The WORST Sin in Personal Finance

imagesYZWENY79To follow up on my last article, I would like to talk (or perhaps rant) about a mistake made by consumers far too often. As readers of this blog should know, becoming financially free in a short amount of time is not rocket science. In fact, it is all about keeping in simple. Simplifying your needs, simplifying your habits, and learning how to not rely on external factors for happiness.

I am not some type of all knowing guru who is letting the world in on some remarkable secret. I am only stating the obvious math. Earn what you can, live a happy life on no more than you need, and invest the difference. It really is that easy.

You can imagine my frustration then when I witness people blatantly ignoring these simple steps every day, and then blaming their money problems on bullshit external factors like taxes or inflation. Even worse though is when people blame their ‘predicament’ on things within their control, like their debts.

The complaints that the system is against us are never-ending, and yet we purchase depreciating overpriced pieces of shit that burn through all our savings. The most extreme example of this is financing a car.

If you EVER want to stop relying on paid employment, you will STOP GOING INTO DEBT FOR STUPID THINGS LIKE THIS. Remember that debt of this kind is not okay.

A car is for the purpose of getting from point A to point B. Almost everyone out there understands that you can get a fully functional sedan a few years old for $5,000-$10,000. With this you can get a car that will last you 10 years. Yet for some reason, the number one selling car in America is the Ford F-150. This 4500 lb monster gets 18 MPG and starts at $25,000. Many people do not just have $25,000 sitting around, but hey, the three years old car in the driveway that works perfectly fine is going out of style, and I have great credit, if I can get a 2% rate on it I know I am getting a deal!

Lets get real here, the difference in price between a new Ford truck and a perfectly reliable sedan is at least $15,000. The minimum 8 mpg fuel difference adds up to another $10,000 in gas over the next decade with compounding, not to mention that 2% adds about $3500 with compounding.

Is it really worth paying an extra $28,500 for something that will perform the same job as any used car off Craigslist? $28,500 is a YEAR’s worth of living expenses at least! Not to mention you are supporting an industry that actively mines thousands of pounds of the earth herself to produce the latest mobile status symbols. If you are owning a different car every 2-3 years, you are upgrading just to keep up with the jones’s down the street.

Little do most people know that this little switch-a-roo costs them an extra year of paid employment, maybe now they will think twice before dumping their reliable car with only 60,000 miles on it?

There is absolutely no reason to be purchasing a car that is less than three years old. When gas guzzling cars are financed, people are basically investing in a stock that they know will go down, and on top of this the company collects dividends from them.

And what if you don’t even have the $5,000-$10,000 for a nice used car? You start saving. If you do not have $5,000 cash, you are NOT in a financial position to be going into debt. I understand you have places to go, but public transportation will get you there. If you think public transport can really suck, you are right. Use this as motivation to save more and bike the shorter trips. Since you already know how to cut out all the little bits of waste, amassing the money for a used car will take no time at all.

It is always a much, MUCH better option to own the things you have, rather than actively working so that you may someday own your stuff. Pay for purchases up front in cash. The one exception to this rule is when buying a house, which I promise to release an article on soon.

If you really think about it, car ownership is not as pivotal to leading a normal life as most people make it out to be. We act as if it is a right of passage, and that every 16 year old in the country must learn how to maintain and operate a car or otherwise fall behind. In fact, some may get by just fine without one. Having used about 15 gallon of gas in the past 10 months myself, I have decided I am one of these people. So as off today, my car up for sale.

There will be a time in the future that I own a car again, but for now I can easily do without.

Anyone interested in a 1997 Volvo 850?