Do You Really Want That Car Note?

Buying a New Car: Is the Car Note Really Worth It?

Anyone would love buying a new car. It’s fresh. It’s different. It’s well… something new. But while everyone loves new things, is buying a new car really worth it? What growth potential does that new car cost you? Let’s find out.

So, let’s say you buy a new car? That isn’t why you are poor.

Let’s face the reality of things. Buying a new car isn’t what makes you poor. A car is an investment and something that will reliability (hopefully) get you from point A to point B. So, buying a car is not a bad idea but let’s talk about the smart approach when it comes to maximizing your income for profits that you should take.

First off, if you have barely any money in the bank, financing a car is a bad idea. Sure, you say you can’t afford to buy a 2-thousand-dollar car right now but you can easily turn around afford a 15 thousand car instead because it was 0 to little down. This seems like a solid investment because you talked yourself into the fact that it will get you to work, allow you to run errands and do everything to make you money.

Show Me The Numbers

So, let’s talk numbers since that is what seems to catch people’s attention the most. Say you walk in and buy that car for 15k down and maybe have close to an additional 1k in fees to register it. This puts you at 16k total for this car. (you can’t afford a 2000-dollar car but you are now driving around in a 16-thousand-dollar car? Interesting…)

Buying The New Car

buying new car

Now because you are financing this car, you will have to get yourself some bigger insurance. Instead of around 130 a month, you are now paying 260 a month. Only an extra 130 a month. Since you are financing this car, you will also have to pay interest on it too. Let’s say you have a rate of 7.99 APR. Now let’s put the numbers in our magic wallet calculator. We also put down that you are going to pay off this car in 3 years.

Monthly Payment Estimate $501
Annually Payment Estimate $6012
Total Principal Paid Estimate $16,000
Total Interest Estimate $2,036
Total Payout Estimate $18,036

You will average a bill of 56 dollars a month for 3 years in just interest. That is a total of $672 dollars a year. That is more than enough to cover minor repairs on a car. But we are not done. You still have insurance.

Monthly Estimate $260
Annually Estimate $3120
3 years Estimate $9360

Buying The “Old Reliable” Option

buying new car

Now let’s look at that $2000 car you picked up on the market place to get back and forth for now.

Car Cost $2000
Registration $150 Estimate
Maintenance, Tires, Fluids, Breaks, bulbs. $800
Extras! Car scent, wax, vacuuming, etc. $75
Total $3025

As an older car stays in your garage, you should always set aside an extra 100 bucks a month to cover repairs for it. If you do some research, you could probably fix a lot of the small issues on your own with little to no knowledge with resources like YouTube, google and other maintenance car books based on your model.

Here is the cost of the car now with insurance.

First Year (counting 100 away a month) $4225
Second Year (Counting 100 away a month) $1200
Third Year Counting 100 away a month) $1200
Total for the three years $6625

Maintenance

Do keep in mind that you will have to pay for maintenance on your new car too. Now let’s see the insurance on this car.

Monthly Estimate $130
Annually Estimate $1560
3 years Estimate $4680

What’s the Total?

So now that you have seen numbers, let’s see them side by side.

  New Car Used Car Difference
Car Purchase      
First Year $6012 $4225 $1787
Second Year $6012 $1200 $4812
third Year $6012 $1200 $4812
Total $18,036 $6625 $11,411 
Insurance      
Monthly $230 $130 $100
Annually $2760 $1560 $1200
Total $8280 $4680 $3600
Total $26,316 $11,305 $15,011

So, if you bought that car for 2k, you will have saved $15,011 plus any of the 100 bucks a month that you put away that you didn’t spend. But what is the point of saving that money if it’s not going to grow?

What Can That Extra Money Do For Me?

Now we will take that $15,011 invest it into an account that grows at just 7.5 percent APR. This is for 1 year.

Amount to invest (the amount you saved) $15,011
APR 7.5%
Number of years? 1
Monthly interest Potential $93.81
Total of Interest $1125.82
New Value of your investment at the end. $16,136.82

Now, let’s move this up to 3 years.

Amount to invest (the amount you saved) $15,011
APR 7.5%
Number of years? 3
Monthly interest Potential $93.81
Total of Interest $3,377.46
New Value of your investment at the end. $18388.46

Let’s compare 5 years.

