Posted in Car Buying, College & Student Loans, Debt Free, Financial Freedom, You and Your Money

To Buy or To Lease – That is the Question

Car

 

This weekend I was having an intense conversation with my 19 year old daughter about all of the options for buying a car.  In her mind the only option is paying cash for a used car and at her age that is the best option.  No one in college or even a young adult starting a family should have a new car with an average car payment of $350.  One of the many things that I have realized over my 15 year career is that there are 2 important steps in making all financial decisions:  always do the math and do what will work for you personally and not anyone else.

Having said that keep in mind that debt doesn’t work for anyone.  Never buy anything that you do not have the money for.  This is why the only option, in my book, for a millennial is paying cash for a used car.  But as we get older, many of us build up our savings accounts and we end up having the money to comfortably drive a new car.  So how do we decide what to do between the two options that are available for getting a new car.  The Bible is an awesome book of instructions that God has given us, but no where in the Bible does it tell us to buy a car over leasing or vice versa.  However, it does tell us to be good stewards and great managers of what God has given us which is where the math comes in.

The math when it comes to buying vs. leasing has to be looked at long term.  For example, if you are planning on owning a car for 10 years, you need to total in the amount you pay for the car in addition to repair bills that will be paid over the course of that time.  About 3 years ago, my husband and I were in need of a different vehicle.  We had the financial ability to get a new car and so we began the numbers game.  The van we had that needed to be replaced had 420,000 miles on it and we had owned it for 9 years.  We paid $20,000 for it and had put in at least $5-6K in repairs including a new engine.  That means that over the time of owning the car, it had cost us $240 a month to have that vehicle.  So we decided to look at both of our options and decide if we wanted to buy or lease our new vehicle.

I want to be up front before I go any further.  Leasing is not for everyone and you should never lease just for the low payments.  It can be very attractive especially to people who live in a monthly payment, paycheck to paycheck world.  And just like deciding whether to rent or to buy a home, you need to do what is going to work for you in a positive way.  Leasing is not what it was 20 years ago and there are advantages to leasing, but you must do your research and be honest with yourself about your needs.

Here are a few things to consider when making the decision between buying and leasing:

  • When you buy a car, you own it but cars are not investments and they are only an asset to the extent of what they are worth minus what you owe.  Don’t pay more for a car just because you will “own” it.  Research the car you are looking at and know how well they hold their value.  For example, a Honda will be worth more 10 years from now than a Kia will.
  • When you lease a car, you have no maintenance and this can be a big deal to many people especially as we get older.  An average lease is for 36 months and that is the minimum warranty on most vehicles.  And tires and brakes usually last at least 40,000 miles so you would only be responsible for oil changes which many dealerships will throw in.
  • As you probably know, new cars lose value quickly in the first year or two.  Most leases come with GAP insurance included which will cover the difference should your car become totaled from an accident.  This is an additional purchase when buying (if you are financing) and should be included in the math.
  • When you buy a car, you can drive it as many miles as you want.  However, with a lease you are limited in how many miles you can drive per year (average is 12,000/year or 36,000 total).  When your lease ends, if you don’t purchase the vehicle you will be responsible for paying for the miles over at the rate of the lease agreement (usually .20/mile)

I am not one of those money people who says “never buy a new car” or “never lease a car”.  I have done the research and there are advantages to both.  You can have anything but not everything.  This means that in life we have to choose what is important to us and use our financial resources to do those things.  God loves giving us the desires of our hearts, but He will never help us get something that is going to hurt us.  You work hard for your money and God wants you to enjoy life.  A godly life has great balance.  That may mean that if you have a new car you can’t travel as much or have as big of a house as some.  It may mean that you don’t buy “stuff” everyday.  But if having a nice car is important to you, you will be willing to sacrifice in other areas in order to have what adds value to your life.

Let me close with this – new cars are not evil.  They are awesome and frankly can give you peace of mind when traveling the highways and byways.  But they can also cripple you and take you into bankruptcy if you buy them before you have the ability to pay for them.  Debt is not ok – God made that one pretty clear.  This is true for a used car or a new car.  Anytime you are looking at getting a new car, weigh all of your options, know your true financial situation and always do the math.  Do what is going to move you forward, not backwards.

Have a blessed week!  Lots of love!

~Debbi

http://www.debbiking.com

 

 

Posted in College & Student Loans, You and Your Money

Raising Adults

26acb5ab8e8cc2234dd04e3718393c28

Yesterday, I returned home from a seven day cruise with my 19 year old daughter.  It was an awesome trip full of bonding moments as it was just her and I out in the world for 7 days (and she was trapped on the ship with me with no where to go).  On the last day of our trip which was a sea day, we were eating lunch and starting talking with this couple who had 2 teenagers but were traveling alone.  The gentleman was in law enforcement and my daughter is in college for Criminal Justice.  We talked to them for almost an hour sharing great advice and talking about our passions.  My daughter shared many of the things she has learned over the years and the couple seemed shocked and impressed at her knowledge and grasp on reality.  One of the subjects we talked about was the epidemic in this country with teenagers and young adults believing they are entitled to everything without working for it.  And my daughter agreed – she sees this with her friends and others all the time.  When it was time for us to part ways and move on to other activities, the lady leaned over and whispered in my ear “You raised her well.”  I admit I teared up a little.

