YourChoice Blog

So you had it in your mind that you wanted to buy a new car and then this guy comes into your workplace to talk to you about money management and you decide that maybe it would be best not to take on a large car payment and to just keep driving the used car you currently have.

 

Smart, right? Well...it could be. It all depends on your next step.

 

I recently encountered this scenario and when first hearing the news, I considered my workshop a success for at least this one attendee and gave myself the proverbial pat on the back for another job well done and financial life rescued.

 

But something didn't sit right with me. After this attendee learned more about the effects of debt and how it can crush your dreams, they made an educated decision to not invite more debt into their life. But what will happen to the money they will no longer be spending on a car payment? That to me is of equal importance as the decision not to buy the car. If you decide not to spend money, therefor leaving it on the table, it is not necessarily a win until you reallocate it toward your next financial life goal.

 

Say you decide to get savvy about shopping for everyday home items like toiletries and your are finally going to stick to your list and not load up the shopping cart with home decor items you really don't need. Great! Unless you take the money saved and run next door to spend it on clothing you really don't need.

 

Maybe you've realized you are spending way too much on getting your hair and nails done each month and decide to forgo the fancy salon while you try to get back on track financially. Good choice! Unless you take the hundred bucks you are saving each month to the casino on Friday.

 

In the case of not buying a car, if you choose not to take on the $400 car payment but simply put it back in your pocket and spend it miscellaneously throughout the month, then you are still in the same financial position with an old car. I would rather have the new car.

 

But if you were to take that $400 that you decided not to spend on a car and were to have it automatically deposited into your savings account, then we have reason to celebrate. At $400 a month, you would put aside $4800 a year. What could you do with that money? Look at your list of debts. How many debts could you eliminate with that money?

 

What large financial obligations are approaching...a wedding, a vacation, tuition for your child's college education or a certification that could advance your career? Could you now pay cash for these things?

 

What if you were to keep that money going into the bank and every two years, you were to use it as a down payment on the purchase of a rental property? Ten years from now, you could be sitting on a small real estate empire creating passive income and building wealth for your future.

 

Now we are talking!

 

I know that you have become much more aware of your spending habits and are working to find ways to cut back on your budget. Make sure that when you do create a new habit that lowers your expenditures or you find expenditures that you can cut out of your budget all together that you immediately go back to your payroll processor and you increase the amount of money that you are having deposited into savings each paycheck. This will ensure that your smart money decisions, hard work and sacrifice will truly benefit you financially.