Is Mortgaging Really Better Than Renting?

On the long-term, yes, getting a mortgage is better than renting. However, most people who say “renting is just like throwing away money” are never thinking long-term. They are thinking short-term, and renting is the far better option short-term. There are several reasons, but here are the main few:

(1) Rent Cost is Cheaper than House Cost

For a temporary amount of time, it is significantly cheaper to rent and save up for a down payment than to jump into a mortgage. Don’t just look at the monthly mortgage payment compared to the monthly rent payment. Dig a little deeper.

From personal experience, it would take about 3 years and 6 months in our previous apartment to equal the amount of money we have spent in the 2 years that we have been in our current home.

Those numbers may seem anecdotal, but they are a reality. See chart below.  Then continue reading.

Rent vs House

(2) Renting Increases Ability Rid Consumer Debt

This should seem obvious. Since we have more disposable income, we are able to dump our consumer debt a lot more quickly. If you can imagine, it is liking doing yard work with a 150 pound mortgage fanny pack around your waist.

(3) Rentals are Easier to Clean

Most people who rent live in an apartment. Apartments are typically smaller than houses. Apartments also tend to have appliances, counter tops, flooring, and walls that make dirt and trash easier to see. Sure, we may have more admiration for our homes, but apartments are just slap-out easier to clean. So if cleanliness is an issue for you, hold off on buying a house until you work that issue out.

(4) There is Less Stress with Rentals

What happens when a water heater breaks at your apartment? You call a maintenance guy to replace or fix it for free. What happens when a water heater breaks at your home? You panic because you don’t have an emergency fund in place to cover repair or replacement.

Word to the wise, if you don’t have an emergency fund or aren’t working diligently to save one up, then a house is not for you. Just keep renting until you learn not to take so many risks.

Agree or Disagree?

The ABLE Act: Please Write Your Legislator

Normally I wouldn’t do this, but I urge you to write your state senator and state representative and ask them to support the Achieving a Better Life Experience (ABLE) Act.  It is legislation that directly supports parents and relatives of children with special needs.  It has already been passed at the national level but needs to pass at the state level to be fully implemented.

If you are not aware, in December 2014, the US Congress created subsection (f) of  Section 529 of  the Internal Revenue Code to allow the ABLE Act to follow all the requirements and regulations of a traditional 529 qualified tuition program.  This simply means that parents or relatives can contribute $13,000 yearly toward a child with special needs and that money can grow tax-free and be withdrawn tax-free for assistive technology, health expenses, transportation expenses, education expenses, and many other needs.

In addition, funds from tradition 529 plans can rollover to ABLE plans and vice versa.  For instance, if your gifted child gets into a car accident at 16 years and suffers severe brain damage, you will not be penalized for the money you saved for the college expenses.  If the ABLE Act passes, you will be able to use those funds to help make your child’s disabled life a little more comfortable.  Or you may have a child that is mentally capable but physically challenged.  Now you can pay for college as well as for mobility assistance.  And it’s all tax-free.

Please write your senator or represenative or even the President of the United States at the link that follows: http://capwiz.com/state-al/home/

01 Write Your Senator

1st Annual B&F Rising Star Awards

Rising StarsEvery February while growing up, we all learned about inspirational African-Americans who made a mark in history.  But what about inspirational African-Americans who are making or will be making a mark in history?

Luckily, we don’t have to wonder any longer.  Below are seven fascinating individuals—each with unique stories and backgrounds.  They are Marc Childs Moore, Brandon Chalmers, Candice Hale, Marquis Heath, Trey Moe, Kevin Peterson, and Latrisa Pugh.  Each have been asked the following two questions:

(1) What do you currently do? Where do you see yourself in 5 years?

(2) How does your heritage help or hurt you in the path toward reaching your goals?

