I’ll Always Have a Car Payment: Why It’s a Lie You Don’t Have to Buy

A few months ago, I was honored and flattered to be featured in my friend Heather’s Babble post about bloggers who are debt-free and how they did it.  I think it’s always inspiring and fascinating to hear how other people battled debt and found financial freedom.  Thanks to that post, I was approached by Jon White about participating in his Debt Free Living podcast.  Jon and I spent nearly an hour talking about how Mike and I came into our debt and how we went about paying off $100,000 in six years.  The podcast ended up being about 30 minutes long.  If you’d like to hear an in-depth account of how we became debt-free, have a listen.

One of the biggest factors in dropping our debt was a decision we made to never have another car payment again.  In the beginning, that meant selling our nice, shiny new car.  We’d purchased a brand new Honda Accord when the car Mike’s parents had leased for us was up.  That’s what you do, right?  We both loved that car … it was sharp, it had that new car smell, we seemed so grown-up.  Now, if you’d looked at our finances you’d realize that we weren’t making the most grown up decisions, no matter how we looked on the outside.  We realized that if we wanted to live our dream of owning a home, having a family with me as a stay-at-home parent, and function without financial stress, something had to go.  It was the car.

Mike sold the ’98 Accord and paid cash for an ’88 Accord.  It was not sharp, it did not have that new car smell (although it did have another kind of smell), and it felt like the kind of car you get “gifted” in high school.  But … it was paid for, and we were able to use the money that wasn’t going to a car payment to begin tackling our other debt.  It was just one step in the process, but it was a huge one.  It was like drawing a line in the sand saying we would never be slave to the lender again.

When it was time for me to change cars in 2004, we paid cash for a ’96 Honda Odyssey.  Using insurance money from the car I totalled (whoops) plus our savings, we got a great car.  How great?  I’ve been driving it ever since.

In the last two years, we’ve known that the time was coming to replace the van.  It had over 200,000 miles and it was starting to show its age.  With that in mind, we’ve been socking money away in a savings account.  Last month we finally reached a point where we realized that driving the van even as far as Nashville wasn’t the best idea.  It was time for something “new”.  We ended up buying a 2005 Honda Pilot with just over 100,000 miles.  We all love the car – compared to the van it seems brand-spankin’ new!  And best of all?  Still no car payment.

2005 Honda Pilot

I can’t help but get frustrated when people tell me that paying cash is great for me, but it would never work for them.  You don’t have to go through your adult life assuming that a car payment is just one of those things you have to have.  These are the most common arguments I’ve heard, and why I think they’re a myth our debt-riddled society has created:

1.  I need a dependable car. A used car doesn’t automatically equal undependable.  I drove the Odyssey for over 7 years and never once found myself stranded with car problems.  Do your research (Consumer Reports has great surveys on which used cars are the most dependable), keep it properly maintained, and a used car can be every bit (if not more) dependable than a brand new car.  For added assurance, purchase AAA membership – it’s way cheaper than a car payment and you’ll never find yourself stranded.

2.  It’s expensive to maintain an older car. Again, do your research and buy a car that gets good ratings for upkeep.  In the last 13 years we’ve owned 4 used cars (2 Hondas, a Mercedes and a BMW).  None of them required extensive maintenance to keep them running.  Yes, you will have to put some work into them.  But which makes more sense? $500 a month in someone else’s pocket or the occasional trip to the mechanic?  Put the money you don’t spend on a car payment in a savings account for any repairs … and if you don’t need it do something fun with it instead.

3.  I need a car that reflects my status. Our real estate agent told us this once – she couldn’t possibly haul clients around in a clunker.  Well, yes, I probably would think twice about getting in your Pontiac 6000 (sorry, Mike!).  But what’s the difference between a brand new car and a 2- or 3-year-old car?  Not much, other than your big ol’ car payment.  I will think more highly of you if I know you haven’t financed every last piece of your status.

