Recently a reader commented on his grand plan to remove some uncertainly from his monthly budget process. On the surface, and when introduced this way, it sounds like a good idea and something worthy of a second look. However, that extra moment of review was at once comical and revolting, at least to my budgetary tastes.
Now this article is not intended to blast a reader. Only on a couple rare instances have I been so motivated and never have I followed through. Actually I enjoy comments regardless of their level of agreement or disagreement. Provided the opinions are authentic and civil, I revel in you taking the time to react and will try to do my best to facilitate the dialogue. So in that way, this article is more tribute and expansion on my comment response, even if I disagree with this reader’s specific way of thinking.
The original article was on a car my wife and I owned a couple months ago. We had named the car “Green Bean” and it was our ‘get-out-of-debt-car’ and its looks and functionality were about what you’d expect given that introduction.
The philosophy in owning this car was to minimize our monthly car expenses. The car was paid for and aside from normal auto expenses (gas, insurance, oil changes) we knew to expect a repair or two each year. Therefore, we knew to (and how to) budget for those unplanned but expected expenses.
This approach to our car situation – rather than toting a monthly car note – allowed us to plow a couple hundred extra dollars into our debt snowball each month as we aspired and progressed towards our goal of financial freedom.
And here is about where our paths, my reader and I, began to diverge. We both expressed agreement in wanting out of debt and we both attempted to progress this path by driving older paid-for cars. We both experienced the associated repairs…. and we then went our separate ways.
I socked away a few extra dollars each month, was diligent (if not obsessive) in my preventive maintenance routines, and redirected my snowball payments if a repair was required.
My valued reader, on the other hand, leased a luxury automobile.
Suddenly his car was HOT and mine smoked due to a small oil leak.
But I believe there exists a leak in his logic. Predictable expenses and budget balancing was one of his primary factors in assuming a $400 monthly multi-year obligation. I suppose Kia’s lease payments are not as linear as BMW’s but even that is beside the point.
I felt his frustration when he lamented the expenses and inflated monthly cost of ownership. I know of what he speaks. But signing up for such a large payment solely for the sake of expense consistency is a losing proposition, and reeks of day old car fever.
Assume that lease-covered preventative maintenance balances the increased insurance costs and gas consumption remains the same – because who would want to drive more in the nicer car? – the prospect of returning to the dealer on a prescribed schedule is pure joy and driving a glorified rental is cool. Even if all that is true, which I doubt….
The prospect of making years’ worth of monthly payments for a car you’ll then have to return or finance to purchase is no-brainer bad. And having 20% of a new car’s value erode while driving off the lot is only mildly less debilitating, long term.
I speak strongly on this topic because my feelings (and frustrations) are of equal strength. I once purchased a new car, I know of what I speak.
So here’s my contemplated advice.
This reader, or that, would be better off ‘gaming’ their budget into a consistent flow rather than obligating thousands upon thousands of dollars in the name of balanced budget and predictable debt reduction schedules. Rather than pay a leasing company $400 a month, simply auto-draft the same dollars into savings and drive the beater another few months. The saved money could be used to service a repair, upgrade the beater, or payoff a debt if the “payments” were able to accrue.
Face it, $400/month is $4800 per year. If you’re spending that much money to maintain a $2000 car then your lug nuts are loose. Spend a couple hundred bucks to keep it mobile and in a couple more months upgrade your hoop-dy. Before you know it, you’ll be in a steady, even if not spectacular, car and you’ll be well on your way to debt freedom. You’ll gain genuine confidence with each progressive step towards success and you’ll develop a keen ability to slice through the drama used to justify excessive spending by many folks today.
Your Turn, let me have it! Heck, you may even inspire my next article!