Marc Childs Moore

“I work in Copyright for BMG Chrysalis, the music arm of Bertelsmann Media Conglomerate.  Specifically, I work in music publishing www.bmgchrysalis.com.  I also play violin with the Grammy-nominated blues legend, Phil Wiggins. We perform throughout the country.  In 5 years, I see myself running my own arts company and developing as an expert in artist rights.

Being from Marion, Alabama prepares you for hardwork.  You work hard not because you expect some magnificent reward, but because your work is your reputation.  The quality of your work is a reflection of your seriousness of purpose.  I was taught ‘to whom much is given, much is expected’ and I carry that philosophy with me in all of my work.  There is a serious lack of resources and opportunities in the Alabama Blackbelt.  As a result, when one receives a blessing, we try to make the most of it and hopefully share that blessing with others.”

Brandon Chalmers

“I work in Higher Education at The University of Alabama.  More specifically, I help coordinate one of the university’s graduate programs.  You can find me at http://brandonchalmers.net/.

In 5 years, I hope to still be working in higher education.  It’s a labor of love; I really enjoy working with college students of all levels.  I previously worked with incoming freshman and transfer students, and I now work with graduate students.  Ideally, I would like to work with undergraduates again as I feel like there is something a bit more unique when you capture college students the first time around.

I think that being an African American male certainly created barriers that I had to overcome to get where I am today.  But as for my future trajectory, I don’t feel like I could encounter any obstacle that I couldn’t overcome.  A person I consider a mentor and a role model at the university once told me that he had been passed over for promotions before when he had performed the brunt of the work that got someone else recognized.  He told me to me to keep working hard and add credentials to my body of work and the opportunities would present themselves. He said ‘get your credentials and no one can deny that.’ Good sound advice for anybody to live off of.”

Candice Hale

“I’m currently working on my PhD in English at LSU.  I am concurrently teaching English composition classes, literature classes, and WGS classes for freshman to senior students.  In five years, I see myself professionally in an academic setting at a community college or a small liberal arts college teaching English comp and literature courses.  I would hope to remain in the South and enjoy my family.  I would hope at this point, I would, too, be married and enjoying family and my career as a professor in its fullest capacity.

I sometimes believe that my identity as a biracial black woman has its advantages and disadvantages in the college setting.  At times, it affords me advantages as one of the only “token” students or instructors of color because there are no others to fill a quota.  Then, at times, to be the student/instructor of color in these academic settings can make me appear hyper-invisible as if I do not exist to anyone.  To be overlooked and to experience these covert experiences of institutionalized racism can be very damaging to a workspace and a community.  And while I’ve experienced these types of racist situations and micro-aggressions from colleagues (but not my students), I’ve still managed to succeed academically and professionally.  With my own determination and perseverance to help others in my communities, I know that my experiences are important to the literary world and my social world. I enjoy teaching and spreading the word to all lovers of literature and critical thinkers.”

Marquis Heath

“I am a General Dentist at Rural Health Medical Program, Inc, a non-profit medical clinic under the Health Resources and Services Administration umbrella. I am also an associate dentist at West Princeton Dental Clinic and Clinical Professor at Fortis Institute.

In five years, I plan on being in a very similar position, as I am on the early end of my career.  I do not foresee any major changes in that short period.  A major goal is to incorporate and obtain 501(3)(c) status for my non-profit, which will serve to increase the affordability of dental care and dental education for those who need it.

My heritage has helped me by instilling in me the humility that allows me to be more compassionate in my field.  An often overlooked component of our heritage is the affinity for looking out for others—sticking together.  Being a beneficiary of that mindset, I will always have the goal of helping others.”

Trey Moe

“I’m a comedian and an entrepreneur of a few online businesses.  In five years, I will be working on my third stand up special, owning a few apartment complexes, and more than likely living in LA, but I will also have a place in ATL.

I come from a tough neighborhood and growing up we didn’t have much financially.  But regardless of what was going on outside, there was a plethora of love inside of our house at all times.  Not having much as a kid made it easy for me to make the move to LA.  My up-bringing taught me how to survive in any city—no matter the situation or financial struggles.  Being successful in something that goes against the norm and takes perseverance. It is all about weathering the storm and how much punishment can you take before quitting.  But I’ve been taking punishment my whole life so this LA struggle feels painless.”

