Thursday, January 13, 2011

Letting Go Of Living Above My Needs

For a lot of people the real F-word would be frugal. It doesn't necessarily conjure up the glamorous image many people want to portray. Although I've never gotten into any credit card debt, I did waste a ton of money in the past on things that I really didn't need but that looked pretty - my car being a prime example.

After the car my parents gave me finally died, I drove a used Audi and then a used BMW (seeing a wasteful theme already?) I didn't make smart purchases to begin with. I wasn't concerned about interest rates, or how much the car was, or even what it was worth! I knew I wanted it, and if I could afford the monthly payment being offered to me then why not, right? Of course when the next shiny thing rolled around a year later I traded in my car, rolled over the extra from my previous loan, and started making even more ridiculous payments.

After dealing with a number of issues, I decided I didn't want to deal with the hassles of any more used vehicles. I marched into Lexus, plunked a chunk of change down to get out of my BMW, and drove away in my brand new dream car with an $800 monthly payment.

Seriously, kill me now just thinking about it. What kind of moron am I?

I loved that car, and the one thing I have going for me is that I finally broke my new (used) car-a-year habit. But in 2010 I decided we needed to start socking away savings, and then I started looking for ways to save even more money. I examined our cell phone plans, our cable bill, our grocery spending, etc. and it suddenly sunk in you don't have to be spending this kind of money on a car!

I knew I wanted some kind of hybrid to save even more money on gas. I also knew that I didn't want to buy brand new. Although I loved having a brand new car covered by a warranty, I realized that there were plenty of used options being sold with warranties, and since a car depreciates the most during it's first year it makes a lot more sense to buy a newer used car than a brand new one. I finally decided on a 2007 Prius because it came with a lot of the things I was looking for - namely a backup camera. If you've ever had a car with a backup camera you know it's hard to pun intended.

I had a pretty good car buying experience. It helped that I didn't need to trade in my car and could take my time. My car was selling at dealers for about what I owed, so everyone wanted to give me a trade in value of less. I put my foot down, and would only do the deal if they covered all of what I owed. I also looked at a lot of cars, told my salesperson exactly what I wanted and at what price, and waited about a month until I got just that. And along with my stellar credit score I got a 3.9% rate.

I now pay about a third of what I did on my monthly payment, and fill up on gas about once a month for about $30 a tank - bonus savings since I'd previously been filling up twice a month for about $50. I love the way driving my Prius is like a video game where the highest MPG wins. My car is certainly not as flashy or luxurious as my last one, but it's nevertheless become the favorite of all my cars. I plan to drive it at least until it's completely paid off, and if I can hold out even longer, until the warranty expires in 2017 - thanks Toyota!

Initially I planned to make the same payment I had been and pay off my car really quickly, but because of the low rate I got on my car loan I decided to put the extra money towards my mortgage instead. It feels amazing watching that balance go down. I realize now that even if I was balancing my monthly debt and successfully making payments, I still couldn't afford that car. I'm lucky enough not to be in debt the way most people think of it - in terms of student loans and credit cards - but I do have a mortgage and I do still have a car payment, and until those go away there's no reason to live above my needs.

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