I have a young guy who works on our floor that comes to me with his financial questions. I have posted about him before because no matter what I tell him, he does what he intended to do before he asked my advice. I don't really care because I don't have an emotional investment in the outcome.
What does bother me is that he thinks he is a savvy character and that keeps getting him into trouble.
His latest deal involves a new car. He had been driving a late model truck that he claimed was paid for. Technically, he refinanced the balance into his home loan when interest rates were low, but since he doesn't make a monthly payment, I guess it's close enough. Lately, the truck has been acting up a bit.
A few weeks ago he described the trouble he was having to me and asked me what I thought he should do. The latest engine problem was covered by a warranty, so there was no out-of-pocket cost to him. The warranty has just expired and he was worried that it will break again. My suggestion was to keep driving the truck until it died. It has at least another 100,000 miles of service life remaining.
He came back several days later to say that the truck was for sale and that he was buying a new car. Since he doesn't have enough money to pay cash, he is getting a loan. I think you can fix a lot of breakdowns for the cost of a new car and I told him so, but he wasn't really that receptive.
His second bonehead reason for the new car is that it will get much better mileage. I tried to explain this to him to no avail. If you drive 15,000 mile per year and get 15 mile per gallon you will spend around $2,700 on gas at $2.70 per gallon. If you improve mileage by fifty percent, you would save $900 per year. Spending $3,600 per year to save $900 isn't too smart, not to mention that my little friend's $20,000 new car will be worth $5,000 in five years.
Toady he popped in to say that he sold the truck and had ordered his new car. The proceeds of the truck are being used to pay off other debt and make a $3000 down payment on the new car. He is going to have a $300 monthly payment for the next six years. Oh my.
I am not sure why this fellow asks me for my advice and then discounts it, nor do I really care, as I said. What I do know is that if he drove his truck for 6 more years, deposited $300 per month in a saving account instead of a car payment, he would have over $22000 in the bank. If he let that grow for 20 years, until he was my age, without adding to it at all, it would grow to $103,000, assuming he earned a modest 8% return. Hope he likes the car.
Things in this blog represented to be fact, may or may not actually be true. The writer is frequently wrong, sometimes just full of it, but always judgmental and cranky
Tag: Daily Life
Personal Finance
Humor
9 comments:
My dad always paid cash when he bought a car.
I couldn't agree with you more--you CAN fix an older vehicle and keep it safely on the road. All your need is a good auto repair shop and to be on top of little things like oil changes.
Say Merle, ever thought about taking up a new career as a financial planning consultant in your forthcoming retirement? Then people would pay you for advice and it's up to them to follow it.... maybe.
Ms Soup
abc soup is right--at least write a book on money--it would be fun to read if you wrote it, and give valuable tips.
I think you should write a humorous book with really good tips in it. Kurt could illustrate it.
ps thanks for the smelly link--it was interesting--I will look for his book @my local Library. thnx
visit the feral cat to see my truck when it was brand new! I still drive it-- some people consider it ancient and weird--and will keep it til the bitter end. (I drove my last one for 14 years--had to update due to safety features)
If Merle was a financial planner, he'd have to deal with bozos like this all the time.
However, a book could be fun. It could be like a book of short stories but all the stories are nonfiction (except for the names) and teach a lesson about finances. And all the short stories could be categorized under various sections like transportation (for this story and some taxi-rides-to-Walmart stories, etc.).
Soup beat me to it -- I was going to suggest the same thing! My Mom took up working for H&R Block in her retirement and she loves it, though she's continually appalled by people's financial decisions.
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