Many times in life we realize we make mistakes with home issues, relationship issues, work issues, or financial issues. How many times do you wish that you could go back in time and redo certain events. This section is dedicated to financial lessons that we have all learned in life and hope to never to repeat. Please feel free to post your life lessons in this section.
I’ll start with one of my own lesson (cars)
The year was 2000 the year I graduated from college. I had just got my first career job and was ready to spend all the money I had not yet made. The first item on my list was an automobile. I needed (wanted) a Mitsubishi Eclipse I wasn’t real big on having to have a new one, but my mother thought it would be dumb to buy a used one, “You are only buying someone else’s problems”. So on the advice of my mom I purchased a black, new Eclipse. It was the first year of the GT with a V6, it had a sunroof, power everything, 5 speed transmission and I had to get the windows tinted. I bought the car in the fall of 2000 so it was one of the last of that model and I got a “good deal” on the car. The purchase price was somewhere around $24,000 and I had a few thousand to pay down. I got a good finance rate 2.9% and with tax title and liscense I financed about $21,500. My payment was $385 per month for 60 months.
Now, at the time I was single so the only bills I had were rent which I shared with 4 other guys so that was only about $200 a month and normal utilities which were also shared, another $100 per month. At the time $385 per month seemed like nothing to me. It was the perfect thing for me to spend my hard earned money on and my total money out of pocket each month would only be around $700 including the car payment.
Well, I had my Eclipse for about one year and my girlfriend and I started planning to get married. We had plans of purchasing our first home together right after we got married. On my own free will I decided to do the right thing and trade the Eclipse for a 2000 Grand Am GT. It was still sporty, had good power and was also four doors. My new car payment after the trade in was $285 for 60 months so we could save an additional $100 per month toward our home.
A little over a year later we were married and purchased our first home. Both of us got an increase in salary at our jobs and the house payment was pretty easy to make along with the two car payments. What was my next move? I had to buy another sports car because I missed my Eclipse and I made the sacrifice for the house. I purchased a 1999 Pontiac Trans Am which moved my car payment back to $320 for another 60 months. That lasted for another year or so and then the Trans Am had major problems that would cost over $1,000 in repairs so what did I do? Traded in the Trans Am for a 2002 Honda Accord. I kept the Accord until I got a company vehicle from my current employer so there was no need for me to have a car. I sold the car only to break even. No, I wasn’t the only one doing the car trading, my wife made it a hobby too, but that’s another story.
Lessons I learned about cars and car payments and where I went wrong
Don’t buy a new car. New cars lose so much value as soon as you take ownership of them. I looked back on my checkbook statements from when I purchased my Eclipse and discovered that I was paying over $600 per month on my Eclipse. Sure I was paying down my car quicker and saving money on interest, but just imagine how much money I could have made if I were saving $600 per month.
Don’t trade a car every year even if it is used. I thought I was saving money by trading my Eclipse in for the Grand Am but all I did was finance the car for another 60 months spreading it out over 5 years. If I would have kept my Eclipse and refinanced it I would have probably been in the same financial situation.
Don’t trade a car in because there are mechanical problems in order to save money. You won’t save money even if the problem will cost $1000. I could have paid the $1000 to fix my Trans Am, kept my dream car and not had to pay to refinance or lose more money on the trade (yes dealers always make money on trades).
Purchase a good used car and if you have to finance the car don’t finance for longer than 3 years. If you can’t afford the payment then that car is probably more than you can afford.
Do you have a story to share? Pose it here for others to read and maybe save someone some money.