Amount to invest (the amount you saved) $15,011
APR 7.5%
Number of years? 5
Monthly interest Potential $93.81
Total of Interest $5,628.60
New Value of your investment at the end. $20,639.60

Keep it there for 10 years?

Amount to invest (the amount you saved) $15,011
APR 7.5%
Number of years? 10
Monthly interest Potential $93.81
Total of Interest $11,257.20
New Value of your investment at the end. $26,268.20

Keep it there for 20 years

Amount to invest (the amount you saved) $15,011
APR 7.5%
Number of years? 20
Monthly interest Potential $93.81
Total of Interest $22,514.40
New Value of your investment at the end. $37,525.40

Let’s say you keep it there will you retire. You started this at 25 and retire at 65.

Amount to invest (the amount you saved) $15,011
APR 7.5%
Number of years? 40
Monthly interest Potential $93.81
Total of Interest $45,028.80
New Value of your investment at the end. $60,039.80

Now if you look at things, you can take that 13 grand easily turn it into over 200k over the next 40 years. All because you drove that beat up car for just 3 years. If you treat everything in your life with this mindset, your success is limitless.

financial stability

Big Image Over Big Bank

Financial Stability: The Illusion Versus Reality

When it comes to society, financial stability is judged by what we see. We see friends and co-workers with all the latest gadgets and assume, “Wow, they must be doing well. They have so many nice things.” However, this can be misleading. Many of these same people are in debt, behind on bills and credit card payments. It’s common for many to take money from things they need to pay for these new toys. So, while it may look like they are doing well, they could very well be struggling because of this purchase.

Seeing Through the Illusion

When you go to your friends house, do you notice anything? Let’s start with the car they drive. Normally within a few years old, probably a car note. Big screen TV in the living room for sure to match that nice living room set. The kitchen is full of brand new appliances because they are required in order to have a nice home. Plus there are more and more purchases that you do not see through out the house.

Now let’s take a step back financially and observer things. It would appear that he has put a lot of these natural purchases on his credit cards.  But looking past everything, even if he had paid cash for all of this, how much is he really losing?

See, society measures our ranking by the types of goods we have. If someone has a 5 year old smart phone, all their friends push for them to upgrade. This also goes to those who have a 2 year old phone or even as new as 1 year.

Social Media – The Anti-Social Media…

Everyone feels the need to brag about their big purchases online but let me ask you this? What if your bank account was as public as all of those purchases that you have made day after day? What if everyone could see your financial stability status? Would you be as open about that as you are with your expensive purchases? You know that selfie in the mall with your brand new shirt that costed $40 bucks (because a $10 dollar shirt wouldn’t satisfy your followers?). Or that $60 dollar game that within 6 months will drop down to 25 bucks? Those football tickets that were $550 dollars a piece because the ones 20 feet up that were $200 weren’t close enough.

You see, we base everything we have on the image that we show. But if that image was measured with a number next to our name that linked to our bank accounts, I feel things would change. New car sales would probably drop drastically too. $400 dollar a month car note in one year is close to 5k ish. For the competitive market, adding 5k to their social number would be huge.

Dating?

This would be great. How many guys with corvettes and nice toys would fail to guys making a third of the money but a bank account 30 times in size? To break it down, would a girl want to date a guy with only $1000 in savings or a man with $30,000 in savings? If I am trying to decide who to build a family with, financial stability would be a good knowledge point. A girl would turn down the men with a brand new sports car for the men with a beat up Honda that he can actually afford maintenance on comfortably.

Facing Reality

While it may look and feel good to have nice things, does it really have as much value as society thinks? It comes down to deciding where that is better off used. Financial stability gives you security for your bills, car, home, and your family. It gives you less to stress about. When you realize that you are giving up all of this, is that cool new gadget that all your friends have really worth it?

Learning to Build Wealth by Being Poor

Common Misconception of Wealth

Wealth is commonly thought to be the solution to any problem that could arise. The answer to all problems is more money but the problem is, more money does not mean less problems. The problem is the other way around. When you have more money, you tend to spend more money.

