Showing posts with label Buying a Car. Show all posts
Showing posts with label Buying a Car. Show all posts
Jul 7, 2011
Dave Ramsey video about buying cars (Carole)
So, after a long winter's nap, here I am with a great video from Dave Ramsey on buying cars. Hope you enjoy it and get a little bit of inspiration!
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Nov 17, 2010
Buying Your Child a Car (Janssen)
As far back as I can remember, my parents made it clear that they would not be buying me or any of my siblings a car when we got our licenses. If any of us wanted a car, we'd have to buy it ourselves.
In December of my senior year, the inconvenience of me not having a car (and having early morning seminary, school, daily play practice, and a part-time job) changed their minds. They bought me a car. It was a 10 year old car and it. . . .was not a great car. In a year, they probably put more money into it than they paid for it in the first place. (Needless to say, I loved this little car with all the ferocity a seventeen year old can muster).
Eventually, about a year after I went away to college and the car became Merrick's main transportation, they replaced it with a much nicer, new little red Hyundai and that car eventually went to my youngest sister who still drives it.
When I was driving my parents' cars, they paid for the gas and I paid a small portion of my insurance. When they bought me my own car, I was now solely responsible for the gas and paid a slightly larger portion of my insurance.
Although I could have afforded a car, I never ever ever considered buying one because doing so would have cost the vast majority of my savings and I was unwilling to do that. Better to drive the minivan.
Bart's parents also said they wouldn't buy their children cars. To the best of my knowledge, all but one of their children purchased their own cars while in high school (there is one amusing picture I've seen of four of the children lined up beside their four cars along the sidewalk in front of their home). Bart said he wasn't, for a moment, willing to not have his own car. He saw it as a complete necessity.
Of course, buying a car, insuring it (as a teenage boy), and paying for gas meant that practically every dime Bart made went directly to the car. He worked three jobs his freshman year in college. He paid a high price to have his own car, including having no savings.
Because this is an issue that was such a big deal to both of us in high school, we have talked at length about what we plan to do as far as cars go for our children (seeing as our daughter just turned sixteen weeks old on Friday, I think we have some time).
Our plan (which we reserve the right to alter) is to buy a car that our children can drive when they turn sixteen. It won't be a particularly nice car, but it'll be reliable and nice enough that we don't spend a fortune on upkeep. They'll pay for gas and part of their insurance. And when they go off to college, the car will stay with us and become the primary possession of the next child. They'll have some of the financial responsibility for a car, but not such a huge burden that it prevents them accumulating any savings or forcing them to work an enormous amount to shoulder the burden.
What about you? How did your parents handle a car? What do you plan to do with your children?
In December of my senior year, the inconvenience of me not having a car (and having early morning seminary, school, daily play practice, and a part-time job) changed their minds. They bought me a car. It was a 10 year old car and it. . . .was not a great car. In a year, they probably put more money into it than they paid for it in the first place. (Needless to say, I loved this little car with all the ferocity a seventeen year old can muster).
Eventually, about a year after I went away to college and the car became Merrick's main transportation, they replaced it with a much nicer, new little red Hyundai and that car eventually went to my youngest sister who still drives it.
When I was driving my parents' cars, they paid for the gas and I paid a small portion of my insurance. When they bought me my own car, I was now solely responsible for the gas and paid a slightly larger portion of my insurance.
Although I could have afforded a car, I never ever ever considered buying one because doing so would have cost the vast majority of my savings and I was unwilling to do that. Better to drive the minivan.
Bart's parents also said they wouldn't buy their children cars. To the best of my knowledge, all but one of their children purchased their own cars while in high school (there is one amusing picture I've seen of four of the children lined up beside their four cars along the sidewalk in front of their home). Bart said he wasn't, for a moment, willing to not have his own car. He saw it as a complete necessity.
Of course, buying a car, insuring it (as a teenage boy), and paying for gas meant that practically every dime Bart made went directly to the car. He worked three jobs his freshman year in college. He paid a high price to have his own car, including having no savings.