Facebook.com/TreyMoeShow

Kevin Peterson

“I make YouTube videos and maintain an active social media presence. I’ve establish a decently audience of “fans” and engage with them any way I can using the internet. Since the internet changes and evolves rapidly, I have no idea where I’ll be in 5 years.  Hopefully my success will increase to the point that I will be more financially independent and be able to do more ambitious projects.

I don’t consciously think about my ‘heritage’ that much, but I grew up poor and I am black and I think the perspective I have gained from those experiences informs what I create and my viewpoints which obviously come across in my videos.  There aren’t very many “mega successful” black YouTubers, but it’s not a thing I think about as being a hindrance.  I feel that I have as much of a chance to make it as anyone else.”

Famous People That Are My Age (YOUTUBE)

Latrisa Pugh

“I am an accountant and instructor at The University of Alabama for the Division of Student Affairs.  As an accountant, I act as a liaison for the various departments under this umbrella which is anything that has to do with student life (housing, recreations center, career center, student media, etc).  As an instructor through the UA Honors College, I teach a financial freedom seminar class each semester. I am also the founder of Educational Cash Flow Youth Program where we teach financial education to youth and adults.  Currently, I am partnered with the LIFT program through the UA School of Accountancy to teach adults and students in the community.

Five years from now, I should have passed exams to be licensed in financial planning and public accounting. I do plan on continuing to work in higher education and move up in my career track. I also hope that the nonprofit be working throughout the state of Alabama and many families lives have changed for the better financially.

My heritage is very important to my career path. It has really been a driving force.  It has helped me with my goals because I do understand the many sacrifices that have been made.  The career path I have chosen is to improve the current and next generations.  I have a responsibility to make sacrifices of my own.”

Cheers to the first annual Baxter & Friends’ Rising Stars!

Top 5 Cars Under $3000 | Baxter

Recently, I wrote a blog entry (Click Here) that said the biggest money mistake in my early adult years was wasting a perfectly good $3000 savings on a down payment and loan for a $13,000 nearly new NISSAN Versa Hatchback.  If you re-read a bit further, you will see that I ended up paying $20,000 for that car, which I plan to drive until it dies a slow death.  But writing that blog made me wonder: what if I was smart enough to just buy a car with straight cash for $3000?  What could I have gotten?

For this exercise, I assume that all cars are being bought from a private party via Craigslist, newspaper classifieds, or some other method that is not a dealership.  As of February 2015, in no particular order, my top 5 list of used cars under $3000 is as follows:

1) Mercedes-Benz C-Class (2001 Model)

According to Kelley Blue Book, I can get this entry level luxury sedan in good condition for $2748.  That’s quite a steal if you ask me.  Plus, it still looks pretty slick for a car that’s almost 15 years old.

01 MB C-Class

2) BMW X5 (2000 Model)

This shnazy sports activity vehicle was the very first vehicle every produced in the United States by BMW.  If it were not for the success of this vehicle and others like it, the economy of the South would not be as strong and diversified as it is today.  This SUV is available currently for between $2700 and $3200.  But if you play your cards right, I’m sure you can get someone to sell you one for $2500 or lower.

02 BMW X5

3) Ford Mustang (2003 Model)

If you can find this car in excellent condition (which likely), you can buy it for under $3000.  In fact, KBB says that we should be able to buy one for $2964. That’s a real deal.  Pump up the engine package and the price will rise, but it is still very affordable.  The price is main reason why this is usually everyone’s first sports car.

03 Ford Mustang

4) Honda Civic (2002 Model)

This right here is ol’ reliable.  If you need a car and do not have a lot of money, then the Honda Civic is your car.  Not to mention, several independent body shops specialize in Honda vehicles so this makes maintenance very affordable as well.  Did I mentioned that it has whopping 28 MPG in the city and 36 MPG on the highway?

