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This is great advice in any circumstances. Aside from the safety aspect (especially at night), and the aspect of you never know what can happen to you (such as falling and hurting yourself, getting stung by a bee, seeing something really outrageous that nobody will believe later), it is also more fun to walk if you are walking with someone.
After yesterday’s post, I started thinking about the concept of never walking alone financially.
As we all know, the housing market is currently facing a rough patch. I’m not going to get into the particulars, but I think we’re just seeing the beginning of this thing.
My wife and I have been considering buying a new house. We like where we live, but there are some other considerations that make us think about ownership. Knowing the market has been going down, we were goofing off the other day, when we saw a house that was in a nice neighborhood and price range.
It was a good enough deal that we decided to take a closer look: After all, what harm could come of it. The house was really nice, but that’s about the most I could say– nice. My wife liked it, but didn’t love it. We talked about it, and decided that we could easily afford to pass up the great deal in favor of one later on.
The thing is, we both liked the house, and agreed that it wasn’t a bad deal, and had we been alone, we might have gone through with it. But together, we have decided that we deserve better than “nice” or “like”. We’ve worked hard, saved our money, and plan on staying in our home for a few years. Would we have been happy in this house? Sure. Is “sure” enough after all the work we’ve put in? Nope.
Young people usually don’t have the spouse to walk through decisions with. You need to talk out big decisions with somebody. Probably a few somebodies. Parents are usually good for this, and so are life-long friends (as opposed to those friends you really aren’t that close with), but whatever you do, make it a point that you talk out any major purchase with someone who cares about saving for the future AT LEAST as much as you do. This will help keep you on track, and may even save you a few lumps for making a really bad decision.
I was reading through some of my favorite blogs, when THIS came up. I liked the post, and some of the points were great. When I was reading the comments LAZY MAN made a fair comment about not seeing men talk about the designer suit they didn’t buy.
So I had to.
A couple of years ago, my wife and I were asked to stand up for our nephew as Godparents for his baptism. Of course we were honored, and said yes. My wife got a nice outfit and I decided that, since I had put on a LOT of weight since the last time I wore a suit, it was a good enough excuse to do so.
Now that I was HUGE, I was kind of limited to the places I could go. I could go to the local fat-guy store (that’s what I call them since I have yet to see a tall guy walk into a big and tall) and get something that I was okay with, or I could go to the high class Fat Gentleman store and have a suit custom made. On a lark, I chose the latter.
I went to the Fat Gentleman store, and tried on this suit that felt like butter. It was easily the nicest suit I had ever worn, and I would have thoroughly enjoyed wearing it. I would have worn it EVERYWHERE. So, I get the guy to take my measurements and write up an order. The cost was $900.00 after everything. My wife and I make good money, but we are both frugal and have both agreed (if I knew what was best for me) that she manage our finances since I have a lot of other things on the table. We made a deal where I tell her about any expenditures that are over a certain amount. I forgot.
When I got home and told her the good news, she flipped out! She couldn’t get over the fact that this suit was well worth the amount of money, since it didn’t come with a bike or something. We had a big fight, I cancelled my order, and never forgave her.
The aftermath:
First, we get to the baptism, and if I would have worn the suit, I would have been woefully overdressed. In fact, I wore a tie, put decided to take it off when I saw that the father wasn’t even wearing a tie.
Second, I needed to get some work done on my car. Anyone guess how much that cost me?
Third, I recently started losing a lot of weight, and the amount of weight would have made the really really nice suit useless.
The lessons here are simple: First, never buy something on an impulse, especially if it costs more than what you have in your pocket. Second, if you have agreed to have someone manage your money in a certain way, stick to it. Third, think ahead before you make any large purchases. When you do this, more often than not you will see that you don’t need to buy as many things.
I’ve got one of those stupid VISA commercials going through my head where they show how great using a debit card can be. There is one guy who pays cash for something, and he stops the well-oiled machine dead while the clerk gives him his change.
Are debit cards that great?
Sure, there is a convenience factor of being able to use them wherever VISA (or MASTERCARD) is accepted. But that also lets in some badness when it comes to young people and finance.