Because this is an issue that was such a big deal to both of us in high school, we have talked at length about what we plan to do as far as cars go for our children (seeing as our daughter just turned sixteen weeks old on Friday, I think we have some time).
Our plan (which we reserve the right to alter) is to buy a car that our children can drive when they turn sixteen. It won't be a particularly nice car, but it'll be reliable and nice enough that we don't spend a fortune on upkeep. They'll pay for gas and part of their insurance. And when they go off to college, the car will stay with us and become the primary possession of the next child. They'll have some of the financial responsibility for a car, but not such a huge burden that it prevents them accumulating any savings or forcing them to work an enormous amount to shoulder the burden.
What about you? How did your parents handle a car? What do you plan to do with your children?
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Sep 27, 2010
What Would You Tell a Teenager About Money? (Carole)
A few weeks ago, I was asked to speak about money to the teenaged girls in our church congregation. Thanks to all of you and your many good comments on this blog since January, I felt like I knew what kind of information would be most interesting and helpful to these girls who are just on the cusp of adulthood.
Here's what we discussed:
1. Getting a job and saving 50% of what you earn while in your teens. I also shared with them examples of impressive teenagers I've known through the years and the amounts of money they've been able to save in their bank accounts by the time they graduated from high school.
2. The cost of tuition at local and out-of-state colleges and universities. We even took a look at the cost of elite schools like Harvard and Stanford, just so they would know.
3. Typical salaries of standard jobs: surgeon, fire fighter, grocery store clerk, pilot, flight attendant, lawyer, school teacher. . . and what the monthly take-home pay (after federal taxes) would be for each of these jobs. So. . .is a college education really worth the time and money invested for your particular profession?
4. How much adult life costs: housing, groceries, transportation, utilities and insurance. True to one of my previous examples of teaching children about money, I brought in $3,000 (which is a typical take home salary if you make $50,000/year -- the average salary in Las Vegas) in cash -- in $10 bills. Together we paid the bills of a typical family in southern Nevada. Much to their surprise, we ran out of money, long before we ran out of bills. This was very eye-opening to this lovely group of girls.
5. How compound interest works. We walked through how compound interest works in your favor if you're saving money or investing, but how it works against you if you're paying off a loan or a credit card bill. We also discussed how the length of the loan (or investment) and the interest rate influence your payment (or return) and the total you will pay (or earn) over the lifetime of the loan (or investment).
It was a fun night, and I felt like the girls were right with me. But I'd love to know what YOU would have said to them? What do you wish someone had told you at their age?
Here's what we discussed:
1. Getting a job and saving 50% of what you earn while in your teens. I also shared with them examples of impressive teenagers I've known through the years and the amounts of money they've been able to save in their bank accounts by the time they graduated from high school.
2. The cost of tuition at local and out-of-state colleges and universities. We even took a look at the cost of elite schools like Harvard and Stanford, just so they would know.
3. Typical salaries of standard jobs: surgeon, fire fighter, grocery store clerk, pilot, flight attendant, lawyer, school teacher. . . and what the monthly take-home pay (after federal taxes) would be for each of these jobs. So. . .is a college education really worth the time and money invested for your particular profession?
4. How much adult life costs: housing, groceries, transportation, utilities and insurance. True to one of my previous examples of teaching children about money, I brought in $3,000 (which is a typical take home salary if you make $50,000/year -- the average salary in Las Vegas) in cash -- in $10 bills. Together we paid the bills of a typical family in southern Nevada. Much to their surprise, we ran out of money, long before we ran out of bills. This was very eye-opening to this lovely group of girls.
5. How compound interest works. We walked through how compound interest works in your favor if you're saving money or investing, but how it works against you if you're paying off a loan or a credit card bill. We also discussed how the length of the loan (or investment) and the interest rate influence your payment (or return) and the total you will pay (or earn) over the lifetime of the loan (or investment).
It was a fun night, and I felt like the girls were right with me. But I'd love to know what YOU would have said to them? What do you wish someone had told you at their age?