04 Honda Civic

5) Chevrolet Silverado 1500 Regular Cab (2002 Model)

I honestly do not have a preference for the F-150, Silverado, or Ram—all of them are good sturdy trucks for every day normal use.  Not only that, they tend to be cheaper than other vehicles but are still very easy to sell once you decide to upgrade in car.

05 Chevy Silverado

What’s your Top 5? 

Why I Traded My $300 Hoopty for a $13,000 Car and a $20,000 Loan

MirageA few weeks before I got married in late summer 2011, I suddenly wanted to buy a new car.  In fact, I felt I deseeeerved a new car.  Up until that point, I was perfectly fine with my loyal yet atrocious 1998 Mitsubishi Mirage that was gifted to me during my junior year of college.  However, at this point in time, the pressure of an approaching wedding and the excitement of an out-of-town bachelor party made me yearn to become what I thought to be a real adult—a person with a car loan and a credit score.

In my naivety, I searched online for a car and found a “good deal” on a 2010 NISSAN Versa during the 2012 car season.  To be fair, it actually was a good deal if I didn’t also have $25,000+ in student loans around my neck.  Despite this previous debt, I pressed forward towards purchasing my car.

With $3000 as a down payment, I marched down to the dealership to test drive my future auto.  It felt so good to hold the grip of a new steering wheel beneath my fingers, to have air conditioning and automatic locks for the first time ever, to utilize a functioning horn once more, and to hear the music from a working car radio again.  It was a thrill. It was an intoxication.  It was a gateway drug.

As it happens, all gateway drugs eventually lead to death or debt—my experience was no exception.

While my journey to a new car was smiles and rainbows on the dealership lot, it quickly became frowns and thunderstorms once I entered the financing office.  What was once a $13,000 car inflated into total payments of $20,000—and that’s only because I paid the loan off three years early.  These payments included a meager down-payment, bloated interest charges, high tax fees, an unnecessary maintenance pre-payment plan, and a ludicrous invention called gap insurance.

Never has Proverbs 22:3 been so true: “The prudent see danger and take refuge, but the simple keep going and pay the penalty.”

Simple I was. So simple that I thought I pulled one over on the dealership.  Trust me folks, you will never pull one over on a dealership.  Salespeople are professionals, they study you, and they know how to push your buttons.  Please use my experience as words of caution: if you don’t have the money to pay something in full, then you can’t afford it!

—–

As a bit of fun, I know it will take some digging, but what are some good cars that I can purchase now for $3000 that would be better than buying a new car for thousands more?

Can You Live on $7.25 in Tuscaloosa? | YES or NO

Cashier CareerThere has been a lot of buzz about how no one can make it on minimum wage.  Well, I’m here to tell you that that’s a load of hot garbage.  Yes, it is tough, but it is nowhere near impossible.  And here are the facts to back that claim up.  Below are the financials (CHART) for an 18 year old Ben Baxter to survive in Tuscaloosa, Alabama in the year 2014.  For the example, let’s assume his parents or guardians are no longer involved.

Ben is a hard working young man.  He worked while in high school to help put food on the table, and while do so, he gained the opportunity to work 40 hours per week as a cashier at a local pharmacy when he graduated.  He’s still making the minimum wage of $7.25 per hour, but working a full 40 hours per week really helps.  He has some other odd jobs that he does to earn money, but for now let’s focus on his base pay.

If we assume Ben works 40 hours per week (or 2080 hours per year), he will earn $15,080 before taxes.  That equates to $11,254.13 take-home pay after federal taxes, state taxes, Social Security, and Medicare are taken out.  He also lives with two roommates, Ruiz Chalmers and Harris Carr, in a median rental home for $720 per month.  Rent is split three ways with each person paying $240 per month.  Utilities are also split three ways.  He pays for his own food at $150 per month and his own health insurance at $25 per month.

