THIS OR THAT?
There are so
many choices in life especially when it comes to finances. These choices can lead to wealth or they can
lead to a continuous cycle of just enough to get by. One of those choices that everyone will make
in their life at least if they don’t live in a major metro city like New York
where transit rules is when to buy a car.
Not only when to buy a car, but how to pay for that car. If you only look at car commercials you would
think the only option a person had was to finance the car they wanted. Why do these commercials only show how you
can get a car payment or a lease?
Because that is where the car dealership or the bank can soak all the
extra money out of you in the form of interest.
The car companies are clever with their commercials because they make
the person watching the commercials feel that they NEED that car and that the
car will raise their status in the world.
Unfortunately it actually does the opposite.
After
looking at a few of these car commercials, I have seen monthly payments of
$399, $569, even one that was $749. Who
would pay $749 a month for a piece of scrap metal? That is the rate of a two bedroom apartment
in the south and you can actually live in an apartment! I use to be part of the car loan crowd in
2007 when my husband and I signed our names to a $20,000 car loan for a
Chrysler 300. The car company appealed
to our desire to impress others. As a
result of this vanity my husband and I landed on the wrong side of “this or
that”. We chose this (car loan) and
missed out on that (paying off a college loan fast). See we also had a $25,000 college loan as
part of our debt and if we were smart instead throwing our money away each
month in the form of a car payment ($400) we could have been paying that
student loan off. It got to a point when
I looked in the driveway at that car all I could see was a missed opportunity
to be debt free! Just like us whenever
you choose a car payment you are missing out on a brighter future financially
because you are spending money that could be used for something more valuable
like investing. For example take our
$400 car payment that we paid on for two years.
If we would have invested that same amount over the same period in a
mutual fund that has a 10% return on investment then our family would have over
$10,000. If we would have stayed on the
loan company’s five year schedule and invested that same amount we would have
saved over $30,000! When I seen these
numbers I decided to pay off the Chrysler and to only pay cash for used cars in
the future. I also found out that
millionaires only drive used cars and let others take the depreciation hit by
buying new.
We now only drive paid for
cars and as a result money that used to go to car payments is now going to
saving for the future. If you have a car
payment you have to ask yourself “this or that” and realize what you are
missing out on. Do you have a car
payment and there’s no extra money to save for retirement, for college
education, or insurance then it is time to say do I want “This” a car payment
on something that goes down in value everyday or “That” a financial future
where there is no struggle and your family has generational wealth?