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Aug 23, 2010
When Negotiating, Make Them Say "No" (Carole)
"Make them say 'No'."
It means that when you are trying to buy an item or service (car, house, household repair, renovations, something at a garage sale) where there is negotiation involved, you should always bid low, low, low. The object is to get the other person to say "No." Because if the sales person says "Yes" to your bid, you COULD have bid lower.
Your goal is to figure out the lowest possible price.
I have a relative who uses this tactic on just about every purchase he makes. He offers about 75% of the asking price. He's pretty sure this bid will be safely below the "No Line." For example, if a car is listed at $15,000 then he offers about $11,000.
Sure enough -- "No!" (Bidding lower than 75% can often be offensive, but if you have a thick skin and can handle a cool, steely glare, give it a try!)
Now he has a bottom price to work from and he can negotiate up from there. He almost always gets a killer deal this way.
There are many strategies that can be used when negotiating on a item, but these three simple rules seem to work in almost every case -- even for those of us who don't enjoy confrontation.
1. Make them say "no," then work to a price you can both be happy with
2. Remain pleasant
3. Be willing to not buy this item.
Please share your negotiation success stories! What has worked for you?
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Jul 21, 2010
The Magic of Compound Interest (Carole)
When you are investing money, there are two basic types of interest your money can earn: Simple Interest and Compound Interest.
Quickly, let's look at the difference between these.
Add this interest earned to your original $10,000
The formula is a bit complex and hard for me to type out, but you can look it up here if you just really need to see it for yourself.
Monthly Interest = $27,126.40
Yearly Interest = $26,532.98
The longer your money is invested the more interest you'll earn. Your same $10,000 at 5% for 30 years turns into $43,219.42 Same money, same interest for 40 years is $70,399.89
The higher your interest rate, the more interest you'll earn. Your same $10,000 at 10% for 20 years will become $67,275.00
Combine longer time and higher interest and it starts to get really fun:
$10,000 at 10% for 30 years = $174,494.02
$10,000 at 10% for 40 years = $452,592.56
$10,000 at 12% for 20 years = $96,462.93
$10,000 at 12% for 30 years = $299,599.22
$10,000 at 12% for 40 years = $930,509.70 (yep, nearly a million $)
Imagine if you could scrape together only $10,000 by age 20 and find a good mutual fund that paid 12% interest (not that difficult really) and just LEFT YOUR MONEY THERE until you were 65 years old, you would have $1,639,876.04 That's without you ever adding one more cent of principal to this investment. The sooner you can get investing in something earning a decent interest rate, the better off you will be at retirement.
That is magic. If you want to work some magic yourself, here is a compound interest calculator. I'll warn you -- it's addictive!
P.S. Your mortgage (or car payment, student loan, credit card bill. . .) works on a compound interest formula in your lender's favor. That is why you often end up paying 3 times the cost of your house by the time your loan is completed.
Quickly, let's look at the difference between these.
Simple Interest
(Interest is only calculated on the money you have invested):
If you invest $10,000 (your principal) at 5% interest for 20 years:$10,000 x 5% x 20 years = $10,000 (interest earned)
$10,000 + $10,000 = $20,000
Compound Interest
(Interest is calculated on your invested money PLUS your previously earned interest):
If you invest $10,000 (your principal) at 5% interest for 20 years with compound interest you'll end up with $26,532.98 . The formula is a bit complex and hard for me to type out, but you can look it up here if you just really need to see it for yourself.
