down as soon as possible, I made the minimum payments (cringe worthy, I know). I eventually got tired of looking at that balance. Earlier this year, with $3,000 left, I blew it up and paid it off.
Yup. Your math is correct. That’s almost 20 years of making interest payments. Totally brilliant.
Which will show you that even those who know what to do are still capable of doing stupid things. Hopefully, your mistakes increase your intelligence and awareness. Then, when someone tells you they just bought a $40,000 vehicle, instead of saying “nice, sweet ride”, you exclaim:
“Perfect! Now you can apply for the food stamps you’ll need.”
For my kids, it’s this: forget about the 4,000 square foot house, the 400 horsepower car, and life events that suck all of your money into a debt riddled vortex.
Three things. House, car, consumer debt. Get them right and you’re golden.
What say you? Are the “Big Three” enough to turn you into a financial shining star? What would you add to take it further? Let me know with your comment!