Let’s break it down like this. If you only have $40 a week for dinner because you are hurting for money, how much extra are you going to buy? You are probably not going to waste money to buy soda or snacks, you are sure not going to buy beer, and fast food is not an option. So you start looking at the options available for a filling dinner and something that will last.

Do you think if you have $200 a week to spare on food, that you would shop like this? Of course not! You will spend a lot of nights stopping by fast food chains, ordering pizza or the generic Chinese buffet up the road.

Also the amount of snacks, drinks, alcohol and high end stuff will now be added to your shopping list. How is it that someone can stretch 40 dollars for dinner a week but someone can still easily blow through over 200 a week also feeding the same amount of people?

 

What about cars?

This conversation is always one of the best ones you can have with anyone. It amazes me how people who are poor can keep the same car year after year and make it work for them but anyone who makes what they consider to be a good amount of money can magically afford a car note and extended insurance(full coverage).

Look, if you can afford to put money away in savings, building up your investments, and build your retirement. Also, take care of your bills with no doubts, be prepared for bad rainy days and have food covered, then go get your car note. The average new car note is around $500 a month for a car. That is over $6000 a year, not counting the full coverage insurance. The broke man can afford to drive a 15 year old truck for 300,000 miles and still counting. The college graduate has to trade in his car every 100,000 miles.

Why can the poor man drive the same thing for 10+ years? How can this be when a man with money absolutely needs a new one every two years?

 

Phones? Oh my..

What about phones? The poor man can keep a 100-dollar phone going for over a year easily while the wealthy man has to purchase a 1000-dollar phone every 2 years. The poor man also can make a 40 dollar a month cell phone plan work while the wealthy man pays that much for his phone alone, not counting the service.

 

Well I need nice furniture for my home…

So, the poor man goes on his market websites like Craigslist, Facebook even some local places like Habitat for Humanity to furnish his home. He spends about $150 on his living room set, about 100 per bed room and doesn’t put a lot of money into the furniture because he can’t afford too. He decides to go buy a TV for the living room which is a big investment. This brings him to his big buy of $300 on his 50-inch TV in the living room. It’s not the best TV but it makes him happy. He also picks up some used 32 inch TVs for the bedrooms at just $150 a piece.

The wealthy man starts out by driving out to some furniture stores. He knows what he wants but he wants to make sure he gets something that will last years. He starts with the living room. Finds a beautiful living room set for just 700 bucks. This includes love seat, couch and recliner. He still needs a good TV stand, luckily the ones at Walmart for just 170 will look amazing with this new furniture.

Next, the bedroom. This is his sanctuary, he needs to have the best bed because your bed is your investment for years to come. He finds the perfect Tempurpedic mattress on sale for just 899.99. But realizes he should probably get the king because it will provide extra space. Now his bed is up to 1299.99 before he has even purchased a box spring or bed frame with it built in. He still doesn’t have a dresser or night stands.

His TV has to be the best, because he is going to have all his friends over for the game. He can’t settle for just a big screen, but has to have the best refresh rate, highest color rating and strongest quality available. He finds that these TVs can get up to 4-8 thousand. But when he finds a new Samsung for just 1800, he takes it in a heartbeat.

 

The Outcome on Wealth

Both men now have their homes furnished in the living room and bedrooms, but there is one issue with this. The wealthy man now has spent so much money on his setup that it will clog up his credit cards and other loans for months or even years to come. The poor man has everything paid off and doesn’t even have to worry about his bills going up.

The wealthy man is also paying interest on a lot of his purchases, especially the ones not paid off within 12 months. The poor man doesn’t change his budget for the upcoming months since he is already past this.

The wealthy man is now living paycheck to paycheck now in order to keep up with everything while poor man is enjoying his life putting away a little in his savings to build his wealth every month.

Now what would have happened if the wealthy man had set himself up like the poor man? The wealthy man would be pretty good right now. He would be putting more and more money away in his savings. He would be living comfortably and happy. The wealthy man also wouldn’t be stressing about bills. But instead, he didn’t purchase better stuff. He purchased a better image to look better than his poor friend. But at the end of the day, who is really winning?