In addition:
The more often your compound is calculated (daily, monthly, yearly) the more interest you will earn. Daily Interest = $27,180.96Monthly Interest = $27,126.40
Yearly Interest = $26,532.98
The longer your money is invested the more interest you'll earn. Your same $10,000 at 5% for 30 years turns into $43,219.42 Same money, same interest for 40 years is $70,399.89
The higher your interest rate, the more interest you'll earn. Your same $10,000 at 10% for 20 years will become $67,275.00
Combine longer time and higher interest and it starts to get really fun:
$10,000 at 10% for 30 years = $174,494.02
$10,000 at 10% for 40 years = $452,592.56
$10,000 at 12% for 20 years = $96,462.93
$10,000 at 12% for 30 years = $299,599.22
$10,000 at 12% for 40 years = $930,509.70 (yep, nearly a million $)
Imagine if you could scrape together only $10,000 by age 20 and find a good mutual fund that paid 12% interest (not that difficult really) and just LEFT YOUR MONEY THERE until you were 65 years old, you would have $1,639,876.04 That's without you ever adding one more cent of principal to this investment. The sooner you can get investing in something earning a decent interest rate, the better off you will be at retirement.
That is magic. If you want to work some magic yourself, here is a compound interest calculator. I'll warn you -- it's addictive!
P.S. Your mortgage (or car payment, student loan, credit card bill. . .) works on a compound interest formula in your lender's favor. That is why you often end up paying 3 times the cost of your house by the time your loan is completed.
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Jun 30, 2010
Time Well Spent (Carole)
the faster you're living your life, the more money you're probably spending
Because it takes some time to:
* Write up a budget
* Plan a menu
* Cook your own meals
* Look for and use coupons
* Become familiar with the usual prices of things
* Comparison shop
* Do your homework on the best brands
* Shop at more than one grocery store
* Try a DIY project
* Home repairs
Are you living your life too fast to be frugal??
It's difficult to remove yourself from the frenzied pace of modern life. But try to slow it down, think things through, consider your options before you buy something, take a few deep breaths and spend your hard-earned money wisely. Your savings can be enormous.
Photo courtesy of FreeFoto.com
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May 16, 2010
A One-Car Family (Carole)
I'm not saying this course is for everyone. We currently own three cars (hubby's, mine and one with our daughter at college). But in our former life, with very young children, we were one of those one-car families - for 12 years. It wasn't that bad. Really. My husband and I were both flexible, and I tried to consolidate my errands and only take the car when I really needed it. I think a good attitude helps too. My girls will remember many, many nights going to pick up Dad at his office while they read in the back seats already dressed in their PJs. We'd often crank up That Thing You Do on the CD player and cruise down to his office on Flamingo Road and occasionally stop for ice cream cones at McDonalds before picking him up. If he was running late, we'd dash to the local book store that was open until 11:00 PM and wander around until he was ready to go. It was actually kind of a cozy time.
Besides special, fun times in the car, however, there is one very compelling reason to own just one car: Money. Of course. Your car, as you know, is the single largest guaranteed negative investment of cash you will ever make -- unless something really bad happens to you. Almost no car appreciates -- you spend tens of thousands of your hard earned dollars on a beautiful, shiny car and within 5 years any car is nearly worthless. You can hardly give it away. Ouch.
In addition:
1. Think of the tax you paid when you signed those papers. 7.35% is a lot on $20,000 - $60,000.
2. Interest too, if you have a monthly payment.
3. Then there's auto insurance every month.
4. Gasoline.
5. Maintenance (oil, tires, tune ups, repairs. . .)
6. State licensing (several hundred dollars in most states).
7. And remember you actually had to earn at least 25% more than the cost of the car just to pay the federal taxes on your income that paid for that car. Happily Nevada has no state tax, but if your state does, then add in another 7% or so.
Even a $20,000 car, if kept for 5 years, will cost you approximately $50 per day to own and operate. That's nearly $20,000 per year. And that's if you paid cash. It goes up if you have monthly payments. Or bought a more expensive car. Or both. My goodness, you could have vacationed quite nicely for a couple of months in europe on that! Or fully funded you 401k for the year. And an IRA. And then retire a multi-millionaire at age 50 -- if you started early enough.
