Last weekend was an eventful one. My 12 year old Chevy Trailblazer had some serious car troubles. It got to the point the repairs were worth more than the car itself 🙁
I absolutely loved the car. It stuck with me for all of college, moving to Arizona and 6 six years post college! But it was time, it didn’t make financial sense to keep repairing it. If I did the repairs something new could have happened the next month or next year that was completely unrelated. I had two choices, buy a used car or buy a new car?
The new car idea was immediately off the table as new cars decline roughly 30% the second you drive them off the lot. This Wisebread article sums up why you shouldn’t buy a new car perfectly:
“Let’s say you pay $20,000 for a brand new car and $3,000 in finance charges over the length of a five-year term. This brings the total cost of your car to $23,000. We’ll factor in a 19% rate of depreciation for the first year, which brings the value of the car down to $16,200. Your payments are $350 a month, or $4,200 a year, so by the end of year one, you’ll owe the bank $18,800. Sure, you’re making progress on the loan. But since the value of your car dropped nearly $4,000, you now have negative equity and you owe $2,600 more than the car is worth.”
This is why I bought a used car! Besides whether it was new or used it was NEW to me!
Once my car hit the decade mark a few years ago I decided it was time to start saving. Since late 2014 I’ve been saving in an Ally savings account for my next car. I would put a portion of each paycheck and commission directly to my new (used, but new to me) car fund.
The second decision was, do I buy a car and pay off 100% with my savings or finance some of it?
The difference basically came down to the type of car I wanted to purchase. I could’ve bought another used Chevy and paid off in cash. Or I could buy a higher end car such as BMW. But after driving a “decent” car for 12 years I decided I wanted to “treat myself” with this purchase. I decided to go with a 2012 certified pre owned BMW with 28,000 miles.
Let’s call it a “30 year old life crisis”…..Why not buy an American car? Isn’t that a bad financial idea? Aren’t you contradicting the message of your blog?
Isn’t that Un-Super Millennial?
As soon as I posted the pic of my new car I had a few people comment to me that it wasn’t very “super millennial” of me to purchase a BMW. Yes my co-workers and friends use super millennial as a verb (ha).
But that’s when I realized the site is not about being frugal. People seem to get the wrong perception of me as being someone who hoards every penny for the future. Don’t get me wrong I like saving money but you have to have a balance of saving and spending. The biggest reason I started the site was to help educate others with personal finances. Navigating the real world, especially with finances, is difficult. This site is meant to show that you can both enjoy your day to day activities AND save for the future. That’s the key!
If you save all your money when you’re young without enjoying any of your hard work it will be difficult to keep saving. You’ll think, what’s the point I don’t get to use any? The alternative is spending almost every penny, living paycheck to paycheck and not planning for your future. Sadly to many people make this choice. Don’t pick one or the other, do both! It is possible to save for your retirement AND enjoy nice things in your life. Don’t wait until your 65 to start “living life.”
How Can You Save & Spend?
If you don’t have a plan you’ll be screwed. Whether you’re planning your finances, fitness goals, or earning more money you need a plan. Otherwise you’ll go along accomplishing very little of your potential. Instead find out what your goal is. Whether it is to buy a car, a house, save for a vacation, or pay off debt. The point to ensure you have a goal so you can create a plan to reach your goal.
To create guilt free spending (and not test your willpower) automate your finances, especially retirement accounts. Your retirement money will be primarily composed of your 401K and Roth IRA contributions. Your 401K is the EASIEST way to save as it’s automatically deducted each paycheck. Ensure you are signed up, contributing regularly, increasing contributions with raises, and choosing low cost index funds to maximize your returns.
Contributing to a Roth IRA is more work (not much) and can also be deducted with each paycheck. Learn how to get started with Vanguard here.
Set Savings Goals
Saving to save is pointless, it’s like going to the gym with no workout planned. You need to have a vision of what your savings will go towards. Will it be for a down payment on a car or house? Will it be for a vacation you’ve always wanted to go on? Pay off student loan debt? Whatever your goals are make sure to write them down and place them somewhere you can see regularly.
Keep Low Overhead
“The more you own the more owns you.” This may sound hypocritical as a homeowner and car owner but these are different than buying pointless crap like jet-skis, motorcycles, or an oversized house. Instead my house payment is $1,125/month. Since I live with Ms. Super Millennial my payment is only $700. If we decided to rent instead of own it would be $400-$800/more a month for the same type of house (2 bed/2 bath).
The car payment is $225/month. By putting more down at signing, negotiating (a lot), trading in my old car I was able to keep my payment low. $925 is what I need to pay for my car payment and house payment. If something were to happen tomorrow I’d be able to work at Taco Bell and still able to make these payments since my overhead is low!
Too many people think it’s impossible to save for the future and enjoy life when you’re young. This attitude can lead to excessive spending in 20’s and 30’s without thinking about their retirement. People like buying new cars, renting expensive places and impress others. Stop trying to impress people that probably don’t care.
Focus on YOUR personal finances and YOUR goals so you can enjoy all stages of your life.