I don’t say this to brag although I am super proud of my daughter and the young lady she has become.  I am telling this story because it brought home a lesson that I learned many years ago and have shared from that day forward – we are raising adults.  It doesn’t matter whether a kid is 2, 12, or 20, you are always raising an adult.  Let me explain.

Your kids and kids in your life – whether for a moment or for a lifetime – are watching every move you make and every word you say (and the way you say it).  Kids aren’t born knowing how to do things.  They learn by what we teach them.  The key word is teach them.  Now, you can teach your kids on purpose like I did my daughter or you can teach them by default – either way, they are watching and learning every moment of every day.  The other day I was in Wal-Mart and I heard a kid screaming from 4 aisles over.  He just kept screaming until he got to the aisle I was on.  Then I saw his mom give him a phone and he stopped.  Whether she realized it or not, she taught him that if he screamed, he would eventually get his way.

I hear parents say all the time “We don’t use the word no”.  Well you should, but not as a mantra.  Use it in conjunction with an explanation as to why the action or behavior is not allowed.  A great example is the entitlement issue I spoke of earlier.  Kids believe they are entitled to everything because that is what they have been taught – again either on purpose or simply by not teaching them a different way.  My daughter is no different than every other kid out there – she wanted stuff and still does.  However, I have no issue telling her no and at the same time explaining to her why not.  She has never once heard “because I said so” from me.

We must realize we are raising adults from the moment our kids are born.  Did you know that a newborn will cry and get upset if you are stressed when holding them?  But if you are calm and soothing they will be too.  It starts from day one and continues through their entire lives.  My daughter is still watching me even at 19 years old.  It is still my responsibility to be an awesome example to her on how to navigate life in a positive direction and reach all of her goals and dreams (not mine, hers).  So the next time you are speaking with a little tone because something isn’t going right or you are swiping that credit card to pay for something, just remember they are watching your every move.

Posted in Budgeting for Everyone, College & Student Loans, Debt Free, Saving for Your Future, You and Your Money

College – Is It Worth the Investment?

Clemson's Tillman Hall
Clemson’s Tillman Hall

Today on Twitter, I was participating in a chat on this very subject.  And, as always, I was truly fascinated by the answers to the question and a little concerned.  As a majority, we tend to see college as a must.  We even go so far as to look down on those without a college degree.  But realistically, college isn’t for everyone and in many cases isn’t even necessary.  College is only worth the investment if it is needed and if it is approached wisely and with a plan.

I was blessed to have the opportunity to go to school debt free.  And it was understood that I would go to college when I graduated, basically for the reason I stated above.  No one bothered to ask me what I was passionate about – no one bothered to help me find out what I would love to do every day if money wasn’t a factor.  I just went to college and got a degree in a subject that I was good at in school and had a decent pay grade in the workforce.

And I was miserable for the first 15 years of my adult life.  Many of our youth are heading to college because they are pressured into believing that it is the next logical step.  Guidance counselors are giving out the emails of all students with decent grades to colleges so that they can bombard them with propaganda to come to their school.  The pressure is high and as a result is creating a problem in this country.  We currently have $1.2 trillion in student loan debt.  And much of that debt is for degrees that were never finished or never used.

When deciding for yourself or helping your child decide what to do after high school, consider these 3 tips and consider them in the order that is presented.

  1. What is your passion? – Many careers don’t require a college education.  Some require no experience, some a certificate and some a small amount of vocational schooling.  Before you can decide what education path to take, you must first decide what you want to do – not just a j-o-b, but a career and a passion.  I always throw out the question “What would you do if money wasn’t an issue?”.  The saying “Do what you love and you will never work a day in your life” is so true.  Unfortunately, I didn’t find this out until later in life, but I am so happy I did.  Because now I am doing what I love and I am guiding my 17 year old daughter to her passion – which by the way doesn’t require a college degree.  And odds are she will make more money than most because she will be working for herself.  Owning a small business is a great way to accomplish your passion and make lots of money if done correctly.  You should take some business courses, but it doesn’t require a degree – just some awesome mentoring from those who have been successful.
  2. What is the best way for me to get the education I need? – Once you determine the level of education you need, you then need to find the best way to get that education without becoming part of the statistic above.  You can pay for a 4 year degree with cash and without the help of parents, but you can only do it with a plan and determination.  You have no idea what your first job is going to be or how much you are actually going to be making.  Don’t mortgage your next 20 years if you don’t have to (and you don’t).
  3. Pay cash – This option is harder and may take a little longer, but I promise you it is the best way to invest in your future.  This is where I lose most people – if I haven’t already.  First of all, people don’t believe it can be done.  And secondly, they don’t want to do the work to make it happen.  Yes, it is easier now to sign up for the student loan.  But as millions are finding out, it is not the easiest in the long run.

Here’s the bottom line – I loved every minute of my college experience, but I wasn’t a fan of the 15 years I spent being miserable and not doing something that I was passionate about.  I was working a j-o-b to pay the b-i-l-l-s.  So find what you love to do, wisely get the education you need to get to follow that passion and do it with cash.  Live your dreams!

Buy any of Debbi’s award winning books on her website or on Amazon today.