Feb 4, 2008

Responsible money management is not about affordable payments

This post at I've Paid for This Twice Already on "The ‘Can We Afford The Payments' Mentality" got me thinking. Back in 2003, when my husband and I bought our first car together, we divided the responsibilities as follows: my husband did the technical research, deciding what kind of car we should get and what a reasonable price was; I handled the financing research.

I knew enough about car buying and money management to know that the most important thing was the total price of the car, not the monthly payment. So I repeatedly fended off the salesman's efforts to get me to quote an acceptable monthly payment. Even though I knew I wanted a payment of approximately $350, I never uttered that figure to him. He was so frustrated when I told him for the third or fourth time that I simply wanted to know what the total cost of the car would be that I knew most people must not hesitate to say what monthly payment they can afford.

In 2003, when we bought the car, I thought we were doing pretty well when it came to money. We got a great price on the car, our good credit got us the extremely low interest rate of 1.9% on the loan, and our monthly payment was less than $365. The thing is, it never occurred to me to buy a car without a monthly payment.

Admittedly, back in 2003, we probably couldn't have afforded to pay cash for a new car unless we saved for a couple of years (and we really needed a new car then). We didn't want to buy a used car for reasons I've discussed previously. But it never occurred to me that we could buy a new car without payments until a few months ago, when I resolved to pay cash for our next car.

I guess over the last five years, I've abandoned the payments mentality completely. I suppose the only time I might go into debt is to buy investment real estate, although I don't really see that in our future since neither my husband nor I want to take care of tenants. But otherwise, I don't think we'll be borrowing money again - ever.


Anonymous said...

Be careful for "all-new" cars. Sometimes owners of those cars turn out to be part of the beta process of working out the kinks of newly designed and engineered cars. You'd be better off researching cars a year or two after a re-design to see if indeed any adjustments were made to work out those kinks.

Living Almost Large said...

I will not say that, I took our debt for DH's MBA. He has a phd and we're easily I think double his income with the MBA. So $17k for $100k income? No brainer?

So while I might not use CC debt, I can't say I won't do debt. We might use a business loan, a second mortgage for a vacation home, etc. So we'll see.

Chief Family Officer said...

@anon - You're right, we will definitely be wary of new and re-designed models. Thanks!

@LAL - You're right too, it's not that all debt is bad. But there's something so marvelous about being almost debt-free, it's going to take a lot for me to take on more debt in the future!