Just like when buying a house, cars are big ticket items, so there is a lot of money to be saved by making wise choices. I don't know about you, but I OFTEN wish I lived in a big city (preferably London :), right downtown so I could easily walk most places. I'd happily give up my car. I could rent a pretty nifty auto for the occasional trip out of town for a whole lot less than $20,000 per year. Also, think how trim my calves would be from all that walking or biking!! I'd also buy a lot fewer items knowing I had to carry them back to my home. The benefits and savings just keep on comin'!! Mostly, I'm writing this post because now that I only have one child at home, and my husband stays in one location all day while at work -- I'm thinking about it again. What I could do with all that extra cash! I'm really very tempted. How about you??
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Apr 26, 2010
Saving for Both Short and Long Term Goals (Carole)
Melanie, a faithful FWWL reader, asked about saving for both Long Term and Short Term goals at the same time. Haven't we all been there? If you sit down and think of all the things you really should/want to save money for, it will probably be a mighty long list. Where do you start? Most people don't have the personal discipline to prioritize their wants and needs, so they just buy everything on credit the moment they want it and soon find themselves in deep financial trouble.
There is a better way and it works every time.
First -- Write your list. Take a couple of days or weeks to work on it, as it often takes some time for all your past ideas to come to the surface. Take this time to decide what you REALLY want and need.
Second -- Divide your list into both Long Term and Short Term financial goals.
Long Term Goals might include:
Emergency fund (3 - 6 months of take-home pay saved in cash -- this money is used to cover unexpected car repairs, household repairs, major medical expenses, and possible unemployment),
A down payment on a house,
A new car paid for with cash.
Some of these long term goals aren't that exciting, but they will bring stability and safety to your future financial life. Definitely worth the effort.
Short Term Goals might include:
A new piece of furniture,
Re-carpeting a room,
A vacation.
Remember financial goals are about both wants AND needs.
Third -- Now comes the hard part. Prioritize your Long Term Goals. 1, 2, 3. . . Same with your Short Term Goals.
You will quickly see that you cannot possibly save toward all of these at the same time, unless you have a great deal of extra money sitting around. My husband refers to this as trying to "ride your horse off in all directions at once." (He's said this to me many times over the years). If you try to spread your savings money too thinly, you will make very little progress on anything and will quickly get discouraged.
I suggest that you choose #1 from your Long Term list and #1 from your Short Term list and save for only those two. Decide how much money each of these goals needs to bring them to fruition. Then look to see how much money you can reasonably put toward each goal every month. Make yourself a chart (I LOVE CHARTS!) with completion dates. Tape the charts up somewhere you'll see them every day, so that you will keep these goals in the front of your mind. Take it from someone who has saved for dozens and dozens of things over the years -- the first few months of saving pass very, very slowly. But before you know it, it's been 6 months and your saved $ amounts begin to look pretty substantial. Those big numbers are highly motivating to keep moving forward! I've been saving up for a set of custom doors leading from my dining room to my kitchen for quite some time and just passed the $5,000 mark (these are expensive doors) and it feels GOOD. I'm ordering them soon!
The Short Term Goal will probably max out within only a few months and you can go buy whatever fabulous thing it was you wanted to get -- with cash! Celebrate not only by making your purchase, but also write across your chart in big red marker "SUCCESS!" and begin wallpapering your bathroom with these as you achieve each one OR fold up the chart and place it in your journal for future motivation. Then move onto Short Term Goal #2. You may find that some of your short term goals (possibly items #4 and below) begin to look a lot less interesting as time goes on. You'll be glad you didn't impulsively buy these items on credit and now 18 months later you're still paying for things that aren't important to you anymore. Delaying a purchase often causes your rational thinking to take control again or for you to simply change your mind. The VISA people hate that.
Your Long Term Goal may take you a few years to accomplish, but you'll get there too! It may seem like a slow process at times, but there is absolutely no other way to achieve your long term financial goals. This is where you see the value of keeping your monthly fixed expenses low. The more expensive your daily life is, the harder it is to save for your future or any extra lovely things.
By following this technique you will join that rare breed of people who save money to protect their futures and pay cash when they buy something substantial! Let me be the first to say it, "YOU are amazing!"
There is a better way and it works every time.