I love my debit card. I rarely use anything else. But when I’m going to a fast-food place, or any place where it is too easy to make impulse purchases, I prefer to use cash. I only carry a few dollars on me at any time, and I don’t like to make multiple trips to the ATM. I know the availability is there for using the debit, but there is always something that I think would be really cool to have, that is usually slightly more expensive than the amount of cash I have on me. At these times, I’m glad to use cash.
There is another downside to a debit dependence. Every time you use your debit card, you are opening yourself up to possible fraud. If you use cash when you can (and without carrying too much), you are limiting that risk.
At the end of the day, the debit card is an awesome thing, and there may be a day in your lifetime where it replaces cash completely, but I still contend that cash is king, especially for those small purchases.
Is leasing throwing money out the window?
Let me say that I’ve never leased a car in my life. Maybe it’s a throwback to my parents who would keep cars forEVER, or maybe it’s just the fear of making a bad financial choice. But that’s really the question here, is leasing a bad choice?
Let’s take a look at the major alternatives as they relate to young people.
Every PF’er will tell you that CA$H is the way to go. Of course, I agree with that wholeheartedly, and wouldn’t go any further in this post. But let’s face it. Most people won’t do that. Most young people just can’t do it. Here are a few reasons to do it:
- Zero (0%) per cent interest.
- No monthly payment
- You have title (complete ownership)
- More relaxed insurance requirements.
- You can “Pimp your Ride”. Many people don’t know this, but if you are financing your car, the bank owns your car. They usually don’t like people putting on lift-kits, expensive rims, or TV monitors. In fact, doing so could void your loan agreement, making the total amount payable on demand. If you pay your car in cash, this is not a worry.
So why would people NOT want to pay cash for their vehicles?
- They don’t have the money
- Some people finance their cars to help build, establish, or re-establish credit.
The second option is financing your purchase. In this scenario, you are buying a car, but using the bank’s money to do so. You pay a monthly payment that includes interest as well as principal, and at the end of the term, you own a car. This is what I usually do. I don’t mind making a car payment, especially since the car payments I make are very small. I don’t particularly care for expensive cars, and I like to put a hefty chunk down on the car. Some of the pros are:
- By financing your vehicle, you are building credit.
- If you are getting a really good rate, you could take money and save or invest it at a better rate.
o For young people, this is less of a benefit since you will probably not get the best rates.
- You can afford to make payments, but you might (probably can’t) afford to buy a car outright.
Some of the reasons against financing a vehicle:
- You are paying interest on something that is losing value.
- It is too easy to justify buying a car that you really can’t afford by justifying making the monthly payment.
- You are required to have added insurance on your vehicle for the term of the loan.
- In many cases, you have to get permission to take your vehicle out of state or out of the country for trips.
- You usually can’t modify your car in any way until it is paid off.
The final choice is to lease. Some people equate leasing to an extended rental agreement. I think that’s as good a definition as any, but it isn’t strictly accurate. When you lease a car, you are paying a leasing fee, and getting the option to buy the vehicle (at a reduced price) at the end of the lease or of turning in the car and getting something else. Of course, you lose any money you have paid into the car, but for some, this is not a deal-breaker. There are some advantages to leasing a car.
- The payments are usually significantly less than purchasing a car.
- You aren’t buying a car, so you aren’t buying a depreciating asset.
- If you don’t like a car, you aren’t married to it. Just turn it in.
Of course, there is a down-side as well:
- You are paying a lot of money for something you don’t own.
- You are limited to the number of miles that can be driven without a penalty.
- No matter how much money you are putting into it, at the end of the lease you have to almost start over if you want to buy the car (this is the residual or discounted price you get to buy the car at).
- Lease Buy-outs are a pain in the neck to do if you finance the buyout.
o You have to pay sales tax on the residual
o There is A LOT more DMV paperwork
o Many loan people at banks and credit union screw these up regularly.
Overall, for young people, I strongly urge to stick with cash. If that is absolutely not an option (and that is rare indeed), then I recommend financing a purchase. Leasing has its place; I just don’t think that place is with young people.