Ben does not have a car, and nor does he need one.  Almost every route within the quadrant of McFarland Blvd, Lurleen Wallace Blvd, Interstate 20/59, and the Black Warrior River can be measured at around 3 miles or less.  At Ben’s current stride, he can easily commute by foot in approximately 45 minutes to almost anywhere.  This is great for his health as well since he will burn over 600 kilocalories during that routine 45 minute commute.

Ben assumes he will need to travel longer distances sometimes so he rents a BAMA Bike from a local university for $10 per month.  This university provides all maintenance on this bicycle.  Ben also budgets for education because he would like to make more than minimum wage by the time he is 25 years old.  He is attending Shelton State Community College.  And he is majoring in Air Conditioning and Refrigeration for his Associate in Applied Science Degree.

His yearly budget is listed below.  After one year, he stills has $500 leftover to go into savings for a rainy day.  You never know when that may come in handy.

Could you live on what Ben is living on? (SEE BELOW)

Ben's Budget

5 Tips for Full-Time Workers Who Go Back to School

Grad SchoolBeing a student—whether in high school, college, or grad school—can be challenging.  It can be even more challenging if concurrent full-time employment is involved.  And furthermore challenging if marriage and parenthood is involved.  However, even with all of those challenges, reaching your goal of gaining more education is still achievable—you just need a few tips to get you over the hump.

(1) Move to 2nd or 3rd Shift

Maybe don’t do this forever, but definitely try it while you are in school.  I have worked with several people who have done this, and it made taking traditional classes a lot more feasible.  Also, most people who work on off shifts get paid a little more than their dayshift counterparts because of the perceived inconvenience.  One man’s inconvenience is another man’s treasure.

(2) Take Online Classes or Weekend/Evening Classes

If you’re pretty much stuck on dayshift or irregular shifts, try taking online courses or weekend/evening courses.  Not only does this potentially give you more flexibility, it also keeps your employer from getting annoyed with all of the personal time off (PTO) you are using to attend classes during traditional daytime hours.

(3) Make the Most of Downtime

Do you have a 10 minute work break? Write flashcards.  Do you take a 60 minute lunch period? Read your textbook.  Is your baby asleep? Start a term paper.  Did your husband go to the home improvement store? Take a practice test.  Downtime is precious.  If you notice that you have some, make the most of it.

(4) Become a 7 Year Senior

Streeeeeeeetch out your time in school.  If you have a pretty decent job and can pay the bills, slow your academic pace so that you can spend more time with your family and friends.  Being able to socialize and stay connected may help the grunts of hard work be a little easier to bare.

(5) Utilize Employer Tuition Reimbursements

With the stress of working a job and going to school, money is the last thing many people want to worry about.  That’s why it’s good to check to see if your employer offers tuition assistance.  This will greatly decrease your financial burden and may help you sleep easier at night.  Better sleeping equals better reaping.

What are some other success tips not listed?

Top 5 Reasons to Quit Your Job (and Yet Remain Employable)

Photo: http://janeencarlberglaw.com/

Photo: http://janeencarlberglaw.com/

If you have followed my career at all, you are well aware that I have been around the block a few times when it comes to employers.  Most of that has to do with the short-term and long-term repercussions of changing careers two years after college because of the M-word—marriage (which I thoroughly enjoy, by the way).

This career change has taught me a lot about recruiting, interviewing, vetting, and networking.  But it has also taught me a whole lot about quitting.  Fancier people may call it “resigning” or “seeking new opportunities,” but regardless, there is an art and science to being able to quit without it being seen as a negative attribute on your resume.  So without further ado, here are the top 5 most acceptable and commendable reasons to quit your current job.

