So, you have some debt. When you owe people, you can feel the weight on your shoulders. You know that any big financial problem or trial in your life could completely turn you on your head.
The best place to start to get yourself out of that position is to make a budget. If nothing else, get started by listing out your expenses in a month and the income you take home. (Don’t look at your gross income, that will just make you sick 🙂 )
Then look at where your money goes. Do you spend a lot on things you shouldn’t? Do you waste a lot of money? Chances are, if you aren’t working off a concrete, written-down budget you are letting money fall out of your wallet daily.
Take some time to write these things down. Physically. Then take a week, month, or a couple months to actually track where your money goes. You may be shocked at all the holes you have in your finances.
Homework: Track your spending for 2 weeks (or however long your pay-period is) Then evaluate whether you can do some trimming, or whether you need to find some more income!
You probably drive by one everyday. Full of new shiny cars with bright numbers and red tags in the windshield. New car lots. I am somewhat (although not full bore) of a Dave Ramsey subscriber. I do firmly agree that debtors are slaves to the lenders and I have seen the statistics and done the calculations to see what getting rid of a car payment and investing that money instead can do. It is nuts. Lets play this game.
So, you have 3,000 let’s say. You can 1. Put that as a down payment on a new car that costs 21,000. 2. Put that as a down payment on a used car for 10,000 and still feel pretty cool. Or…#3. Use that cash in hand to negotiate a deal on a not so new or pretty but reliable car. The average car payment in America is around 5 years (60months) and let’s be conservative and say $350.
Stick with me. Let’s buy the old car. So, I pocket and invest the money for those payments. Let’s say i make just under the market average and make it easy to calculate with 10% growth. Alright, so 350 a month payment
for a year is $4,200. Plus 10% interest: $4,620. That’s your money!
Running that calculation for 5 years…..26,472.60… Of Your own money! Not owed. Can you afford a 10,000 car now? I’d hope so! And…if you kept saving and investing, you’d be able to do the same thing a few years later… Also, how much would that 21,000 car be worth at the end of 5 years? 5,000? Not a good investment.
Moral of the story: let your money work for you, instead of chasing around things on credit you can’t afford. It will keep you poor!
(Here is Dave’s example) http://www.daveramsey.com/article/the-truth-about-car-payments/lifeandmoney_automobiles/