 

The Truth Behind Building Wealth

In today’s time, everyone worries about their image. It’s normal to rationalize why we need the new stuff. We rationalize the price to convince ourselves that these new purchases are a necessity. You hear and see it daily, or probably even do it yourself. The reality is that those purchases aren’t as necessary as you think. That phone you’ve had for 11 months that still functions does not stop working just because a newer model is released. It still does everything you need it for in our life. Yet, as a society, we classify that new phone as a necessity. We add that extra purchase or bill to our lives, even if it means taking away from our savings, our bills, our rent, or even food out of our mouths. We take comfort and security out of our lives solely for public image. When you build wealth, your financial stability and security should come before all of the extras in life.

shopping, splurge

Going to the grocery store for 3 items, leaving with 30…

Breaking Your Budget

Splurge Spending

Have you ever heard the statement “I went to Walmart to purchase a bottle of shampoo and 300 dollars later, we left”? This happens to us all the time. You walk into Walmart with a list (well, some of us do) and you are on a mission to get in and get out. All you need is eggs and milk. Then you walk by the frozen food area and decide to add ice cream to your list. That Blue Bell isn’t cheap, but you don’t change your budget for this.

Domino Effect

This appears to be the pattern as you continue through the store. Before you know it, you bought candy, snacks, extra soda, cake mix, special bread, cheese, more yogurt. Etc., etc., etc. You’re here anyways, so why not stock up, right? But, it doesn’t stop there. You are in a shopping center, and you start to wander past the other aisles. You purchase a video game, new shirt and a cute hat. Now when you get home, you realize a lot of what you bought was the impulse buyer in yourself. Did you even budget that video game? Sure, it was a good deal. You told yourself it was, but where will that 30 dollars come out of before the end of the month? We know you are not going to tell your friends you can’t go out tonight because it would be embarrassing to stay inside over a video game. We know you must pay your car insurance. You can’t cut gas prices. I guess it’s safe to say that if you can’t afford things at the end of the month, you can just skip lunch.

Now you have to do this for every dollar extra you spent. That $15 hat, $7 ice cream tub, the soda that wasn’t on sale so you spend another $2 times 3 packs. Do you realize how much you actually are spending extra when doing this?

If you spend just 20 dollars extra every visit to the store, once a week in a year; This is what you spend.

1 month $86.67
3 months $260.00
6 months $520.00
1 year $1040.00
2 years $2080.00
5 years $5200.00
10 years $10400.00
20 years $20800.00

So, next time you head to Walmart and spend just an extra couple dollars, just think to yourself what you could do without that 12th hat being added to your collection.

money financial health raise

Start Your Daily Financial Workouts

In order to be strong with your finances, you must build the strength. Best way to do this is work out your finical muscles on a daily base.

In the world today, we see people who make commitments and start out on news years saying they are going to head to the gym every day. The reason is they want to build up their strength and get in shape. They also understand that you must be persistent to not only get results but to keep results.

Persistence is the best way to financial fitness. Only the ones who stay persistent with their practices will gain wealth.

The same goes for our finances. Everyone wants to be financially fit but who wants to take the time to write up a budget, stick to it and learn how to say no when being confronted with purchasing a new item. The problem is we become so weak based on the opinion of others around us. We are forced to lower our standards and purchase something above our standards. Now, what if are thinking if you buy a newer car? That has to mean you will have better standards opposed to the guy driving the 10-year-old Honda?

So owning a car will make you look better But now think about it like this. Will that image help you when you are now adding an extra 400 bucks a month to your budget because of that car note and extended car insurance? Sure you can afford the car note, everyone can. But what sacrifices will you make when you can’t say no to that TV at best buy or that new phone at the store?

Learning to ask not “if you can afford something”, but “how can you afford something”.

You see, we all ask our selfs if we can afford something. That is how many people think and it builds no financial strength, only teaches you to think in a yes or no mentality. But what about for those people who think in the sense of asking, “How can I afford this”? Now taking that extra step, you are sitting back and actually digging into your mind and your budget on how this purchase will affect you. It’s time to start thinking in a way that will open up your eyes towards what really matters.

Example: If I make this purchase, I have a chance to be late on rent near the end of next week. I do have a car pending in my drive way that I am selling in which I did not budget for having that extra cash. Maybe I should wait until that car sells. Who knows, in 3 weeks, I may not even want to afford this item. On one hand, It is so nice and all my friends will like it. On the other hand, I know none of them will even come over until football season begins.