(1) Unethical and Unsafe Work Environment

This is my number one because it has the biggest impact on your future employment.   If you are with an employer that does not truthfully prohibit unethical and unsafe characteristics then you will probably be hurt more by staying than if you quit.  Please turn in your two-week notice immediately if your boss or a significant portion of management are guilty of doing or accepting the following:

  • lying to customers and suppliers
  • using sexual or suggestive language
  • touching coworkers sexually or inappropriately
  • drinking alcohol or doing drugs on the job
  • consistently paying workers late or not paying at all
  • making racist comments or jokes
  • letting jealousy and anger affect decision-making
  • endangering workers with poor safety practices or no safety practices
  • doing other inappropriate behavior

(2) Becoming a Stay-at-Home Parent

This is a very tough (or very easy) decision for many families to make.  If this decision is something you and your spouse are going through currently, then please do not be pressured into feeling you have to work outside the home to be a fully developed human being.  Being a stay-at-home parent is perfectly acceptable as long as you can pay your bills on-time and not accumulate debts.

In order to prepare for this season in life, try living on only one income for 3 months while you are still working.  If you succeed at this task, then go ahead and let your employer know your family’s decision for you to become a stay-at-home parent.  And again, please do not feel pressured into staying at work.  And please, only come back to work when you want to come back to work.

(3) Spouse Works Significantly Far Away

Often this affects newly married couples and military couples the most.   It also affects couples who have a spouse that has received a dream job offer in a distant city.   If you and your spouse work with employers that are hundreds and thousands of miles apart, then you have a pretty arduous decision ahead of you: determining which one of you has to quit.

This can be very difficult because both spouses may love their jobs; however, spouses need to love each other more than their jobs.  Firstly, seek to see if you can just transfer within your current company.  Secondly, if this is not possible or takes too much lead-time, then you will have to quit.  This does not have to be an immediate resignation, but you definitely need to get the ball rolling in that direction.

(4) Becoming an Entrepreneur

Do not do this on a whim.  Only do this if your hobby or “side hustle” has become lucrative enough that you can afford to quit your day job.  The romanticism of being a business owner fades quickly if you cannot put food on your dinner table.  However, if your business is capable of paying you similarly to or more than what you are making currently, then by all means, quit!

Careful: Just be sure not to burn any bridges with your current employer. You may need them to hire you back in the future if your business flops.

(5) Seeking More Pay or More Opportunity

Sometimes you reach the proverbial glass ceiling.  Many large companies do not give pay increases very often, or they give pay increases yearly but at a 1% or 2% rate.  Meanwhile, many smaller companies only have a handful of employees so opportunities for promotion are pretty slim.  In order to grow and reach your potential, you are going to have to quit.  However, make sure you have a new job first!

Depending on the situation, some people may call you greedy for making a move.  Take their opinion with a grain of salt though—while your mentors may have your best interest at heart, other people may just be green-eyed with envy.

ARE THERE ANY OTHER VALID REASONS TO QUIT BESIDES THESE?

4 Ways to Keep a Pay Raise from Stealing Your Joy

Salary increases are very important to self-esteem and motivation.  However, joy is much more important.  Often times, salary increases can steal your joy—making you wish you had your old salary back.  As a by-product of this bittersweet phenomenon myself, I have several tips that you and the folks you share this article with can use to maintain joy or increase joy throughout your careers.  (Please follow the chart below as a reference guide)

Job Happiness

(1) Seek Promotions or Lateral Moves Within Current Company

This tends to be easier at larger firms; however, smaller firms may give this opportunity as well.  In an ideal world, I would have done this at the first company that I worked for after college.  The company provided a large network for career paths at the location I was stationed as well as at other locations in the region.  In fact, this type of mobility and versatility was encouraged by management (to a point).  As stated in the title of this section, sometimes you do not necessarily need a pay increase or promotion to increase your joy, you just want a change of scenery. Staying with the same company makes that possibility quite easy—as long as you like the company you are with, of course.