4.  I can’t afford to pay cash for a car – financing is too good of a deal to pass up, anyways. It’s paying cash for that first car that’s tough.  I totally get it – it’s a hard cycle to break out of.  The dealers make it so much easier to trade your old car in and get something nice.  But they’re not financing cars because they care about you – they’re doing it because they’re making money off of you.  If you’re a few years out of needing a car, start saving as much as you can now.  Even $50 or $100 a month will make a difference in time when combined with the money you can make selling your old car.  If you have a more immediate need, consider making this car your “gateway” car to financial freedom.  Buy what you can afford that will get you where you need to go.  Drive something less than perfect for a year or two until you can save up enough to buy what you want.  It’s not forever, I promise.  Like Dave Ramsey says, “Live like no one else so that one day you can live like no one else.”

5.  I can’t get all the bells and whistles I want in a used car. Is a built-in DVD player, satellite radio and a GPS really worth going into debt for?  Buy what you can afford and use the money you save to purchase those things on your own.  My used car?  It’s paid for AND it has butt warmers.  I win.

The bottom line is, if we can do it, you can do it.  Take a chance and say goodbye to that car payment.  If you miss it, you can always get a new one!  I have a feeling you won’t miss that payment one bit, though.

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Chores, Charts and Allowances for Tweens (Alternatively Titled: “Shouldn’t We Have This Figured Out By Now?”)

Disclosure:  I was compensated by MomSelect in exchange for reviewing the GoalForIt Chore Chart.  All thoughts and opinions are my own.

Start typing my name into an iPhone, and it wants to auto-correct it to “nag.”  Certain members of my family might find this amusing, but I find it hits a little too close to home.

Yes, Ang likes to nag.  Ang especially likes to nag Elena.

Are your clothes in the hamper? Did you brush your hair and teeth? Homework done? Is your backpack ready to go? Is your room picked up?.  Is it really picked up? And so on and so forth.  It gets old.  I get tired of listening to myself, and judging from the heavy sighs and eye-rolling, Elena doesn’t find it very endearing, either.

Every family has its strengths and weaknesses and I’m here to admit that holding our kids responsible for chores and following through with payment is a major weakness for us.  We’ve been through a few different systems, both for chores and deciding upon how to reward chores done,  and none of them seem to have stuck.  Our issues fall into a couple of categories.

  1. We don’t have a set list of chores that we expect Elena to complete. We know what chores she’s capable of, and should be doing, but they’re not written out anywhere and they’re certainly not followed up on consistently.  We know she can get her dirty clothes from her room to the laundry room, and some days we expect she do it … but other days I just do it for her.  It’s faster, I’m doing laundry anyways, yadda yadda.
  2. We can’t seem to stick to a system for communicating chores and what they’re worth. We’ve tried a few different charts, and some have worked okay, but they never last.  I think this has less to do with the chart than it does with the fact that we’ve never come to an agreement on how to pay out for chores.  Do you earn money for everything?  If so, how much is appropriate for a 9-year-old?  Or are some chores just things you do as part of a family while others are worth money?  Do you get a certain amount of money just for existing, whether you do the chores or not?  Do you get punished for not doing chores, or do you just not get paid?
  3. We’re horrible at following through with payment. Again, probably because we’re not sold on how exactly to divvy out payment, but we don’t consistently pay on time.  And there we come full circle:  if I was working and not always getting paid, would I do what was asked?  Or would I simply endure the nagging like Elena does?

A few weeks ago I was asked to check out GoalForIt, a free, customizable chore chart that can be used on or off-line.  To date, we’ve only tried written chore charts.  Elena loves any chance to get on the computer, so I thought this would be a good system to try.

