Brain Fertilizer

Top Ten Money Drains

Here's the thing: wasting money is like a pay cut. If you don't waste money on a regular basis, it is like a pay raise.

If you make sure you don't pay interest (on anything but your mortgage...a house is nearly impossible to pay for all at once), it's like giving yourself somewhere between a 5 and 10% pay raise.

Most people pay between 11 and 19% on credit card interest. That's huge. And don't get sucked in by the 0% interest balance transfers: they usually have a transfer fee that means you pay 3% up front; it might be worth it, if you do the math...but better to not have the debt at all.

Yes, that means you shouldn't pay interest on a car, either. Particularly since a car's value depreciates, it just isn't worth it. If you purchase a new car for $15,000, even at 5% interest you'll be wasting almost $2k over 5 years. Obviously, it's even more if you buy a more expensive car, or if you extend the loan to 6 years, or can't get 5% interest.

You don't have to buy a new car anymore to get reliable, fuel-efficient transportation. Cars last longer; 100k is no longer an automatic death for any brand except maybe Kia (and I might be slandering them...Hyundai has excellent quality control these days).

I can afford to pay cash for a Lexus, Acura, or BMW right now. But I drive a '99 Toyota Corolla and an '01 Chevy Prizm. Why? Because neither of them have given me a lick of trouble in more than a year. The Prizm has nearly 100k miles on it, but I am confident I can drive it up to 150k without a hiccup. I plan on driving it into the ground, because when you get right down to it, it transports 4-5 people to a destination in comfort, safety and convenience. Isn't that all you need from a car? Why waste the money on new car payments and interest to get essentially the same function?

That money adds up.

But, as always: you get what you pay for. I do not wish to disparage those who value the enjoyment of the bar experience, who savor their Starbucks Coffee (I think it tastes burnt, personally), who value getting the latest and greatest car at their earliest possibility (I, too, have purchased new cars...but regretted almost every time). Some people like to purchase what they can afford at the earliest opportunity. Patience pays, but we all make our own decisions and live with the consequences. I just like to clarify what those consequences are, exactly.