First -- Write your list. Take a couple of days or weeks to work on it, as it often takes some time for all your past ideas to come to the surface. Take this time to decide what you REALLY want and need.
Second -- Divide your list into both Long Term and Short Term financial goals.
Long Term Goals might include:
Emergency fund (3 - 6 months of take-home pay saved in cash -- this money is used to cover unexpected car repairs, household repairs, major medical expenses, and possible unemployment),
A down payment on a house,
A new car paid for with cash.
Some of these long term goals aren't that exciting, but they will bring stability and safety to your future financial life. Definitely worth the effort.
Short Term Goals might include:
A new piece of furniture,
Re-carpeting a room,
A vacation.
Remember financial goals are about both wants AND needs.
Third -- Now comes the hard part. Prioritize your Long Term Goals. 1, 2, 3. . . Same with your Short Term Goals.
I suggest that you choose #1 from your Long Term list and #1 from your Short Term list and save for only those two. Decide how much money each of these goals needs to bring them to fruition. Then look to see how much money you can reasonably put toward each goal every month. Make yourself a chart (I LOVE CHARTS!) with completion dates. Tape the charts up somewhere you'll see them every day, so that you will keep these goals in the front of your mind. Take it from someone who has saved for dozens and dozens of things over the years -- the first few months of saving pass very, very slowly. But before you know it, it's been 6 months and your saved $ amounts begin to look pretty substantial. Those big numbers are highly motivating to keep moving forward! I've been saving up for a set of custom doors leading from my dining room to my kitchen for quite some time and just passed the $5,000 mark (these are expensive doors) and it feels GOOD. I'm ordering them soon!
The Short Term Goal will probably max out within only a few months and you can go buy whatever fabulous thing it was you wanted to get -- with cash! Celebrate not only by making your purchase, but also write across your chart in big red marker "SUCCESS!" and begin wallpapering your bathroom with these as you achieve each one OR fold up the chart and place it in your journal for future motivation. Then move onto Short Term Goal #2. You may find that some of your short term goals (possibly items #4 and below) begin to look a lot less interesting as time goes on. You'll be glad you didn't impulsively buy these items on credit and now 18 months later you're still paying for things that aren't important to you anymore. Delaying a purchase often causes your rational thinking to take control again or for you to simply change your mind. The VISA people hate that.
Your Long Term Goal may take you a few years to accomplish, but you'll get there too! It may seem like a slow process at times, but there is absolutely no other way to achieve your long term financial goals. This is where you see the value of keeping your monthly fixed expenses low. The more expensive your daily life is, the harder it is to save for your future or any extra lovely things.
By following this technique you will join that rare breed of people who save money to protect their futures and pay cash when they buy something substantial! Let me be the first to say it, "YOU are amazing!"
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Apr 2, 2010
A Peek at the Promised Land (Carole)
A few weeks ago, Tara commented that she didn't see the point in being frugal, frugal, frugal just so she could be a millionaire when she and her husband are 80! What is the fun in that?? Maybe some of you have had the same thoughts as you've thought about coupon-ing, garage sale-ing, eating at home. . . Hopefully, I can give you a glimpse at where this whole Frugal Life thing is really headed.
If you have credit card debt, car loans and/or student loans, most people (when you finally get very serious about it) can pay all of it off within 3 years. We have never carried credit card debt, but we've had a few car loans and we had over $60,000 in student loans back in the 1980's -- so about $130,000 in today's money. We paid minimum payments for a number of years, and then we got religion. We paid off our car in about 8 months and our student loans in about 2 years. So we paid off all our consumer debt in right around that 3 year mark. We weren't making tons of money and we had 3 children. We were extremely average. You could probably pay things off faster than we did.