We’ve been using it for almost 2 weeks now.  There are several things I like about this online system versus other chore charts we’ve tried:

  • Customizable: You or your child can tweak the chart to your liking, including colors, and themed templates.  You can then add items to the chart, with different choices for chores, behavior, and healthy habits.   You also have the option to add custom tiles if you don’t see something you’d like to add to the chart.  Rather use a paper-based system?  You can print out the charts instead.
  • E-mail notification: You have the option to set up daily, weekly or monthly email updates for each chart, which helps us follow-through with payment.
  • Reward Tracking: You can assign each chore a point to help with tracking, whether for allowance or for a different reward system.  You also have the ability to create your own reward system, if you’re choosing activities and things over money.
  • Free: I’ve seen several systems that require some kind of fee.  I’m loathe to invest in anything if I’m not sure we’ll stick with it.

There are a few things we wish were different:

  • Tween/Teen Choices: Elena wanted to use the tween templates, but the items available to add to the chart are pretty limited, and a little odd (“Have a balanced day?”).  The choices for the kids’ charts were still age-appropriate, but the graphics were on the babyish side for her preference.
  • Have Monetary Option: Completing items on the chart earns you points.  It would be nice to have the option to have items worth a monetary amount instead.  Otherwise, you have to decide how much each point would be worth and document that somewhere else.  One more step makes it that much harder for us to remain consistent.

After 2 weeks, I could see this as a system we could make work.  I’ll probably still be on the search for something that helps us track payment.  I definitely like the idea of having something online, as that seems to be slightly more motivating for Elena.  I still find myself having to remind her to fill out the chart, so any suggestions you have to help us motivate her to take more initiative would be greatly appreciated.  In the meantime, we’ll continue to use GoalForIt – paperless and free is always the preferred method for us!

How do you manage chores and allowance for the older child in your home?  If you have a system that works, please share!  And if you’re having difficulties like us, where do you struggle?

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Remembering to Act My Wage.

$140

That's what I counted in our envelope of cash that we keep for spending money on Friday afternoon.  

$140 to get us to Tuesday, the last day of the month.

Now, to be fair, that amount may either seem like a little or a lot to you, depending on your circumstances.  Your reaction probably also depends on knowing what exactly that money is earmarked for.  

For us, that means we have $140 left to spend on anything that comes under the following categories: eating out, entertainment, random household expenses, kid-related expenses, or groceries.  Want to order a pizza? Get out the envelope.  Feel like a movie?  Get out the envelope.  Gotta have that cute knick-knack for the mantel? Envelope, please.  Out of milk?  That's right – no envelope, no leche.

We've had great months where we've kept our spending way in check, with extra money left to save.  We've had horrible months (March, I'm looking at you), where the money pours out like soup in a strainer.  Though we've always strived to live on less than we make, it used to seem a little less necessary.  Personally, I always felt like we had the supplemental income that poker provided to help us out on those "soupier" months.  We're almost 2 months into the post-poker world, though, and as far as we know it's not coming back for a long time.  

Where in the past I would have made a feeble attempt to make that $140 last until the end of the month, now I feel as if it's a must.  I only bought what I absolutely needed at the grocery today.  I took the kids to the park instead of the Indianapolis 500 Parade.  I drove cranky, famished kids home for lunch instead of going out to eat.  

It's not that I want you to feel bad for us.  In no way are we lacking for anything that we need.  We redid our patio last month, and booked a summer vacation last week, and paid cash for both.

It was more of a realization, looking at that $140, counting the days ahead, and thinking of the wants and needs that added up to, well, more than $140.  It was a realization that, until I go back to work at some point, things will be tight.  It was the realization that if we want to stay on the right path and eventually live a life with some breathing room, it's time to Act Our Wage.  Not just on some days, but every day.

If there's one thing I know for sure about personal finance, it's that the lessons one needs to learn are never easy.  You can know the right thing to do with every fiber of your being (spend less than you make!), but your inside voice and the outside influences can convince you otherwise time and time again.

Yesterday we had $140.  Tonight we have $73.  Hopefully come midnight on May 31st we'll have at least a couple of quarters left to rub together.  But no matter what, we know we have the peace of mind that comes with paying attention and realizing that what we have is more than enough.

Edited on May 31, 2011:  $10.  We finished the month with $10 left over.  I think we kind of rock.

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