What Else Are We Supposed to Do?!?!
A friend of a friend recently made an exciting decision: He purchased a new car!!! Everyone around him is so excited. "Congratulations!" exclaimed one person on social media. "Well deserved," quipped another. Silently, I mourned for him. He did exactly what he was supposed to do, and now, he's screwed.
He's a young man in his early 20s, with an okay job ($22/hour, full-time). It's not a bad job, but after I tell you the next part, you'll probably cringe. He has a $62,000 loan on his new purchase. I don't know the exact terms of his financing, but it's highly likely that his monthly payment is north of $1,000.
When I asked my friend about this guy's decision, he said something interesting. This young guy was just trying to do what he's supposed to do. He needed a car, new cars cost a lot of money, so he did what he needed to do to buy it. It's not his fault that he doesn't have a higher income. It's not his fault that cars cost so much. It's not his fault that his new payment is going to crush him. This is the way of the world, and he's just trying to survive.
This young man isn't alone. In fact, I'd say more people fall into this line of thinking than not. It's pervasive.....and it's destructive! I regularly meet with folks who are burdened by crushing vehicle loans. Very rarely do they admit there was a mistake made. Instead, they typically do what this young man did: defend it through the lens of what culture says we should do, have to do.
Is there an alternative? Of course there is! Sarah and I haven't had a car loan for the entirety of our 17-year marriage. It's not because we've always had so much money. Rather, it's because we said we would never again have car debt, then made decisions to honor that promise. What does that look like? In our case, only buying vehicles we could afford. I've never paid more than $19,000 for a vehicle, EVER. Here, I'll show you:
Age 16: $7,000 (if I remember correctly) - used debt
Age 17: $2,500 (after totaling above vehicle) - with cash
Age 19: $19,000 (stupid!) - with a LOT of debt (stupid, stupid!!!)
Age 26: $10,000 (reasonable) - with cash
Age 30: $15,000 (car for me) - with cash
Age 35: $18,000 (car for Sarah to fit twin babies) - with cash
Age 36: $16,000 (replacing a car that got totaled) - with cash
Age 42: $9,000 (my fun 350z convertible) - with cash
We'll soon replace Sarah's vehicle that we purchased a decade ago for $18,000, which now has about 250,000 miles. The budget is $25,000 for a used Toyota Sienna. Why used? Because that's the amount we can justifiably afford without going into debt. It's not easy, but it's simple.
At the exact same time, young adults all over America who are making a much lower income than us are spiraling into crippling debt because "that's what we're supposed to do." Please don't fall for the trap. It's not worth it. I promise, it's not worth it!
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