Our next step was paying off our house. We knew a couple of families our own age (early 30's) who had paid off their houses. We were AMAZED. Could we do that too?? How long would something like that take? We owed about $160,000 on our house at the time. As a little family we confronted this monumental financial goal with everything we had. We printed out an amortization schedule (numerous pages of small type -- very scary), and taped it ALL to the back of the door where the bills were paid in our house. Every month when we paid our regular house payment, we also added as much extra $$ as we could scrape out of our home budget and sent that along to the mortgage company too -- that extra money goes straight to the principle. We often gathered our 3 girls into the room while we marked off the payment amount with a highlighter pen and circled all the skipped interest payments that NEVER HAS TO BE PAID-- EVER!! Did we starve through this time? Live on nothing? Never leave the house? No, we actually took a few pretty decent vacations along the way and fed and clothed everyone. Probably saw a few movies too. But we stuck to our house payback schedule. We threw everything we could at this debt and in 3+ years we received our title, free and clear, in the mail. That is a moment never to be forgotten.
We paid that house off in 1996. In 2003 I wanted a bigger house (we had more children, the older ones were larger, and we wanted to live in a better school district). We found the house we wanted and went back into a $100,000 mortgage (we were able to pay for MOST of the house with cold, hard cash from the sale of our first house -- that felt very, very nice). We paid off this new mortgage in about 2 years. I thought I would mention here that both times we got down to the last $30,000 on our mortgage, extra money just started appearing. I can't even explain it. It's like the Lord knows you are serious about taking care of your family and your finances, so He blesses you beyond anything you've ever seen. The last $30,000 was paid off about 5 months earlier than scheduled -- both times. When you get to that point, let me know if this happens to you too!
So, when you've paid off all of your debt -- in under 5 years probably -- how does life look? It is an amazing place to be. Think of the amount of money you bring home every month in your paycheck. Now think of how much it would cost you to live with no major bills. No credit card payments, no car loans, no student loans, no house payment. Can you even wrap your mind around that?
You still have to buy food, electricity, gasoline, car insurance, clothes, property taxes. That's about it. Hmm. How much would that add up to in a month? Not very much. All the rest of your take home pay is YOURS. Wow.
What will you do with it?
Saving is a big thing. Putting as much money as you can into tax-free or tax-deferred programs is very smart.
Beyond that, you can spend it on anything you want. You could buy a new car with cash -- every few months! You could buy a brand new boat in cash, also in just a few months. You could redecorate your entire house. Put in a backyard pool. You can be generous beyond anything you can imagine. Travel to Europe, Asia, Africa -- every few months. All for cash.
You will finally be free. All the hard work you (or your spouse) puts in to bring home money, will finally benefit YOU. All in about 5 years.
Enjoy.
If you have credit card debt, car loans and/or student loans, most people (when you finally get very serious about it) can pay all of it off within 3 years. We have never carried credit card debt, but we've had a few car loans and we had over $60,000 in student loans back in the 1980's -- so about $130,000 in today's money. We paid minimum payments for a number of years, and then we got religion. We paid off our car in about 8 months and our student loans in about 2 years. So we paid off all our consumer debt in right around that 3 year mark. We weren't making tons of money and we had 3 children. We were extremely average. You could probably pay things off faster than we did.
Our next step was paying off our house. We knew a couple of families our own age (early 30's) who had paid off their houses. We were AMAZED. Could we do that too?? How long would something like that take? We owed about $160,000 on our house at the time. As a little family we confronted this monumental financial goal with everything we had. We printed out an amortization schedule (numerous pages of small type -- very scary), and taped it ALL to the back of the door where the bills were paid in our house. Every month when we paid our regular house payment, we also added as much extra $$ as we could scrape out of our home budget and sent that along to the mortgage company too -- that extra money goes straight to the principle. We often gathered our 3 girls into the room while we marked off the payment amount with a highlighter pen and circled all the skipped interest payments that NEVER HAS TO BE PAID-- EVER!! Did we starve through this time? Live on nothing? Never leave the house? No, we actually took a few pretty decent vacations along the way and fed and clothed everyone. Probably saw a few movies too. But we stuck to our house payback schedule. We threw everything we could at this debt and in 3+ years we received our title, free and clear, in the mail. That is a moment never to be forgotten.
