Does Your Stuff Own You?

When new members come into FPU, they come just as they are. The class is a judgment zone free: we’ve all done silly things with money (some with more zeros than others).

The first time I heard Dave Ramsey say “Hi, my name is Dave, and I like stuff” I knew I was going to like this guy. You see, that is exactly who I am: I like stuff. And, if it is computer or home theater related, I like it even more.

I did not even know I had a problem with stuff, after all, I could afford it. But that was a form of denial. I was living with just enough “manageable debt”, with less than $1,800 in a savings account (and feeling good about that), no retirement plan (other than randomly picked investments in my company’s 401k) and no savings towards the kid’s college (unless you counted about $600 in a savings account).

My stuff was owning me and was preventing me from doing what I knew I should be doing.

I needed to change.

I Can Make The Payments!

The last time I bought a car, it was a 2002 Pontiac Grand Am. It was my second car that I had bought from a dealer, and I was by no means an expert at negotiations. Most likely, I had a nice red “Sucker” written across my forehead. I just didn’t know it at the time.

I remember taking the test drive, falling in love with the car on the test drive and emotionally buying that car within twenty minutes of being on the lot.

I was nervous about buying the car because I new how much I could afford to pay each month (I had just finished paying off another car, so I knew I had that much). However, some creative financial magic must have occurred in the back room and the payments where right on target.

I drove off the lot with a brand new car whose payments were not much higher than the car I had just paid off.

The Cost of Opportunity

What I had really done was just committed to five years of $400 payments for a vehicle whose value would drop about 70% in the first four years.

Think about what $400 a month injected into your budget would help you accomplish? What if you had financed two cars? Breath in what an $800 dollar monthly raise would feel like!!

If you have watched the video Drive Free, Retire Rich on Dave’s sight, you might think as I did “sure, I can invest $400.00, but, would I really do that?”

Maybe not right now, but, wait until you get to Baby Step 4 – Retirement. You are going to start putting away 15% of your income to retirement. Do you like to give? 10% is a lot easier when your paycheck doesn’t go to GMAC. Think you can’t pay cash for next year’s Christmas? Think again!

You can only spend a dollar once, and it is gone. You have to choose what you are going to do with it. But, once it is gone, you loose the opportunity to spend it elsewhere.

I want my FPU members to begin thinking about spending in terms of opportunity cost. I really want them to break the “I can make the payments” mentality, because that mindset has not helped them out so far. I want them to get the most out of their budgets by not taking on more payments (aka debt).

Live like no one else, so later, you get to live like no one else.