(2) Keep Current Job and Develop a “Side Hustle”

What if you have very predictable working hours and lots of leisure time, but the pay is awful?  That’s how I felt within Firm B in 2012.  Nothing got on my nerves more than knowing that the peers I graduated with were making more money that I was.  However, instead of being smart, my pride got the best of me—I wanted employment elsewhere.  With the amount of leisure time that I had though, getting a new job should have been the last thing I wanted to do.  I should have sought a side hustle.  A side hustle is a miniature version of the DREAM CAREER that you want in the future.  If you work 40 hours per week or less, I highly recommend this option for increasing or maintaining joy.  Use your spare time to make your dreams come true—maximizing your joy and your checking account.

(3) Reduce Personal Debt and Give Yourself a Raise

Simply put, if you eliminate your debts (student loans, car loans, credit cards, etc), you will effectively have more recreational money and investment money—you have given yourself a raise!  Not only does this mean that you have more money to have fun with, but you also have more money to invest in yourself and your family (please revisit Step 2).  Reducing your debts is completely within your control as well.  So unlike landing a promotion or snagging a raise, you do not have to depend on luck—you can depend on faith and will-power! What’s not joyous about that?!

(4) Thoroughly Vet Opportunities for Advancement before Jumping Ship

The grass isn’t always greener on the other side.  You heard me earlier mention how I had almost laughably easy working hours.  I haven’t had that type of work/life balance in years.  And the stress is definitely wearing me down.  However, this could have all been avoided if I vetted the companies that I wanted to work for as thoroughly as possible.  Sometimes this isn’t easy, but it can be done.  Ask people who currently work at the firm that you wish to apply for.  If you end up getting an interview, ask to speak to an individual who has a similar job to the one you are applying for.  And lastly, if you get some unescorted time, look for the people who have the worst jobs within sight—they might be the most honest with you! If you get “bad vibes” after doing a proper vetting, then stay put and wait for another opportunity to arise—a pay increase isn’t worth sacrificing your joy for!

#CareerJoy What are some other ways to maintain joy while also increasing your income?

How My New Car Cost Me $1,000,000

“I Will Always Have a Car Loan”

The next time that you hear someone say this phrase, please sprinkle holy Evian on them immediately and then refer them to this blog. That phrase is not only false, but it will cost us MILLIONS of dollars over our lifetimes.  Millions? Yes, millions! Let’s break things down so we can get a clearer picture of what I mean.

The average brand new car in March 2014 was $32,086 with an average monthly car loan payment of $710 with the assumption of a 48 month loan term at 3% interest.   For the record, this example has already made our total loan repayment $34,068 before we really get too deep. Yes, we just lost $2000 before we even left the car dealership lot. But let’s move on to bigger fish.

Typically, cars lose 20% in depreciation in the first year, 15% in the second and third year, and then 10% in the fourth year. So in this example, this would mean that the car is worth $16,691.

The average age of cars on the road in the United States today is a little over 11 years old. Most automobiles are pretty dependable nowadays because of the advances in quality and technology—so 11 years is not a stretch at all. So given that information, we could have owned the same car for over 50% less money if we had just waited a few years and bought with cash. But, I’m still not done.

Let’s assume we repeat this “gotta have a new car” buying habit for 40 years. For simple math purposes, let’s assume each new car costs exactly as much as the first car did.

So after 40 years, we have bought 10 cars and lost:

(a) a whopping $20,000 to car loan interest

(b) a monstrous $173,950 to depreciation

But it gets worse, you also lost:

(c) a life-changing $2.36 million dollars!

2MILLION DOLLARS

(Assumes we invested $404 per month in lost depreciation and car loan interest every month into a good mutual fund at 10% rate of return for 40 years)

CAN YOU AFFORD TO LOSE THIS MUCH MONEY?

For giggles, let’s assume we learned our lesson on the first car, but we still bought the first car anyway. In that scenario, let’s deposit $404 per month for just four years and then wait 40 years. After 40 years, you still lost the opportunity to:

(d) a still life-changing $760,000 dollars!

700K

CAN YOU AFFORD TO LOSE THIS MUCH MONEY?