I’ve been thinking about writing this for some time, but always had a tough time deciding where to start. A to B to C, etc. I finally decided there is really no good place to start, but to start writing these as they come to me.
Listen: I’m not saying I’m perfect. Far from it. Yet, I have made the appropriate decisions that keeps me on the path of making money and keeping (aka saving) more of what I earn.
One of the big things that struck me is when I go purchase a vehicle, I look for a nice used one. Always. I’ve only purchased one new truck (1999 Ford Ranger) in my life, and I ran that one into the ground. Needed a new engine repair that would cost $4000 to fix while it was only worth $4000 to sell. It was time to get rid of it.
People know I’m pretty good with my money. I don’t brag about it, but they see me not worrying about it or struggling with bills. So they choose to come to me and ask for advice. I’m always happy to hand out whatever I have learned over the years.
Queue: In walks a family relative to ask me how loans work, etc. I explain and then ask why it is needed.
A four wheeler.
aka ATV (All Terrain Vehicle)
aka A Toy
When he was asking me about getting a $10,000.00 loan I was assuming it was for a reasonably priced car. Not for a toy.
Ah, but this was different he told me. This was brand new and what a deal it was… $4000.00 off the going price since it was time for the new models to come in. Plus it had all the latest features and a color scheme that he just had to have.
I did my best to steer him to buy a low cost used one. Heck, I questioned whether he really needed one at all. He didn’t live where he could use it, would have to trailer it, buy a new trailer too, etc.
I honestly believed I got through to him and won him over and turned him into a new money saving individual! At least that is what I believed until the next week when he told me how happy he was that he went through and bought it.
Of course I had to feign being happy for him. He already made the purchase, was happy about it, so I just went along with it. I’m not here to ruin his day. Maybe one day he will look back on his decision and think about my advice and realize I was correct. Maybe…
Leveraging allows you to afford more today. But at what cost?
To me: Leveraging is a great tool… Until it isn’t.
Leveraging allows you to use your weekly paycheck to afford a house that costs hundreds of thousands. Still have money left over? Great. Now you buy a car that is another payment. Then you buy a boat and an ATV with a 5 year loan. Make sure you have that vacation put on a credit card so you can pay for it over time. Look at you! Living like a King now and getting everything you want now.
It feels great the day you bought it and the first day you enjoy it, but as time goes on, you stop using it as much, it’s no longer that much fun and yet there you are still saddled with all this debt.
Debt is slavery.
Debt has a way of weighing you down.
You are now forced to work, even if it is at a job you may no longer like, fearful of losing your job, missing out on potentially better opportunities out of fear of leaving a job that is giving you the paycheck you now must have week to week. You are a slave to your job because you owe this debt. You leveraged your life now to have fun now, only to be enslaved by this debt in the future.
We see it everywhere. Very few ask: Is this car or house what I need?
Instead it’s how much house or car can I afford? Most understand that they can afford the cheaper used car. But what they really want to know is how much of a car can I afford. The more money I spend, the nicer car I can get… So just keeping stretching that payment out so I can afford it. Heck, they now offer a 72 month car loan!
Now this doesn’t mean we are not allowed to have toys! On the contrary, I own quite a few of them. Motor boat, motorcycles, sports car, etc. But I follow my own advice and purchase a nice used model that will depreciate very little.
Here is an example: I purchased a 1978 MGB many years ago. Probably had it for 6 to 7 years before selling it. I paid $3000 cash for it. Put a little money and sweat equity into fixing it up. Probably another $1000 over the course of those years. So $4000 total. I sold it for $2800.00
This car, this toy, cost me $200 a year to own (after getting the money from the sale). I put plenty of miles on it, entered it into car shows, drove all around with the top down and yes, even had to save it broken down on the side of the road once. Tons of memories.
That’s what I call cheap fun.
The main depreciation from being new was long gone. I had just as much fun as the person with the four wheeler, maybe more as I know I got more use out of it and it cost me next to nothing to enjoy it.
The take away from all of this? Be smart about what you purchase, just because you can afford more doesn’t mean you need more. Sure you may want more, but change those wants into wanting to retire earlier and you’ll quickly find yourself making smarter purchases.