This experiment began several years ago when I received a brochure in the mail advertising silver bullion coins as an investment vehicle. The “hook” was, “We will sell you two silver eagles for the price of one, if you agree to read our special report on silver.” When I saw this, I thought, “I could give one of these coins to a friend who was having money problems as a touch point for her prayers.” I sent her a coin and a notebook with instructions. Every day we prayed that the Lord would grant her wisdom in the area of finance. Every day she made an entry in her notebook.
The initial experiment was extremely successful. At the end of six months, her attitude towards money was radically different. She began to systematically eliminate her consumer debt. She changed some behaviors that were sabotaging her financial situation. Then towards the end of the six month experiment, she was able to move into her own home for the first time in her life.
Finally, when the participants are ready, they will give their coin with a blank notebook to a friend or a family member who is ready to change their relationship with money. In this way, friendship and blessings will keep flowing forward forever, even into eternity.
One of my favorite targets is the middle class myth that we have to live with a car loan. It isn’t true. I have never had a car loan. Back in the day, I drove some pretty nasty worn out cars, but at least I paid cash for them. My first car cost $600 in 1973. That would be equal to about $3,000 in today’s money. With trips to local junk yards and my father in law’s guidance in the rudiments of automotive maintenance and repair, this rust bucket lasted for seven more years and covered about 75,000 miles. I sold it to a friend for $50.00.
Rule of thumb: Don’t buy a car that costs less than $3,000 unless you are receiving a discounted price from a family member or you are a mechanic.
Cars are a tool, not a source of self actualization unless we are talking about a 1970 Boss 302 Mustang with the big valve Cleveland heads. I am certain that if my father bought me one back when I was 19 years old, I would have become an ascended master of cool.
When you prepare a requirements list, be honest. If you live in a city with a good public transportation system (such as Washington DC) you might be able to live without a car for a few years until you can afford to buy one. However in most of the country, a car is a necessity.
If you need a car to drive 7 miles to and from work, 3 miles once a week to the grocery store, and to miscellaneous obligations like church and doctors’ appointments, you don’t need much of a car. If you are an anvil salesman with a five state route, you need an entirely different kind of vehicle, but remember, a $51,000 heavy duty pickup with a seven year note will not make you a more manly man.
A list of requirements might include an automatic transmission if you can’t use a manual transmission, but could you live without an air conditioner for a couple of years until you could afford something better? Three of my early cars did not have air conditioning, but my wife’s cars did have air conditioning.
Then there is the budget. Set a number, look in places like Consumer Reports for advice in that price range, then start looking for cars.
Rule of thumb: It is almost always cheaper to repair your existing car than it is to buy a new car.
Rule of thumb: An average new car depreciates 20% the second you drive it off the lot. They depreciate at the rate of 15% per year thereafter, making a late model used vehicle your best buy. Note: Build a cost/year curve for your particular model of interest using normal mileage valuations from the Kelly Blue Book. The years around the inflection point on your graph will represent the best value.
Rule of thumb: When you don’t have much money, consider trading in your car when your car will be worth less than the cost of repairs after the proposed repairs would be complete.
Rule of thumb: When you have some money, consider trading in your car when the cost of repairs starts to approach the monthly loan payment on a similar new car. Then, of course, always pay cash. The loan number is just a suggested trigger point.
Rule of thumb: Buying a late model used car will probably be the best course of action in most situations. However, buying a new car and keeping it for twelve or more years is also a pretty efficient use of capital.
Since buying our first new car in 1988, I have always bought new. Our current second car is a 16 year old Nissan Altima. Although it isn’t worth much of anything anymore, it still runs just fine.
While I’m thinking about it:
Rule of thumb: Retired folks most likely don’t need that second car.
Now if I can just convince my wife of that last rule of thumb—at thumbtime in the future.