We paid that house off in 1996. In 2003 I wanted a bigger house (we had more children, the older ones were larger, and we wanted to live in a better school district). We found the house we wanted and went back into a $100,000 mortgage (we were able to pay for MOST of the house with cold, hard cash from the sale of our first house -- that felt very, very nice). We paid off this new mortgage in about 2 years. I thought I would mention here that both times we got down to the last $30,000 on our mortgage, extra money just started appearing. I can't even explain it. It's like the Lord knows you are serious about taking care of your family and your finances, so He blesses you beyond anything you've ever seen. The last $30,000 was paid off about 5 months earlier than scheduled -- both times. When you get to that point, let me know if this happens to you too!
So, when you've paid off all of your debt -- in under 5 years probably -- how does life look? It is an amazing place to be. Think of the amount of money you bring home every month in your paycheck. Now think of how much it would cost you to live with no major bills. No credit card payments, no car loans, no student loans, no house payment. Can you even wrap your mind around that?
You still have to buy food, electricity, gasoline, car insurance, clothes, property taxes. That's about it. Hmm. How much would that add up to in a month? Not very much. All the rest of your take home pay is YOURS. Wow.
What will you do with it?
Saving is a big thing. Putting as much money as you can into tax-free or tax-deferred programs is very smart.
Beyond that, you can spend it on anything you want. You could buy a new car with cash -- every few months! You could buy a brand new boat in cash, also in just a few months. You could redecorate your entire house. Put in a backyard pool. You can be generous beyond anything you can imagine. Travel to Europe, Asia, Africa -- every few months. All for cash.
You will finally be free. All the hard work you (or your spouse) puts in to bring home money, will finally benefit YOU. All in about 5 years.
Enjoy.
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Jan 15, 2010
What Does a Monthly Car Payment Really Cost You? (Carole)
Most people in America can’t even imagine life without a car payment. Many of us even begin our car payment lives while still in high school! It’s just such a part of our lives. But what does that monthly car payment really COST you?
I’m going to let one of my favorite financial gurus answer this question. Here is what Dave Ramsey has to say in his book “The Total Money Make-over” on page 32.
“Taking on a car payment is one of the dumbest things people do to destroy their chances of building wealth. The car payment is most folks’ largest payment except for their home mortgage, so it steals more money from the income than virtually anything else. USA Today notes that the average car payment is $464 over sixty-four months. Most people get a car payment and keep it throughout their lives. As soon as a car is paid off, they get another payment because they “need” a new car. If you keep a $464 car payment throughout your life, which is “normal,” you miss the opportunity to save that money. If you invested $464 per month from age 25 to 65, a normal working lifetime, in the average mutual fund averaging 12 percent (the seventy-year stock market average), you would have $5,458,854.45 at age sixty-five. Hope you like the car!”
$5.5 million dollars! That is what your car payment could cost you. So what is the alternative? Pay cash.
How is that even possible?
Buy whatever level of car you can actually afford for cash right now, then save aside a typical monthly car payment for the next 12 months. You will now have nearly $6,000 to add to the money you will earn from selling your current paid-for car to buy a nicer car for CASH. Do this step again for another 12 months and you’ll have enough to buy an even nicer used car for cash. Imagine buying a $15,000 car for cash! You can keep doing this until you get a car you’re satisfied with. But pretty soon, you’ll want to start investing that money instead of just saving for the next car. Investing that money is the goal, remember? You’ll never get rich just buying cars.
According to the experts, a 3 or 4-year-old car purchased from an individual (especially if he or she is a motivated seller), will get you the most car for your money. You’ll also have incredible purchasing leverage when you show up in their driveway with cold hard cash in your hand.
Plan on keeping this car for around five years. Keep yourself out of other consumer debt and you’ll find that when it’s time to buy your next car, you’ll already have the money saved (probably in a mutual fund someplace, because you're smart like that!) to buy a great car for cash the first time. Your money accumulates like magic when it isn’t being mailed to the Ford Motor Company or VISA every month.
Ask yourself, is missing out on several million dollars in retirement really worth that new car smell??
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