I thought to begin this blog, it might make sense to list out various decisions that I have made in the past that led me to believe I was “good with money” or those that I didn’t mind making because I had already labeled myself as being good with money.
One such decision surrounded car buying.
I come from a family that has always struggled financially. My father was a mechanic and my mother was a hairdresser. We were not exactly being recruited for an episode of Lifestyles of the Rich and Famous. Making us even more conscious of this was the fact that we lived in an incredible affluent area. We grew up on the North Shore of Long Island, NY. This is a section of the country nicknamed the Gold Coast. The parking lot of the public High School that I attended looked like an auto show. There were BMW’s, Mercedes, Jeeps, etc. One classmate actually got dropped off each day in a limousine that her father rode to his Wall Street job. Despite this class differential, on the 17th birthday of each child in my family, we received a car from our parents. It was not a new car by any means. As mentioned, my father was a mechanic, so leading up to each of our birthdays he would find a fixer-upper and he would work on it after hours until it was considered road worthy enough for him to trust it to carry his child around. My car was a 1978 Volkswagen Dasher. It was a great car with many little characteristics that I remember to this day. The first was that although it had an automatic transmission, there was an issue that forced the driver to shift gears manually. For example, from a stopped position, I would have to put the car is 1st gear, then shift to second gear and finally up to Drive once it had some momentum. While this may have embarrassed some teens, I loved it. The other “feature” this car had was a stereo that had a cassette single stuck in the tape deck which allowed just one single song to play if you wanted music. If you chose to listen to this one song, the speakers were such that it sounded like the artist was singing under water. It was really quite the ride.
Having had this vehicle and comparing it daily to the much nicer cars of my classmate is something that always stuck with me. I often day dreamed about getting a new car once I had the income to do so. Once I got my first real job after college, I quickly went out and purchased a gently used BMW. It was beautiful and of course it was financed. I made those payments religiously. It cost approximately 50% of my take home pay and ensured that I would be living with my parents much longer than should have been necessary, but I did not care. This was the first of many car financing arrangements.
Fast forward to later in life when I got married. My wife had her own car and it was fully paid for. As we sat down to discuss our future finances, we determined then and there that we would only ever have one car payment. We would not upgrade (and finance) either of our cars until the other car was fully paid for. The fact that this type of thinking was very much better than most of my friends and family, I patted myself on the back for having such a strong financial base to work from.
If I took the time to go back and calculate exactly how much money I have paid in interest on those loans and then take the further step of calculating the present value of those dollars had I invested that money instead, it would most likely be a shock to my system that I may not recover from.
My current auto situation is much better. Approximately two years ago, my wife was in “need” of a newer car. I started doubling my monthly payments on my car loan and got it paid off fairly quickly. This allowed us to search for a newer vehicle for my wife. We purchased a 2011 Ford Explorer and of course we financed it. Now that I have embraced a more frugal lifestyle and decided to follow the Financial Independence principles, I have started to power pay the loan for that car. In a very short period of time, I can now report that I have paid the note off in full. The very next day, I adjusted my auto-investment into Vanguard in the amount of the monthly payment I used to make on the car. While I do have an SUV which is not the most economical and the car is probably newer than we need, I consider this a small victory. Onward and upwards.